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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>As
filed with the Securities and Exchange Commission on June&nbsp;10, 2009</B>
</DIV>




<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt; margin-top: 6pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>




<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 8pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 8pt"><B>FORM S-1</B>
</DIV>


<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</B>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><IMG src="w74407w7440701.gif" alt="(POLYMEDIX LOGO)"></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>POLYMEDIX, INC.</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B><I>(Exact name of registrant as specified in its charter)</I></B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B><BR>
<I>(State or other jurisdiction of <BR>
incorporation or organization)</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>2834</B><BR>
<I>(Primary Standard Industrial<BR>
Classification Code Number)</I>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>27-0125925</B><BR>
<I>(I.R.S. Employer<BR>
Identification No.)</I></TD>
</TR>
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</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>170 N. Radnor-Chester Road, Suite&nbsp;300<BR>
Radnor, Pennsylvania 19087<BR>
(484)&nbsp;598-2400</B><BR>
<I>(Address, including zip code and telephone number, including area code, of Registrant&#146;s principal executive offices)</I></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><B>The Corporation Trust Company<BR>
Corporation Trust Center<BR>
1209 Orange Street<BR>
Wilmington, Delaware<BR>
(302)&nbsp;658-7581</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt"><I>(Name, address, including zip code and telephone number, including area code, of agent for service)</I></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 10pt">Copies to:</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
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<TR valign="bottom">
    <TD align="center" valign="top"><B>Nicholas Landekic <BR>
Edward Smith <BR>
PolyMedix, Inc. <BR>
170 N. Radnor-Chester Road <BR>
Suite&nbsp;300<BR>
Radnor, PA 19087<BR>
(484)&nbsp;598-2400</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>Jeffrey P. Libson, Esq.<BR>
Pepper Hamilton LLP<BR>
400 Berwyn Park<BR>
899 Cassatt Road<BR>
Berwyn PA, 19312-1183<BR>
(610)&nbsp;640-7800</B></TD>
</TR>
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</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Approximate date of commencement of proposed sale to the public: </B>As soon as practicable after
this registration statement becomes effective.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If any of the securities being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule&nbsp;415 under the Securities Act of 1933, check the following box. <FONT face="Wingdings">&#254;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated file, or a smaller reporting company. See the definitions of &#147;large accelerated
filer,&#148; &#147;accelerated file&#148; and &#147;smaller reporting company&#148; in Rule&nbsp;12b-2 of the Exchange Act.
(Check one):
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="22%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
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<TR valign="bottom">
    <TD align="center" valign="top">Large accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Non-accelerated filer <FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>Smaller reporting company <FONT face="Wingdings">&#254;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top" nowrap>(Do not check if a smaller reporting company)</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
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</TABLE>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="23" style="border-bottom: 3px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed Maximum</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed Maximum</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center"><B>Title of Class of Securities</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount to</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Offering Price Per</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Aggregate Offering</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount of</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center"><B>to be Registered</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>be Registered(1)</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Share(2)</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Registration Fee</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>

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<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
                    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Common Stock, $0.001 par value</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">12,000,000</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">0.67</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">8,040,000</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">448.63</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Series&nbsp;C Preferred Stock
Purchase Rights (3)</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">12,000,000</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="center" style="border-top: 2px solid #000000">N/A</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="center" style="border-top: 2px solid #000000">N/A</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="center" style="border-top: 2px solid #000000">N/A</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="23" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>

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</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Pursuant to Rule&nbsp;416 under the Securities Act, the shares being registered hereunder include
such indeterminate number of shares of common stock as may be issuable with respect to the
shares being registered hereunder as a result of stock splits, stock dividends or similar
transactions.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Estimated solely for the purpose of calculating the amount of the registration fee pursuant
to Rule 457(c) of the Securities Act of 1933 based upon the last sale price of the common
stock of the Registrant as reported on the OTC Bulletin Board on
June&nbsp;8, 2009.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>This prospectus also relates to the rights to purchase shares of Series&nbsp;C Preferred Stock of
the registrant, which are attached to all shares of common stock issued, pursuant to the terms
of the registrant&#146;s Rights Agreement dated May&nbsp;12, 2009. Until the occurrence of prescribed
events, the rights are not exercisable and will be transferred with and only with shares of
our common stock.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 4%"><B>THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY
TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.</B>
</DIV>


<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">







<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">


<DIV align="left" style="font-size: 11pt; margin-top: 6pt">The information in this prospectus is not complete and may be changed. The
securities offered pursuant to this prospectus may not be sold until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
</DIV>

</DIV>



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUBJECT
TO COMPLETION, DATED JUNE 10, 2009</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>PROSPECTUS</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="w74407w7440701.gif" alt="(POLYMEDIX LOGO)">
</DIV>


<DIV align="Center" style="font-size: 12pt; margin-top: 6pt">12,000,000 SHARES OF COMMON STOCK

</DIV>
<DIV align="left" style="font-size: 9pt; margin-top: 6pt">This prospectus relates to the offer and resale of up to 12,000,000 shares of our common stock, par
value $0.001 per share, by the selling stockholder, Dutchess Equity Fund, L.P., or &#147;Dutchess,&#148;
which Dutchess has agreed to purchase pursuant to the investment agreement dated May&nbsp;20, 2009,
between Dutchess and us. Subject to the terms and conditions of such investment agreement, which
is referred to in this prospectus as the &#147;Investment Agreement,&#148; we have the right to put up to
$10.0&nbsp;million in shares of our common stock to Dutchess. This arrangement is sometimes referred to
as an &#147;Equity Line.&#148; For more information on the selling stockholder, please see the section of
this prospectus entitled &#147;Selling Stockholder&#148; beginning on page 20.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">We will not receive any proceeds from the resale of these shares of common stock offered by
Dutchess. We will, however, receive proceeds from the sale of shares to Dutchess pursuant to the
Equity Line. When we put an amount of shares to Dutchess, the per share purchase price that
Dutchess will pay to us in respect of such put will be determined in accordance a formula set forth
in the Investment Agreement. Generally, in respect of each put, Dutchess will pay us a per share
purchase price equal to ninety-five percent (95%) of the volume weighted average price, or &#147;VWAP,&#148;
of our common stock during the five consecutive trading day period beginning on the trading day
immediately following our put notice.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">Dutchess may sell the shares of common stock from time to time at the prevailing market price on
the Over-the Counter (OTC)&nbsp;Bulletin Board, or on an exchange if our shares of common stock become
listed for trading on such an exchange, or in negotiated transactions. Dutchess is an
&#147;underwriter&#148; within the meaning of the Securities Act of 1933, as amended (the &#147;Securities Act&#148;)
in connection with the resale of our common stock under the Equity Line. For more information,
please see the section of this prospectus entitled &#147;Plan of
Distribution&#148; on pages 72 through 73.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">Our common stock is quoted on the OTC Bulletin Board under the symbol &#147;PYMX&#148;. The last reported
sale price of our common stock on the OTC Bulletin Board on June&nbsp;4, 2009 was $0.68 per share.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt"><B>Investing in the offered securities involves risks, including those set forth in the &#147;Risk Factors&#148;
section of this prospectus beginning on page 7, as well as those set forth in any prospectus
supplement.</B>
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">We will be responsible for all fees and expenses incurred in connection with the preparation and
filing of this registration statement, provided, however, we will not be required to pay any
underwriters&#146; discounts or commissions relating to the securities covered by the registration
statement.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">You should read this prospectus and any prospectus supplement carefully before you decide to
invest. You should not assume that the information in this prospectus is accurate as of any date
other than the date on the front of this document.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt"><B>Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">The date of this prospectus is <U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U>, 2009.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">PAGE</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">STATEMENT REGARDING FORWARD LOOKING STATEMENTS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">PROSPECTUS SUMMARY</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">THE OFFERING</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">6</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">RISK FACTORS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">USE OF PROCEEDS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">20</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">SELLING STOCKHOLDER</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">20</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">OUR BUSINESS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">21</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">EMPLOYEES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">39</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">DESCRIPTION OF PROPERTY</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">39</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">LEGAL PROCEEDINGS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">39</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">MANAGEMENT</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">40</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#112">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">44</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">EXECUTIVE COMPENSATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">DIRECTOR COMPENSATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">52</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">54</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">62</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">CORPORATE GOVERNANCE</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">64</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">65</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">DESCRIPTION OF SECURITIES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">67</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#120">PLAN OF DISTRIBUTION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">72</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#121">EXPERTS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#122">LEGAL MATTERS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123">CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#124">COMMISSION&#146;S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#125">ADDITIONAL INFORMATION</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">74</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>STATEMENT REGARDING FORWARD LOOKING STATEMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Some of the statements included in this prospectus and any prospectus supplement contain
forward-looking statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of historical facts contained
in this prospectus and any prospectus supplement, including statements regarding our plans,
objectives, goals, strategies, future events, capital expenditures, future results, our competitive
strengths, our business strategy and the trends in our industry are forward-looking statements. The
words &#147;believe,&#148; &#147;may,&#148; &#147;could,&#148; &#147;estimate,&#148; &#147;continue,&#148; &#147;anticipate,&#148; &#147;intend,&#148; &#147;should,&#148; &#147;plan,&#148;
&#147;expect,&#148; &#147;appear,&#148; &#147;future,&#148; &#147;likely,&#148; &#147;probably,&#148; &#147;suggest,&#148; &#147;goal,&#148; &#147;potential&#148; and similar
expressions, as they relate to our Company, are intended to identify forward-looking statements.
All statements, other than statements of historical fact, included in this prospectus and any
prospectus supplement regarding our financial position, business strategy and plans or objectives
for future operations are forward looking statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Forward-looking statements reflect only our current expectations. In any forward-looking statement,
where we express an expectation or belief as to future results or events, such expectation or
belief is expressed in good faith and believed to have a reasonable basis, but there can be no
assurance that the statement of expectation or belief will be achieved or accomplished. Our actual
results, performance or achievements could differ materially from those expressed in, or implied
by, the forward-looking statements due to a number of uncertainties, many of which are unforeseen,
including:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our need for, and the availability of, substantial capital in the future to fund our
operations and planned clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the conditions in the capital markets and the biopharmaceutical industry that make
raising capital or entering into strategic arrangements difficult and expensive;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the timing of our product development and evaluation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the timing and magnitude of expenditures we may incur in connection with our ongoing
research and development activities;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the results of our preclinical and clinical trials, including regulatory approvals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the maintenance of our existing licenses with the University of Pennsylvania and the
University of Massachusetts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the success, timing and financial consequences of our formation of new business
relationships and alliances; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the timing and volume of sales of products for which we obtain marketing approval.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, you should refer to the &#147;Risk Factors&#148; section of this prospectus beginning on page 7
for a discussion of other factors that may cause our actual results to differ materially from those
implied by our forward-looking statements. As a result of these factors, we cannot assure you that
the forward-looking statements in this prospectus and any prospectus supplement will prove to be
accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may
be material. In light of the significant uncertainties in these forward-looking statements, you
should not regard these statements as a representation or warranty by us or any other person that
we will achieve our objectives and plans in any specified time frame, if at all. Accordingly, you
should not place undue reliance on these forward-looking statements. All subsequent written and
oral forward looking statements attributable to us or the persons acting on our behalf are
expressly qualified in their entirety by the applicable cautionary statements. We undertake no
obligation to update any of these forward looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable law or regulation.
</DIV>


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<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROSPECTUS SUMMARY</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The following summary highlights selected information contained in this prospectus. Because it is a
summary, it does not contain all the information you should consider before investing in our common
stock. Before making any investment decision, you should read the entire prospectus carefully,
including the &#147;Risk Factors&#148; section of this prospectus beginning on page 7, the financial
statements and the notes to the financial statements. Unless stated otherwise, references in this
prospectus to the &#147;Company,&#148; &#147;we,&#148; &#147;us,&#148; or &#147;our&#148; refer to PolyMedix, Inc., a Delaware corporation.</I>
</DIV>






<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Company</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a biotechnology company focused on treating life threatening, serious, infectious diseases
and acute cardiovascular disorders with synthetic small molecule compounds that mimic the activity
of large natural protein molecules, compounds referred to as biomimetics. Using our proprietary
computational drug design technology, we have created novel defensin mimetic antibiotic compounds,
heparin antagonist compounds (or &#147;heptagonists&#148;) and other drug compounds intended for human
therapeutic use. The following chart illustrates the current stage of development of our
internally developed pipeline along with planned development timings for our two lead programs that
are in clinical development:
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="w74407w7440702.gif" alt="(CHART)">
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Program on hold pending additional financing</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Investigational New Drug Application (or &#147;IND&#148;) or equivalent Canadian Clinical Trial
Application</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">***</TD>
    <TD>&nbsp;</TD>
    <TD>Unfractionated heparin (&#147;UFH&#148;) and low molecular weight heparin (&#147;LMWH&#148;)</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Clinical Stage Compounds</B></U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Defensin mimetic antibiotics </I>are compounds that have a novel mechanism-of-action that mimics the
antimicrobial activity of host defense proteins, a group of proteins naturally found in most higher
forms of life including humans, which provide the first line of defense against bacterial
infections. We believe that bacteria are less likely to develop resistance to antibiotic products
with this mechanism-of-action than currently marketed antibiotics. Most antibiotics exert their
activity by interacting with a specific biochemical molecular target or pathway, such as an
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">enzyme. Bacteria can often develop mutations in these molecular targets in a process called &#147;target
mutation&#148;, which renders the antibiotic drug unable to interact with its intended biochemical
target. Additionally, bacteria can sense that a foreign chemical has entered its cell and can pump
it out before it can bind to its intended biochemical target, through a process called efflux.
Both of these factors can cause bacteria to become drug-resistant. Instead of relying on a
specific molecular target that can mutate, our product candidates target the entire bacterial cell
membrane. Our defensin mimetic antibiotic product candidates destabilize the bacterial cell
membrane and cause either leakage of cellular content or complete disruption of the membrane, which
results in bacterial cell death. Additionally, because our product candidates target the bacterial
cell membrane and do not have to enter the cell, the opportunity for bacterial efflux is reduced.
We believe this mechanism-of-action makes it unlikely for bacteria to develop resistance to our
defensin mimetic antibiotic product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Worldwide, the hospital antibiotic market is $8&nbsp;billion, treating approximately seven million
patients per year and the total worldwide antibiotic market is $26&nbsp;billion, treating approximately
49&nbsp;million patients per year. According to the Centers for Disease Control and Prevention, or CDC,
bacterial infections are the fourth leading cause of death in the U.S. and are one of the fastest
growing causes of death. Because of the increasing rate of bacterial resistance and the
corresponding death rate, we believe there is a significant medical and market need for a new class
of antibiotics, defensin mimetics, with a novel mechanism of action designed to make it unlikely
for bacteria to develop resistance. Our first product candidate will be an i.v. formulation
intended to treat complicated skin and soft tissue infections, including gynecological infections,
caused by strains of <I>Staph </I>bacteria. We anticipate that the bacterial targets of PMX-30063 will
include drug resistant strains, particularly broadly targeting the various strains of <I>Staph</I>
bacteria. In the future, we also hope to expand indications to also potentially include other
bacterial strains.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2008, we completed and announced positive results from our single dose escalation
clinical study of healthy volunteers receiving PMX-30063 at various dose levels (Phase 1A). This
ascending single-dose intravenous pharmacokinetic and safety study met the necessary Phase 1 goals
of defining both a limiting single dose and the plasma distribution/elimination kinetics. In this
study, the dose was not limited by any measurable clinical or laboratory parameters. A subjective
syndrome of parasthesias was identified, appearing only at the higher dosages and consisting of
abnormal neuronal sensations often likened to dental anesthesia. These effects were graded as mild
to moderate by investigators or subjects, but their reproducibility and dose-proportionality
allowed dose-escalation to be successfully concluded after achieving levels well in excess of the
expected therapeutic range. The effects were temporary and resolved on their own. The same study
provided detailed information on the time course of the drug during and after dosing. These
pharmacokinetics appear favorable for therapeutic use of the drug. The half-time for elimination
from the plasma was approximately 15 hours, allowing for flexibility in dosing to obtain optimal
peak and trough drug levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2009 we commenced an ascending  multi-dose intravenous pharmacokinetic and safety study of healthy volunteers who will
receive PMX-30063 at various dose levels (Phase 1B). The primary endpoint for the two Phase 1
studies is a safety assessment. We have and plan to continue to conduct the Phase 1 studies to
United States standards, submit an IND with the FDA before commencing Phase 2 studies in the United
States, and ultimately seek regulatory approval in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Heptagonists </I>such as PMX-60056, our second development program, are compounds that bind to and
thereby reverse the anticoagulant effects of both Unfractionated heparin (or UFH) and Low Molecular
Weight Heparins (or LMWH). UFH is a class of commonly used blood clot prevention drugs used in
numerous surgical applications, such as cardiothoracic procedures. LMWH is another class of
commonly used blood clot prevention drugs used in patients under longer-term administration,
because of their ease of administration and longer half-life. Overdoses of UFH or LMWH are
dangerous due to potentially life-threatening bleeding. While widely used, UFH and LMWH have the
possibility of adverse bleeding side effects, which requires frequent monitoring. Protamine is the
only available reversing agent for UFH. It is used as both an antidote in the event of overdose
and, more commonly, in standard treatment following coronary artery bypass grafts in which
post-operative treatment involves administering protamine to counter the action of UFH, which is to
prevent blood clots while a patient is on a heart-lung support machine. While widely used to
reverse UFH, protamine has a number of adverse side effects, including bleeding, difficulty and
complexity in dose titration, allergic reactions, immunogenicity, and abnormal clot formation, all
of which require frequent monitoring and follow up. As a result, there is a significant medical
and market need for a safer UFH reversing agent. Additionally, there is currently no approved
reversing agent agent for LMWH.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Worldwide, we estimate that approximately two million extracorporeal blood procedures, including
cardiothoracic procedures, are performed per year that utilize heparin and may require UFH
reversal, and approximately twelve million patients receive LMWH per year for a variety of uses,
including deep vein thrombosis, post heart attack, cancer, and atrial fibrillation. There have
been several published studies which demonstrate that up to 20% of LMWH patients experience
clinically significant bleeding, and up to 4% of cases are considered to be serious or life
threatening. The availability of an antidote to LMWH would allow patients experiencing a LMWH
bleeding event to be pharmaceutically treated. Additionally, the availability of a reversing agent
for LMWH could allow LMWH to be used in cardiothoracic surgical procedures or in patients who may
need to undergo re-operation. Thus, an LMWH antagonist could substantially increase the market and
sales of LMWH drugs.
</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2009, we successfully completed our first-in-man clinical study with the novel heparin
antagonist drug PMX-60056. This ascending single-dose intravenous pharmacokinetic and safety study
met the necessary Phase 1 goals of defining both a limiting single dose for ten-minute infusions
and also the plasma distribution/elimination kinetics for the drug in the absence of heparin. This
first study has demonstrated that PMX-60056 can be given safely in the absence of heparin if
ten-minute infusions include less than 0.4 mg/kg. The data suggest that the limiting side effect of
hypotension is related to peak plasma drug level, which means that slower infusions could allow
delivery of more drug. To investigate this possibility, PolyMedix plans to study slower infusions,
of twenty and potentially thirty minutes, in an extension of this study. These longer infusions are
expected to allow higher doses to be given, and will add support for potential clinical studies for
the reversal of LMWH, which may require greater total amounts of drug to be administered. Analysis
of the plasma-level assays indicates that a single-compartment model is consistent with the
observed data, and the plasma elimination half-time is 1.5 to 2.5 minutes in the dosage range
administered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the third quarter of 2009, we plan to commence a study of heparinized subjects who receive
PMX-60056 at various increasing dose levels (Phase 1B). While the primary endpoint is a safety
assessment, we will be able to gather efficacy data in this Phase 1B study.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>Pre-Clinical Stage Compounds</B></U>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In order to achieve the best balance of financial rate of return with risk and timing to market, we
also intend, pending sufficient additional financing, to conduct pre-clinical development of our
antibiotic compounds for both topical and oral antibiotic applications. The initial topical
application we plan to pursue is an ophthalmic antibiotic for the treatment of eye infections, and
the initial oral application we are investigating is a non-absorbed antibiotic for the treatment of
gastrointestinal infections such as <I>Clostridium difficile</I>. Pending sufficient additional
financing, we hope to advance pre-clinical development and file additional IND applications for the
ophthalmic topical and non-absorbed oral antibiotic indications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are also evaluating our antibiotic compounds for a number of other topical applications,
including use for skin structure infections, oral healthcare applications for treatment of
periodontal disease, a type of gum disease, topical treatment for ear infections, topical treatment
of fungal infections, topical treatment of acne, and a variety of non-therapeutic applications in
personal care and materials applications.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Summary Financial Data</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because this is only a summary of our financial information, it does not contain all of the
financial information that may be important to you. Therefore, you should carefully read all of
the information in this prospectus and any prospectus supplement, including the financial
statements and their explanatory notes and the section entitled &#147;Management&#146;s Discussion and
Analysis of Financial Condition and Results of Operations,&#148; before making a decision to invest in
our common stock. The information contained in the following summary are derived from our
financial statements for the quarters ended March&nbsp;31, 2009 and 2008 and the years ended December
31, 2008 and 2007 (in thousands).
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Quarters ended</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Years ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 0px solid #000000"><B>December 31,</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2009</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Statement of Operations Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Grant and research revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,276</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,801</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,920</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,823</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,986</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,164</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance Sheet Data:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total cash and investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,725</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">15,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,903</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,722</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,661</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,143</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,134</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Business History</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PolyMedix, Inc. (formerly known as BTHC II Acquisition Corp.) was originally organized in the State
of Texas as BTHC II LLC, a public shell company. On September&nbsp;29, 2004, BTHC II LLC and its sister
companies filed an amended petition under Chapter&nbsp;11 of the United States Bankruptcy Code. On
November&nbsp;22, 2004, the court
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->-4-<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">approved BTHC II LLC&#146;s Amended Plan of Reorganization. On March&nbsp;24,
2005, and in accordance with its Amended Plan of Reorganization, BTHC II LLC changed its state of
organization from Texas to Delaware by merging with and into BTHC II Acquisition Corp., a Delaware
corporation formed solely for the purpose of effecting the reincorporation. After this merger,
BTHC II Acquisition Corp. became the public shell company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) was incorporated on August&nbsp;8,
2002 in the State of Delaware as PolyMedix, Inc. to serve as a biotechnology company focused on
treating infectious diseases. On October&nbsp;6, 2005, the former BTHC II Acquisition Corp. entered
into an Agreement and Plan of Merger and Reorganization with the former PolyMedix, Inc., pursuant
to which the stockholders of the former PolyMedix, Inc. exchanged their equity ownership interests
in the former PolyMedix, Inc. for an aggregate 94% equity ownership interest in the former BTHC II
Acquisition Corp. Pursuant to the Agreement and Plan of Merger and Reorganization, the former
PolyMedix, Inc. merged with a wholly-owned subsidiary of the former BTHC II Acquisition Corp. and,
as such, became a wholly-owned subsidiary of the former BTHC II Acquisition Corp.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the time of the merger, the former BTHC II Acquisition Corp. had no operations and no assets or
liabilities. Because the stockholders of the former PolyMedix, Inc. exchanged their equity
ownership interests in the former PolyMedix, Inc. for an aggregate 94% equity ownership interest in
the former BTHC II Acquisition Corp., the former PolyMedix, Inc. was, for accounting purposes, the
surviving entity of the merger. Accordingly, all financial information included in this annual
report for the periods prior to the merger is for the former PolyMedix, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;24, 2006, the former BTHC II Acquisition Corp. changed its corporate name to PolyMedix,
Inc., and the former PolyMedix, Inc. changed its corporate name to PolyMedix Pharmaceuticals, Inc.
</DIV>






<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Our Principal Executive Offices</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our principal executive offices are located at 170 N. Radnor-Chester Road; Suite&nbsp;300, Radnor,
Pennsylvania 19087. Our telephone number is (484)&nbsp;598-2400 and our website address is
www.polymedix.com. Information included or referred to on our website is not a part of this
prospectus.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-5-<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>THE OFFERING</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This prospectus relates to the resale of up to 12,000,000 shares of our common stock by Dutchess.
Dutchess will obtain our common stock pursuant to the terms and conditions of the Investment
Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Investment Agreement with Dutchess provides that Dutchess is committed to purchase up to
$10,000,000 of our common stock, over the course of thirty-six months. We may draw on the facility
from time to time, as and when we determine appropriate in accordance with the terms and conditions
of the Investment Agreement. When we put an amount of shares to Dutchess, the per share purchase
price that Dutchess will pay to us in respect of such put will be determined in accordance with a
formula set forth in the Investment Agreement. Generally, in respect of each put, Dutchess will
pay us a per share purchase price equal to ninety-five percent (95%) of the VWAP of our common
stock during the five consecutive trading day period beginning on the trading day immediately
following our put notice. The maximum number of shares issuable by us and purchasable by Dutchess
under the Investment Agreement is 12,000,000.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="35%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="60%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities Offered
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Up to 12,000,000 shares of our common stock by the
selling stockholder.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Offering Price
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">To be determined by the prevailing market price for the
shares at the time of the sale or in negotiated
transactions.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Use of Proceeds
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">We will not receive any proceeds from the sale of shares
by the selling stockholder. However, we will receive
proceeds from the Equity Line. See &#147;Use of Proceeds.&#148;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Risk Factors
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">An investment in our common stock involves a high degree of
risk. See &#147;Risk Factors&#148; beginning on page 7 and the other
information in this prospectus for a discussion of the
factors you should consider before you decide to invest in
the units.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">OTC Bulletin Board Symbol
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">PYMX</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The total number of shares of our common stock outstanding as of June&nbsp;4, 2009 is 59,845,065, and
excludes:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>12,000,000 shares of common stock reserved for issuance upon puts to
Dutchess pursuant to the Equity Line;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>10,724,000 shares of common stock issuable upon exercise of
outstanding stock options at a
weighted average exercise price of $1.41 per share;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>4,119,194 additional shares of common stock reserved for issuance under various
outstanding warrant agreements, at an exercise price of $1.23, as the
same may be adjusted as a consequence of
the weighted average anti-dilution provisions contained in such warrant agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>2,943,222 additional shares of common stock reserved for issuance under various
outstanding warrant agreements, at an exercise price of $1.10;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>28,653,495 additional shares of common stock reserved for issuance under the
Series&nbsp;A and Series&nbsp;B Warrants, including placement agent warrants, at an exercise
price of $1.00; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>15,369,194 additional shares of common stock reserved for future issuance under
our stock plans subject to available authorized shares.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Unless otherwise specifically stated, information throughout this prospectus does not assume the
exercise of outstanding options or warrants to purchase shares of our common stock.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-6-<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="104"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISK FACTORS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>In addition to the other information included in this prospectus and any prospectus supplement, the
following factors should be carefully considered in evaluating our business, financial position and
future prospects. Any of the following risks, either alone or taken together, could materially and
adversely affect our business, financial position or future prospects. If one or more of these or
other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect,
our actual results may vary materially from what we have projected. There may be additional risks
that we do not presently know or that we currently believe are immaterial which could also
materially adversely affect our business, financial position or future prospects.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to Our Business</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We have incurred losses since inception and anticipate that we will continue to incur losses for
the foreseeable future.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a development stage company with a limited operating history. As of March&nbsp;31, 2009, we had
an accumulated deficit of approximately $39,779,000. We expect to continue to incur significant
and increasing operating losses, in the aggregate and on a per share basis, for the next several
years. These losses, among other things, have had and will continue to have an adverse effect on
our stockholders&#146; equity, net current assets and working capital.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because of the numerous risks and uncertainties associated with developing new drugs, we are unable
to predict the extent of any future losses or when we will become profitable, if at all.
Currently, we have no products available for commercial sale, and, to date, we have not generated
any product revenue. We have financed our operations and internal growth primarily through the
sale of equity securities. We have devoted substantially all of our efforts to research and
development, including cGMP manufacturing and cGLP compliant toxicology, safety pharmacology,
genotoxicity studies and clinical studies for our clinical product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are unable to meet our needs for additional funding in the future, we will be required to
limit, scale-back or cease operations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We do not currently have the funding resources necessary to carry out all of our short and
long-term operating activities. We believe that our current cash and
investment  balances, exclusive of any cash to be generated from the
Equity Line, will be sufficient to  fund
our planned Phase 1 studies for PMX-30063 and PMX-60056 and can fund our operations for at least
the next 12&nbsp;months; however, due to the continued deterioration of the capital markets and
prospects for securing additional financing, in order to prolong our cash runway we will scale back
and delay some of our activities and do not plan to commence a Phase 1B clinical trial for
PMX-60056 until the third quarter of 2009. In addition, our current cash and investment balances
are not sufficient to fund the Phase 2 clinical or other development activities of either of these
product candidates. We plan to seek additional funding beyond the
Equity Line during 2009 in one or more financings.
However, if we are unable to secure adequate additional funding during 2009, we
will delay, scale-back or eliminate certain of our future research, drug discovery or development
activities or certain other aspects of our operations and our business until such time as we are
successful in securing adequate additional funding. Our future capital requirements will depend on
many factors, including:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>success of our clinical trials for PMX-30063 and PMX-60056;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>continued progress of and increased spending related to our research and
development activities, including our plan to hire additional research and
development employees;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the conditions in the capital markets and the biopharmaceutical industry
that make raising capital or entering into strategic arrangements difficult and
expensive;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>progress with preclinical experiments and clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ongoing general and administrative expenses related to our being a reporting company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost, timing, and results of regulatory reviews and approvals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the maintenance of our existing licenses with the University of Pennsylvania
and the University of Massachusetts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the success, timing, and financial consequences of any future collaborative,
licensing and other arrangements that we may establish;</TD>
</TR>

</TABLE>
</DIV>
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<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs of commercializing any of our other product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>technological and market developments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost of manufacturing development; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>timing and volume of sales of products for which we obtain marketing approval.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These factors could result in variations from our currently projected operating and liquidity
requirements. Additional funds may not be available when needed, or, if available, we may not be
able to obtain such funds on terms acceptable to us. If adequate funds are unavailable, we may be
required, among other things, to:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delay, reduce the scope of or eliminate one or more of our research or
development programs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>license rights to technologies, product candidates or products at an earlier
stage than otherwise would be desirable or on terms that are less favorable to us
than might otherwise be available; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain funds through arrangements that may require us to relinquish rights to
product candidates or products that we would otherwise seek to develop or
commercialize by ourselves.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Funding, especially on terms acceptable to us, may not be available to meet our future capital
needs because of the deterioration of the credit and capital markets.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Global market and economic conditions have been, and continue to be, disruptive and volatile. The
debt and equity capital markets have been impacted by significant write-offs in the financial
services sector and the re-pricing of credit risk in the broadly syndicated market, among other
things. These events have negatively affected general economic conditions and it is uncertain when
the credit and capital markets will stabilize or improve.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In particular, the cost of raising money in the debt and equity capital markets has increased
substantially while the availability of funds from those markets has diminished significantly.
Also, as a result of concern about the stability of financial markets generally and the solvency of
counterparties specifically, the cost of obtaining money from the credit markets has increased as
many lenders and institutional investors have increased interest rates, enacted tighter lending
standards and reduced and, in some cases, ceased to provide funding to borrowers. Low valuations
and decreased appetite for equity investments, among other factors, may make the equity markets
difficult to access on terms or unavailable altogether.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If funding is not available when needed, or is available only on unfavorable terms, meeting our
capital needs or otherwise taking advantage of business opportunities may become challenging, which
could have a material adverse effect on our business plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Development of our proposed product candidates is a lengthy, expensive and uncertain process that
requires investment of substantial amounts of time and money that may not yield viable products
which may cause our business and results of operations to suffer.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We face the risks of failure inherent in developing drugs based on new technologies. None of our
product candidates have received regulatory approval for commercial sale and our product candidates
may never be commercialized. In addition, all of our product candidates are in the early stages of
development and several programs are on hold pending additional financing. During the third
quarter of 2008, we commenced clinical trials for the first time with our lead product candidates,
PMX-30063 and PMX-60056. The progress and results of these and any future clinical trials or
future pre-clinical testing are uncertain, and if our product candidates do not receive regulatory
approvals, our business, operating results, financial condition and cash flows will be materially
adversely affected. Our product candidates are not expected to be commercially available for
several years, if at all.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our development programs require a significant amount of cash to support the development of product
candidates. We estimate that it will cost $65 to $85&nbsp;million in research, drug development and
clinical development costs over 36-48&nbsp;months to file an NDA for each of PMX-30063 and PMX-60056,
assuming adequate and timely financing.
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"> We may not be able to obtain additional financing on terms
acceptable to us or at all to allow us to fully fund our product candidates through the regulatory
approval process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, a number of potential drugs have shown promising results in early testing but failed
in subsequent clinical trials and/or failed to obtain necessary regulatory approvals. Data
obtained from tests are susceptible to varying interpretations, which may delay, limit or prevent
regulatory approval. Regulatory authorities may refuse or delay approval as a result of many other
factors, including changes in regulatory policy during the period of product development.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Completion of clinical trials may take many years. The length of time required varies
substantially according to the type, complexity, novelty and intended use of the product candidate.
The FDA monitors the progress of each phase of testing, and may require the modification,
suspension, or termination of a trial if it is determined to present excessive risks to patients.
The clinical trial process may also be accompanied by substantial delay and expense and the data
generated in these studies ultimately may not be sufficient for marketing approval by the FDA. Our
rate of commencement and completion of clinical trials may be delayed by many factors, including:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our inability to manufacture sufficient quantities of materials for use in clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>variability in the number and types of patients available for each study;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>difficulty in maintaining contact with patients after treatment, resulting in incomplete data;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unforeseen safety issues or side effects;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>poor or unanticipated effectiveness of products during the clinical trials; and/or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>government or regulatory delays.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notwithstanding the submission of any requested additional information, the FDA ultimately may
decide that the application does not satisfy the regulatory criteria for approval and refuse to
approve the application by issuing a &#147;not approvable&#148; letter. Furthermore, the FDA may prevent us
from marketing a product candidate under a label for its desired indications or place other
conditions, including restrictive labeling, on distribution as a condition of any approvals, which
may impair commercialization of the product.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We are a development stage company, which makes it difficult to evaluate our existing business and
business prospects and increases the risk that the value of any investment in our Company may
decline.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a development stage company and to date, our only revenues have been from research grants.
We will not be able to generate revenue from product sales or royalties unless and until we receive
regulatory approval and begin commercialization of our product candidates or otherwise out-license
our compounds. We are not certain of when, if ever, that will occur. Although we intend to
introduce new products, we may not do so. Because the market for our products is relatively new,
uncertain and evolving, and because we are a development stage company, it is difficult to assess
or predict the growth rate, if any, and the size of this market. We may not develop additional
products, a market for our products may not develop, and/or our products may not achieve market
acceptance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If our product candidates are not demonstrated to be sufficiently safe and effective in clinical
trials, they will not receive regulatory approval and we will be unable to commercialize them and
our business and results of operations will suffer.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our product candidates must satisfy rigorous standards of safety and efficacy before they can be
approved by the FDA and/or other foreign regulatory authorities for commercial use. The FDA and
foreign regulatory authorities have full discretion over this approval process. We will need to
conduct significant additional research, involving testing in animals and in humans, before we can
file applications for product approval. Typically, in the pharmaceutical industry there is a high
rate of attrition for product candidates in pre-clinical testing and clinical trials. Also,
satisfaction of regulatory requirements typically takes many years, is dependent upon the type,
complexity and novelty of the product and requires the expenditure of substantial resources.
Success in pre-clinical testing and early clinical trials does not ensure that later clinical
trials will be successful. For example, a number of companies in the pharmaceutical industry,
including biotechnology companies, have suffered significant setbacks in advanced clinical trials,
even after promising results in earlier trials and in interim analyses. In addition, delays or
rejections may be encountered based upon additional government regulation, including any changes in
FDA policy, during the process of product development, clinical trials and regulatory approvals.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are not able to retain our current management and advisory team and attract and retain
qualified scientific, technical and business personnel, our business will suffer.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are highly dependent on our executive officers and other key management and technical personnel,
including Nicholas Landekic, Richard Scott, Ph.D., Eric McAllister, M.D., Ph.D., Edward Smith, Greg
Ford and Bozena Korczak, Ph.D., as well as key members of our advisory team, including William
DeGrado, Ph.D., Michael Klein, Ph.D. and Gregory Tew, Ph.D. The loss of any of them could have a
material adverse effect on our future operations. We presently do not maintain &#147;key person&#148; life
insurance policies on any of our personnel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our success is also dependent on our ability to attract, retain and motivate highly trained
technical, marketing, sales and management personnel for the development, maintenance and expansion
of our activities. We may not be able to retain our existing personnel or attract additional
qualified employees. The loss of key personnel or the inability to hire and retain additional
qualified personnel in the future could have a material adverse effect on our business, financial
condition and results of operation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our success is dependent on the continuation of certain licensing arrangements and other strategic
relationships with third parties. These arrangements and relationships may not continue and we may
not be successful in entering into other similar arrangements and relationships.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All of our product candidates are licensed from or based upon licenses from either the University
of Pennsylvania or the University of Massachusetts. If either or any of these license agreements
are properly terminated, our ability to advance our current product candidates or develop new
product candidates will be materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to these licensing arrangements, we rely on the expertise of Dr.&nbsp;William DeGrado, a
Professor of Biochemistry and Biophysics at the University of Pennsylvania, and Dr.&nbsp;Gregory Tew, an
Assistant Professor in the Polymer Science and Engineering Department at the University of
Massachusetts. If our agreements with either or both of Drs.&nbsp;DeGrado and Tew, were terminated, our
ability to advance our current product candidates or develop new product candidates may be
adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We depend, and will continue to depend, on these arrangements, and potentially on other licensing
arrangements and/or strategic relationships with third parties for the research, development,
manufacturing and commercialization of our product candidates. If any of our licenses or
relationships are terminated or breached, we may:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>lose our rights to develop and market our product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>lose patent and/or trade secret protection for our product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>experience significant delays in the development or commercialization of our
product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>not be able to obtain any other licenses on acceptable terms, if at all; and/or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>incur liability for damages.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Licensing arrangements and strategic relationships in the pharmaceutical and biotechnology
industries can be very complex, particularly with respect to intellectual property rights.
Disputes may arise in the future regarding ownership rights to technology developed by or with
other parties. These and other possible disagreements between us and third parties with respect to
our licenses or our strategic relationships could lead to delays in the research, development,
manufacture and commercialization of our product candidates. These third parties may also pursue
alternative technologies or product candidates either on their own or in strategic relationships
with others in direct competition with us. These disputes could also result in litigation or
arbitration, both of which are time-consuming and expensive, and could require significant time and
attention from our management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our i.v. antibiotic product candidate or any of our other eligible product candidates may not be
granted any of the accelerated development or approval paths by the FDA and, even if any of our
product candidates receive such status, development of the product candidate may not be
accelerated.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe that our i.v. antibiotic product candidate, which is a systemic antibiotic drug, may be
eligible for one of the accelerated development or approval paths under FDA procedures, such as
&#147;fast track,&#148; &#147;priority review&#148; or &#147;accelerated approval.&#148; We have not yet applied for any of these
designations for our i.v. antibiotic product candidate or any of our other product candidates. Our
product candidates may not receive any such consideration. If granted, some of these paths may
help to abbreviate the size and scope of the trials required for submission and approval of an NDA
and/or to shorten the review time of any such filing. If the FDA grants any of these designations
to any of our product candidates, we may then make an application with the FDA with respect to any
further development program and corresponding regulatory strategy.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Even in the event that one of our product candidates is designated for &#147;fast track,&#148; &#147;priority
review&#148; or &#147;accelerated approval&#148; status, such a designation does not necessarily mean a faster
development process or regulatory review process or necessarily confer any advantage with respect
to approval compared to conventional FDA procedures. Any accelerated designation status may be
withdrawn by the FDA if the FDA believes that this designation is no longer supported by emerging
data from our clinical development program or for patient safety reasons. Receiving &#147;fast track,&#148;
&#147;priority review&#148; or &#147;accelerated approval&#148; status from the FDA does not guarantee that we will
qualify for or be able to take advantage of any accelerated development or approval procedures.
Even if the accelerated development or approval procedures are available to us, depending on the
results of clinical trials, we may elect to follow the more traditional approval processes for
strategic and marketing reasons, since drugs approved under &#147;accelerated approval&#148; procedures may
be more likely to be subjected to post-approval Phase 4 clinical studies to provide confirmatory
evidence that they are safe and effective. If we fail to conduct any such required post-approval
studies or if the studies fail to verify that any of our product candidates are safe and effective,
our FDA approval could be revoked. It can be difficult, time-consuming and expensive to enroll
patients in Phase 4 clinical trials because physicians and patients are less likely to participate
in a clinical trial to receive a drug that is already commercially available.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Even if regulatory authorities approve our product candidates, they may not be commercially
successful.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our product candidates may not be commercially successful because physicians, government agencies
and other third-party payors may not accept them. Third parties may develop superior products or
have proprietary rights that preclude us from marketing our products. We also expect that most of
our product candidates will be very expensive, if approved. If we do obtain regulatory approval
for any of our product candidates, we will need to achieve patient acceptance and demand in order
to be commercially successful. Patient acceptance of and demand for any product candidates will
depend upon many factors, including but not limited to, the extent, if any, of reimbursement of
drug and treatment costs by government agencies and other third-party payors, pricing, the safety
and effectiveness of alternative products, and the prevalence and severity of side effects
associated with our products. If we do not achieve product acceptance and sufficient demand, we
will not be able to sell our products and our operating results and financial condition will be
materially adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We do not currently have sales, marketing or distribution capabilities. If we fail to effectively
sell, market and distribute any product candidate for which we receive regulatory approval, our
business and results of operations will suffer.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If we are unable to create sales, marketing and distribution capabilities or enter into agreements
with third parties to perform these functions, we will not be able to successfully commercialize
any of our product candidates that receive regulatory approval in the future. We currently have no
sales, marketing or distribution capabilities. In order to successfully commercialize any of our
product candidates, we must either internally develop sales, marketing and distribution
capabilities or make arrangements with third parties to perform these services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If we do not develop a marketing and sales force with technical expertise and supporting
distribution capabilities, we will be unable to market any of our products directly. To promote
any of our products through third parties, we will have to locate acceptable third parties for
these functions and enter into agreements with them on acceptable terms and we may not be able to
do so. In addition, any third-party arrangements we are able to enter into may result in lower
revenues than we could have achieved by directly marketing and selling our products.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may suffer losses from product liability claims.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any of our product candidates could cause adverse events to patients, such as immunologic or
allergic reactions. These reactions may not be observed in clinical trials, but may nonetheless
occur after commercialization. If any of these reactions occur, they may render our product
candidates ineffective in some patients and our sales would suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We may be susceptible to product liability lawsuits, from events arising out of the use of product
candidates in clinical studies. If product liability lawsuits are brought against us, we may incur
substantial liabilities and may be required to limit commercialization of our products. Our
business exposes us to potential product liability risks, which are inherent in the testing,
manufacturing, marketing and sale of pharmaceutical products. We may not be able to avoid product
liability claims. Product liability insurance for the pharmaceutical and biotechnology industries
is generally expensive, if available at all. If we are unable to protect against potential product
liability claims, we may be unable to commercialize our product candidates. A successful product
liability claim brought against us in excess of our insurance coverage may cause us to incur
substantial liabilities and, as a result, our business may fail.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Due to our reliance on third-party manufacturers, suppliers and research organizations, we may be
unable to implement our manufacturing, supply and clinical operations strategies, which would
materially harm our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If our current and future licensing, manufacturing and supply strategies are unsuccessful, then we
may be unable to complete any future preclinical or clinical trials and/or commercialize our
product candidates in a timely manner, if at all. Completion of any potential future pre-clinical
trials and commercialization of our product candidates will require access to, or development of,
facilities to manufacture a sufficient supply of our product candidates, or the ability to license
them to other companies to perform these functions. We do not have the resources, facilities or
experience to manufacture our product candidates on our own and do not intend to develop or acquire
facilities for the manufacture of product candidates for pre-clinical trials, clinical trials or
commercial purposes in the foreseeable future. We intend to continue to license technology and/or
rely on contract manufacturers to produce sufficient quantities of our product candidates necessary
for any pre-clinical or clinical testing we undertake in the future. Such contract manufacturers
may be the sole source of production and may have limited experience at manufacturing, formulating,
analyzing, filling and finishing our types of product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also intend to rely on third parties to supply the components that we will need to develop, test
and commercialize all of our product candidates. There may be a limited supply of these
components. We might not be able to enter into agreements that assure us of the availability of
such components in the future from any supplier. Our potential suppliers may not be able to
adequately supply us with the components necessary to successfully conduct our pre-clinical and
clinical trials and/or to commercialize our product candidates. If we cannot acquire an acceptable
supply of components to produce our product candidates, we will not be able to complete
pre-clinical and clinical trials and will not be able to commercialize our product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, we rely on contract research organizations in conducting clinical trials for our
product candidates. We do not have the resources, facilities or experience to conduct clinical
studies for our product candidates on our own and do not intend to develop or acquire such
resources, facilities or experience in the foreseeable future. The quality, cost and timing of
work performed by our contracted contract research organizations has a significant impact on our
clinical programs and our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we make technology or product acquisitions, we may incur a number of costs, may have integration
difficulties and may experience other risks that could harm our business and results of operations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All of our product candidates are licensed from, or based upon technologies licensed from, third
parties. We may acquire and/or license additional product candidates and/or technologies in the
future. Any product candidate or technology we license or acquire will likely require additional
development efforts prior to commercial sale, including extensive clinical testing and approval by
the FDA and applicable foreign regulatory authorities, if any. All product candidates are prone to
risks of failure inherent in technology product development, including the possibility that the
product candidate or product developed based on licensed technology will not be shown to be
sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot
assure you that any product candidate that we develop based on acquired or licensed technology that
is granted regulatory approval will be manufactured or produced economically, successfully
commercialized or widely accepted in the marketplace. Moreover, integrating any newly acquired
product could be expensive and time-consuming. If we cannot effectively manage these aspects of
our business strategy, our business may not succeed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Furthermore, proposing, negotiating and implementing an economically viable acquisition or license
can be a lengthy, costly and complex process. Other companies, including those with substantially
greater financial, marketing and sales resources, may compete with us for the acquisition or
license of product candidates and/or technologies. We may not be able to acquire the rights to
alternative product candidates and/or technologies on terms that we find acceptable, or at all.
Our failure to acquire or license alternative products and/or technologies could have a material
adverse effect on our business, prospects and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Failure to effectively manage our growth may have a material adverse effect on our business,
results of operations and financial condition.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If we commence Phase 2 clinical trials for our two lead product candidates, PMX-30063 and
PMX-60056, of which there can be no assurance as to the availability of sufficient adequate
additional funding needed in order to commence such trials, we will need to expand our operations,
including hiring of additional personnel. However, we may not be able to effectively grow and
expand our business. Successful implementation of our business plan will require management of
growth, which will result in an increase in the level of responsibility for management personnel.
To manage growth effectively, we will be required to continue to implement and improve our
operating and financial systems and controls to expand, train and manage our employee base. The
management, systems and controls currently in place or to be implemented may not be adequate for
such growth, and the steps taken to hire
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">personnel and to improve such systems and controls might
not be sufficient. If we are unable to manage our growth effectively, it will have a material
adverse effect on our business, results of operations and financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We rely on third parties to provide software necessary to the future success of our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Currently, we rely on a non-exclusive license from the University of Pennsylvania to use, copy,
perform, display, distribute, modify and prepare derivative works based on three software packages,
which include a suite of proprietary computational algorithms that we use in the development,
refinement, and testing of our product candidates. If this license agreement is properly
terminated by the University of Pennsylvania, our ability to advance our current product candidates
or develop new product candidates may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the future, we expect to rely upon the software programs licensed from the University of
Pennsylvania, as well as software licensed from other third parties, including software that might
be integrated with our internally developed software and used to perform key functions. If we
license such third-party software, it is likely that certain of these licenses may not contain
favorable terms for us, including duration for limited terms, can be renewed only by mutual consent
and may be terminated if we breach the terms of the license and fail to cure the breach within a
specified period of time. Such licenses may not be available to us on commercially reasonable
terms, if at all. The loss of or inability to maintain or obtain licenses on such third party
software could result in the discontinuation of, or delays or reductions in, product shipments
unless and until equivalent technology is identified, licensed and integrated with our software.
Any such discontinuation, delay or reduction would harm our business, results of operations and
financial condition. In addition, financial or other difficulties that may be experienced by such
third-party vendors may have a material adverse effect upon the technologies that may be
incorporated into our products. If such technologies become unavailable, we may not be able to
find suitable alternatives, which could harm our business, operating results, and financial
condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our executive officers and directors have the ability to significantly influence matters submitted
to our stockholders for approval.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our executive officers and directors, in the aggregate, beneficially own shares representing
approximately 14% of our common stock. Beneficial ownership includes shares over which an
individual or entity has investment or voting power and includes shares that could be issued upon
the exercise of options and warrants within 60&nbsp;days after the date of determination. On matters
submitted to our stockholders for approval, holders of our common stock are entitled to one vote
per share. If our executive officers and directors choose to act together, they would have
significant influence over all matters submitted to our stockholders for approval, as well as our
management and affairs. For example, these individuals, if they chose to act together, would have
significant influence on the election of directors and approval of any merger, consolidation or
sale of all or substantially all of our assets. This concentration of voting power could delay or
prevent an acquisition of our company on terms that other stockholders may desire.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to our Intellectual Property</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>The obstacles to procurement and enforcement of our intellectual property and proprietary rights
could harm our competitive position by allowing competitors access to our proprietary technology
and to introduce competing products.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We regard our product candidates as proprietary and rely primarily on a combination of patents,
trademarks, copyrights, and trade secrets and other methods to protect our proprietary rights. We
maintain confidentiality agreements with our employees, consultants and current and potential
affiliates, customers and business partners.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If we fail to secure and then enforce patents and other intellectual property rights underlying our
product candidates and technologies, we may be unable to compete effectively. The pharmaceutical
industry places considerable importance on obtaining patent and trade secret protection for new
technologies, products and processes. Our success will depend, in part, on our ability, and the
ability of our licensors, to obtain and to keep protection for our products and technologies under
the patent laws of the U.S. and other countries, so that we can stop others from using our
inventions. Our success also will depend on our ability to prevent others from using our trade
secrets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our pending U.S. and foreign patent applications may not issue as patents or may not issue in a
form that will be advantageous to us. If we do not receive patents for these applications or do
not receive adequate protections, our developments will not have any proprietary protection and
other entities will be able to make the products and compete with us. Also, any patents we have
obtained or do obtain may be challenged by reexamination, opposition or other administrative
proceeding, or may be challenged in litigation, and such challenges could result in a determination
that the patent is invalid or unenforceable. In addition, competitors may be able to design
alternative methods or devices that avoid infringement of our patents. To the extent our
intellectual property protection offers
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">inadequate protection, or is found to be invalid, we are
exposed to a greater risk of direct competition. Both the patent application process and the
process of managing patent disputes can be time consuming and expensive and may require significant
time and attention from our management. Furthermore, the laws of some foreign countries may not
protect our intellectual property rights to the same extent as do the laws of the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, the standards that the United States Patent and Trademark Office, or the U.S. PTO,
uses to grant patents can change. Consequently, we may be unable to determine the type and extent
of patent claims that will be issued to us or to our licensors in the future, if any patent claims
are issued at all. In addition, if the U.S. PTO and/or other patent offices where we file our
patent applications increase the fees associated with filing and prosecuting patent applications we
would incur higher expenses and our intellectual property strategy could be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The confidentiality agreements we require of our employees and those which we enter into with other
parties may not provide adequate protection for our trade secrets, know-how or other confidential
information or prevent any unauthorized use or disclosure or the unlawful development by others.
If any of our confidential intellectual property is disclosed, our business may suffer. Such
agreements may not be enforceable or may not provide meaningful protection for our trade secrets or
other proprietary information in the event of unauthorized use or disclosure or other breaches of
the agreements, and we may not be able to prevent such unauthorized disclosure. Monitoring
unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent
such disclosure are, or will be, adequate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may have to engage in costly litigation to enforce or protect our proprietary technology, which
may harm our business, results of operations, financial condition and cash flows.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The pharmaceutical field is characterized by a large number of patent filings involving complex
legal and factual questions, and, therefore, we cannot predict with certainty whether any patents
or in-licensed patents will be enforceable. Additionally, we may not be aware of all of the
patents potentially adverse to our interests that may have been issued to others. Should third
parties file patent applications, or be issued patents, claiming technology also claimed by us in
pending applications, we may be required to participate in interference proceedings in the U.S. PTO
to determine priority of invention. We, or our licensors, also could be required to participate in
interference proceedings involving our issued patents and pending applications of another entity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the event a competitor infringes upon our patent or other intellectual property rights,
litigation to enforce our intellectual property rights or to defend our patents against challenge,
even if successful, could be expensive and time consuming and could require significant time and
attention from our management. We may not have sufficient resources to enforce our intellectual
property rights or to defend any patents against challenges from others. If our intellectual
property does not provide adequate protection against our competitors&#146; products, our competitive
position and business could be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our commercial success depends significantly on our ability to develop and commercialize our
products without infringing the intellectual property rights of third parties.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our commercial success will depend, in part, on our not infringing the patents or proprietary
rights of third parties. Third parties that believe we are infringing on their rights could bring
actions against us claiming damages and seeking to enjoin clinical testing, manufacturing and
marketing of the affected product or products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If we become involved in any litigation, it could consume a substantial portion of our resources,
regardless of the outcome of the litigation. If any of these actions are successful, we could be
required, in addition to any potential liability for damages, to obtain a license to continue to
manufacture or market the affected product, in which case we may be required to pay substantial
royalties or grant cross-licenses to our patents. However, any such license may not be available
on acceptable terms or at all. Ultimately, we could be prevented from commercializing a product,
or forced to cease some aspect of our business operations, as a result of patent infringement
claims, which would harm our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We may enter into licensing agreements with third party intellectual property owners for use of
their property in connection with our products in order to ensure that such third party&#146;s rights
are not infringed. Although we are not aware that any of our intended products would materially
infringe the rights of others, a claim of infringement may be asserted against us and any such
assertion may result in costly litigation or may require us to obtain a license in order to make,
use, or sell our products. Third parties may assert infringement claims against us in the future
with respect to current or future products. Any such claims or litigation, with or without merit,
could be costly and a diversion of management&#146;s attention, which could have a material adverse
effect on our business, operating results and financial condition. Adverse determinations in such
claims or litigation could harm our business, operating results and financial condition.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be unable to protect the intellectual property rights of the third parties from whom we
license certain of our intellectual property or with whom we have entered into other strategic
relationships, which may harm our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are, and will continue to be, reliant upon such third parties to protect their intellectual
property rights to this technology. Such third parties may determine not to protect the
intellectual property rights that we license from them and we may be unable defend such
intellectual property rights on our own or we may have to undertake costly litigation to defend the
intellectual property rights of such third parties. We may not continue to have proprietary rights
to the intellectual property that we license from such third parties or otherwise have the right to
use through similar strategic relationships. Any loss or limitations on use with respect to our
right to use such intellectual property licensed from third parties or otherwise obtained from
third parties with whom we have entered into strategic relationships could have a material adverse
effect on our business, operating results and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Many countries, including certain countries in Europe, have compulsory licensing laws under which a
patent owner may be compelled to grant licenses to third parties. In addition, most countries
limit the enforceability of patents against government agencies or government contractors. In
these countries, the patent owner may be limited to monetary relief and may be unable to enjoin
infringement, which could materially diminish the value of the patent. Compulsory licensing of
life-saving products is also becoming increasingly popular in developing countries, through either
direct legislation or international initiatives. Such compulsory licenses could be extended to
include some of our product candidates, which may limit our potential revenue opportunities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>International patent protection is particularly uncertain, and if we are involved in opposition
proceedings in foreign countries, we may have to expend substantial sums and management resources.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Patent law outside the U.S. is even more uncertain than in the U.S. and is currently undergoing
review and revision in many countries. Further, the laws of some foreign countries may not protect
our intellectual property rights to the same extent as U.S. laws. For example, certain countries
do not grant patent claims that are related to the treatment of humans. We may participate in
opposition proceedings to determine the validity of our foreign patents or our competitors&#146; foreign
patents, which could result in substantial costs and diversion of our management&#146;s efforts.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to our Industry</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may experience delays in obtaining required regulatory approvals in the U.S. to market our
proposed product candidates.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Delays in regulatory approval, limitations in regulatory approval and withdrawals of regulatory
approval may have a negative impact on our results of operations. If we experience significant
delays in testing or approvals, our product development costs, or our ability to license product
candidates, will increase. If the FDA grants regulatory approval of a product, this approval will
be limited to those disease states and conditions for which the product has been demonstrated
through clinical trials to be safe and effective. Any product approvals that we receive in the
future could also include significant restrictions on the use or marketing of our products.
Product approvals, if granted, can be withdrawn for failure to comply with regulatory requirements
or upon the occurrence of adverse events following commercial introduction of the products.
Failure to comply with applicable FDA or other applicable regulatory requirements may result in
criminal prosecution, civil penalties, recall or seizure of products, total or partial suspension
of production or injunction, as well as other regulatory action against our product candidates or
us. If approvals are withdrawn for a product, or if a product were seized or recalled, we would be
unable to sell or license that product and our revenues would suffer. In addition, outside the
U.S., our ability to market any of our potential products is contingent upon receiving market
application authorizations from the appropriate regulatory authorities and these foreign regulatory
approval processes include all of the risks associated with the FDA approval process described
above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If competitors develop and market products that offer advantages as compared to our product
candidates, our commercial opportunities will be limited.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other companies have product candidates in development to treat the conditions we are seeking to
ultimately treat. If these competitors are able to develop products that are more effective, have
fewer side effects, are less expensive or offer other advantages as compared to our product
candidates, our commercial opportunities will be limited. Furthermore, if our competitors
commercialize competing products before we do, then our ability to penetrate the market and sell
our products may be impaired.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our competitors include fully integrated pharmaceutical companies and biotechnology companies,
universities and public and private research institutions. Many of the organizations competing
with us have substantially greater capital resources, larger research and development staffs and
facilities, greater experience in drug development and
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in obtaining regulatory approvals, and
greater manufacturing and marketing capabilities than we do. These organizations also compete with
us to:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>attract parties for acquisitions, joint ventures or other collaborations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>license proprietary technology that is competitive with the technology we are practicing;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>attract funding; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>attract and hire scientific talent.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the antibiotic market, many major pharmaceutical companies, such as GlaxoSmithKline, Pfizer,
Bayer, Merck and Sanofi Aventis have already established significant positions. Additionally, many
smaller companies, such as Cubist Pharmaceuticals, Oscient Therapeutics, NovaBay Pharmaceuticals,
Inc., Ceragenix and Inhibitex either have marketed, or are attempting to enter this market by
developing, novel and more potent antibiotics that are intended to be effective against
drug-resistant bacterial strains. In the UFH antagonist market, protamine is the only available
antidote for and antagonist to UFH and, as such, protamine currently dominates this market.
Because of protamine&#146;s virtual monopoly of the UFH antidote/antagonist market, we believe that it
may be difficult for our future UFH antidote/antagonist products to penetrate this market. There
may be additional competitive products about which we are not aware.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Healthcare reform measures could adversely affect our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The business and financial condition of pharmaceutical companies is affected by the efforts of
governmental and third party payors to contain or reduce the costs of healthcare. In the U.S. and
in foreign jurisdictions there have been, and we expect that there will continue to be, a number of
legislative and regulatory proposals aimed at changing the healthcare system. For example, in some
countries other than the U.S., pricing of prescription drugs is subject to government control, and
we expect proposals to implement similar controls in the U.S. to continue. The implementation of
such additional controls could have the effect of reducing the prices that we are able to charge
for any products we develop and sell through these plans. Prescription drug legislation and
related amendments or regulations could also cause third-party payors other than the federal
government, including the states under the Medicaid program, to discontinue coverage for any
products we develop or to lower reimbursement amounts that they pay.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Further federal, state and foreign healthcare proposals and reforms are likely. While we cannot
predict the legislative or regulatory proposals that will be adopted or what effect those proposals
may have on our business, including the future reimbursement status of any of our product
candidates, the pendency or approval of such proposals could result in a decrease in our stock
price or limit our ability to raise capital or to obtain strategic partnerships or licenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Because our activities may involve the use of hazardous materials, we may be subject to claims
relating to improper handling, storage or disposal of these materials that could be time consuming
and costly.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If we use biological and hazardous materials in a manner that causes injury, we may be liable for
damages. Our research and development activities may involve the controlled use of potentially
harmful biological materials as well as hazardous materials, chemicals and various radioactive
compounds. We cannot completely eliminate the risk of accidental contamination or injury from the
use, storage, handling or disposal of these materials. In the event of contamination or injury, we
could be held liable for damages that result, and any liability could exceed our resources. We are
subject to federal, state and local laws and regulations governing the use, storage, handling and
disposal of these materials and specified waste products. The cost of compliance with these laws
and regulations could be significant.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to our Capital Stock and this Offering</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We
are registering the resale of a maximum  of 12,000,000 shares of common stock which may be
issued to Dutchess under the Equity Line. The resale of such shares by Dutchess could depress the
market price of our common stock.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are registering the resale of a maximum  of 12,000,000 shares of common stock under the
registration statement of which this prospectus forms a part. We may issue up to that number of
shares to Dutchess pursuant to the Equity Line. The sale of these shares into the public market by
Dutchess could depress the market price of our common stock. As of May&nbsp;31, 2009, there were
59,845,065 shares of our common stock issued and outstanding.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-16-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Existing stockholders could experience substantial dilution upon the issuance of common stock
pursuant to the Equity Line.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our Equity Line with Dutchess contemplates our issuance of up to 12,000,000 shares of our common
stock to Dutchess, subject to certain restrictions and obligations. If the terms and conditions of
the Equity Line are satisfied, and we choose to exercise our put rights to the fullest extent
permitted and sell 12,000,000 shares of our common stock to Dutchess, our existing stockholders&#146;
ownership will be diluted by such sales.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Dutchess will pay less than the then-prevailing market price for our common stock under the Equity Line.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The common stock to be issued to Dutchess pursuant to the Investment Agreement will be purchased at
a 5% discount to the volume weighted average price (VWAP)&nbsp;of our common stock during the five
consecutive trading day period beginning on the trading day immediately following the date of
delivery of a put notice by us to Dutchess, subject to certain exceptions. Dutchess has a financial
incentive to sell our common stock upon receiving the shares to realize the profit equal to the
difference between the discounted price and the market price. If Dutchess sells the shares, the
price of our common stock could decrease.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may not be able to access sufficient funds under the Equity Line when needed.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our ability to put shares to Dutchess and obtain funds under the Equity Line is limited by the
terms and conditions in the Investment Agreement, including restrictions on when we may exercise
our put rights, restrictions on the amount we may put to Dutchess at any one time, which is
determined in part by the trading volume of our common stock, and a limitation on Dutchess&#146;s
obligation to purchase if such purchase would result in Dutchess&#146;s beneficial ownership of
PolyMedix exceeding 4.99%. In addition, we do not expect the Equity Line to satisfy all of our
funding needs, even if we are able and choose to take full advantage of the Equity Line.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our common stock is thinly traded and the price of our common stock may be negatively impacted by
factors that are unrelated to our operations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our common stock is currently quoted on the OTC Bulletin Board. Trading of our stock through the
OTC Bulletin Board is frequently thin and highly volatile. The market price of our common stock
could fluctuate substantially due to a variety of factors, including market perception of our
ability to achieve our business objectives, the results of our clinical trials, trading volume in
our common stock, changes in general conditions in the economy and the financial markets, or other
developments which affect us or our industry. In addition, the stock market is subject to extreme
price and volume fluctuations. This volatility has had a significant effect on the market price of
securities issued by many companies for reasons unrelated to their operating performance and could
have the same effect on our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>A decline in the price of our common stock could affect our ability to raise further working
capital and adversely impact our ability to continue operations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A prolonged decline in the price of our common stock could result in a reduction in the liquidity
of our common stock and a reduction in our ability to raise capital. Because a significant portion
of our operations has been and will continue to be financed through the sale of equity securities,
a decline in the price of our common stock could be especially detrimental to our liquidity and our
operations. Such reductions may force us to reallocate funds from other planned uses and may have
a significant negative effect on our business plans and operations, including our ability to
develop our product candidates and continue our current operations. If our stock price declines,
it may be more difficult to raise additional capital. If we are unable to raise sufficient capital
in the future, and we are unable to generate funds from operations sufficient to meet our
obligations, we will not be able to have the resources to continue our normal operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The market price for our common stock may also be affected by our ability to meet or exceed
expectations of analysts or investors. Any failure to meet these expectations, even if minor, may
have a material adverse effect on the market price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>When we issue additional shares in the future, it will likely result in the dilution of our
existing stockholders.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our certificate of incorporation authorizes the issuance of up to 250,000,000 shares of common
stock with a $0.001 par value and 10,000,000 preferred shares with a par value of $0.001, of which
59,845,065 common shares were issued and outstanding as of March&nbsp;31, 2009. We may need to increase
our authorized share count in order to issue additional shares of common stock in the future. From
time to time we also will increase the number of shares available for issuance in connection with
our equity compensation plans. Our board of directors may fix and
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->-17-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">determine the designations,
rights, preferences or other variations of each class or series within each class of preferred
stock and may choose to issue some or all of such shares to provide additional financing or acquire
more businesses in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Moreover, in the past, we issued warrants and options to acquire shares of common stock. As of
March&nbsp;31, 2009, we had warrants and options to purchase an aggregate of 46,089,911 shares of our
common stock. Warrants to purchase 4,119,194 shares of our common stock have weighted average
anti-dilution protection if we sell certain securities at a price per share less than $1.23 per
share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The issuance of any shares for acquisition, licensing or financing efforts, upon conversion of any
preferred stock or exercise of warrants and options, pursuant to our equity compensation plans, or
otherwise may result in a reduction of the book value and market price of the outstanding shares of
our common stock. If we issue any such additional shares, such issuance will cause a reduction in
the proportionate ownership and voting power of all current stockholders. Further, such issuance
may result in a change of control of our corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Financial Industry Regulatory Authority (FINRA)&nbsp;sales practice requirements may also limit a
stockholder&#146;s ability to buy and sell our common stock.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">FINRA has adopted rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customer&#146;s
financial status, tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative low priced
securities will not be suitable for at least some customers. FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common stock, which may
limit your ability to buy and sell our stock and have an adverse effect on the market for our
shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We have never paid dividends on our common stock and do not anticipate paying any in the
foreseeable future.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have never declared or paid a cash dividend on our common stock and we do not expect to pay cash
dividends in the foreseeable future. If we do have available cash, we intend to use it to grow our
business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Sales of a substantial number of shares of our common stock into the public market may result in
significant downward pressure on the price of our common stock and could affect your ability to
realize the current trading price of our common stock.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sales of a substantial number of shares of our common stock in the public market could cause a
reduction in the market price of our common stock. To the extent stockholders sell shares of
common stock, the price of our common stock may decrease due to the additional shares of common
stock in the market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any significant downward pressure on the price of our common stock as stockholders sell their
shares could encourage short sales of our common stock. Any such short sales could place further
downward pressure on the price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Delaware law, our stockholder rights plan and our amended and restated certificate of incorporation
and amended and restated bylaws contain provisions that could delay and discourage takeover
attempts that stockholders may consider favorable.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain provisions of our amended and restated certificate of incorporation and our amended and restated bylaws and
applicable provisions of Delaware corporate law may make it more difficult for or prevent a third
party from acquiring control of us or changing our board of directors and management. These
provisions include:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability of our board of directors to issue preferred stock with voting or
other rights or preferences;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>limitations on the ability of stockholders to amend our charter documents,
including stockholder supermajority voting requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>requirements that special meetings of our stockholders may only be called by the
chairman of our board of directors, our president, or upon a resolution adopted by,
or an affirmative vote of, a majority of our board of directors; and</TD>
</TR>


</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->-18-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>advance notice procedures our stockholders must comply with in order to nominate
candidates for election to our board of directors or to place stockholders&#146;
proposals on the agenda for consideration at meetings of stockholders.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We will also be afforded the protections of Section&nbsp;203 of the Delaware General Corporation Law,
which will prevent us from engaging in a business combination with a person who acquires at least
15% of our common stock for a period of three years from the date such person acquired such common
stock, unless board or stockholder approval were obtained.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We review these provisions from time to time. Any delay or prevention of a change of control
transaction or changes in our board of directors or management could deter potential acquirers or
prevent the completion of a transaction in which our stockholders could receive a substantial
premium over the then current market price for their shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, we have a stockholder rights plan pursuant to which we distributed rights to purchase
shares of our Series&nbsp;C Preferred Stock. The rights become exercisable upon the earlier of ten
business days after a public announcement that a person or group of affiliated or associated
persons has acquired, or obtained the right to acquire, 15% or more of our common stock then
outstanding or ten business days after the commencement of a tender or exchange offer that would
result in a person or group beneficially owning 15% or more of our common stock then outstanding.
These rights may cause substantial dilution to a person or group that attempts to acquire us (or
which otherwise acquires 15% or more of our common stock) on terms or in a manner not approved by
the Board, except pursuant to an offer conditioned upon the negation, purchase or redemption of
these rights. Accordingly, these rights could delay or discourage someone from acquiring our
business, even if doing so would benefit our stockholders.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-19-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<A name="105"></A>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>USE OF PROCEEDS</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We will not receive any proceeds from the resale of our common stock offered by Dutchess. However,
we will receive proceeds from the sale of our common stock to Dutchess pursuant to the Investment
Agreement. The proceeds from our exercise of the put option pursuant to the Investment Agreement
will be used to support the commercialization of our current and future product candidates, to fund
our research and development activities, for general working capital needs, or for other purposes
that our board of directors, in its good faith, deems to be in our best interest.</DIV>

<A name="106"></A>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SELLING STOCKHOLDER</B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The information provided in the table and discussions below has been obtained from the selling
stockholder. The selling stockholder may have sold, transferred or otherwise disposed of, or may
sell, transfer or otherwise dispose of, at any time or from time to time since the date on which it
provided the information regarding the shares, all or a portion of the shares of common stock
beneficially owned in transactions exempt from the registration requirements of the Securities Act.
As used in this prospectus, &#147;selling stockholder&#148; includes the person or persons listed in the table below, and the donees, pledgees, transferees or other
successors in interest selling shares of our common stock received from the named selling
stockholder as a gift, pledge, distribution or other non sale-related transfer.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Beneficial ownership is determined in accordance with Rule&nbsp;13d-3(d) promulgated by the Securities
and Exchange Commission under the Exchange Act. Unless otherwise noted, each person or group
identified possesses sole voting and investment power with respect to the shares, subject to
community property laws where applicable.</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="8"><B>Beneficial Ownership of Common Shares Prior to</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Beneficial Ownership of Common</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="8" style="border-bottom: 1px solid #ffffff"><B>this Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Shares to be</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #ffffff"><B>Shares After this Offering</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Sold Under this</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Selling</TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #ffffff"><B>Prospectus</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Number of</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left">Stockholder</TD>

    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">Number of Shares</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff">Percent of Class</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"> Shares <SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #ffffff">Percent of Class</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px">
    <TD colspan="21" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Dutchess Equity
Fund, L.P. (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,000,000</TD>
    <TD>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>These numbers assume the selling stockholder sells all of its shares being offered pursuant to this prospectus.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Dutchess is a Delaware limited partnership. Michael Novielli and Douglas H. Leighton are
directors of Dutchess with voting and investment power over the shares.</TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents the maximum number of shares issuable by us and purchasable by Dutchess under the Investment Agreement, all of which are being offered by the selling stockholder under this prospectus.</TD>
</TR>
</TABLE>

<P align="center" style="font-size: 10pt"><!-- Folio -->-20-<!-- /Folio --></DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">





<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OUR BUSINESS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a biotechnology company focused on treating life threatening, serious, infectious diseases
and acute cardiovascular disorders with synthetic small molecule compounds that mimic the activity
of large natural protein molecules, compounds referred to as biomimetics. Using our proprietary
computational drug design technology, we have created novel defensin mimetic antibiotic compounds,
heparin antagonist compounds (or &#147;heptagonists&#148;) and other drug compounds intended for human
therapeutic use. The following chart illustrates the current stage of development of our
internally developed pipeline along with planned development timings for our two lead programs that
are in clinical development:
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="w74407w7440702.gif" alt="(CHART)">
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Program on hold pending additional financing</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Investigational New Drug Application (or &#147;IND&#148;) or equivalent Canadian Clinical Trial
Application</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">***</TD>
    <TD>&nbsp;</TD>
    <TD>Unfractionated heparin (&#147;UFH&#148;) and low molecular weight heparin (&#147;LMWH&#148;)</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>CLINICAL PROGRAMS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Defensin Mimetic Antibiotic Product Candidates</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Market Opportunity</I></B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Worldwide, more than seven million patients are hospitalized each year for bacterial infections,
with approximately 49&nbsp;million total patients being treated for infections annually. In 2002, the
estimated number of healthcare associated infections (HAI&#146;s) in U.S. hospitals, adjusted to include
federal facilities, was approximately 1.7&nbsp;million with 99,000 deaths according to a 2007 Public
Health Report issued by the Centers for Disease Control. According to a 2001 article published in
<I>Emergin</I>g <I>Infectious Diseases</I>, healthcare-acquired infections cost approximately $4.5&nbsp;billion
annually in the U.S. The same article estimates that drug-resistant bacteria cause more than 70%
of healthcare-acquired infections. A February&nbsp;2008 report from the Association for Professionals
in Infection Control
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and Epidemiology estimates that 70% of infections may now be resistant to antibiotics. As drug-resistance continues to spread, the need for potent novel antibiotic drugs
increases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">According to DataMonitor, a provider of healthcare market analysis data, the world&#146;s antibiotic
market was approximately $25.5&nbsp;billion in 2005 after growing at a compound annual growth rate of
5.1% between 2001 and 2005 and the hospital antibiotic market across the world&#146;s seven major
markets was $7.9&nbsp;billion in 2006 (MIDAS sales data, IMS Health, March, 2007). DataMonitor further
estimates that the U.S. market for all antibiotic drugs was approximately $10.8&nbsp;billion in 2004.
The portion of the antibiotic market that we initially intend to target is the North American
acute-care hospital market. This market includes intravenous or subcutaneously infused products
that are administered, or at least prescribed, in the hospital. According to IMS Health, another
leading provider of healthcare market analysis data, the size of this market during the twelve
months ended August&nbsp;2004 was approximately $3&nbsp;billion.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Host Defense Proteins</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our small molecule defensin mimetic antibiotic product candidates mimic the activity of host
defense proteins. Host defense proteins are part of the innate immune system. In the human body,
host defense proteins primarily exist in the respiratory tract, the urogenital tract, the
gastrointestinal track and the epidermal tissues under the skin, all locations where microbial
pathogens first enter the human body, and represent a first line of defense against bacterial
attack. Host defense proteins act rapidly against bacteria, unlike other parts of the immune
system that take longer to work.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Host defense proteins use a simple, but effective method for killing bacteria by targeting
bacterial membranes and disrupting them. At low doses, these antimicrobial proteins associate in
membranes causing membrane thinning and formation of transient pores leading to membrane
permeabilization and leakage of cellular ions and metabolites, which results in the killing of the
bacterial cell. At higher doses, they cause generalized disruption of the bilayer structure of the
membrane, leading to the complete breakdown of the bacterial membrane and leakage of cellular
contents, which results in the killing of the bacterial cell.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Antibiotics on the market today generally target specific molecular targets in bacteria and many
must enter the bacteria cell to work. Bacterial cells can become resistant to antibiotics through:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>genetic mutations that modify the molecular targets themselves, rendering them
invulnerable to the antibiotic in question; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>metabolic responses that cause the cell to pump out foreign agents, preventing
the antibiotics from accessing the molecular targets.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">By contrast, host defense proteins physically disrupt the cell from the outside. The mechanism of
action of the host defense proteins makes it difficult for bacteria to develop resistance because
of several reasons:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>they do not have to enter the bacterial cell to work;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>they act quickly, killing bacteria within minutes of exposure, thereby limiting
the bacterial response time; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in order to develop effective defenses, the bacteria would have to alter the
structure of its cell membrane, which is a highly complex multi-step response that
would likely reduce the ability of the newly mutated bacteria to grow and survive
in a natural environment due to changes in membrane transport of essential
nutrients and wastes.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">It has been documented in many studies published by the American Society of Microbiology and others
that susceptible bacteria do not readily develop resistance to host defense proteins under
experimental conditions where resistance readily develops against conventional antibiotics.
Furthermore, bacteria remain sensitive to the host defense proteins despite hundreds of millions of
years of evolution in which bacteria have been exposed to host defense proteins&#146; antimicrobial
mechanism of action.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Another favorable attribute of host defense proteins is that they selectively target bacteria and
not mammalian cells, by recognizing the differences in the composition of bacterial and mammalian
cell membranes. The outer surface of bacterial cell membranes is more negatively charged than
mammalian cells. Bacterial cell membranes also lack cholesterol, an essential component of all
mammalian membranes. Host defense proteins specifically target
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">membranes that lack cholesterol and have a high degree of negative electrical charge. Therefore, they selectively attack bacterial
cell membranes while mitigating harm to mammalian cells.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe that the host defense proteins provide an attractive mechanistic approach for the
development of a new type of antibiotic therapeutic drug due to their strong antimicrobial
activity, unique mechanism of action for which bacterial resistance appears less likely to develop,
and selective targeting of bacteria but not mammalian cells. Attempts were made in the past by
other companies to develop natural host defense proteins as novel antibiotics. Those products
lacked robust activity in models of systemic infection, and were studied for niche topical
applications, likely as a result of their limited systemic availability. None of them has been
successfully commercialized to date because of difficulties relating to some of the inherent
complexities associated with protein drugs: a lack of systemic bioavailability and stability. For
systemic applications, all protein drugs have a number of limitations, including often not being
bioavailable with either injectable or oral administration, often expensive to produce, often
unstable even with intravenous administration, and at risk of eliciting immunological reactions
which can neutralize their activity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our Approach</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have developed PMX-30063, our lead defensin mimetic antibiotic product candidate, and other
novel small molecule defensin mimetic antibiotics that mimic the activity of host defense proteins.
We are seeking to commercialize these defensin mimetic compounds as antibiotics in a variety of
forms to combat drug-resistant bacterial infections. PMX-30063 and our other defensin mimetic
antibiotic product candidates are completely synthetic, which make them easier and less expensive
to produce than proteins. Importantly, our small molecule compounds demonstrate activity in animal
models of systemic infection, activity that was lacking in others&#146; past attempts to develop natural
host defense proteins. These defensin mimetic antibiotic product candidates may be developed in a
variety of formulations, including injectable, tablet and topical, for a wide range of antibiotic
applications. The results of our preclinical experiments for PMX-30063 and our other defensin
mimetic antibiotic product candidates suggest several advantages compared to other marketed
antibiotics. Such advantages include:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Broad spectrum of activity, including against resistant bacterial strains</I>. By
acting on bacterial cell membranes, we believe our antibiotics will be effective
against a broad range of Gram-positive and Gram-negative pathogens. In our in
vitro efficacy studies, our defensin mimetic antibiotic product candidates as a
class demonstrated potent antibacterial activity on hundreds of common bacterial
pathogens. To support our initial clinical target of broad treatment of
<I>Staphylococcus </I>infections, we have also demonstrated activity against 148 different
strains and species of <I>Staph, </I>including 89 drug-resistant strains. The
antibacterial activity of our defensin mimetic antibiotic product candidates has
also been demonstrated in animal models of systemic infections.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Lower likelihood for the development of drug-resistance</I>. It is very difficult
for bacteria to develop drug resistance to natural antimicrobial host defense
proteins because these proteins act on bacterial membranes rather than on a single,
mutable molecular target, such as an enzyme. Because our defensin mimetic
antibiotic product candidates are designed to have the same mechanism of action as
host defense proteins, we anticipate they will have a similar lower likelihood of
developing bacterial resistance compared to conventional antibiotics. This reduced
likelihood of bacterial resistance has been demonstrated in laboratory serial
passage experimental studies.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Potentially faster acting than other antibiotics</I>. In time-kill studies, our
defensin mimetic antibiotic product candidates act quickly when bacteria are
exposed to them. We observed bactericidal activity in a matter of minutes after
exposure to our defensin mimetic antibiotic product candidates. In contrast, many
currently marketed drugs can take hours or even several days to show effect.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>PMX-30063 Clinical Development</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have scaled up synthesis of drug substance and manufactured clinical supplies for our lead
antibiotic compound, PMX-30063, under current Good Manufacturing Practice (&#147;cGMP&#148;) conditions. The
current Good Laboratory Practice (&#147;cGLP&#148;) compliant toxicology, safety pharmacology and
genotoxicity studies have been completed, which indicate that an effective therapeutic index for
PMX-30063 may be achieved. Our first product candidate will be an i.v. formulation intended to
treat complicated skin and soft tissue infections, including gynecological infections, caused by
strains of <I>Staph </I>bacteria. We anticipate that the bacterial targets of PMX-30063 will include drug
resistant strains, particularly broadly targeting the various strains of <I>Staph </I>bacteria. In the
future, we also hope to expand indications to also potentially include other bacterial strains.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Clinical Experiments to Date</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2008, we completed and announced positive results from our single dose escalation
clinical study of healthy volunteers receiving PMX-30063 at various dose levels (Phase 1A). This
ascending single-dose intravenous pharmacokinetic and safety study met the necessary Phase 1 goals
of defining both a limiting single dose and the plasma distribution/elimination kinetics. In this
study, the dose was not limited by any measurable clinical or laboratory parameters. A subjective
syndrome of parasthesias was identified, appearing only at the higher dosages and consisting of
abnormal neuronal sensations often likened to dental anesthesia. These effects were graded as mild
to moderate by investigators or subjects, but their reproducibility and dose-proportionality
allowed dose-escalation to be successfully concluded after achieving levels well in excess of the
expected therapeutic range. The effects were temporary and resolved on their own. The same study
provided detailed information on the time course of the drug during and after dosing. These
pharmacokinetics appear favorable for therapeutic use of the drug. The half-time for elimination
from the plasma was approximately 15 hours, allowing for flexibility in dosing to obtain optimal
peak and trough drug levels.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Planned Clinical Studies</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2009 we commenced a multi-dose study of healthy volunteers who will
receive PMX-30063 at various dose levels (Phase 1B). The primary endpoint for the two Phase 1
studies is a safety assessment. We have and plan to continue to conduct the Phase 1 studies to
United States standards, submit an IND with the FDA before commencing Phase 2 studies in the United
States, and ultimately seek regulatory approval in the United States.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">After Phase 1, our plan is to investigate and pursue one of the accelerated development and/or
review processes, which may be granted by the FDA to speed up the review process for products that
address an unmet medical need. These paths include: &#147;fast track,&#148; which is based on recognition by
the FDA of medical need; &#147;priority review,&#148; which provides for a six-month review time after filing
of a New Drug Application (&#147;NDA&#148;) and &#147;accelerated approval,&#148; under which drugs for serious or life
threatening disorders for which there is an unmet medical need may be approved based on Phase 2
clinical data or surrogate clinical markers, with a requirement to complete studies and show
clinical outcomes. If a compound is granted one of these designations, it may help to abbreviate
the size and scope of the trials required for submission and approval of an NDA and may help
shorten the review time of any such filing. Drugs to treat HIV, the virus that causes AIDS, are
examples of agents that have been approved under &#147;accelerated approval&#148; provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Further, each of the last three antibiotic drugs that targeted methicillin-sensitive <I>Staphylococcus
aureus</I>, or MRSA, drug resistant <I>Staph </I>infections, one of the anticipated clinical targets of
PMX-30063, and applied to be granted &#147;fast track&#148; status received such status. We believe that use
of PMX-30063 as an antibiotic would address an unmet medical need; however, the FDA may not grant
PMX-30063 any of these designations that would allow for accelerated development and/or review
status. See the section entitled &#147;Risk Factors&#148; for a further discussion of the risks associated
with our intention to apply for such accelerated development and/or review status.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If PMX-30063 is not granted accelerated approval status, we estimate that it will cost $65 to $85
million in research, drug development and clinical development costs over 36-48&nbsp;months to file an
NDA for this product candidate. In the event that we are granted &#147;fast track,&#148; &#147;priority review&#148;
or &#147;accelerated development&#148; status by the FDA, it is possible that both the time and cost to file
an NDA could be significantly less than these estimates. The exact extent of these potential time
and cost savings can only be determined based on future discussions with the FDA. In any case, we
do not currently have the funding resources necessary to carry out all of our short and long-term
operating activities. While we believe that our current cash and
investment balances, exclusive of any cash to be generated from the
Equity Line, will be sufficient to  fund our
planned Phase 1 studies for PMX-30063 and PMX-60056 and can fund our operations for at least the
next twelve months; however, due to the continued deterioration of the capital markets and
prospects for securing additional financing, in order to prolong our cash runway we will scale back
and delay some of our activities and do not plan to commence a Phase 1B clinical trial for
PMX-60056 until the third quarter of 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We plan to
seek additional funding beyond the Equity Line during 2009 in one or more financings. If we are unable to
secure adequate additional funding, we may delay, scale-back or eliminate certain of our research, drug discovery or development activities or certain other aspects of our operations and
our business related to this program until such time as we are successful in securing adequate
additional funding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2004, we received a Small Business Innovation Research, or SBIR, grant of $238,000 from
the National Institute of Health (NIH)&nbsp;to conduct animal testing of our product candidates.
Research under this grant was completed and, in March&nbsp;2006, we received a Phase 2 SBIR grant of
$2.9&nbsp;million over three years in support of our development of an i.v. antibiotic product
candidate.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Preclinical Experiments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our preclinical research indicates that PMX-30063, our lead defensin mimetic antibiotic product
candidate, has a number of favorable attributes, including relatively low molecular weight, potent
and broad spectrum antibacterial activity, low cytotoxicity, good tolerance in acute toxicity and
repeat dose animal experiments and strong efficacy in animal models of bacterial infection. Our
defensin mimetic antibiotic product candidates have demonstrated efficacy in preclinical
experiments against strains of bacteria that are currently resistant to one or more classes of
currently available antibiotics. Due to the novel mechanism of action of our product candidates
and the results of our preclinical research, we believe it is less likely that resistance will
develop against our defensin mimetic antibiotic product candidates compared with conventional
antibiotic drugs. The results of certain of our preclinical experiments for PMX-30063 are
discussed below.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Bacterial Resistance</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We employed a serial passage method to measure the potential development of bacterial drug
resistance to PMX-30063. In serial passage experiments, bacteria are repeatedly exposed to
sub-lethal concentrations of a drug, which accelerates the over-growth of mutant forms of bacteria
that are resistant to the action of an antibiotic drug. In our experiments, we compared PMX-30063
with norfloxacin, a widely used broad-spectrum antibiotic drug. Resistance by <I>Staph </I>bacteria,
including MRSA, was readily observed for norfloxacin, whereas no resistance was observed for
PMX-30063. In similar studies performed by a contract research organization, no resistance
developed to PMX-30063, or to our other defensin mimetic antibiotic compounds, when bacterial
strains that were resistant to other antibiotics were used in the test. These results are
consistent with those that have been previously demonstrated with host defense proteins.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Pharmacokinetics</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pharmacokinetics is the study of how a compound behaves in the body. Efficacy studies determine
how effective a compound is for its intended use, in this case, PMX-30063 as an antibiotic agent.
Pharmacokinetic and efficacy studies are performed to establish the most effective dosage levels.
Pharmacokinetic analysis has been completed for PMX-30063 in a mouse model. In these experiments,
blood samples were collected at nine time points over 24 hours and quantified. One of the
important measurements in these blood sample studies is half-life, which measures the time it takes
for half of an administered dose of compound to be cleared from the body. These measurements guide
how often a compound needs to be administered. PMX-30063 generally exhibited half-lives in the
range of 0.81 hours to 2.66 hours in animals, which is comparable to the half-life in rodents of
several antibiotics widely used in the hospital setting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Proteins and other components in blood can have significant effects on the activities of drug
candidates, such as loss of antimicrobial activity. Our preclinical research suggests that
PMX-30063 is stable and the antimicrobial activity is maintained in the presence of blood serum.
These serum-effect profiles compare very favorably with many marketed antibiotic drugs.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>In Vitro Activity</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PMX-30063 has demonstrated potent and selective in vitro antibacterial activity. In our
preclinical experiments, PMX-30063 demonstrated potent activity against both Gram-positive and
Gram-negative bacteria, two general classes of bacteria, as well as fungi. Potent activity is
found against bacteria isolated from human infections including three important hospital pathogens,
MRSA, vancomycin-resistant S. aureus, and vancomycin resistant enterococcus. Additionally,
PMX-30063 was active against Staphylococcal isolates that were no longer susceptible to daptomycin
or linezolid. Overall, our defensin mimetic antibiotic compounds as a class have demonstrated in
the pre-clinical studies antimicrobial activity against a broad spectrum of over 100 strains of
bacteria, including clinical isolates of Gram-positive and Gram-negative bacteria.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>In Vitro Metabolism</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Metabolism studies seek to determine what happens to a compound after it has been administered to a
body, if it is changed in the body, and how it may be eliminated from the body. PMX-30063 has been
tested for stability in the presence of mouse and human liver hepatocytes to investigate the extent
to which liver metabolism could be a factor upon compound administration. PMX-30063 demonstrated
high stability in the presence of liver hepatocytes. PMX-30063 was also stable in blood plasma
from rats, dogs and humans. These data suggest that PMX-30063 should be metabolically stable.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Animal Efficacy and Toxicology Studies</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following animal efficacy and toxicology data provides important proof-of-concept information
that we believe supports development of PMX-30063 as a novel antibacterial agent for systemic
infections. We have conducted
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">additional efficacy studies in both mice and rats using intravenous
infusions to examine the activity of PMX-30063 in validated models of bacterial infection to find a
dosing regimen that would maximize the tolerability of PMX-30063. Additional pharmacokinetic,
toxicology and safety pharmacology studies were also conducted to evaluate PMX-30063.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Thigh burden model</I>. The thigh burden model is a widely used and accepted animal model for
evaluating antibacterial activity of antibiotic drugs, such as PMX-30063, in animals. Mice were
inoculated in the thigh muscle with <I>S</I>. <I>aureu</I>s and then treated with PMX-30063 by intravenous bolus
administration. PMX-30063 significantly reduced the bacterial burden in thighs compared to the
inoculated control treatment of saline even when first administered one hour after inoculation with
bacteria.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Sepsi</I>s <I>model</I>. We also tested the antibacterial efficacy of PMX-30063 in a mouse sepsis model. In
our studies, we infected mice with <I>S</I>. <I>aureu</I>s at 100 times the lethal dose through injections into
the body cavity. These animals were then treated with either vancomycin or PMX-30063. All animals
were observed for mortality over seven days following treatment. This is a stringent test of a
compound as it involves a severe infection and the drug must both work quickly, and be able to
reach many body compartments from the bloodstream at sufficiently high concentrations to kill the
infectious bacteria for the animals to survive. When left untreated, the infected mice all died
within one to two days. Mice treated with PMX-30063 demonstrated comparable to superior survival
rates to mice treated with vancomycin. These studies demonstrate that when delivered
intravenously, PMX-30063 can be distributed throughout the body and reach the compartments needed
to effectively treat bacterial infection.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Toxicolog</I>y <I>Testing</I>. Toxicology studies are done to determine the difference between the dose at
which a compound is effective and the dose at which it demonstrates toxicity. These studies and
measurements are done to determine the ratio between the toxic and effective doses. This ratio is
referred to as the therapeutic index or selectivity ratio. The cGLP compliant toxicology, safety
pharmacology and genotoxicity studies have been completed, which indicate that an effective
therapeutic index for PMX-30063 may be achieved.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Heptagonist Product Candidate</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">UFH and LMWH are blood clot prevention drugs, which are commonly used in numerous post-surgical
applications as anti-coagulants. Overdoses of UFH or LMWH are dangerous due to potentially
life-threatening bleeding. While widely used, UFH and LMWH have the risk of adverse bleeding side
effects, which requires frequent monitoring.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Market Opportunity</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Unfractionated Heparin (UFH)</I>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Protamine is the only available reversing agent for UFH. Protamine is used both as an antidote in
the event of overdose, and more commonly in standard treatment as a reversing agent following
coronary artery bypass grafts (CABG, or &#147;bypass&#148; procedures), in which standard practice involves
administering UFH while the patient is on the heart-lung bypass machine to prevent blood clots from
forming in the machine and which could then cause problems when the blood is re-infused to the
patient. However, protamine has many significant potential adverse effects, including:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>unpredictable efficacy</I>, resulting in variable inter-patient activity;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>anticoagulant activity </I>of protamine can actually increase and worsen the
anticoagulant activity of UFH, and which requires complex dose-titration and
careful administration of often several doses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>allergic anaphylactic reactions </I>in some patients due to the fact that protamine
is a biological product derived from fish sperm;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>inferior fibrokinetics</I>, or clot formation, can result in leaky clots and in more
serious cases rebound bleeding may occur; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>immunogenic reactions </I>with antibodies formed after sensitization to protamine in
patients who have previously received protamine can impact efficacy and result in
severe reaction; some patients, such as diabetic patients receiving zinc insulin,
or males who have undergone vasectomy, may have pre-existing antibodies that could
pre-dispose them to sensitivity to protamine.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result, we believe there is a significant medical and market need for a safer UFH antagonist.
Worldwide, we estimate approximately two million extracorporeal blood procedures, including
cardiothoracic procedures, are
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">performed that utilize heparin and may require UFH reversal, and
eight million doses of protamine are used annually (IMS data). We believe our hepatagonists will
be a safer alternative to protamine.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Low Molecular Weight Heparin (LMWH)</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The LMWHs are often used for longer term prevention of blood clots (thrombophylaxis), in
indications such as deep vein thrombosis (DVT), in patients who have had heart attacks (post MI),
and in cancer patients. All of these patient groups are at risk of developing potentially
life-threatening blood clots, and are given anti-clotting drugs including LMWHs to prevent
dangerous clot formation. Because of their benefits, LMWHs are being increasingly used, with
worldwide sales of approximately $4&nbsp;billion in 2005 (according to IMS/RDN Insight), and we estimate
are used by approximately 12&nbsp;million patients annually.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">While having favorable risk/benefit characteristics, a number of clinical studies have shown that
there is a significant incidence of bleeding in patients who receive LMWHs. Most studies generally
show that 1%-4% of patients experience serious, life-threatening bleeding, and up to 20% may
experience clinically significant bleeding. Protamine is not considered reliably effective and is
not approved for reversal of LMWH. In patients who experience bleeding problems while on LMWH,
current care may involve hospitalization, blood transfusions, and surgery, which can be expensive
and unreliable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">LMWHs are not currently used in acute surgical settings, such as cardiothoracic procedures, because
of the lack of a reversing agent. The long half-life of LMWH products of up to 24 hours, while an
advantage for longer-term administration, can be a major disadvantage if a patient has a major
bleeding episode or must be re-operated on shortly after surgery. If clotting time is prolonged
due to systemic LMWH, re-operation may not be possible. There currently are no antidotes for LMWH
on the market. The availability of an antidote to LMWH could allow these drugs to be used in
cardiothoracic surgical procedures, as well as used in patients who are currently contraindicated
for LMWH or who may need to undergo re-operation. Thus, an LMWH antagonist could substantially
increase the market and sales of LMWH drugs, thereby also increasing the need and market for a LMWH
antagonist such as our heptagonist product candidate.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Product Opportunity</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe that an antagonist to UFH and LMWH is an attractive product opportunity for the
following reasons:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Unmet medical need</I>. We believe that a safer antagonist to UFH and an effective
and safe antagonist for LMWH would address a large unmet medical need;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Ease of clinical trials</I>. The reversal of the blood clotting effects of UFH and
LMWH provides an effective and easily measured end point for human trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Attractive companion product for an LMWH</I>. An LMWH-antagonist offers the
possibility to increase market share of a proprietary brand of LMWH and also
provide significant differentiating advantages versus other LMWH products without a
companion antagonist;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Predictiv</I>e <I>preclinical models</I>. The method and laboratory measurement of
clotting time in animals is identical to the methodology needed in human clinical
trials and should be predictive of efficacy;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Pricing</I>. If our product candidates are approved by the FDA and marketed, we
believe that such products would have reasonable cost of goods and attractive gross
margins; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><I>Focused acute care markets. </I>Use of UFH and LMWH is concentrated in hospitals,
which could be addressed by a small sales force.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our Approach</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">UFH and LMWH are composed of sulfated polysaccharides, which provide an attractive target for the
structure based design of novel molecules. Based on a model for the three-dimensional structure of
these molecules, we have produced a series of compounds that bind very tightly to the critical
pentasaccharide site found on both UFH and LMWH. In preclinical experiments, our compounds have
demonstrated efficacy at sub-micromolar concentrations, and the ability to reverse the effect of
both UFH and LMWH in whole human blood. Furthermore, we believe these compounds function with a
high degree of specificity. We have synthesized and screened a number of compounds that
demonstrate reversal of both UFH and LMWH resulting in the normalization of blood clotting time.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our objectives in this program are to develop a product that:</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>is as effective as protamine in reversing the anticoagulant effect of UFH;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>is safer than protamine;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>is easy to use;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>has superior fibrokinetic activity (less deleterious impact on clot formation than protamine);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>is less sensitizing than protamine; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>is effective in reversing the anticoagulant effect of LMWH.</TD>
</TR>
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe that a heptagonist with these attributes could replace protamine for its current uses,
expand the heparin reversal market by introducing a reversing agent for LMWH, provide a new
treatment for patients receiving LMWH and who experience bleeding complications and require
reversal, and further expand the LMWH market by allowing physicians to more widely use LMWH.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>PMX-60056 Clinical Development</I></B></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have scaled up synthesis of drug substance and manufactured clinical supplies for PMX-60056,
under cGMP conditions. cGLP compliant toxicology, safety pharmacology and genotoxicity studies
have been completed, which indicate that an effective therapeutic index for PMX-60056 may be
achieved. During the third quarter of 2009, we plan to commence a study of heparinized subjects
who receive PMX-60056 at various increasing dose levels (Phase 1B). While the primary endpoint is
a safety assessment, we will be able to gather efficacy data in this Phase 1B study.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Clinical Experiments to Date</I></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2009, we successfully completed our first-in-man clinical study with the novel heparin
antagonist drug PMX-60056. This ascending single-dose intravenous pharmacokinetic and safety study
met the necessary Phase 1 goals of defining both a limiting single dose for ten-minute infusions
and also the plasma distribution/elimination kinetics for the drug in the absence of heparin. This
first study has demonstrated that PMX-60056 can be given safely in the absence of heparin if
ten-minute infusions include less than 0.4 mg/kg. The data suggest that the limiting side effect of
hypotension is related to peak plasma drug level, which means that slower infusions could allow
delivery of more drug. To investigate this possibility, PolyMedix plans to study slower infusions,
of twenty and potentially thirty minutes, in an extension of this study. These longer infusions are
expected to allow higher doses to be given, and will add support for potential clinical studies for
the reversal of LMWH, which may require greater total amounts of drug to be administered. Analysis
of the plasma-level assays indicates that a single-compartment model is consistent with the
observed data, and the plasma elimination half-time is 1.5 to 2.5 minutes in the dosage range
administered.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Planned Clinical Studies</I></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We estimate that it will cost $65 to $85&nbsp;million in research, drug development and clinical
development costs over 36-48&nbsp;months to file an NDA for this product candidate. We do not currently
have the funding resources necessary to carry out all of our short and long-term operating
activities. While we believe that our current cash and investment balances, exclusive of any cash
to be generated from the Equity Line, will be sufficient to fund our planned
Phase 1 studies for PMX-60056, our current cash and investment balances are not sufficient to fund
the Phase 2 development of PMX-60056. In addition, due to the continued deterioration of the
capital markets and prospects for securing additional financing, in order to prolong our cash
runway we will scale back and delay some of our activities and do not plan to commence a Phase 1B
clinical trial for PMX-60056 until the third quarter of 2009.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We plan to secure additional funding
beyond the Equity Line during 2009 in one or more financings. If we are unable to
secure adequate additional funding during 2009, we will delay,
scale-back or eliminate certain of our research, drug discovery or development activities or
certain other aspects of our operations and our business related to this program until such time as
we are successful in securing adequate additional funding.</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2007, we received a Small Business Innovation Research, or SBIR, grant of $100,000 from
the National Institute of Health (NIH)&nbsp;to support the development of biomimetic compounds, such as
PMX-60056, as anti-coagulant antagonists.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Preclinical Experiments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">One laboratory model used to evaluate the activity of an antagonist to a blood clot prevention drug
(UFH or LMWH) is the measurement of time it takes for blood or plasma to clot, with and without
antagonist (PMX-60056), in the presence of the blood clot prevention drug. PMX-60056 was able to
neutralize the activity of both UFH and LMWH products, as measured by normalization of clotting
time or normalization of various enzyme activities involved in clot formation. For example, in one
experiment normal untreated blood required 28 seconds to clot. When UFH was added to the human
plasma, clotting time increased to more than 300 seconds. When PMX-60056 was added to plasma that
had been treated with UFH, the clotting time was normalized. PMX-60056 was also able to neutralize
UFH in whole human blood. Normalization of clotting time with PMX-60056 occurred at similar
concentrations as that for protamine, indicating comparable potencies for antagonism of UFH in
human plasma and blood between PMX-60056 and protamine. PMX-60056 also effectively reversed the
anti-coagulant activities of several different clinical preparations of LMWH in human plasma or
whole blood.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In pre-clinical studies, PMX-60056 has been shown to have distinct potential advantages over
protamine in two safety and efficacy-related assays. Protamine significantly impaired the
aggregation of platelets (necessary for normal clot formation) whereas PMX-60056 had little effect
on platelet aggregation. Furthermore, when PMX-60056 reversed the effects of UFH or LMWH it also
restored the normal rate and extent of clot formation. However, when protamine was used to reverse
UFH or the LMWHs, normal rates and extent of clot formation were not achieved. In the selection
of a safe and effective compound to control and prevent bleeding in the presence of an
anti-coagulant, we believe that platelet aggregation and restoration of normal clot formation will
be critically important factors for choosing the preferred agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PMX-60056 rapidly restored normal clotting time in UFH-treated rats and dogs. For example, when
rats were administered UFH at an i.v. dose of 75 U/kg, clotting time was greater than 120 seconds.
Treatment with PMX-60056 after UFH administration restored clotting time to normal (approximately
12-15 seconds) within 1 minute after PMX-60056 treatment at an i.v. dose of 2 mg/kg. In other
experiments with UFH-treated rats, normal clotting time was rapidly restored at i.v. dosages of 0.5
and 1.0 mg/kg of PMX-60056. In dogs treated with 300 U/kg UFH, clotting time was greater than 120
seconds. Treatment with an i.v. dose of 4 mg/kg PMX-60056 restored normal clotting time by the
first time point examined, which was 5 minutes after compound administration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our belief that the safety of PMX-60056 is supported by in vitro hemolysis assays where the
sensitivity, or lysis, of human erythrocytes (red blood cells) was examined in the presence of
increasing concentrations of PMX-60056. In these assays, PMX-60056 was not hemolytic at
concentrations that far exceed the expected therapeutic levels. Single dose toxicity studies in
mice demonstrated that PMX-60056 was well tolerated, indicating that an effective therapeutic
index, which measures the difference between effective doses and toxic doses, may be achieved.
Other safety studies measuring hemodynamic effects (heart rate and blood pressures) in the rat and
cardiovascular responses (EKG, heart rate and blood pressures) in dogs also indicated that an
effective therapeutic index for PMX-60056 may be achieved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Toxicology Testing. Toxicology studies are done to determine the difference between the dose at
which a compound is effective and the dose at which it demonstrates toxicity. These studies and
measurements are done to determine the ratio between the toxic and effective doses. This ratio is
referred to as the therapeutic index or selectivity ratio. The cGLP compliant toxicology, safety
pharmacology and genotoxicity studies indicated that an effective therapeutic index for PMX-30063
may be achieved.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>PRECLINICAL PROGRAMS</B>:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to our clinical programs for PMX-30063 and PMX-60056, we have conducted preclinical
studies for other product candidates that are described below. These preclinical programs are
either currently on hold or are not actively being pursued until such time as we secure adequate
additional funding. Further, we may consider expanding or initiating other development activities
pending additional funding.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Defensin Mimetic Antibiotics</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In order to achieve the best balance of financial rate of return with risk and timing to market, we
also intend to resume pre-clinical development of PMX-30063 and other defensin mimetic antibiotic
compounds for both topical and oral antibiotic applications. These programs are currently on hold
pending additional financing. The initial topical application we are pursuing is an ophthalmic
topical antibiotic for the treatment of eye infections, and the
</DIV>
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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">initial oral application is a
non-absorbed oral antibiotic for the treatment of gastrointestinal infections such as Clostridium
difficile. With additional financing, we plan to advance pre-clinical development and file
additional INDs for the ophthalmic topical and non-absorbed oral antibiotic indications in the
future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are also evaluating our defensin mimetic antibiotic compounds for a number of other topical and
local applications, including topical antibiotic use for skin structure infections, oral healthcare
applications for treatment of periodontal disease, a type of gum disease, topical treatment for ear
infections, topical treatment of fungal infections, topical treatment of acne, and a variety of
non-therapeutic applications in personal care and materials applications.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are also exploring the potential use of our defensin-mimetic antibiotics for the treatment of
other infectious diseases. In particular, recent pre-clinical studies by PolyMedix and our academic
collaborators have shown activity of certain of our compounds for potential use against
tuberculosis and malaria. We intend to seek grants and other funding sources to continue the
development of compounds for these applications.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Medical Device, Industrial and Consumer Applications</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have conducted preliminary experiments which demonstrate that polymer derivatives of our
compounds, such as PMX-70004 and PMX-50003, which we refer to as our antimicrobial polymers, may be
used as effective antimicrobial agents as additives to materials. In one experiment, we coated
glass slides with a polyurethane plastic film. One of our antimicrobial polymers (0.1%
concentration) was then infiltrated into the polyurethane material using solvent and dried. The
slides were placed in a bacteria-rich nutrient broth for 72 hours to ascertain growth of bacterial
colonies on the submerged surfaces. After 72 hours, uncoated glass slides and slides coated with
polyurethane alone were covered with many bacterial colonies. In contrast, slides coated with
polyurethane film containing our antimicrobial polymer showed no bacterial growth.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Similar experiments have been performed in which solid polyurethane plastic disks were created with
one of our antimicrobial polymers directly mixed into the polyurethane plastic matrix. These disks
were then immersed in bacteria-rich broth for 24 hours. After 24 hours, plain polyurethane plastic
disks were covered with bacteria, whereas disks incorporating our polymer were devoid of bacterial
growth. When the disks treated with our antimicrobial polymer were stored at room temperature for
up to 45&nbsp;days either dry or submerged in a large excess of water, there was little to no loss of
antibacterial activity. Experiments employing longer storage times are now being conducted to
determine the stability of the polymer-formulated plastics under a variety of environmental
conditions. When our polymers are incorporated into the plastic of intravenous catheter tubing or
the plastics used in sutures and exposed to a high inoculum of bacteria, significant anti-bacterial
activity is observed with the polymer-derivatized catheter and suture plastics but not with the
untreated plastics.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Based on these and other preliminary experiments, we believe that our antimicrobial polymers can
effectively be used as additives to materials, such as various medical devices to prevent certain
healthcare-acquired infection. Additionally, they may be added to paint, plastic or ceramic
materials to create a self-sterilizing environment against certain bacteria in hospitals or other
areas that may benefit from a clean, bacterial resistant environment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Another potential application of our antimicrobial polymers is to combat <I>Stachybotry</I>s <I>chartarum</I>, or
Black Mold, that causes significant household and commercial building damage in the U.S. Several
of our compounds have shown potent activity against Black Mold as well as other problematic
environmental molds. Polymers can be used as additives to paints, drywall, and other construction
materials to prevent growth of this troublesome and unhealthy fungus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We do not currently plan to conduct advanced development of any medical device, industrial or
consumer application of our antimicrobial polymers. We intend to focus on generating a limited
core of basic enabling data to support our efforts to license our antimicrobial polymers to
out-licensing partners who will continue research and development efforts in developing marketable
products. We intend to pursue these out-licensing opportunities with minimal use of our resources.
Our antimicrobial polymers and the out-licensing opportunities they present serve as a possible
avenue to accelerate revenue generation, thereby helping us to fund development of our more
advanced product candidates, including PMX-60056 and PMX-30063.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Biodefense</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In recent years, improving our nation&#146;s defense against bioterrorism has become an increasingly
important task. The Department of Homeland Security Appropriation Act signed by President Bush in
October&nbsp;2003 includes $5.6&nbsp;billion through 2013 for medical countermeasures against bioterrorism
threats. One of the major components of spending is focused on the development of antibiotic
compounds to treat biowarfare agents, including the highly infectious bacteria that cause anthrax,
tularemia and plague.
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Antibiotic activity against anthrax and other biowarfare pathogens, with a mechanism by which
resistance is unlikely to develop, has commercial, medical and national security value.
Preliminary data from our preclinical experiments indicates that our product candidates have potent
activity against biowarfare agents that cause anthrax, tularemia and plague.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of this preliminary data, we are pursuing funding from government sources, such as the
Department of Defense, the Defense Advanced Research Projects Agency and other military and
security agencies to further test and advance our product candidates for indications important to
national security. In November&nbsp;2004, we received a Phase 1 SBIR grant of $168,000 to support
preliminary research in the biodefense area. In June&nbsp;2009, we were awarded a $1.6&nbsp;million contract
with the Defense Threat Reduction Agency to develop new defensin-mimetic antibiotic compounds to
combat biowarfare pathogens.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Anti-Tuberculosis</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Tuberculosis is a highly contagious disease that affects one-third of the world&#146;s population today.
Approximately, 1.7&nbsp;billion people are infected worldwide, including 15&nbsp;million cases in the United
States. There are 8&nbsp;million newly reported cases each year and 3.1&nbsp;million people die from the
disease annually. Tuberculosis is the leading cause of death of women, AIDs patients and the young
in the world and there are more deaths from tuberculosis than any other single infectious disease.
Mycobacterium tuberculosis is the primary infectious agent for tuberculosis and drug resistance has
become a paramount issue, accounting for over 50&nbsp;million infections. The drug-resistant forms of
the disease are significantly more difficult to treat, leading to higher mortality rates and
escalating costs of care. PolyMedix compounds, including PMX-10070, have demonstrated encouraging
in vitro specificity for tuberculosis versus mammalian cells.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Anti-Malaria Agents</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Recent pre-clinical studies with PolyMedix&#146;s defensin mimetic antibiotics show encouraging activity
for the potential treatment of the malaria parasite, Plasmodium falciparum, the infectious agent
for the most prevalent and deadly forms of malaria. P. falciparum accounts for 80% of all human
malarial infections and 90% of deaths from such infections. More than 120&nbsp;million clinical cases
of malaria and between 1 to 1.5&nbsp;million deaths occur worldwide every year. Current therapies for
malaria are plagued by rapid resistance, which has become endemic in certain regions of the world.
Two of our compounds, PMX-70008 and PMX-30024, have demonstrated encouraging <I>in vitro </I>specificity
for the parasite versus mammalian cells.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Antifungal Agents</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our compounds, such as PMX-10098, have demonstrated promising activity against fungus strains that
often cause human infectious diseases. In preclinical experiments, certain of our compounds have
demonstrated effectiveness at inhibiting fungal growth and, for certain strains of fungus,
effectiveness was achieved at lower concentrations than that of fluconazole, a commonly used
antifungal agent. We intend to continue to investigate the potential of our compounds as novel
treatments for human fungal infections.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result of this preliminary data, we are pursuing funding from government sources, such as the
National Institutes of Health to further test and advance our product candidates. In May&nbsp;2008, we
received a Phase 1 SBIR grant of $126,000 to support preliminary research for antifungal defensin
mimetic applications.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Angiogenesis Inhibitor</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our angiogenesis inhibitor compounds, such as PMX-20005, have demonstrated promising activity in <I>in
vitro </I>and animal models of inhibition of angiogenesis, the abnormal growth of blood vessels. An
angiogenesis inhibitor may be effective in treating age related macular degeneration (or AMD); a
common form of blindness caused by excessive and abnormal growth of blood vessels in the back of
the eye. If additional financing is secured, we hope to continue to investigate the potential of
our compounds as novel treatments of AMD and other angiogenesis related diseases.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Strategy</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our goal is to discover and develop novel agents for the treatment of serious infectious diseases
and cardiovascular disorders using biomimetics. To achieve this objective, we are implementing the
following strategies:
</DIV>



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</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Advance the Development of our Lead Product Candidates</I>. We believe our current financial resources
provide us with sufficient funding to support the continued development of two programs through
Phase 1B clinical trials: PMX-30063 as our i.v. antibiotic product candidate and PMX-60056 as our
heptagonist product candidate. To advance other potential indications for our defensin-mimetics,
such as tuberculosis and malaria, or other programs into clinical development, we will require
additional financial resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Retain Rights to Market Hospital-Based Products to Hospitals in North America</I>. We have exclusive
commercial rights to all of our current programs and in addition have either exclusive ownership
rights or options to obtain exclusive license rights to any new products that result from our
academic relationships. Our objective is to generate maximum value from sales of our product
candidates if regulatory approval is achieved. To achieve this goal, we intend to build our own
specialty sales force to market hospital-based therapeutics, such as PMX-30063 and PMX-60056, to
hospitals in North America. Additionally, we plan to collaborate with third parties to
commercialize our products in the primary care markets and in international markets.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Pursue Near-Term Revenue Opportunities through Out-Licensing and Partnership Agreements</I>. We intend
to out-license selected product candidates from internal programs that are not part of our
strategic focus. For example, polymer derivatives of our antibiotic product candidates may be used
as additives to medical device, industrial and consumer materials to create self-sterilizing
surfaces and bactericidal products. We are pursuing strategic alliances with leading
pharmaceutical and biotechnology companies to design biomimetic compounds for targets selected by
our partners. Such collaborations could generate multiple sources of revenue, such as up-front
fees, research funding, milestone payments and royalties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Utilize our Technology to Pursue Additional Drug Development Programs for Other Therapeutic Areas</I>.
Using our computational drug design tools, we have already identified potential product candidates
for other therapeutic areas, including angiogenesis inhibitors. If sufficient resources become
available, we plan to pursue development in these areas through partnerships or on our own in order
to expand our product pipeline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Strengthen Collaborations with Existing Partners and Enter into Agreements with Potential New
Partners</I>. We have entered into collaborations and agreements with leading academic institutions.
We are actively pursuing additional agreements that would provide for license fees, research
funding and milestone payments and royalties to PolyMedix from research results and subsequent
product development and commercialization. Through our collaborations with academic institutions,
we gain cost effective access to new technologies and expertise important to the further
development of our technology and products. Our network of academic advisors and collaborators
consists of respected experts in computational chemistry and drug design technology.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Research and Development</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We incurred research and development expenses of $1,675,000 and 2,726,000 for the three month
period ended March&nbsp;31, 2009 and 2008, respectively, and $7,401,000, $9,328,000 and $3,306,000 for
the years ended December&nbsp;31, 2008, 2007 and 2006, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Proprietary Rights</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>University of Pennsylvania</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2003, we entered into a Patent License Agreement with the University of Pennsylvania, or
Penn. Under the terms of the agreement, we were granted an exclusive, worldwide royalty-bearing
license to use, make and sell products utilizing seven of Penn&#146;s issued patents or pending patent
applications for the life of such patents. These patents and applications cover our clinical and
preclinical stage product candidates, as well as future product candidates utilizing the licensed
patents and applications. The licensed patents and applications include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>two issued U.S. patents and four pending U.S. patent applications covering the
composition of matter on antimicrobial compounds, including small molecules,
oligomers and polymers. The first issued patent expires in 2017, the second issued
patent expires in 2022, and the other patents, if issued, will expire at varying
times from 2022 to 2025. There are corresponding foreign applications to one of
the issued U.S. patents and to each of the four pending U.S. patent applications.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT> </TD>
    <TD width="1%">&nbsp;</TD>
    <TD>one U.S. patent application and two corresponding foreign patent applications
covering polycationic compounds and their use for treating cancer. The patent, if
issued, will expire in 2026.</TD>
</TR>

</TABLE>
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Penn may terminate the licenses if:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we are more than 60&nbsp;days late in paying to Penn royalties, expenses, or any
other undisputed amounts due under the agreement and we do not pay such amounts
within 30&nbsp;days&#146; written notice of such delinquency;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we become insolvent, enter into bankruptcy or a similar proceeding or call a
meeting of our creditors in order to arrange adjustment of our debts; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we otherwise materially breach the agreement.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this license agreement is properly terminated by Penn, we may not be able to execute our
strategy to develop and commercialize our i.v. antibiotic product candidate, our heptagonist
product candidate, our oral antibiotic product candidates, our antimicrobial polymers for
biomaterials applications, or to develop and commercialize future product candidates utilizing the
licensed patents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also entered into a Software License Agreement with Penn in May&nbsp;2003. Under the terms of the
agreement, Penn granted us a non-exclusive, royalty-free license to use three software programs and
an exclusive, royalty-free license to three patent applications relating to such software programs.
The software programs and patents covered by the agreement include a suite of proprietary
computational algorithms that we use in the development, refinement and testing of our product
candidates. The licenses expire contemporaneously with our Patent License Agreement with Penn.
The patents relating to the software licenses, if issued, will expire at varying times in 2023 and
2024. Penn may terminate the agreement if:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we are more than 60&nbsp;days late in paying to Penn any undisputed amounts due under
the agreement and we do not pay such amounts within 30&nbsp;days&#146; written notice of such
delinquency;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we become insolvent, enter into bankruptcy or a similar proceeding or call a
meeting of our creditors in order to arrange adjustment of our debts; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we otherwise materially breach the agreement.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If this license agreement is properly terminated by Penn, our ability to advance our current
product candidates or develop new product candidates may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also sponsor certain research by Dr.&nbsp;William DeGrado, a Professor of Biochemistry and Biophysics
at Penn. Any discoveries made under this arrangement are intended to be covered by our Patent
License Agreement with Penn or a new license agreement with Penn containing substantially the same
terms. Dr.&nbsp;DeGrado&#146;s current research for us focuses on further development of our antimicrobial
and hepatagonists applications. For these services, we pay Dr.&nbsp;DeGrado a consulting fee of $7,000
per month. In addition, we have granted stock options in the past to Dr.&nbsp;DeGrado. Dr.&nbsp;DeGrado
also serves as Chairman of our Scientific Advisory Board. Either we or Dr.&nbsp;DeGrado may terminate
his consulting arrangement at any time. If Dr.&nbsp;DeGrado terminates his consulting arrangement, our
ability to advance our antimicrobial and hepatagonists programs may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>University of Massachusetts</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2004, we entered into a Sponsored Research Agreement with the University of
Massachusetts, or UMass. Under the terms of this agreement, as amended, we have agreed to sponsor
certain research of Dr.&nbsp;Gregory Tew, an Assistant Professor in the Polymer Science and Engineering
Department at UMass, through March&nbsp;2009, and have the exclusive option to license any intellectual
property generated by such research. We may exercise this option by issuing 7,500 shares of our
common stock to UMass for each $100,000 of research conducted by Dr.&nbsp;Tew. During 2007, we issued
12,500 shares to UMass in connection with this agreement. Dr.&nbsp;Tew&#146;s research focuses on methods to
add our antibiotic agents to biomaterials, testing the physical properties of our antibiotic agents
and safety evaluation of our antimicrobial agents. The agreement will terminate if Dr.&nbsp;Tew leaves
UMass or ceases work in the antimicrobial field of research. In addition, UMass may terminate the
agreement including any licenses granted thereunder if we materially breach the agreement,
including by nonpayment of amounts due under the agreement. If the Sponsored Research Agreement or
any license thereunder is properly terminated by UMass, our ability to advance our antimicrobial
program or develop new product candidates may be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2005, we entered into an Exclusive License Agreement with UMass, pursuant to which UMass
granted us an exclusive, worldwide license to use, make and sell products under one U.S. patent
application and seven corresponding foreign patent applications covering polynorborene co-polymers
and methods of use for the life of such patents. The patents, if issued, will expire in 2025.
UMass may terminate the license agreement if we materially breach the agreement, including by
nonpayment of amounts due under the agreement or in the case of a change in our ownership or
control. If the license agreement is properly terminated by UMass, we may not be able
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">to execute our strategy to develop and commercialize our antimicrobial polymers for biomaterials
applications or to develop and commercialize future product candidates utilizing the licensed
patents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Technology</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We initiate the design of our product candidates using our proprietary computational drug design
technology that is licensed from Penn. There are several computational methods used to assist the
drug design process, which includes the capabilities to:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability to model molecular interactions in the presence of solvent, such as
an aqueous environment, rather than in a vacuum, which more closely resembles the
real-life characteristics of how molecules interact with each other;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability to simulate molecular interactions for hundreds of microseconds
which are time frames much longer than possible with previous molecular dynamics
technologies; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability to design compounds which target the bacterial cell membrane,
instead of a biochemical cell target.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our innovative and proprietary <I>de novo </I>drug design approach starts with protein targets with
well-understood physical structures and biological activity, and designs small molecule compounds
that mimic or regulate the activity of these targets. This biomimetic approach of regulating
biological activities by mimicking nature itself with synthetic small molecule compounds allows us
to rationally design novel product candidates that we believe greatly improve the efficiency of new
drug discovery.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Intellectual Property</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We rely on a combination of patents and trade secrets, as well as confidentiality and non-use
agreements to protect our intellectual property. Our patent strategy is designed to facilitate
commercialization of our current and future product candidates; and create barriers to entry. Our
intellectual property portfolio currently consists of three provisional applications, two patent
applications (U.S. and foreign) owned by us, two issued U.S. patents we exclusively license from
Penn and eight U.S. patent applications we exclusively license from Penn and/or UMass (as well as
foreign counterparts thereof). Our patent applications and the ten issued patents and pending
patent applications we exclusively license from Penn and/or UMass include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>seven U.S. patent applications that have been filed (as well as foreign
counterparts thereof) covering the composition of matter on 11 classes of
antimicrobial compounds, including small molecules, oligomers and polymers. Two
U.S. patents have been granted on two of these applications;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>one patent application covering the use of claimed oligomers for treating
ophthalmic and otic infections;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>one patent application covering the use of claimed oligomers for treating mycobacterium;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>one patent application covering the use of claimed oligomers for treating malarial infections;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>one patent application covering synthetic mimetics of host defense proteins and their use;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>one patent application covering the combination of claimed compounds and
polymers with sesquiterpenoid enhancing agents;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>one patent application covering novel angiogenesis inhibitors with a wide range
of therapeutic uses;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>one patent application covering the use of claimed oligomers for treating
cancer; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>three patent applications covering our proprietary, computational algorithms and
models, such as the coarse grain model and a new force field. These patent
applications do not disclose the specific computer code, which either will be
copyrighted or kept as a proprietary trade secret.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-34-<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We expect to continue to expand our intellectual property portfolio with additional filings of both
composition of matter and method of use patent applications. A number of new patent applications
are currently in process.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We attempt to protect our trade secrets by entering into confidentiality agreements with third
parties, employees and consultants. Our employees and consultants also sign agreements requiring
that they assign to us their interests in patents and other intellectual property arising from
their work for us. All employees sign an agreement not to engage in any conflicting employment or
activity during their employment with us and not to disclose or misuse confidential information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, we have received trademark protection for &#147;PolyMedix.&#148;
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>COMPETITION</B><U> </U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Defensin Mimetic Antibiotic Product Candidate Competition</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The pharmaceutical industry is highly competitive. We face significant competition from
pharmaceutical companies and biotechnology companies that are researching and selling products
designed to treat bacterial infections. Many major pharmaceutical companies, such as
GlaxoSmithKline, Pfizer, Bayer, Merck and Sanofi Aventis have already established significant
positions in the antibiotic market. Additionally, many smaller companies, such as Cubist
Pharmaceuticals, Oscient Therapeutics, Ceragenix, NovaBay Pharmaceuticals, Inc. and Inhibitex have
either marketed antibiotics and/or are attempting to enter this market by developing novel and more
potent antibiotics that are intended to be effective against drug-resistant bacterial strains.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These companies, as well as potential entrants into the antibiotic market, have longer operating
histories, larger customer or use bases, greater brand recognition and significantly greater
financial, marketing and other resources than we do. Many of these current or potential
competitors can devote substantially greater resources to the development and promotion of their
products than we can.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Additionally, there has been consolidation within the pharmaceutical industry and larger,
well-established and well-financed entities may continue to acquire, invest in or form joint
ventures to gain access to additional technology or products. Any of these trends would increase
the competition we face and could adversely affect our business and operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Heptagonist Product Candidate Competition</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There are currently no products available in the marketplace as an antidote for and antagonist to
LWMH, while protamine is the only available antidote for and antagonist to UFH and, as such,
protamine currently dominates this market. Because of protamine&#146;s potentially problematic side
effect profile, we believe that our heptagonist products may penetrate into the UFH antagonist
market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Government Regulation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Government authorities in the U.S., at the federal, state, and local level, and foreign countries
extensively regulate, among other things, the following areas relating to our product candidates:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>research and development;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>testing, manufacture, labeling and distribution;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>advertising, promotion, sampling and marketing; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>import and export.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All of our product candidates will require regulatory approvals by government agencies prior to
commercialization, but none of our product candidates has received these approvals. In particular,
human therapeutic products are subject to rigorous preclinical and clinical trials to demonstrate
safety and efficacy and other approval procedures of the FDA and similar regulatory authorities in
foreign countries. Various federal, state, local, and foreign statutes and regulations also govern
testing, manufacturing, labeling, distribution, storage and record keeping related to such products
and their promotion and marketing. The process of obtaining these approvals and the compliance
with federal, state, local, and foreign statutes and regulations require the expenditure of
substantial time and financial resources. In addition, the current regulatory and political
environment at the FDA could lead to increased testing and data requirements that could impact
regulatory timelines and costs.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-35-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>U.S. Government Regulation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act and
implementing regulations. If we fail to comply with the applicable requirements at any time during
the product development process, approval process, or after approval, we may become subject to
administrative or judicial sanctions. These sanctions could include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>refusal to approve pending applications;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>withdrawals of approvals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>clinical holds;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>warning letters;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>product recalls and product seizures; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>total or partial suspension of our operations, injunctions, fines, civil
penalties or criminal prosecution.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Any agency enforcement action could have a material adverse effect on us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Currently there is a substantial amount of congressional and administration review of the FDA and
the regulatory approval process for drug candidates in the U.S. As a result, there may be
significant changes made to the regulatory approval process in the U.S.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The steps required before a drug may be marketed in the U.S. include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>preclinical laboratory tests, animal studies and formulation studies;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>submission to the FDA of an IND, which must become effective before human
clinical trials may begin;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>execution of adequate and well-controlled clinical trials to establish the
safety and efficacy of the product for each indication for which approval is
sought;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>submission to the FDA of an NDA, or biologics license application, or BLA;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>satisfactory completion of an FDA inspection of the manufacturing facility or
facilities at which the product is produced to assess compliance with cGMP; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FDA review and approval of the NDA or BLA, or any supplements thereto,
including, if applicable, a determination of its controlled substance schedule.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Preclinical studies generally are conducted in laboratory animals to evaluate the potential safety
and activity of a product. Violation of the FDA&#146;s good laboratory practices regulations can, in
some cases, lead to invalidation of the studies, requiring these studies to be replicated. In the
U.S., drug developers submit the results of preclinical trials, together with manufacturing
information and analytical and stability data, to the FDA as part of the IND, which must become
effective before clinical trials can begin in the U.S. An IND becomes effective 30&nbsp;days after
receipt by the FDA unless before that time the FDA raises concerns or questions about the proposed
clinical trials outlined in the IND. In that case, the IND sponsor and the FDA must resolve any
outstanding FDA concerns or questions before clinical trials can proceed. If these concerns or
questions are unresolved, the FDA may not allow the clinical trials to commence.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Clinical trials involve the administration of the investigational product candidate or approved
products to human subjects under the supervision of qualified investigators. Clinical trials are
conducted under protocols detailing, among other things, the objectives of the study and the
parameters to be used in assessing the safety and the effectiveness of the drug. Typically,
clinical evaluation involves a time-consuming and costly three-phase sequential process, but the
phases may overlap. Each trial must be reviewed, approved and conducted under the auspices of an
independent institutional review board, and each trial must include each patient&#146;s informed
consent. The following sets forth a brief description of the typical phases of clinical trials:
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Phase 1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Refers typically to closely monitored clinical trials and includes
the initial introduction of an investigational new drug into human
patients or healthy volunteer subjects. Phase 1 clinical trials
are designed to determine the safety, metabolism and pharmacologic
actions of a drug in humans, the potential side effects of the
product candidates associated with increasing drug doses and, if
possible, to gain early evidence of the product candidate&#146;s
effectiveness. Phase 1 trials also include the study of
structure-activity relationships and mechanism of action in
humans, as well as studies in which investigational drugs are used
as research tools to explore biological phenomena or disease
processes. During Phase 1 clinical trials, sufficient information
about a drug&#146;s pharmacokinetics and pharmacological effects should
be obtained to permit the design of well-controlled,
scientifically valid Phase 2 studies. The total number of
subjects and patients included in Phase 1 clinical trials varies,
but is generally in the range of 20 to 80 people.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Phase 2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Refers to controlled clinical trials conducted to evaluate
appropriate dosage and the effectiveness of a drug for a
particular indication or indications in patients with a disease or
condition under study and to determine the common short-term side
effects and risks associated with the drug. These clinical trials
are typically well controlled, closely monitored and conducted in
a relatively small number of patients, usually involving no more
than several hundred subjects. Phase 2 studies can be sequenced
as Phase 2a or Phase 2b.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Phase 3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Refers to expanded controlled and uncontrolled clinical trials.
These clinical trials are performed after preliminary evidence
suggesting effectiveness of a drug has been obtained. Phase 3
clinical trials are intended to gather additional information
about the effectiveness and safety that is needed to evaluate the
overall benefit-risk relationship of the drug and to provide an
adequate basis for physician labeling. Phase 3 trials usually
include from several hundred to several thousand subjects.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Phase 4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Refers to trials conducted after approval of a new drug and which
explore approved uses and approved doses of the product. These
trials must also be approved and conducted under the auspices of
an institutional review board. Phase 4 studies may be required as
a condition of approval.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Clinical testing may not be completed successfully within any specified time period, if at all.
The FDA closely monitors the progress of each of the first three phases of clinical trials that are
conducted in the U.S. and may, at its discretion, reevaluate, alter, suspend or terminate the
testing based upon the data accumulated to that point and the FDA&#146;s assessment of the risk/benefit
ratio to the patient. The FDA can also provide specific guidance on the acceptability of protocol
design for clinical trials. The FDA or we may suspend or terminate clinical trials at any time for
various reasons, including a finding that the subjects or patients are being exposed to an
unacceptable health risk. The FDA can also request additional clinical trials be conducted as a
condition to product approval. During all clinical trials, physicians monitor the patients to
determine effectiveness and to observe and report any reactions or other safety risks that may
result from use of the drug candidate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Assuming successful completion of the required clinical trial, drug developers submit the results
of preclinical studies and clinical trials, together with other detailed information including
information on the chemistry, manufacture and control of the product, to the FDA, in the form of an
NDA or BLA, requesting approval to market the product for one or more indications. In most cases,
the NDA/BLA must be accompanied by a substantial user fee. The FDA reviews an NDA/BLA to
determine, among other things, whether a product is safe and effective for its intended use.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Before approving an application, the FDA will inspect the facility or facilities where the product
is manufactured. The FDA will not approve the application unless cGMP compliance is satisfactory.
The FDA will issue an approval letter if it determines that the application, manufacturing process
and manufacturing facilities are acceptable. If the FDA determines that the application,
manufacturing process or manufacturing facilities are not acceptable, it will outline the
deficiencies in the submission and will often request additional testing or information.
Notwithstanding the submission of any requested additional information, the FDA ultimately may
decide that the application does not satisfy the regulatory criteria for approval and refuse to
approve the application by issuing a &#147;not approvable&#148; letter.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The testing and approval process requires substantial time, effort and financial resources, which
may take several years to complete. The FDA may not grant approval on a timely basis, or at all.
We may encounter difficulties or unanticipated costs in our efforts to secure necessary
governmental approvals, which could delay or preclude us from marketing our products. Furthermore,
the FDA may prevent a drug developer from marketing a product under a label for its desired
indications or place other conditions, including restrictive labeling, on distribution as a
condition of any approvals, which may impair commercialization of the product. After approval,
some types of changes to the approved product, such as adding new indications, manufacturing
changes and additional labeling claims, are subject to further FDA review and approval.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">If the FDA approves the NDA/BLA, the drug can be marketed to physicians to prescribe in the U.S.
After approval, the drug developer must comply with a number of post-approval requirements,
including delivering periodic reports to the FDA, submitting descriptions of any adverse reactions
reported, biological product deviation reporting, and complying with drug sampling and distribution
requirements. The holder of an approved NDA/BLA is required to provide updated safety and efficacy
information and to comply with requirements concerning advertising and promotional labeling. Also,
quality control and manufacturing procedures must continue to conform to cGMP after approval. Drug
manufacturers and their subcontractors are required to register their facilities and are subject to
periodic unannounced inspections by the FDA to assess compliance with cGMP, which imposes
procedural, and documentation requirements relating to manufacturing, quality assurance and quality
control. Accordingly, manufacturers must continue to expend time, money and effort in the area of
production and quality control to maintain compliance with cGMP and other aspects of regulatory
compliance. The FDA may require post-market testing and surveillance to monitor the product&#146;s
safety or efficacy, including additional studies to evaluate long-term effects.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition to studies requested by the FDA after approval, a drug developer may conduct other
trials and studies to explore use of the approved drug for treatment of new indications, which
require submission of a supplemental or new NDA and FDA approval of the new labeling claims. The
purpose of these trials and studies is to broaden the application and use of the drug and its
acceptance in the medical community.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Foreign Regulation</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Whether or not we obtain FDA approval for a product, we must obtain approval of a clinical trial or
product by the comparable regulatory authorities of foreign countries before we can commence
clinical trials or marketing of the product in those countries. The approval process varies from
country to country, and the time may be longer or shorter than that required for FDA approval. The
requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement
also vary greatly from country to country. Although governed by the applicable country&#146;s
regulations, clinical trials conducted outside of the U.S. typically are administered with the
three-phase sequential process that is discussed above under &#147;U.S. Government Regulation.&#148;
However, the foreign equivalent of an IND is generally not a prerequisite to performing pilot
studies or Phase 1 clinical trials.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Furthermore, regulatory approval of prices is required in most countries other than the U.S. We
face the risk that the resulting prices would be insufficient to generate an acceptable return to
us or our collaborators.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Business History</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PolyMedix, Inc. (formerly known as BTHC II Acquisition Corp.) was originally organized in the State
of Texas as BTHC II LLC, a public shell company. On September&nbsp;29, 2004, BTHC II LLC and its sister
companies filed an amended petition under Chapter&nbsp;11 of the United States Bankruptcy Code. On
November&nbsp;22, 2004, the court approved BTHC II LLC&#146;s Amended Plan of Reorganization. On March&nbsp;24,
2005, and in accordance with its Amended Plan of Reorganization, BTHC II LLC changed its state of
organization from Texas to Delaware by merging with and into BTHC II Acquisition Corp., a Delaware
corporation formed solely for the purpose of effecting the reincorporation. After this merger,
BTHC II Acquisition Corp. became the public shell company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) was incorporated on August&nbsp;8,
2002 in the State of Delaware as PolyMedix, Inc. to serve as a biotechnology company focused on
treating infectious diseases. On October&nbsp;6, 2005, the former BTHC II Acquisition Corp. entered
into an Agreement and Plan of Merger and Reorganization with the former PolyMedix, Inc., pursuant
to which the stockholders of the former PolyMedix, Inc. exchanged their equity ownership interests
in the former PolyMedix, Inc. for an aggregate 94% equity ownership interest in the former BTHC II
Acquisition Corp. Pursuant to the Agreement and Plan of Merger and Reorganization, the former
PolyMedix, Inc. merged with a wholly-owned subsidiary of the former BTHC II Acquisition Corp. and,
as such, became a wholly-owned subsidiary of the former BTHC II Acquisition Corp.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At the time of the merger, the former BTHC II Acquisition Corp. had no operations and no assets or
liabilities. Because the stockholders of the former PolyMedix, Inc. exchanged their equity
ownership interests in the former PolyMedix, Inc. for an aggregate 94% equity ownership interest in
the former BTHC II Acquisition Corp., the former PolyMedix, Inc. was, for accounting purposes, the
surviving entity of the merger. Accordingly, all financial information included in this report for
the periods prior to the merger is for the former PolyMedix, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On February&nbsp;24, 2006, the former BTHC II Acquisition Corp. changed its corporate name to PolyMedix,
Inc., and the former PolyMedix, Inc. changed its corporate name to PolyMedix Pharmaceuticals, Inc.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EMPLOYEES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We currently have 16 employees, including one M.D. and six employees with Ph.D. degrees. Nine of
our employees are focused on research and development and seven are focused on general
administration. We also utilize a number of consultants to assist with research and development
and commercialization activities.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF PROPERTY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We currently lease 24,223 square feet of office and laboratory facilities at 170 N. Radnor-Chester
Road, Suite&nbsp;300 in Radnor, Pennsylvania, pursuant to a twelve-year lease. All of our tangible
personal property, consisting mainly of computers, office furniture and lab equipment, is located
at our leased office and laboratory facilities and is in good operating condition and repair
(subject to normal wear and tear).
</DIV>
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>LEGAL PROCEEDINGS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To our knowledge, we are not a party to any pending or threatened material legal proceedings. To
our knowledge, no governmental authority is contemplating commencing a legal proceeding in which we
would be named as a party.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MANAGEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the respective names, ages and positions of our executive
officers and directors as of June&nbsp;9, 2009:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Age</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Position(s)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nicholas Landekic
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President, Chief Executive Officer and Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">James Gregory Ford
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">47</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President, Business Development</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Bozena Korczak
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President, Drug Development</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">R. Eric McAllister, M.D., Ph.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">67</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President, Clinical Development and Chief
Medical Officer</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Richard W. Scott, Ph.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">56</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President, Research</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Edward F. Smith
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Vice President, Finance, Chief Financial
Officer and Secretary</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Frank P. Slattery, Jr.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">71</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board of Directors</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Brian Anderson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">62</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Richard W. Bank, M.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">75</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">William N. Kelley, M.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">69</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Michael E. Lewis, Ph.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">57</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Stefan Loren, Ph.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">45</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Shaun F. O&#146;Malley
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">73</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Douglas J. Swirsky
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">39</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Nominee for Director at our 2009 Annual
Meeting of Stockholders</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Executive Officers and Directors</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Nicholas Landekic </B>has served as <I>President, Chief Executive Officer and Director </I>of PolyMedix, Inc.
since November&nbsp;2005 and of PolyMedix Pharmaceuticals, Inc. where he served in the same capacity
since inception in August&nbsp;2002. Mr.&nbsp;Landekic has more than 20&nbsp;years of pharmaceutical experience.
From 2000 to 2002, he was President and Chief Executive Officer of Locus Discovery. From 1995 to
2000, Mr.&nbsp;Landekic was Senior Vice President of Corporate Development &#038; Investor Relations at
Guilford Pharmaceuticals. From 1991 to 1995, Mr.&nbsp;Landekic served as Senior Director of Business
Development at Cephalon and, from 1988 to 1991, served as Senior Manager for Strategic Marketing at
Bristol-Myers Squibb. He also held positions in Finance and Business Development at Johnson &#038;
Johnson Corporation (McNeil Pharmaceutical) from 1985 to 1988 and positions in the research
laboratories at the Mt. Sinai Medical Center from 1982 to 1983. Mr.&nbsp;Landekic received an M.B.A.
from the State University of New York at Albany, an M.A. in Biology from Indiana University and a
B.S. in Biology from Marist College.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>J.&nbsp;Gregory Ford </B>has served as <I>Vice President, Business Development </I>of PolyMedix, Inc. since
December&nbsp;2008. Mr.&nbsp;Ford has over 20&nbsp;years of biotechnology and pharmaceutical experience. Prior
to joining PolyMedix, Mr.&nbsp;Ford was Vice President, Business Development and Strategic Planning for
CollaGenex Pharmaceuticals, Inc., from August&nbsp;2004 until November&nbsp;2008. Prior to CollaGenex
Pharmaceuticals, Inc., Mr.&nbsp;Ford served as Vice President, Global Business Development of SkyePharma
US Inc. from February&nbsp;2003 to April&nbsp;2004. Prior to SkyePharma US Inc., Mr.&nbsp;Ford served in various
positions of increasing responsibility at SkyePharma Canada, Inc. and its predecessor RTP Pharma
Inc., Boehringer Ingelheim Pharmaceuticals, Inc., Mylan Laboratories, Inc., and Mylan
Pharmaceuticals, Inc. Mr.&nbsp;Ford received an M.B.A and a B.S. in Industrial Engineering from West
Virginia University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Bozena Korczak, Ph.D. </B>has served as <I>Vice President, Drug Development </I>of PolyMedix, Inc. since
November&nbsp;2007. Dr.&nbsp;Korczak has over 20&nbsp;years of experience in discovery, pre-clinical and clinical
research at burgeoning biotechnology organizations. Prior to joining PolyMedix, Dr.&nbsp;Korczak was a
consultant for PharmaReach, Ltd., a private drug development consulting company, from October&nbsp;2005
to November&nbsp;2007. From September&nbsp;2001 to October&nbsp;2005, Dr.&nbsp;Korczak was Vice President of Research
and Development of Cytochroma, Inc., a private biotechnology company. Prior to Cytochroma, Inc.,
Dr.&nbsp;Korczak served in various positions of increasing responsibility at Glycodesign, Inc., Allelix
Biopharmaceutical, Inc. and Mount Sinai Hospital. She is an author of thirty-five peer review
scientific papers and holds a Ph.D. in biochemistry from the Polish Academy of Science.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>R.&nbsp;Eric McAllister, M.D., Ph.D. </B>has served as <I>Vice President, Clinical Development and Chief
Medical Officer </I>of PolyMedix, Inc. since November&nbsp;2006. Dr.&nbsp;McAllister has over 25&nbsp;years of
industry and clinical trials experience, most recently from October&nbsp;2004 to October&nbsp;2006 as Sr.
Vice President of Clinical Development at CombinatoRx Inc. Prior to that, from May&nbsp;2002 to October
2004, Dr.&nbsp;McAllister was Vice President, Clinical Research with Sicor Pharmaceuticals, Inc. Dr.
McAllister has held various clinical development positions with TAP Pharmaceuticals, Inc.,
Cholestech Inc., Bristol-Myers Squibb, Co., G.D. Searle and Company, and Syntex Pharmaceuticals
Ltd. Dr.&nbsp;McAllister also spent seven years as a clinical investigator with MedStudies. He has
worked on the development of such major pharmaceutical products as Lupron, Pravachol, Capoten,
Kerlone, Cardene, Calan, Avandia, Actos, Teveten, and Atacand. Dr.&nbsp;McAllister received his M.D.
from Dalhousie University, and D. Phil. (Ph.D.) degree from Oxford University, and was also a
Rhodes Scholar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Richard W. Scott, Ph.D. </B>has served as <I>Vice President, Research </I>of PolyMedix, Inc. since November
2005 and of PolyMedix Pharmaceuticals, Inc. since November&nbsp;2002. Dr.&nbsp;Scott has approximately 20
years of biopharmaceutical industry experience. Most recently, he was Vice President of Biology at
Cephalon, Inc. where he held positions of increasing responsibility from 1991 to 2001. From 1985
to 1990, Dr.&nbsp;Scott worked at the research laboratories of DuPont and Company. Dr.&nbsp;Scott has
authored more than 45 papers and book chapters, and is named on six patents. Dr.&nbsp;Scott holds a
Ph.D. in Microbiology from the University of Pennsylvania and a B.S. in Biology from Muhlenberg
College.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Edward F. Smith</B>, has served as <I>Vice President, Finance and Chief Financial Officer </I>of PolyMedix,
Inc. since January&nbsp;2006. Mr.&nbsp;Smith has approximately 15&nbsp;years of combined biopharmaceutical
industry and financial management experience. From 2000 to 2005, he was Executive Director of
Finance at InKine Pharmaceutical Company, Inc. (acquired by Salix Pharmaceuticals, Ltd. in 2005).
From 1993 to 1999, Mr.&nbsp;Smith held various positions of increasing responsibility in public
accounting, most recently as a manager in the audit practice at Deloitte &#038; Touche LLP. Mr.&nbsp;Smith
is licensed as a Certified Public Accountant in Pennsylvania and holds a B.S. degree in Business
Administration from the University of Hartford.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Frank Slattery, Jr. </B>has served as <I>Chairman of the Board of Directors </I>of PolyMedix, Inc. since
November&nbsp;2005 and was a co-founder of PolyMedix Pharmaceuticals, Inc. where he served in the same
capacity since inception in August&nbsp;2002. Frank Slattery is the President and founder of Quintus
Corporation, a consulting company, a position he has held since 1995, and Executive Director and
Chief Executive Officer of the Philadelphia Orchestra, a position he has held since January&nbsp;2009.
Mr.&nbsp;Slattery was the President, Chief Executive Officer and Director of LFC Financial Corp. from
1969 to 1994. Mr.&nbsp;Slattery was formerly Chairman of the Main Line Health Systems, Inc. and has
founded and currently serves as the Chairman of the Board of Directors of several privately held
companies, including GelMed Inc., Probaris Technologies, Inc., Franklin Fuel Cells, Inc., Knite,
Inc., MinusNine Technologies, Inc. and NanoSelect, Inc. He also currently serves as Vice Chairman
and Trustee of the Jefferson Health Systems and a director of Clarient, Inc., a publicly held
company. Mr.&nbsp;Slattery holds an A.B. from Princeton University and a J.D. from the Law School of
the University of Pennsylvania.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Brian Anderson </B>has served as a <I>Director </I>of PolyMedix, Inc. since January&nbsp;2008. Since March&nbsp;2007 he
has served as an advisor to companies involved in the health care industry. From January&nbsp;2006
until March&nbsp;2007 Mr.&nbsp;Anderson was employed by Alkermes, Inc., in a market development capacity.
Prior to that, from April&nbsp;2004 to September&nbsp;2005, Mr.&nbsp;Anderson was Chief Business officer for
MediciNova,Inc., a publicly traded specialty pharmaceutical company. Mr.&nbsp;Anderson was an advisor
to Montridge, Inc., a boutique investor relations firm from September&nbsp;2002 to January&nbsp;2004. He was
President and CEO of Cognetix, Inc., a biotechnology company, from 1998 to 2002. Prior to that,
from 1995 to 1998, Mr.&nbsp;Anderson was Senior Vice President for Commercial Development at Indevus
(formerly Interneuron) Pharmaceuticals, a publicly traded biopharmaceutical company. Mr.&nbsp;Anderson
has held various senior level positions in sales, marketing and business development at
Bristol-Myers Squibb and Pharmacia (later Pharmacia &#038; Upjohn). Mr.&nbsp;Anderson graduated from the
University of Manitoba where he received his Bachelors degree.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Richard W. Bank, M.D. </B>has served as a <I>Director </I>of PolyMedix, Inc. since July&nbsp;2008. Dr.&nbsp;Bank is
currently the President of BioVest Advisors, a consulting company, and has served in such capacity
since July&nbsp;2006. Dr.&nbsp;Bank has served as Senior Portfolio Manager, Managing Director, and Senior
Vice President of the Liberty View Health Sciences Fund, a division of Liberty View Capital
Management, a Lehman Brothers company, from July&nbsp;2004 to July&nbsp;2006. Dr.&nbsp;Bank has served as
President and Managing Director of First-Tier Biotechnology Partners from February&nbsp;1995 until its
acquisition by Lehman Brothers in July&nbsp;2004. From February&nbsp;1995 through April&nbsp;1996, Dr.&nbsp;Bank
served as President and Secretary of Biomedical Sciences, Incorporated. He has also served as
President and Secretary of BioVest Health Sciences, Incorporated since its organization in April
1996 to July&nbsp;2004. Dr.&nbsp;Bank was Senior Research Analyst Director/Biotechnology SBC Warburg Dillon
Read from 1998 to 1999. He was also Entrepreneur-In-Residence in Life Sciences for Tucker Anthony
Sutro for 2000 through 2001. Dr.&nbsp;Bank has served as Professor of Medicine at the University of
Southern California and was Medical Commissioner for the 1984 Olympic Games. Dr.&nbsp;Bank received his
B.S. from Washington &#038; Lee University and his M.D. from Finch University of Health Sciences, The
Chicago Medical School.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>William N. Kelley, M.D. </B>has served as a <I>Director </I>of PolyMedix, Inc. since November&nbsp;2005 and of
PolyMedix Pharmaceuticals, Inc. since August&nbsp;2005. Dr.&nbsp;Kelley will not be standing for re-election
to the Board of Directors at the Company&#146;s 2009 Annual Meeting of Stockholders on June&nbsp;30, 2009.
Dr.&nbsp;Kelley has served as Professor of Medicine and Professor of Biochemistry and Biophysics at the
School of Medicine of the University of Pennsylvania since 1989. From 1989 to 2000, Dr.&nbsp;Kelley
served as Executive Vice President of the University of Pennsylvania with responsibilities as Chief
Executive Officer for the Medical Center (and Health Systems upon its formation in 1993), Dean of
the School of Medicine, and the Robert G. Dunlop Professor of Medicine and Biochemistry and
Biophysics. From 1975 to 1989, Dr.&nbsp;Kelley was the John G. Searle Professor and Chair of the
Department of Internal Medicine and Professor of Biological Chemistry at the University of
Michigan. Prior to joining the faculty at the University of Michigan, Dr.&nbsp;Kelley was Professor of
Medicine at Duke University Medical Center. Dr.&nbsp;Kelley currently serves as a director of Merck &#038;
Co., Beckman Coulter, Inc. and GenVec, Inc., which are all publicly held companies, and Advanced
Bio-Surfaces, Inc., a privately held company. During his career, Dr.&nbsp;Kelley has also served on the
editorial boards of 13 medical journals and his bibliography includes over 260 publications,
including 17 books. Dr.&nbsp;Kelley holds an M.D. from Emory University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Michael E. Lewis, Ph.D. </B>has served as a <I>Director </I>of PolyMedix, Inc. since November&nbsp;2005 and of
PolyMedix Pharmaceuticals, Inc. since its inception. Dr.&nbsp;Lewis has more than 30&nbsp;years of
scientific experience in academic and government laboratories and in several major pharmaceutical
and biotechnology companies. Since 1994, Dr.&nbsp;Lewis has served as President of BioDiligence
Partners, Inc., where he co-founded three other biotechnology companies, Cara Therapeutics, Inc.,
Arena Pharmaceuticals, Inc. and Adolor Corporation. Dr.&nbsp;Lewis has served as Chief Scientific
Advisor and a director of Cara Therapeutics, Inc. since its inception in 2004. He has also served
as a director of Aeolus Pharmaceuticals, Inc. since 2004. After serving as Chief Scientific
Advisor of Adolor Corporation from 1994 to 1997, Dr.&nbsp;Lewis served as Chief Scientific Advisor of
Arena Pharmaceuticals, Inc. from 1997 to 2003, and as a director from 1997 to 2000. Dr.&nbsp;Lewis is a
co-founder of Cephalon, Inc. and served at Cephalon as Senior Scientist, Director of Pharmacology,
and then as Senior Director of Scientific Affairs from 1988 to 1993. He supervised a molecular
pharmacology research laboratory at the E.I. DuPont Co. from 1985 to 1987, and received
postdoctoral training in pharmacology at the National Institutes of Health, the University of
Michigan, and at the University of Cambridge. He received a Ph.D. from Clark University in 1977.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Stefan D. Loren, Ph.D. </B>has served as a <I>Director </I>of PolyMedix, Inc. since July&nbsp;2008. Dr.&nbsp;Loren is
currently a Managing Director of Westwicke Partners, a consulting company and a consultant to MTB
Investment Advisors, a family of equity funds, and has held these positions since August, 2008.
Prior to that, Dr.&nbsp;Loren was Analyst/Portfolio Manager with Perceptive Advisors, a health care
hedge fund, from May&nbsp;2007 to August, 2008 and MTB Investment Advisors, a family of equity funds,
from August&nbsp;2005 to May&nbsp;2007. From July&nbsp;1997 to August&nbsp;2005, Dr.&nbsp;Loren was a Managing Director in
the healthcare group at Legg Mason. Prior to that, Dr.&nbsp;Loren was a Research Chemist at the
advanced technologies division of Abbott Laboratories and a research fellow at the Scripps Research
Institute. Dr.&nbsp;Loren received his B.A. from the University of California, San Diego, and his Ph.D.
from University of California, Berkeley.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Shaun F. O&#146;Malley </B>has served as a <I>Director </I>of PolyMedix, Inc. since January&nbsp;2006. Mr.&nbsp;O&#146;Malley is
currently the Chairman Emeritus of Price Waterhouse LLP, a title he has held since July&nbsp;1995.
Prior to 1995, he served as Chairman and Senior Partner of Price Waterhouse LLP. He currently
serves as a member of the Boards of Directors of the Finance Company of Pennsylvania, Monell
Chemical Senses Center and The Philadelphia Contributionship. Mr.&nbsp;O&#146;Malley holds a B.S. in
Economics from the Wharton School of the University of Pennsylvania.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Douglas J. Swirsky </B>has been nominated to stand for election as a <I>Director </I>of PolyMedix, Inc. at the
Company&#146;s 2009 Annual Meeting of Stockholders on June&nbsp;30, 2009. Mr.&nbsp;Swirsky presently serves as
Senior Vice President, Chief Financial Officer, Treasurer, and Corporate Secretary of GenVec, Inc.,
a biopharmaceutical company, a position he has held since 2006. Prior to joining GenVec, Mr.
Swirsky was a Managing Director and the Head of Life Sciences Investment Banking at Stifel Nicolaus
and held the same position at Legg Mason prior to Stifel Financial&#146;s acquisition of the Legg Mason
Capital Markets business in 2005. Mr.&nbsp;Swirsky, a Certified Public Accountant and a CFA
charterholder, has also previously held investment banking positions at UBS, PaineWebber, and
Morgan Stanley. His experience also includes positions in public accounting and consulting. Mr.
Swirsky received his B.S. in Business in Administration from Boston University and his M.B.A. from
the Kellogg School of Management at Northwestern University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Executive officers of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc. are appointed by the
board of directors of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc., respectively. The Chief
Executive Officer, Treasurer and Secretary of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc.
are elected annually by the board of directors of PolyMedix, Inc. and PolyMedix Pharmaceuticals,
Inc., respectively, at its first meeting following the annual meeting of stockholders. Other
officers of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc. may be appointed by the board of
directors of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc., respectively, at any meeting.
Such officers shall hold office until his or her successor is elected and qualified, unless a
different term is specified in the resolution electing or appointing such officer, or until such
officer&#146;s earlier death, resignation or removal.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-42-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All directors of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc. are elected at each annual
meeting of the stockholders of the PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc.,
respectively, to hold office until the next annual meeting of stockholders and until their
successor is elected and qualified, or until such director&#146;s earlier death, resignation or removal.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-43-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table shows information known to us about beneficial ownership of our common stock by:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each of our directors and director nominees;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each of our Named Executive Officers as identified in the Summary Compensation Table;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>all of our directors and executive officers as a group; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each person known by us to beneficially own 5% or more of our common stock.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Beneficial ownership and percentage ownership are determined in accordance with the rules of the
SEC. Under these rules, beneficial ownership generally includes any shares as to which the
individual or entity has sole or shared voting power or investment power and includes any shares
that an individual or entity has the right to acquire beneficial ownership of within 60&nbsp;days of
June&nbsp;4, 2009, through the exercise of any option, warrant, conversion privilege or similar right.
In computing the number of shares beneficially owned by a person and the percentage ownership of
that person, shares of our common stock that could be issued upon the exercise of outstanding
options and warrants that are exercisable within 60&nbsp;days of June&nbsp;4, 2009 are considered to be
outstanding. These shares, however, are not considered outstanding as of June&nbsp;4, 2009 when
computing the percentage ownership of each other person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To our knowledge, except as indicated in the footnotes to the following table and subject to state
community property laws where applicable, all beneficial owners named in this table have sole
voting and investment power with respect to all shares shown as beneficially owned by them.
Percentage of ownership is based on 59,845,065 shares of common stock outstanding as of June&nbsp;4,
2009.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent of</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beneficial Ownership</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Common</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name and Address of Beneficial Owner (1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>of common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Stock</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Directors and Named Executive Officers</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Nicholas Landekic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3,386,722       </TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Frank P. Slattery, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2,159,350       </TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Richard W. Scott, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">895,933       </TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Michael E. Lewis, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">779,250       </TD>
    <TD nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">R. Eric McAllister, M.D., Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">477,778       </TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Edward F. Smith</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">409,722       </TD>
    <TD nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Shaun F. O&#146;Malley</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">342,110       </TD>
    <TD nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">William N. Kelley, M.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">329,250       </TD>
    <TD nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Bozena Korczak, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">250,000       </TD>
    <TD nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Stefan D. Loren, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">93,000       </TD>
    <TD nowrap>(10)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Brian Anderson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">50,000       </TD>
    <TD nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Richard W. Bank, M.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">50,000       </TD>
    <TD nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">J. Gregory Ford</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Douglas J. Swirsky</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B><I>All Directors and Executive Officers as a Group (13 persons):</I></B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B><I>9,253,115       </I></B></TD>
    <TD nowrap><B><I>(12)</I></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right"><B><I>14.2</I></B></TD>
    <TD nowrap><B><I>%</I></B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><B>Five Percent Stockholders </B>(excludes Directors and Executive
Officers set forth above):</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Act Capital Management, LLLP<br>
2 Radnor Corporate Center, Suite&nbsp;111<br>
Radnor, PA 19087</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6,095,642       </TD>
    <TD nowrap>(13)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">9.9</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Jeffrey H. Porter<br>
300 Drakes Landing Road, Suite&nbsp;175<br>
Greenbrae, CA 94904</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3,355,000       </TD>
    <TD nowrap>(14)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.5</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Stephen A. Springer<br>
345 E. 57<SUP style="font-size: 85%; vertical-align: text-top">th</SUP> Street, 8A<br>
New York, NY 10022</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3,306,401       </TD>
    <TD nowrap>(15)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">5.4</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->-44-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Less than 1%.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Unless otherwise indicated, the address of all individuals and entities listed above is
PolyMedix, Inc., 170 N. Radnor Chester Rd., Suite&nbsp;300, Radnor, Pennsylvania 19087.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 2,214,722 shares of common stock issuable upon exercise of options.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 299,250 shares of common stock issuable upon exercise of options and 429,000
shares of common stock issuable upon exercise of warrants. The warrants and 477,000 shares of
common stock are held in the name of Kate Partners XX, L.P. (&#147;Kate Partners&#148;). Mr.&nbsp;Slattery
owns a controlling interest in Kate Partners; therefore, he may be deemed to beneficially own
these shares and warrants. Mr.&nbsp;Slattery disclaims beneficial ownership of these securities
except to the extent of his pecuniary interest in Kate Partners.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 358,333 shares of common stock issuable upon exercise of options.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 299,250 shares of common stock issuable upon exercise of options.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 477,778 shares of common stock issuable upon exercise of options.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 409,722 shares of common stock issuable upon exercise of options.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 299,250 shares of common stock issuable upon exercise of options and 21,430
shares of common stock issuable upon exercise of warrants.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 250,000 shares of common stock issuable upon exercise of options.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 50,000 shares of common stock issuable upon exercise of options and 21,500 shares
of common stock issuable upon exercise of warrants.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 50,000 shares of common stock issuable upon exercise of options.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(12)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 5,057,255 shares of common stock issuable upon exercise of options and 471,930
shares of common stock issuable upon exercise of warrants.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(13)</TD>
    <TD>&nbsp;</TD>
    <TD>We understand that Amir L. Ecker and Carol G. Frankenfield are the General Partners of ACT
Capital Management, LLLP and Act Capital Partners, LP and that voting and investment decisions
made on behalf of ACT Capital Management, LLLP are made primarily by its General Partners.
This figure does not include 3,339,958 shares of common stock issuable upon exercise of
outstanding warrants which are not currently exercisable as a result of aggregate holdings
limitations set forth in the warrants. Also includes 66,000 shares of common stock held in
various accounts of which Mr.&nbsp;Ecker personally has sole investment and voting power, 15,000
shares of common stock held by Ms.&nbsp;Frankenfield, 10,000 shares of common stock held jointly by
Ms.&nbsp;Frankenfield and her husband, and 2,100 shares of common stock held by Ms.&nbsp;Frakenfeld&#146;s
husband. Also includes 960,000 shares of common stock acquired upon the conversion of the
Series&nbsp;2008 Convertible Preferred Stock, as well as 1,180,000 shares of common stock issuable
upon exercise of outstanding Series&nbsp;B Warrants at an exercise price of $1.00 per share.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(14)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Porter is the General Partner for Porter Partners, L.P. and Ben Joseph Partners. Porter
Partners, L.P. beneficially owns 2,995,000 shares of common stock, of which approximately
1,325,000 such shares are issuable upon exercise of outstanding warrants. The beneficial
ownership of Porter Partners, L.P. does not include approximately 75,000 shares of common
stock issuable upon exercise of outstanding warrants which are not currently exercisable as a
result of aggregate holdings limitations set forth in the warrants. Ben Joseph Partners
beneficially owns 285,000 shares of common stock, of which 142,500 such shares are issuable
upon exercise of outstanding warrants.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->-45-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(15)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 409,046 shares of common stock issuable upon exercise of outstanding warrants but
does not include approximately 2,203,097 shares of common stock issuable upon exercise of
outstanding warrants which are not currently exercisable as a result of aggregate holdings
limitations set forth in the warrants.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt"><!-- Folio -->-46-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXECUTIVE COMPENSATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following summary compensation table sets forth information concerning compensation for
services rendered in all capacities for the years ended December&nbsp;31, 2008 and 2007 awarded to,
earned by, or paid to: (i)&nbsp;Nicholas Landekic, who served as our President and Chief Executive
Officer (our CEO) during 2008 and 2007, (ii)&nbsp;Edward F. Smith, who served as our Vice President,
Finance, Chief Financial Officer and Corporate Secretary (our CFO) during 2008 and 2007 and (iii)
our three most highly paid executive officers (as determined based on total compensation) other
than our CEO and CFO as of December&nbsp;31, 2008. These individuals are referred to in this report as
the Named Executive Officers (or &#147;NEOs&#148;).
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="28%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>All Other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>Salary</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>Bonus</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>Awards</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>Total</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Principal Position</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>($) (3)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>($) (4)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2"><B>($)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size: 1px; background: #cceeff">
    <TD colspan="25" align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Nicholas Landekic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">380,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">101,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">393,879</TD>
    <TD nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">875,629</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>President, Chief Executive</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">368,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">111,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">249,853</TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">729,186</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Officer and Director</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Edward F. Smith</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">56,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">105,902</TD>
    <TD nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">387,152</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Vice President, Finance, Chief</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">222,917</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">83,389</TD>
    <TD nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">351,306</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Financial Officer and
Secretary</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">R. Eric McAllister, M.D., Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">192,112</TD>
    <TD nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">535,112</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Vice President, Clinical</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">280,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">151,544</TD>
    <TD nowrap>(10)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">29,329</TD>
    <TD nowrap>(15)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">502,873</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:0px; text-indent:-0px"><I>Development, Chief Medical
Officer </I>(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Richard W. Scott, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,375</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">33,330</TD>
    <TD nowrap>(11)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">344,705</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Vice President, Research</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">263,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">19,323</TD>
    <TD nowrap>(12)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">309,573</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Bozena Korczak, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">51,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">48,721</TD>
    <TD nowrap>(13)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">330,471</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Vice President, Drug</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">4,293</TD>
    <TD nowrap>(14)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,436</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Development </I>(2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Dr.&nbsp;McAllister joined PolyMedix in November&nbsp;2006.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Dr.&nbsp;Korczak joined PolyMedix in November&nbsp;2007.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents performance bonus awards. The 2007 bonus award was paid in 2008 and the 2008
bonus award was paid in 2009.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>This column reflects the dollar amount recognized for financial accounting reporting
purposes, in accordance with SFAS 123(R), pursuant to our equity compensation plans and,
therefore, includes amounts from awards granted in and prior to the applicable fiscal year.
These amounts reflect our accounting expense for these awards, and do not correspond to the
actual value that will be recognized by the Named Executive Officer. The assumptions used in
the calculation of these amounts are described in footnote 6 to our audited financial
statements for the year ended December&nbsp;31, 2008 and our discussion of stock-based compensation
in our annual report on Form 10-K filed with the Securities and Exchange Commission under
&#147;Management&#146;s Discussion and Analysis Of Financial Condition and Results of
Operations&#151;Critical Accounting Policies and Practices&#148; for the year ended December&nbsp;31, 2008.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->-47-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount reflects the compensation expense incurred by us in fiscal year 2008 in
connection with option grants to Mr.&nbsp;Landekic to purchase 500,000 shares of common stock on
December&nbsp;2, 2005, 231,000 shares of common stock on February&nbsp;5, 2007, 600,000 shares of common
stock on January&nbsp;23, 2008, and 1,000,000 shares of common stock on December&nbsp;30, 2008 pursuant
to our 2005 Omnibus Equity Compensation Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount reflects the compensation expense incurred by us in fiscal year 2007 in
connection with option grants to Mr.&nbsp;Landekic to purchase 500,000 shares of common stock on
December&nbsp;2, 2005 and 231,000 shares of common stock on February&nbsp;5, 2007 pursuant to our 2005
Omnibus Equity Compensation Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount reflects the compensation expense incurred by us in fiscal year 2008 in
connection with option grants to Mr.&nbsp;Smith to purchase 250,000 shares of common stock on
January&nbsp;2, 2006, 30,000 shares of common stock on February&nbsp;5, 2007, 125,000 shares of common
stock on January&nbsp;23, 2008, and 325,000 shares of common stock on December&nbsp;30, 2008 pursuant to
our 2005 Omnibus Equity Compensation Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount reflects the compensation expense incurred by us in fiscal year 2007 in
connection with option grants to Mr.&nbsp;Smith to purchase 250,000 shares of common stock on
January&nbsp;2, 2006 and 30,000 shares of common stock on February&nbsp;5, 2007 pursuant to our 2005
Omnibus Equity Compensation Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount reflects the compensation expense incurred by us in fiscal year 2008 in
connection with option grants to Dr.&nbsp;McAllister to purchase 400,000 shares of common stock on
November&nbsp;13, 2006, 200,000 shares of common stock on January&nbsp;23, 2008, and 500,000 shares of
common stock on December&nbsp;30, 2008 pursuant to our 2005 Omnibus Equity Compensation Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount reflects the compensation expense incurred by us in fiscal year 2007 in
connection with option grants to Dr.&nbsp;McAllister to purchase 400,000 shares of common stock on
November&nbsp;13, 2006 pursuant to our 2005 Omnibus Equity Compensation Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount reflects the compensation expense incurred by us in fiscal year 2008 in
connection with an option grant to Dr.&nbsp;Scott to purchase 40,000 shares of common stock on
February&nbsp;5, 2006, 50,000 shares of common stock on January&nbsp;23, 2008, and 225,000 shares of
common stock on December&nbsp;30, 2008 pursuant to our 2005 Omnibus Equity Compensation Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(12)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount reflects the compensation expense incurred by us in fiscal year 2007 in
connection with an option grant to Dr.&nbsp;Scott to purchase 40,000 shares of common stock on
February&nbsp;5, 2006, pursuant to our 2005 Omnibus Equity Compensation Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(13)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount reflects the compensation expense incurred by us in fiscal year 2008 in
connection with option grants to Dr.&nbsp;Korczak to purchase 250,000 shares of common stock on
November&nbsp;13, 2007 and 500,000 shares of common stock on December&nbsp;30, 2008 pursuant to our 2005
Omnibus Equity Compensation Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(14)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount reflects the compensation expense incurred by us in fiscal year 2007 in
connection with option grants to Dr.&nbsp;Korczak to purchase 250,000 shares of common stock on
November&nbsp;13, 2007 pursuant to our 2005 Omnibus Equity Compensation Plan.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(15)</TD>
    <TD>&nbsp;</TD>
    <TD>This amount represents reimbursement of certain relocation expenses to Dr.&nbsp;McAllister as
provided in Dr.&nbsp;McAllister&#146;s offer letter dated October&nbsp;19, 2006.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Narrative Disclosure to Summary Compensation Table</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2008, the Compensation Committee of the Board awarded cash bonuses to each of our NEOs. These
awards are reflected in the column titled &#147;Bonus&#148; in the Summary Compensation Table above. Such
awards were made by the Compensation Committee in its sole discretion at the end of the year after
reviewing the recommendations of our Chief Executive Officer for each NEO other than himself,
individual goals and targets, the performance of each NEO in the applicable fiscal year, evaluating
other components of each NEO&#146;s total compensation package, including the balance of equity to
non-equity compensation, each NEO&#146;s total compensation package relative to executives in benchmark
peer group companies holding similar positions, the report of the Compensation Committee&#146;s
consultant, and our cash position. For benchmarking executive compensation, the Compensation
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-48-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Committee engaged a compensation consulting firm which assisted in establishing a peer group of
companies, analyzing peer company compensation data and comparing our compensation programs with
the practices of the companies represented in the compensation data reviewed. For 2008, the
Compensation Committee&#146;s consulting firm, Compensation Resources, Inc. established a peer group of
35 publicly traded biotechnology companies of similar size to us. The Compensation Committee&#146;s
primary consideration in awarding the cash bonuses for 2008 was to bring each NEO&#146;s total
compensation package in line with the benchmarks established for executives in peer group companies
holding similar positions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Outstanding Equity Awards</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information on all stock option awards held by our NEOs as of
December&nbsp;31, 2008. All outstanding equity awards are in shares of our common stock.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Outstanding Equity Awards at 2008 Fiscal Year-End</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Option Awards (1)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unexercised Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unexercised Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Option Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(#)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(#)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Option Expiration</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Unexercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Nicholas Landekic</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">08/10/2015</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>President, Chief</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/01/2015</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Executive Officer and Director</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">141,167</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">02/04/2016</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I></I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">183,333</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">416,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">01/22/2018</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/29/2018</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Edward F. Smith</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">243,056</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">01/01/2016</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Vice President, Finance, Chief Financial  </I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">18,333</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">02/04/2016</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Officer and Secretary</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">38,194</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,806</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">01/22/2018</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I></I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/29/2018</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">R. Eric McAllister, M.D., Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">208,333</TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">191,667</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/12/2016</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Vice President, Clinical Development,
</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">61,111</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">138,889</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">01/22/2018</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Chief Medical Officer</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/29/2018</TD>
    <TD>&nbsp;</TD>
</TR>
 <TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Richard W. Scott, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">250,000</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">08/10/2015</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Vice President, Research</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24,444</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">02/04/2016</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">15,278</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">01/22/2018</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/29/2018</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Bozena Korczak, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">90,278</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">159,722</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0.98</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11/12/2017</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Vice President, Drug Development x</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12/29/2018</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>There are no restricted stock awards outstanding for any of the NEOs.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Grants with an expiration date of August&nbsp;10, 2015 have a stated term of ten years and vest
50% on the date of grant and 50% on the one-year anniversary of the grant.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Grants with expiration dates of December&nbsp;1, 2015, January&nbsp;1, 2016, February&nbsp;4, 2016, January
22, 2018, November&nbsp;12, 2017 and December&nbsp;29, 2018 have a stated term of ten years and vest in
monthly installments over a three-year period beginning after the date of grant. If a &#147;change
in control&#148; (as defined in our 2005
Omnibus Equity Compensation Plan) were to occur, these options would become immediately
exercisable in full.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->-49-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Grants with expiration dates of November&nbsp;12, 2016 have a stated term of ten years and vest in
50% on the two-year anniversary of the grant and the remaining 50% vests in monthly
installments over a two-year period beginning after the two-year anniversary of the grant. If
a &#147;change in control&#148; (as defined in our 2005 Omnibus Equity Compensation Plan) were to occur,
these options would become immediately exercisable in full.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Employment Contracts and Termination of Employment and Change-in-Control Arrangements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Nicholas Landekic</I>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We extended the offer of employment to Nicholas Landekic for the position of President and Chief
Executive Officer pursuant to an offer letter dated July&nbsp;30, 2002, which provided that his annual
salary will be at least $250,000 per year. Mr.&nbsp;Landekic&#146;s base salary was increased to $350,000 as
of January&nbsp;1, 2006 and further increased to $380,000 as of February&nbsp;2007. Mr.&nbsp;Landekic is eligible
to receive additional compensation depending upon achievement of performance goals as established
by the Board. As an &#147;at-will&#148; employee, Mr.&nbsp;Landekic&#146;s employment can be terminated by us or by
him, at any time and for any reason. In the event Mr.&nbsp;Landekic is terminated by us other than for
&#147;cause&#148; or other than by reason of his &#147;disability,&#148; or he resigns for &#147;good reason&#148; (each as
defined in his offer letter), Mr.&nbsp;Landekic will be entitled to full vesting of all unvested stock
options and restricted stock previously granted to him and a cash payment equal to two-years of his
then current base salary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Edward Smith</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We extended the offer of employment to Edward Smith for the position of Vice President Finance,
Chief Financial Officer and Corporate Secretary pursuant to an offer letter dated December&nbsp;5, 2005,
which provides that his annual salary will be at least $200,000 per year. Mr.&nbsp;Smith&#146;s base salary
was increased to $225,000 as of February&nbsp;2007 and increased to $245,000 effective January&nbsp;1, 2009.
Mr.&nbsp;Smith is eligible to receive additional compensation depending upon achievement of performance
goals as established by the Board. As an &#147;at-will&#148; employee, Mr.&nbsp;Smith&#146;s employment can be
terminated by us or by him, at any time and for any reason. In the event Mr.&nbsp;Smith is terminated
by us other than for &#147;cause&#148; or other than by reason of his &#147;disability&#148; (each as defined in his
offer letter), Mr.&nbsp;Smith will be entitled to full vesting of all unvested stock options previously
granted to him and a cash payment equal to one-year of his then current base salary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>R. Eric McAllister, M.D., Ph.D.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We extended the offer of employment to R. Eric McAllister, M.D., Ph.D., for the position of Vice
President, Clinical Development and Chief Medical Officer pursuant to an offer letter dated October
19, 2006, which provides that his annual salary will be at least $280,000 per year. Dr.&nbsp;McAllister
received an initial grant of 400,000 stock options upon joining us, which vested at 50% on Dr.
McAllister&#146;s second anniversary date with the remainder vesting monthly over his third and fourth
years. In addition, Dr.&nbsp;McAllister is eligible to receive a discretionary cash bonus based on his
performance and our performance. Dr.&nbsp;McAllister is eligible to receive additional compensation
depending upon achievement of performance goals as established by the Board. As an &#147;at-will&#148;
employee, Dr.&nbsp;McAllister&#146;s employment can be terminated by us or by him, at any time and for any
reason. In the event Dr.&nbsp;McAllister is terminated by us other than for &#147;cause&#148; or other than by
reason of his &#147;disability&#148; (each as defined in his offer letter), Dr.&nbsp;McAllister will be entitled
to full vesting of all unvested stock options previously granted to him and a cash payment equal to
one-year of his then current base salary. Further, Dr.&nbsp;McAllister received various relocation
benefits.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-50-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Richard Scott, Ph.D.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We extended the offer of employment to Richard Scott for the position of Vice President, Research
pursuant to an offer letter dated September&nbsp;23, 2002, which provides that his annual salary will be
at least $150,000 per year. Dr.&nbsp;Scott&#146;s base salary was increased to $250,000 effective January&nbsp;1,
2006 and further increased to $265,000 as of February&nbsp;2007. Dr.&nbsp;Scott is eligible to receive
additional compensation depending upon achievement of performance goals as established by the
Board. As an &#147;at-will&#148; employee, Dr.&nbsp;Scott&#146;s employment can be terminated by us or by him, at any
time and for any reason. In the event Dr.&nbsp;Scott is terminated by us other than for &#147;cause&#148; or
other than by reason of his &#147;disability&#148; (each as defined in his offer letter), Dr.&nbsp;Scott will be
entitled to full vesting of all unvested stock options and restricted stock previously granted to
him and a cash payment equal to one-year of his then current base salary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Bozena Korczak, Ph.D.</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We extended the offer of employment to Bozena Korczak for the position of Vice President Finance,
Drug Development pursuant to an offer letter dated November&nbsp;5, 2007, which provides that her annual
salary will be at least $230,000 per year. Dr.&nbsp;Korczak&#146;s base salary increased to $245,000
effective January&nbsp;1, 2009. Dr.&nbsp;Korczak received an initial grant of 250,000 stock options upon
joining us, which vest in equal monthly installments over a three-year period. Dr.&nbsp;Korczak is
eligible to receive additional compensation depending upon achievement of performance goals as
established by the Board. As an &#147;at-will&#148; employee, Dr.&nbsp;Korczak&#146;s employment can be terminated by
us or by her, at any time and for any reason. In the event Dr.&nbsp;Korczak is terminated by us other
than for &#147;cause&#148; or other than by reason of her &#147;disability&#148; (each as defined in her offer letter),
Dr.&nbsp;Korczak will be entitled to full vesting of all unvested stock options previously granted to
her and a cash payment equal to one-year of her then current base salary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>James Gregory Ford</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We extended the offer of employment to James Gregory Ford for the position of Vice President of
Business Development pursuant to an offer letter dated November&nbsp;18, 2008, which provides that his
annual salary will be at least $260,000 per year. Mr.&nbsp;Ford received an initial grant of 400,000
stock options, which vest 50% on the second anniversary of the grant date and the remainder vest in
equal monthly installments thereafter for the third and fourth years from the grant date. Mr.&nbsp;Ford
will be eligible to receive a discretionary cash bonus. For 2009, Mr.&nbsp;Ford may receive a maximum
potential bonus of up to 100% of his base salary for deals in which Mr.&nbsp;Ford was the primary and
lead negotiator and essential to concluding and based on (i)&nbsp;one percent (1%) of cash revenues
actually received by us in 2009 for out-licensing deals, (ii)&nbsp;equity investments actually received
in 2009 made by corporate partners as part of a strategic investment or business opportunity, and
(iii)&nbsp;a 35% bonus payment for in-licensing deals of a marketed or clinical stage LMWH product, or a
to be determined amount for any other clinical stage product. As an &#147;at-will&#148; employee, Mr.&nbsp;Ford&#146;s
employment can be terminated by us or by him, at any time and for any reason. If Mr.&nbsp;Ford&#146;s
employment is terminated as a result of a Qualified Termination (as defined in his offer letter),
then Mr.&nbsp;Ford will be entitled to: (a)&nbsp;continuation of his base salary for one year, (b)&nbsp;Company
payments of COBRA premiums for up to one year following termination, and (c)&nbsp;full vesting of any
unvested stock options. However, if a Qualified Termination occurs within 24&nbsp;months of the
commencement of Mr.&nbsp;Ford&#146;s employment, 200,000 options of his initial grant will vest in lieu of
the schedule in (c)&nbsp;above.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-51-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DIRECTOR COMPENSATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following Director Compensation table sets forth information concerning compensation for
services rendered by our independent directors for fiscal year 2008.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Fees Earned or</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Paid in</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Cash</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Awards</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Total</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>($) (3)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>($)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Frank P. Slattery, Jr.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">32,100</TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Chairman of the Board</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Shaun F. O&#146;Malley</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">32,100</TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">61,100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Chairman, Audit Committee</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Brian Anderson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">63,619</TD>
    <TD nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,619</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Chairman, Compensation Committee</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">William N. Kelley, M.D. (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">32,100</TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36,100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px"><I>Chairman, Governance Committee</I></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Richard W. Bank, M.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">33,615</TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,615</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Frank M. DeLape (2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">56,869</TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,869</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Michael E. Lewis, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">63,619</TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,619</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Stefan D. Loren, Ph.D.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">33,615</TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,615</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>




<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Dr.&nbsp;Kelley has informed us that he will not stand for re-election to our Board at the Annual
Meeting of Stockholders to be held on June&nbsp;30, 2009.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;DeLape retired from the Board of Directors in May&nbsp;2008.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>This column reflects the dollar amount recognized for financial accounting reporting
purposes, in accordance with SFAS 123(R), pursuant to our equity compensation plans and,
therefore, includes amounts from awards granted in and prior to the applicable fiscal year.
These amounts reflect our accounting expense for these awards, and do not correspond to the
actual value that will be recognized by the Named Executive Officer. The assumptions used in
the calculation of these amounts are described in footnote 6 to our audited financial
statements for the year ended December&nbsp;31, 2008 and our discussion of stock-based compensation
in our annual report on Form 10-K filed with the Securities and Exchange Commission under
&#147;Management&#146;s Discussion and Analysis Of Financial Condition and Results of
Operations&#151;Critical Accounting Policies and Practices&#148; for the year ended December&nbsp;31, 2008.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents the compensation expense incurred by us in fiscal year 2008 in connection with
option grants to purchase 150,000 shares of common stock on September&nbsp;11, 2007. As of
December&nbsp;31, 2008, this director holds options to purchase 330,000 shares of common stock.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents the compensation expense incurred by us in fiscal year 2008 in connection with the
option grant to purchase 150,000 shares of common stock on January&nbsp;23, 2008. As of December
31, 2008, this director holds options to purchase 150,000 shares of common stock.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents the compensation expense incurred by us in fiscal year 2008 in connection with
option grants to purchase 150,000 shares of common stock on July&nbsp;31, 2008. As of December&nbsp;31,
2008, this director holds options to purchase 150,000 shares of common stock.</TD>
</TR>

</TABLE>



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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Continuing Education of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are committed to supporting the continuing education of our directors on relevant matters. The
Governance Committee of the Board will decide on a case-by-case basis the appropriate level and
frequency of support to provide.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Directors who are also our employees receive no additional compensation for serving as a director
or as a member of any Committee of the Board. All non-employee directors receive a fee of $1,500
and $1,000 per Board meeting and Committee meeting, respectively, and are reimbursed for expenses
incurred in connection with attending Board and Committee meetings. In addition, our Chairman of
the Board receives an annual retainer of $20,000, the Chairman of the Audit Committee receives an
annual retainer of $16,000, the Chairmen of the Compensation and Nominating and Corporate
Governance Committees receive annual retainers of $14,000 and all other non-employee directors
receive an annual retainer of $12,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">All new non-employee directors receive an initial grant of options to purchase shares of our common
stock upon first becoming a member of the Board. In addition, each non-employee director may, at
the discretion of the Board or Compensation Committee of the Board, receive additional equity
compensation awards. See the Director Compensation Table below for more details.
</DIV>

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<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The following discussion and analysis should be read in conjunction with the consolidated financial
statements including the notes thereto. This discussion and analysis may contain forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results
may differ materially as a result of various factors, including those set forth under &#147;Risk
Factors&#148; or elsewhere in this prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Overview</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a development stage biotechnology company focused on treating life threatening, serious
infectious diseases and acute cardiovascular disorders with synthetic small molecule compounds that
mimic the activity of large natural protein molecules, compounds referred to as biomimetics. Using
our proprietary computational drug design technology, we have created novel defensin mimetic
antibiotic compounds, heparin antagonist compounds and other drug compounds intended for human
therapeutic use. Since 2002, we have been a development stage enterprise, and accordingly, our
operations have been directed primarily toward developing business strategies, raising capital,
research and development activities, conducting pre-clinical testing and human clinical trials of
our product candidates, exploring marketing channels and recruiting personnel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have incurred operating losses since inception, have not generated any product sales revenues
and have not achieved profitable operations. Our deficit accumulated during the development stage
through March&nbsp;31, 2009 aggregated $39,779,000, and we expect to continue to incur substantial
losses in future periods. None of our product candidates have received regulatory approval for
commercial sale and our product candidates may never be commercialized. In addition, all of our
product candidates are in the early stages of development and several programs are on hold pending
sufficient additional financing. The progress and results of our current and any future clinical
trials or future pre-clinical testing are uncertain, and if our product candidates do not receive
regulatory approvals, our business, operating results, financial condition and cash flows will be
materially adversely affected. Our development programs require a significant amount of cash to
support the development of product candidates.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are highly dependent on the success of our research, development and licensing efforts and,
ultimately, upon regulatory approval and market acceptance of our products under development. Our
short and long-term capital requirements depend upon a variety of factors, including market
acceptance for our technologies and product candidates and various other factors. We anticipate
that in order to achieve our operational objectives, including our plans during 2009 for starting
and completing Phase 1B studies as well as beginning preparation for Phase 2 studies for each of
our PMX-30063 and PMX-60056 product candidates, our expenses and cash requirements will increase
from historical levels and we will need to raise additional capital during 2009 in order to fully
fund the research and development of our product candidates. We believe that our current cash and
investment balances, exclusive of any cash to be generated from
the Equity Line, will be sufficient to fund our planned Phase 1 studies for PMX-30063 and PMX-60056 and can fund
our operations for at least the next twelve months; however, due to the continued deterioration of
the capital markets and prospects for securing additional financing, in order to prolong our cash
runway we will scale back and delay some of our activities and do not plan to commence a Phase 1B
clinical trial for PMX-60056 until the third quarter of 2009.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our current cash and investment balances are not sufficient to fund
the Phase 2 clinical or other
development activities of either of our two lead product candidates. We do not plan to initiate
our Phase 2 development activities for both PMX-30063 and PMX-60056 until additional financing is
secured. We expect to seek additional funds beyond the Equity Line through equity or debt financing, among other sources.
In addition, we may actively seek funds through government grants and contracts. However, as a
result of current conditions in the equity and debt markets, we may not be able to obtain
additional funding on favorable terms, if at all. In addition, if we choose to apply for
government grants and contracts, there is no guarantee of acceptance of our applications. If
additional capital resources are not obtained during 2009, we will scale-back,
postpone or eliminate certain of our research, drug discovery or development programs until such
additional capital resources have been obtained, and as a result, our business may be materially
and adversely affected. In the absence of adequate additional funding, we believe that we have the
ability to scale our operations such that our current cash and investment balances,
exclusive of any cash to be generated from the Equity Line, will be sufficient to fund our
operations for at least the next twelve months.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Global market and economic conditions have been, and continue to be, disruptive and volatile. In
particular, the cost of raising money in the debt and equity capital markets has increased
substantially while the availability of funds from those markets has diminished significantly. If
funding is not available when needed, or is available only on</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">unfavorable terms, meeting our capital needs or otherwise taking advantage of business
opportunities may become challenging, which could have a material adverse effect on our business
plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following discussion and analysis provides information that we believe is relevant to an
assessment and understanding of our results of operations for the three-months ended March&nbsp;31, 2009
and 2008, and financial condition as of March&nbsp;31, 2009 and December&nbsp;31, 2008.<BR>
</DIV>




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Critical Accounting Policies and Practices</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of our Consolidated Financial Statements in conformity with accounting
principles generally accepted in the United States requires management to adopt critical accounting
policies and to make estimates and assumptions that affect the amounts reported in our Consolidated
Financial Statements and accompanying notes. These critical accounting policies and estimates have
been reviewed by our Audit Committee. The principal items in our Consolidated Financial Statements
reflecting critical accounting policies or requiring significant estimates and judgments are as
follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Stock-based compensation</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">From our inception, August&nbsp;8, 2002, we adopted the fair value recognition provisions of Statement
of Financial Accounting Standards (&#147;SFAS&#148;) No.&nbsp;123, <I>Accounting for Stock-Based Compensation </I>and
have, since inception, recognized equity compensation expense over the requisite service period.
Beginning January&nbsp;1, 2006, we adopted SFAS No.&nbsp;123(R), <I>Share-based Payment </I>using the
modified-prospective transition method. There was no significant impact from switching from
SFAS No.&nbsp;123 to SFAS No.&nbsp;123(R). Since inception, we have used the Black-Scholes formula to
estimate the fair value of stock options and have elected to continue to estimate the fair value of
stock options using the Black-Scholes formula. The volatility and expected term assumptions have
the most significant effect on the results obtained from the Black-Scholes option-pricing model. We
have to date assumed that stock options have an expected life of five years, representing about
half of their contractual life, and assumed common stock volatility of between 41% and 75%. Higher
estimates of volatility and expected life of the option increase the value of an option and the
resulting expense. Given the absence of an active market for our common stock in prior periods, the
fair value of our common stock has periodically been estimated using several criteria, including
progress and milestones achieved in our research activities along with the price per share of our
preferred and common stock offerings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Results of Operations</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><U>Three-months ended March&nbsp;31, 2009 compared to three-months ended March&nbsp;31, 2008 </U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Revenues and Expenses</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Grant and research revenues </I>were $6,000 and $991,000 for the three-month periods ended March&nbsp;31,
2009, and 2008, respectively. The decrease in grant and research revenue for the three-month period
ended March&nbsp;31, 2009 was the result of the timing of our expenditures and subsequent reimbursement
related to our three-year $2,900,000 National Institutes of Health (or &#147;NIH&#148;) grant, which was
awarded in April&nbsp;2006 and completed in March&nbsp;2009 in support of our development of our i.v.
antibiotic product candidate, PMX-30063.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Research and development expenses </I>were $1,675,000 and $2,726,000 for the three-month periods ended
March&nbsp;31, 2009 and 2008, respectively. The decrease was the result of the delay and scale-back of
certain research, and the delay of certain clinical development costs initiated during 2008.
Pending timely and adequate additional funding, we expect our research and development costs to
increase in the second half of 2009 as a result of increased staff hiring in connection with the
preparation for Phase 2 studies for our PMX-30063 and PMX-60056 product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>General and administrative expenses </I>were approximately $1,277,000 and $1,155,000 for the
three-month periods ended March&nbsp;31, 2009 and 2008, respectively. We do not expect our general and
administrative costs to increase substantially over the next twelve months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Interest income and expense </I>was $26,000 and $67,000 for the three-month periods ended March&nbsp;31,
2009 and 2008, respectively. The changes were mostly the result of lower interest rates and
decreased cash and investment balances resulting in less interest income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Historical Cash Flows</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Operating Activities</I>. Cash used in operating activities during the three-month period ended March
31, 2009 was approximately $2,642,000, compared to approximately $2,867,000 for the three-month
period ended March&nbsp;31, 2008. The decrease was primarily due to change in prepaid expenses and other
current assets, partially offset by decreases in accounts payable, accrued expenses and deferred
rent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Investing Activities</I>. Cash provided by or used in investing activities represents cash paid for the
purchase, and proceeds received from, the maturity of investments and cash paid for property and
equipment. During the three-month period ended March&nbsp;31, 2009, $1,898,000 was used to purchase
investments. During the three-month period ended March&nbsp;31, 2009 and 2008, $7,900,000 and
$2,000,000 was received from the maturities of investments, respectively. During the three-month
period ended March&nbsp;31, 2009, $15,000 was used to purchase property and equipment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Financing Activities</I>. To date, we have financed our operating and investing activities primarily
from the proceeds from the sale of equity securities. During the three-month period ended March&nbsp;31,
2009 we paid $36,000 in financing costs associated with our September&nbsp;2008 private placement of
Series&nbsp;2008 preferred stock units and paid $36,000 in principal associated with our capital leases.
During the three-month period ended March&nbsp;31, 2008 we paid $308,000 in financing costs associated
with our December&nbsp;2007 registered offering of common stock units and paid $32,000 in principal
associated with our capital leases.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Year ended December&nbsp;31, 2008 compared to year ended December&nbsp;31, 2007</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Since inception, our only revenues have been from grants and other research arrangements. Grant and
research revenues were $1,066,000 and $1,126,000 for the years ended December&nbsp;31, 2008 and 2007,
respectively. The decrease in grant and research revenue was attributable to the timing of expenses
and related funds received in connection with our advanced technology grant from the National
Institute of Health, or NIH, in support of our development of our i.v. antibiotic product candidate
and our heptagonist product candidate. We currently have $7,000 remaining available under these
grants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We incurred research and development expenses of $7,401,000 and $9,328,000 for the years ended
December&nbsp;31, 2008 and 2007, respectively. The decrease was the result of the delay and scale-back
of certain research and delay of certain clinical development costs during 2008. With the closing
of our third quarter financing activities, costs to bring both PMX-30063 and PMX-60056 through
Phase 1 development were prioritized and deployed. Research and development costs include $440,000
and $323,000 related to stock-based compensation expense for the years ended December&nbsp;31, 2008 and
2007, respectively. Pending timely and adequate additional funding, we expect our research and
development costs to increase in the second half of 2009 as a result of increased staff hiring in
connection with the start of preparation for Phase 2 studies for our PMX-30063 and PMX-60056
product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">General and administrative expenses were $4,875,000 and $4,473,000 for the years ended December&nbsp;31,
2008 and 2007, respectively. The overall increase was mostly attributable to increased legal costs
and personnel costs. General and administrative costs include $964,000 and $936,000 related to
stock-based compensation expense for the years ended December&nbsp;31, 2008 and 2007, respectively.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income and other expenses were $224,000 and $511,000 for the years ended December&nbsp;31, 2008
and 2007, respectively. The decrease was due to decreased interest rates on our cash, cash
equivalent and investment balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Historical Cash Flows</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Operating Activities</I>. Cash used in operating activities during the year ended December&nbsp;31, 2008
increased to $10,926,000 as compared to $8,266,000 used for the year ended December&nbsp;31, 2007. The
increase was primarily due to increased general and administrative expenses and decreased current
liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Investing Activities</I>. Cash used for investing activities represents cash paid for purchases of
investments and property and equipment, net of maturities of investments. During the year ended
December&nbsp;31, 2008 and 2007, we purchased $9,553,000 and $9,880,000 of investments, respectively.
During the year ended December&nbsp;31, 2008 and 2007, maturities of our investments were $5,700,000 and
$12,098,000, respectively. During the years ended December&nbsp;31, 2008 and 2007, property and
equipment purchases were $0 and $266,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Financing Activities. </I>We have financed our operating and investing activities primarily from the
proceeds from the sale of equity securities. During the years ended December&nbsp;31, 2008 and 2007, we
received $16,966,000 and $2,558,000, respectively, in net proceeds of such issuances of equity
securities. Additionally, during 2008 and 2007 we received $214,000 and $184,000, respectively
from the exercise of stock options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U>Year ended December&nbsp;31, 2007 compared to year ended December&nbsp;31, 2006</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Grant and research revenues were $1,126,000 and $821,000 for the years ended December&nbsp;31, 2007 and
2006, respectively. The increase in grant and research revenue was attributable to funds received
in connection with our advanced technology grant from the National Institute of Health, or NIH, in
support of our development of our i.v. antibiotic product candidate, which commenced in April&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We incurred research and development expenses of $9,328,000 and $3,306,000 for the years ended
December&nbsp;31, 2007 and 2006, respectively. The increase was the result of increased headcount and
outside laboratory research costs associated with our preclinical development, GMP compliant
manufacturing and GLP compliant toxicology, safety pharmacology and genotoxicity studies for
PMX-60056 and PMX-30063 planned for 2008. Research and development costs include $323,000 and
$205,000 related to stock-based compensation expense for the years ended December&nbsp;31, 2007 and
2006, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">General and administrative expenses were $4,473,000 and $4,174,000 for the years ended December&nbsp;31,
2007 and 2006, respectively. The increase was the result of facility, investor relations and legal
costs. General and administrative costs include $936,000 and $934,000 related stock-based
compensation expense for the years ended December&nbsp;31, 2007 and 2006, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Interest income and other expenses were $511,000 and $693,000 for the years ended December&nbsp;31, 2007
and 2006, respectively. The decrease was a result of our decreased average cash and investment
balances along with declining interest rates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Historical Cash Flows</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Operating Activities</I>. Cash used in operating activities during the year ended December&nbsp;31, 2007
increased to $8,266,000 as compared to $4,319,000 used for the year ended December&nbsp;31, 2006. The
increase is attributed primarily to increased research and development spending and increased
general and administrative expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Investing Activities</I>. Cash used for investing activities represents cash paid for purchases of
investments and property and equipment, net of maturities of investments. During the year ended
December&nbsp;31, 2007 and 2006, we purchased $9,880,000 and $10,810,000 of investments, respectively.
During the year ended December&nbsp;31, 2007 and 2006, maturities of our investments were $12,098,000
and $5,000,000, respectively. During the years ended December&nbsp;31, 2007 and 2006, property and
equipment purchases were $266,000 and $274,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Financing Activities. </I>We have financed our operating and investing activities primarily from the
proceeds from the sale of equity securities. During the years ended December&nbsp;31, 2007 and 2006, we
received $2,558,000 and
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">$3,720,000, respectively, in net proceeds of such issuances of equity securities. Additionally,
during 2007 we received $184,000 from the exercise of stock options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Liquidity and Capital Resources</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of March&nbsp;31, 2009 and December&nbsp;31, 2008, we had cash and investment balances of approximately
$12,379,000 and $15,106,000, respectively, and total liabilities of approximately $2,664,000 and
$2,934,000, respectively. The decrease in our cash and investment balances was primarily
attributable to cash used to fund ongoing operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The global financial markets have been and continue to be in turmoil, with extreme volatility in
the equity and credit markets and with some financial and other institutions experiencing
significant financial distress. In addition, neither our access to nor the value of our cash
equivalents or short-term investments have been negatively affected by the recent liquidity
problems of financial institutions. Although we have attempted to be prudent in our investment
strategy and in funding our anticipated near term liquidity needs, it is not possible to predict
how the financial market turmoil and the deteriorating economic conditions may affect our financial
position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">These and any future financial institution failures could cause losses to the extent cash amounts
or the values of securities exceed government deposit insurance limits, and could restrict our
access to the public equity and debt markets. In particular, the cost of raising money in the debt
and equity capital markets has increased substantially while the availability of funds from those
markets has diminished significantly. Also, as a result of concern about the stability of financial
markets generally and the solvency of counterparties specifically, the cost of obtaining money from
the credit markets has increased as many lenders and institutional investors have increased
interest rates, enacted tighter lending standards and reduced and, in some cases, ceased to provide
funding to borrowers. Low valuations and decreased appetite for equity investments, among other
factors, may make the equity markets difficult to access on acceptable terms or unavailable
altogether.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a development stage company and have not experienced significant revenue generating
activities since our formation. We reached a positive working capital position for the first time
in the fourth quarter of 2005 as a result of our financing activities. We have incurred operating
losses for each year since our inception in 2002. To achieve operating profits, we, alone or with
others, must successfully identify, develop and market product candidates. Our principal
activities, from the beginning of our development stage, have been organizational matters, issuance
of stock, product research and development, fund raising and market research.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the near-term, we expect to continue to incur significant and increasing operating losses as a
result of the research and development expenses we expect to incur in developing our product
candidates and the general and administrative expenses we incur as a reporting company under the
Securities Exchange Act of 1934, as amended. Additionally, we do not expect to generate any
revenues from sources other than research grants for the foreseeable future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe
that our current cash and investment balances, exclusive of any cash
to be generated from the Equity Line, will be sufficient to fund  our planned Phase 1 studies for
PMX-30063 and PMX-60056 and can fund our operations for at least the next twelve months; however,
due to the continued deterioration of the capital markets and prospects for securing additional
financing, in order to prolong our cash runway we will scale back and delay some of our activities
and do not plan to commence a Phase 1B clinical trial for PMX-60056 until the third quarter of
2009. In addition, our current cash and investment balances are not sufficient to fund the Phase 2
clinical or other development activities of either of these product candidates. We plan to seek
additional funding during 2009 in one or more financings. However, if we are unable to secure
adequate additional funding during the first half of 2009, we will delay, scale-back or eliminate
certain of our future research, drug discovery or development activities or certain other aspects
of our operations and our business until such time as we are successful in securing adequate
additional funding. In the absence of adequate additional funding, we believe that we have the
ability to scale our operations, however, in doing so, our current cash and investment balances can
only fund our operations into the second half of 2010. Our short and long-term capital
requirements depend upon a variety of factors, including market acceptance for our technologies and
product candidates and various other factors, many of which we cannot control, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>success of our clinical trials for PMX-30063 and PMX-60056;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>continued progress of and increased spending related to our research and
development activities, including our plan to hire additional research and
development employees;</TD>
</TR>


</TABLE>
</DIV>
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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the conditions in the capital markets and the biopharmaceutical industry
that make raising capital or entering into strategic arrangements difficult and
expensive;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>progress with preclinical experiments and clinical trials;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ongoing general and administrative expenses related to our being a reporting company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost, timing, and results of regulatory reviews and approvals;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the maintenance of our existing licenses with the University of Pennsylvania
and the University of Massachusetts;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the success, timing, and financial consequences of any future collaborative,
licensing and other arrangements that we may establish;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs of commercializing any of our other product candidates;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>technological and market developments;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost of manufacturing development; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>timing and volume of sales of products for which we obtain marketing approval.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We expect
to seek additional funds beyond the Equity Line through equity or debt financing, collaborative or other
arrangements with corporate partners, and from other sources. For instance, we may actively seek
more funding through government grants and contracts. We may not be able to obtain any additional
financing on terms acceptable to us, if at all, or we may not raise as much as we expect. If
adequate additional funds are not available when required, we will have to delay, scale-back or
eliminate certain of our research, drug discovery or development activities or certain other
aspects of our operations and our business will be materially and adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are subject to many risks associated with development-stage businesses, including the
above-discussed risks associated with the ability to raise capital. Please see the section entitled
&#147;Risk Factors&#148; for more information regarding risks associated with our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Off-Balance Sheet Arrangements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We do not have any &#147;off-balance sheet arrangements&#148; as defined in applicable SEC regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Commitments and Contingencies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As described above, we believe our current cash and investment balances are adequate to fund
operations, including the following commitments and contingencies, at least for the next twelve
months. If we are unable to secure adequate additional funding during  2009, we
will delay, scale-back or eliminate certain of our future research, drug discovery or development
activities or certain other aspects of our operations and our business until such time as we are
successful in securing adequate additional funding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Capital Lease</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have entered into lease agreements for laboratory equipment. The initial obligation under these
capital leases was $331,000. The value of the laboratory equipment acquired in connection with
these leases was $398,000 and the depreciation associated with these assets is included along with
that of other owned property and equipment. These equipment leases have terms of up to three
years, at interest rates ranging from 9.5% to 11.5% and contain bargain purchase options. In
connection with these capital leases, we will pay $108,000 during 2009, $4,000 of which will be for
interest. These capital leases end during 2009.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Lease</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2006, we entered into a lease agreement for 24,223 square feet of combined office and
laboratory space located in Radnor, Pennsylvania. The initial term of the lease is 12&nbsp;years.
Payments under the lease commenced on December&nbsp;1, 2006. Our future minimum lease payments under
this non-cancelable operating lease are as follows (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Operating Leases</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">686</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">705</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,610</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total minimum lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,754</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prior to the commencement of our current operating lease for our Radnor Facility, we leased
approximately 3,500 square feet of combined office and laboratory space on a month-to-month basis
in Philadelphia, Pennsylvania. Rent expense was $598,000, $598,000 and $559,000 and $1,877,000 for
the years ended December&nbsp;31, 2008, 2007, and 2006, and for the period from August&nbsp;8, 2002
(Inception) to December&nbsp;31, 2008, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Patent License Agreements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>University of Pennsylvania</I>. In January&nbsp;2003, we entered into a Patent License Agreement with Penn.
Under the terms of the agreement, we were granted an exclusive, worldwide royalty-bearing license
to make and sell products utilizing seven of Penn&#146;s issued or pending patents for the life of such
patents. One issued patent and five patent applications cover the composition of matter on
antimicrobial compounds, including small molecules, oligomers and polymers. One patent application
covers the composition and use of polycationic compounds for treating cancer. If a
change-of-control event occurs, in which we transfer the license to these patents to a third party
or we are acquired by another company, we are required to pay a 3% royalty on the gross sales for
licensed products that are sold as pharmaceuticals and a 1.5% royalty on products sold as coatings
for use in medical devices. We are permitted to sublicense the patents provided that (a)&nbsp;the
sublicensee is prohibited from further licensing of the patents and (b)&nbsp;the sublicensee is subject
to all of the terms of the original license granted to us. In addition, we are required to share
with Penn any consideration we receive from sublicensing our patents to a third party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>University of Massachusetts</I>. In January&nbsp;2004, we entered into a five-year sponsored research
agreement with UMass. Under the terms of this agreement, we have the exclusive option to license
any intellectual property that may be generated by Dr.&nbsp;Gregory Tew pursuant to research sponsored
under the agreement. We may exercise this option by issuing 7,500 shares of our common stock to
UMass for each $100,000 of research conducted by Dr.&nbsp;Tew. If we exercise this option, we are also
required to reimburse UMass for direct patent costs incurred by it for the patents licensed by us.
During 2007, we issued 12,500 shares to UMass in connection with this agreement. We sponsored
$36,000 and $107,000, $118,000 of Dr.&nbsp;Tew&#146;s research for 2008, 2007 and 2006, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Agreements with Employees</I>. We have entered into employment agreements with various executives.
These agreements provide for severance arrangements and accelerated vesting of equity compensation
awards in the event that the executive is terminated by us other than for cause or disability or if
the executive resigns for good reason.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Credit Line</I>. In April&nbsp;2006, we entered into a line of credit agreement with a financial
institution. This line of credit provides for monthly interest-only payments at a variable per
annum rate of 3% plus the 30-day LIBOR rate. The amount available under this line of credit ranges
from 85% to 92% of cash and investments pledged as collateral, based upon the amount and security
type. There is currently no outstanding balance on this line of credit. In June&nbsp;2006, we entered
into a letter of credit agreement with the same financial institution to secure our payment
obligations under our facility operating lease. This letter of credit is for $1,400,000, expires
on December&nbsp;1, 2009 and is secured by our credit line.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recently Issued Accounting Pronouncements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2006, the Financial Accounting Standards Board (or &#147;FASB&#148;) issued Statement of
Financial Accounting Standards (or &#147;SFAS&#148;) No.&nbsp;157, <I>Fair Value Measurements </I>(&#147;SFAS 157&#148;). SFAS 157
clarifies the definition of fair value, establishes a framework for measuring fair value and
expands disclosures on fair value measurements. SFAS 157 was effective for financial statements
issued for fiscal years beginning after November&nbsp;15,
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2007 and interim periods within those fiscal years; however, the FASB did provide a one-year
deferral for the implementation of SFAS 157 for nonfinancial assets and liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to
measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level
1 inputs are quoted prices (unadjusted)&nbsp;in active markets for identical assets or liabilities.
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs
that are observable for the asset or liability, either directly or indirectly through market
corroboration, for substantially the full term of the financial instrument. Level 3 inputs are
unobservable inputs based on management&#146;s own assumptions used to measure assets and liabilities at
fair value. A financial asset or liability&#146;s classification within the hierarchy is determined
based on the lowest level input that is significant to the fair value measurement. The adoption of
SFAS 157 did not have any impact on our consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159 <I>The Fair Value Option for Financial Assets and
Financial Liabilities </I>(&#147;SFAS 159&#148;). SFAS 159 permits entities to choose to measure many financial
assets and financial liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. SFAS 159 was effective for fiscal
years beginning after November&nbsp;15, 2007. We did not elect the fair value option available under
SFAS 159 for any financial assets or liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2007, the FASB ratified the consensus reached in EITF Issue No.&nbsp;07-03, <I>Accounting for
Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and
Development Activities </I>(Issue No.&nbsp;07-03). Issue No.&nbsp;07-03 requires that non-refundable advance
payments for future research and development activities should be deferred and recognized as an
expense as goods are delivered or the related services are performed. Issue No.&nbsp;07-03 is effective
for fiscal years beginning after December&nbsp;15, 2007. Issue No.&nbsp;07-03 was adopted effective January
1, 2008 and did not have a material impact on our consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2008, the FASB issued FASB Staff Position No.&nbsp;EITF 03-6-1, <I>Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities, </I>(&#147;FSP EITF 03-6-1&#148;). FSP
EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore need to be included in the earnings
allocation in computing earnings per share, or EPS, under the two-class method described in
paragraphs 60 and 61 of FASB Statement No.&nbsp;128, <I>Earnings per Share </I>(&#147;SFAS No.&nbsp;128&#148;). FSP
EITF 03-6-1 applies to the calculation of EPS under SFAS No.&nbsp;128 for share-based payment awards
with rights to dividends or dividend equivalents. FSP EITF 03-6-1 clarifies that unvested
share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in the computation of
EPS pursuant to the two class method. FSP EITF 03-6-1 is effective for financial statements issued
for fiscal years beginning after December&nbsp;15, 2008, and interim periods within those years. All
prior-period EPS data presented must be adjusted retrospectively (including interim financial
statements, summaries of earnings and selected financial data) to conform with the provisions of
FSP EITF 03-6-1. Early adoption is not permitted. We do not expect EITF 03-6-1 to have a material
impact on our consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2008, the FASB ratified the consensus reached on EITF Issue No.&nbsp;07-05, <I>Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entity&#146;s Own Stock </I>(&#147;EITF No.&nbsp;07-05&#148;). EITF
No.&nbsp;07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed
to an entity&#146;s own stock, which would qualify as a scope exception under SFAS No.&nbsp;133, Accounting
for Derivative Instruments and Hedging Activities. EITF No.&nbsp;07-05 is effective for financial
statements issued for fiscal years beginning after December&nbsp;15, 2008. Early adoption for an
existing instrument is not permitted. We are currently evaluating the impact of the pending
adoption of EITF No.&nbsp;07-05 on our consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-61-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Other than compensation agreements and other arrangements with our executive officers and directors
and the transactions described below, during our last three fiscal years, there has not been, and
there is not currently proposed, any transaction or series of similar transactions to which we were
or will be a party in which the amount involved exceeded or will exceed the lesser of $120,000 or
one percent of the average of our total assets at year-end for the last two completed fiscal years
and in which any of our directors, nominees for director, executive officers, holders of more than
five percent of any class of our voting securities or any member of the immediate family of the
foregoing persons had or will have a direct or indirect material interest.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Fordham Financial Management, Inc.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2008, we entered into an Amended and Restated Co-Placement Agent Agreement with Fordham
Financial, a former 5% stockholder of ours, and Carter Securities, LLC. As consideration for the
placement services rendered by the placement agents, including Fordham Financial, in connection
with our July&nbsp;2008 public offering, during the period from May&nbsp;2008 to July&nbsp;2008 Fordham Financial
received:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a total of $276,000 in commissions, which represented 7% of the gross proceeds
we received for units placed by Fordham Financial;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reimbursement of out of pocket expenses in an amount not to exceed $20,000 and
the fees of Fordham Financial&#146;s legal counsel of up to $50,000 plus approved
disbursements; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>warrants to purchase 281,578 shares of common stock, which represented 5% of the
aggregate number of units sold in the offering. The warrants are currently
exercisable, have an exercise price of $1.00 per share and expire July&nbsp;14, 2013.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the terms and provisions of the Amended and Restated Co-Placement Agent Agreement, we
agreed to indemnify and hold harmless the agents, including Fordham Financial, and any sub-agent
and/or selected dealer, their affiliates, and their respective controlling persons, directors,
officers, stockholders, agents and employees (each referred to as an Indemnified Person) from and
against any and all claims, actions, suits, proceedings (including those of stockholders), damages,
liabilities and expenses incurred by any of them (including the reasonable fees and expenses of
counsel) which were (A)&nbsp;related to or arise out of (i)&nbsp;any actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made) by us in the July&nbsp;2008
public offering, or (ii)&nbsp;any actions taken or omitted to be taken by any Indemnified Person in
connection with our engagement (directly or indirectly) of any agent, including Fordham Financial,
or (B)&nbsp;otherwise relate to or arise out of any agent&#146;s, including Fordham Financial&#146;s, activities
on our behalf pursuant to the Amended and Restated Co-Placement Agent Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2007, Fordham Financial served as a selected dealer in connection with our December
2007 public offering. In consideration for the services rendered by Fordham Financial in
connection with the December&nbsp;2007 public offering, Fordham Financial received a total of $30,720 in
commissions, which represented 7% of the gross proceeds we received for units distributed by
Fordham Financial. In addition, under a placement agent agreement, which covered Fordham
Financial&#146;s activities in the December&nbsp;2007 public offering, we agreed to indemnify and hold
harmless any Indemnified Person, including Fordham Financial, from and against any and all claims,
actions, suits, proceedings (including those of stockholders), damages, liabilities and expenses
incurred by any of them (including the reasonable fees and expenses of counsel) which were (A)
related to or arise out of (i)&nbsp;any actions taken or omitted to be taken (including any untrue
statements made or any statements omitted to be made) by us in the December&nbsp;2007 public offering,
or (ii)&nbsp;any actions taken or omitted to be taken by any Indemnified Person in connection with our
engagement (directly or indirectly) of any agent, including Fordham Financial, or (B)&nbsp;otherwise
relate to or arise out of any agent&#146;s, including Fordham Financial&#146;s, activities on our behalf
pursuant to the placement agent agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Private Placement</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On September&nbsp;23, 2008, we entered into Securities Purchase Agreements with certain institutional
and individual accredited investors, including three of our directors, in a private placement of
$4.25&nbsp;million of units at $7.00 per unit consisting of (i)&nbsp;one share of our Series&nbsp;2008 Convertible
Preferred Stock and (ii)&nbsp;a Series&nbsp;B Warrant to purchase either shares of our 2008 Convertible
Preferred Stock or, if the Series&nbsp;2008 Convertible Preferred Stock has been converted into our
common stock, shares of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the private placement, Stefan Loren, a director of ours, purchased 2,150 units
at an aggregate offering price of $15,050; Frank Slattery Jr., a director of ours, purchased 42,900
units at an aggregate offering price
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-62-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">of $300,300; and Shaun O&#146;Malley, a director of ours, purchased 2,143 units at an aggregate offering
price of $15,001.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the terms of the Securities Purchase Agreements, each share of Series&nbsp;2008 Convertible
Preferred Stock automatically converted into 10 shares of common stock on December&nbsp;10, 2008 upon
the effectiveness of an amendment to our certificate of incorporation to increase the number of
shares of common stock authorized for issuance by us to an amount sufficient to cover the issuance
of shares of common stock upon conversion of the 2008 Convertible Preferred Stock and the issuance
of shares of common stock issuable after such conversion upon exercise of all of the Series&nbsp;B
Warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the terms of the Securities Purchase Agreements, we also agreed to file, and filed, a
registration statement on Form S-1 covering the resale of common stock issuable on the conversion
of the 2008 Convertible Preferred Stock and the issuance of common stock issuable upon exercise of
the Series&nbsp;B Warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Each Series&nbsp;B Warrant represents the right to purchase either (a)&nbsp;one share of Series&nbsp;2008
Convertible Preferred Stock at an exercise price of $10.00 per share or (b)&nbsp;if, at the time the
Series&nbsp;B Warrant is exercised, the Series&nbsp;2008 Preferred Stock has been converted into shares of
common stock, ten shares of common stock at an exercise price of $1.00 per share. Each Series&nbsp;B
Warrant may be exercised at any time through September&nbsp;22, 2013. A holder will not have the right
to exercise any portion of a Series&nbsp;B Warrant to the extent that after giving effect to such
issuance after exercise, the holder (together with the holder&#146;s affiliates), would beneficially own
in excess of 9.99% of the number of shares of the common stock outstanding immediately after giving
effect to such issuance.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-63-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CORPORATE GOVERNANCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our Board currently has eight members. William N. Kelley has informed us that he will not stand for
re-election to our Board at the Annual Meeting of Stockholders to be held on June&nbsp;30, 2009. Our
Board, upon the recommendation of our Governance Committee, has nominated Douglas Swirsky to stand
for election to the Board at the Annual Meeting of Stockholders to be held on June&nbsp;30, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Independence of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In determining the independence of our directors, we apply the definition of &#147;independent director&#148;
provided under the rules of the NYSE Amex (formerly the American Stock Exchange). Pursuant to the
NYSE Amex rules, the Board concluded its annual review of director independence in May&nbsp;2009.
After considering all relevant facts and circumstances, the Board affirmatively determined that all
of the directors then serving on the Board and those directors nominated for election at the Annual
Meeting of Stockholders to be held on June&nbsp;30, 2009 are independent pursuant to the NYSE Amex rules
regarding director independence, with the exception of Nicholas Landekic, who serves as our
President and Chief Executive Officer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Committee Interlocks and Insider Participation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The current members of the Compensation Committee are Brian Anderson, Richard Bank, William Kelley,
and Michael Lewis. Frank DeLape served on the Compensation Committee until his retirement from the
Board of Directors in May&nbsp;2008. Except for Mr.&nbsp;DeLape, none of these individuals has ever been an
officer or employee of ours. From August&nbsp;2005 to November&nbsp;2005, Mr.&nbsp;DeLape served as the sole
officer as well as director of PolyMedix, Inc., formerly BTHC II Acquisition Corp. In addition,
none of our executive officers serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a member of our Board of
Directors or the Compensation Committee.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-64-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Market Information</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Since August&nbsp;18, 2006, our common stock has been traded on the OTC Bulletin Board under the symbol
&#147;PYMX&#148;. The market for our common stock is limited and volatile. The following table sets forth the
range of high and low bid quotations or high and low closing prices, as applicable, for our common
stock for each of the periods indicated as reported by the OTC Bulletin Board. The prices quoted on
the OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or
commissions. The OTC Bulletin Board prices listed below may not represent actual transaction
prices.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Year Ended December 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2009</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Low</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.24</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.63</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter (April&nbsp;1, 2009 &#150; June&nbsp;4, 2009)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.85</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.68</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Year Ended December 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2008</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Low</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.56</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.70</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.05</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.52</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.68</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Year Ended December 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2007</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Low</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.35</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.55</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.75</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.75</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">Year Ended December 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000">2006</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">High</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Low</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.50</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;4, 2009, the last reported sales price of our common stock on the OTC Bulletin Board was
$0.68 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Holders of Record</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of June&nbsp;4, 2009, there were approximately 700 holders of record of shares of common stock.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-65-<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><I>Dividends</I>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Since our reincorporation in Delaware in March&nbsp;24, 2005, we have not paid or declared any cash
dividends on our common stock. We currently intend to retain any earnings for future growth and,
therefore, do not expect to pay cash dividends on our common stock in the foreseeable future.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Equity Compensation Plan Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth, as of December&nbsp;31, 2008, information concerning equity compensation
plans under which our securities are authorized for issuance. The table does not reflect grants,
awards, exercises, terminations or expirations since that date.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(c)</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(a)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of securities</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>(b)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>remaining available</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>to</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>for</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>be issued upon</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise price of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>future issuance</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>under equity</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>options,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>compensation plan</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>options,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>warrants and</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>(excluding securities</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>warrants and rights</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>rights</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>reflected column (a))</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation plans
approved by security holders
(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,890,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.41</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Equity compensation plans not
approved by security holders
(2)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,320,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,210,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">564,500</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents 918,000 and 7,972,000 shares of our common stock issuable under our 2002 Equity
Compensation Plan and our 2005 Omnibus Equity Compensation Plan, respectively, as of December
31, 2008.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>An aggregate of 1,320,000 shares of our common stock represent portions of prior grants that
exceeded the aggregate individual grant limit under our 2002 Equity Compensation Plan or 2005
Omnibus Equity Compensation Plan, as applicable, and are considered to have occurred outside
such plans.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt"><!-- Folio -->-66-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="119"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DESCRIPTION OF SECURITIES</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Capital Stock</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are authorized to issue 250,000,000 shares of common stock, par value $0.001 per share, of which
59,845,065 shares were issued and outstanding as of March&nbsp;31, 2009, and 10,000,000 shares of
preferred stock, par value $0.001 per share, of which no shares were issued and outstanding as of
December&nbsp;31, 2008.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Common Stock</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Holders of common stock are entitled to one vote per share on all matters to be voted upon by the
stockholders and are not entitled to cumulative voting for the election of directors. Holders of
common stock are entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefore subject to the rights of
preferred stockholders. We do not intend to pay any cash dividends to the holders of common stock
and anticipate reinvesting our earnings. In the event of liquidation, dissolution or winding up of
the Company, the holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities and the preferences of preferred stockholders. Shares of common stock
have no preemptive, conversion or other subscription rights. There are no redemption or sinking
fund provisions applicable to common stock.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Preferred Stock</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.001 per
share, and the Board of Directors is authorized to create one or more series of preferred stock,
and to designate the rights, privileges, restrictions, preferences and limitations of any given
series of preferred stock. Accordingly, the Board of Directors may, without stockholder approval,
issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights that
could adversely affect the voting power or other rights of the holders of common stock.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stockholder Rights Plan</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Each outstanding share of our common stock includes an associated preferred stock purchase right (a &#147;Right&#148;) for each outstanding share of our common stock, that
will entitle the registered holder to purchase from us one one-thousandth of a share of Series&nbsp;C
Preferred Stock, par value $0.001 per share, at a purchase price of $15.00 per one one-thousandth
of a share, subject to adjustment.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Because of the nature of the dividend, liquidation and voting rights of Series&nbsp;C Preferred Stock,
the value of the one one-thousandth interest in a share of Series&nbsp;C Preferred Stock purchasable
upon exercise of each Right, should approximate the value of one share of our common stock. The Rights are governed by a Rights Agreement dated as of May&nbsp;12, 2009 (the &#147;Rights Agreement&#148;).</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Separation and Distribution of Rights; Exercisability</I>. Initially, the Rights will be attached to
all shares of our common stock then outstanding, whether or not certificated, and no separate
Rights certificates will be distributed. The Rights will separate from the common stock upon the
earlier of:</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>10 business days following a public announcement that a person or group of
affiliated or associated persons has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of our shares of common stock then outstanding
(&#147;Acquiring Person&#148;) (subject to certain exceptions set forth in the Rights
Agreement), or such earlier date as the Board becomes aware of the Acquiring
Person&#146;s existence; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>10 business days (or some later date as determined by the Board) following the
commencement of a tender or exchange offer that would result in a person or group
beneficially owning 15% or more of our shares of common stock then outstanding
(subject to exceptions as set forth in the Rights Agreement).</TD>
</TR>

</TABLE></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Until the date that the Rights separate from our common stock (the &#147;Distribution Date&#148;), (i)&nbsp;the
Rights will be evidenced by and transferred with, and only with, the shares of our common stock,
(ii)&nbsp;newly issued shares of our common stock, whether or not certificated, will
contain a notation incorporating the Rights Agreement by reference, and (iii)&nbsp;the surrender for
transfer of any shares of our common stock outstanding will also constitute the transfer of the
Rights associated with such shares of our common stock.</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Rights are not exercisable until the Distribution Date and will expire at the close of business
on May&nbsp;12, 2019, unless earlier redeemed by us as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As soon as practicable after the Distribution Date, Rights certificates will be mailed to the
holders of record of our common stock as of the close of business on the Distribution Date and,
after that, the separate Rights certificates will represent the Rights. Except in connection with
shares of our common stock issued or sold pursuant to the exercise of stock options under any
employee plan or arrangements, or upon the exercise, conversion or exchange of securities issued by
us in the future, or as otherwise determined by the Board, only shares of our common stock issued
prior to the Distribution Date will be issued with Rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Flip-in Events</I>. Each holder of a Right (other than the Acquiring Person and any associate or
affiliate thereof) will have the right to receive, upon exercise, shares of our common stock (or,
in some circumstances, cash, property or our other securities) having a value equal to two times
the purchase price of the Right, as the case may be, if:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any person becomes an Acquiring Person (except pursuant to specified
exceptions);</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we are the surviving corporation in a merger with an Acquiring Person and the
common stock is not changed or exchanged; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>during the time that there is an Acquiring Person, a merger, reclassification or
similar event occurs that results in increasing the Acquiring Person&#146;s beneficial
ownership of shares of our common stock by more than 1%.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Notwithstanding any of the foregoing, following the occurrence of any of the events described in
this paragraph, all Rights that are, or (under some circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and void. The events
described in this paragraph are referred to as &#147;Flip-in Events.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">For example, at a purchase price of $15.00 per Right, each Right not owned by an Acquiring Person
(or by some related parties or transferees) following a Flip-in Event set forth in the preceding
paragraph would entitle its holder to purchase $30.00 worth of our common stock (or other
consideration, as noted above) for $15.00.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Flip-over events</I>. At any time following the earlier of a public announcement that a person has
become an Acquiring Person or the date that a majority of the Board becomes aware of the existence
of an Acquiring Person (in either case, the &#147;Stock Acquisition Date&#148;), each holder of a Right
(except Rights which previously have been voided as set forth above) will have the right to
receive, upon exercise, common stock of an acquiring company having a value equal to two times the
purchase price of the Right if any of the following occur:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we enter into a merger in which we are not the surviving corporation;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we are the surviving corporation in a merger pursuant to which all or part of
the outstanding shares of our common stock are changed into or exchanged for stock
or other securities of any other person or cash or any other property; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>more than 50% of our combined assets, cash flow or earning power and our
subsidiaries is sold or transferred (in each case other than some consolidations
with, mergers with and into, or sales of assets, cash flow or earning power by or
to our subsidiaries as specified in the Rights Agreement).</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The events described in this paragraph are referred to as &#147;Flip-over Events.&#148; Flip-in Events and
Flip-over Events are referred to collectively as &#147;Triggering Events.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Anti-dilution Adjustments; Fractional Shares</I>. The applicable purchase price payable, the number of
shares of Series&nbsp;C Preferred Stock or other securities or property issuable upon the exercise of
the Rights, and the number of applicable Rights outstanding are subject to adjustment from time to
time to prevent dilution, in the event of a stock dividend on, or a subdivision, combination or
reclassification of, Series&nbsp;C Preferred Stock or common stock, or upon the occurrence of certain
other specified dilutive events. No fractional shares of Series&nbsp;C Preferred Stock are required to
be issued (other than fractions which are integral multiples of one one-thousandth of a share of
Series&nbsp;C Preferred Stock) and, in lieu of the issuance of fractional shares, we may make an
adjustment in cash based on the market price of the Series&nbsp;C Preferred Stock on the trading date
immediately prior to the date of exercise.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Dividend, Liquidation and Redemption Rights of the Series&nbsp;C Preferred Stock</I>. Each share of Series&nbsp;C
Preferred Stock will be entitled, when, as and if declared, to a minimum preferential quarterly
dividend payment equal to the greater of $0.001 per share and an aggregate amount of 1,000 times
the dividend declared per share of common stock (other than stock dividends payable in common
stock). Upon liquidation, the holders of Series&nbsp;C Preferred Stock will be entitled to the greater
of (1)&nbsp;a minimum preferential liquidation payment of $1,000 per share (plus any accrued but unpaid
dividends) and (2)&nbsp;an aggregate payment equal to 1,000 times the payment to be made per share of
common stock. Each share of Series&nbsp;C Preferred Stock will have 1,000 times the number of votes each
share of the common stock has on matters the respective class is entitled to vote on, which will be
voted together with common stock. Upon any merger, consolidation or other transaction in which
shares of common stock are converted or exchanged, each share of Series&nbsp;C Preferred Stock will be
entitled to receive 1,000 times the amount received per share of common stock. These rights are
protected by customary antidilution provisions.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At any time, or from time to time, the Board may redeem the outstanding shares of Series&nbsp;C
Preferred Stock, in whole but not in part, at a cash price per share equal to 105% of (i)&nbsp;1,000
(subject to adjustment) times the average market value of common stock plus (ii)&nbsp;all accrued and
unpaid dividends of the Series&nbsp;C Preferred Stock as of the redemption date.</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Exchange of the Rights</I>. At any time after the occurrence of a Flip-in Event and prior to the
acquisition by a person or group of 50% or more of the shares of common stock then outstanding, the
Board may, without payment of the purchase price by the holder, exchange the Rights, in whole or in
part, as follows:</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&#149;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>each Right (other than the Rights owned by the Acquiring Person or group, which
will become void) may be exchanged for one-half the number of shares of common
stock, one one-thousandth of a share of Series&nbsp;C Preferred Stock or shares or other
units of other property for which a Right is exercisable immediately prior to the
time of the action of the Board to exchange the Rights.</TD>
</TR>

</TABLE></DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Redemption of the Rights</I>. At any time prior to the earliest of (i)&nbsp;the Stock Acquisition Date,
(ii)&nbsp;the tenth business day (or such later date as may be determined by action of the Board of
Directors prior to such time as any person or group of affiliated or associated persons becomes an
Acquiring Person) after the commencement of, or announcement of an intention to commence, a tender
offer or exchange offer the consummation of which would result in any person becoming an Acquiring
Person, or (iii)&nbsp;May&nbsp;12, 2019, we may redeem all, but not less than all, of the Rights at a price
of $0.001 per Right (payable in cash, shares of our common stock or other consideration deemed
appropriate by the Board and subject to adjustment). Immediately upon the action of the Board
ordering redemption of the Rights, the Rights will terminate and the only right of the holders of
these Rights will be to receive the $0.001 redemption price.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>No Rights as Stockholder</I>. Until a Right is exercised, the holder will have no rights as a
stockholder of ours, including, without limitation, the right to vote or to receive dividends.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Amendment of the Rights Agreement</I>. Other than those provisions relating to the principal economic
terms of the Rights, any of the provisions of the Rights Agreement may be amended by the Board at
any time during the period in which the Rights are redeemable. At any time when the Rights are no
longer redeemable, the provisions of the Rights Agreement may be amended by the Board only if the
amendment does not adversely affect the interest of holders of Rights (excluding the interest of
any Acquiring Person) or cause the Rights to become redeemable again.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Certain Anti-takeover Effects</I>. The Rights approved by the Board are designed to protect and
maximize the value of our outstanding equity interests in the event of an unsolicited attempt by an
acquirer to take over the Company, in a manner or on terms not approved by the Board. Takeover
attempts frequently include coercive tactics to deprive the Board and its stockholders of a full
opportunity to evaluate an offer in light of our long term prospects. The Rights have been
declared by the Board in order to deter such tactics.</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Rights are not intended to prevent all takeovers of the Company and will not do so. Since,
subject to the restrictions described above, we may redeem the Rights prior to the Distribution
Date, the Rights should not interfere with any merger or business combination approved by the
Board.</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Rights may have the effect of rendering more difficult or discouraging an acquisition of the
Company deemed undesirable by the Board. The Rights may cause substantial dilution to a person or
group that attempts to acquire us (or which otherwise becomes an Acquiring Person) on terms or in a
manner not approved by the Board, except pursuant to an offer conditioned upon the negation,
purchase or redemption of the Rights.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We issued Series&nbsp;B Warrants to purchase 6,088,340 shares of common stock in connection with our
2008 Private Placement at an exercise price of $1.00 per share. These warrants expire on September
22, 2013. In addition, we issued to the placement agents in the 2008 Private Placement Series&nbsp;B
Warrants to purchase 279,583 shares of common stock as partial compensation for services in
connection with the 2008 Private Placement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We issued Series&nbsp;A Warrants to purchase 21,428,571 shares of common stock, of which 21,214,143 are
currently outstanding, in connection with our July&nbsp;2008 registered direct offering of units at an
exercise price of $1.00 per share. These warrants expire on July&nbsp;15, 2013. In addition, we issued
to the placement agents and selected dealers in the offering warrants to purchase 1,071,429 shares
of common stock as partial compensation for services in connection with the offering. These
warrants are substantially similar to the Series&nbsp;A Warrants and expire July&nbsp;14, 2013.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We issued warrants to purchase 2,943,222 shares of common stock in connection with our December
2007 registered direct offering of units at an exercise price of $1.10 per share. These warrants
expire on December&nbsp;20, 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We issued warrants to purchase 4,119,194 shares of common stock in connection with our 2006 private
placement of Series&nbsp;1 preferred stock to the placement agent of our Series&nbsp;1 Preferred Stock.
These warrants have an exercise price of $1.23 per share, as adjusted for weighted average
anti-dilution protection. These warrants expire on November&nbsp;8, 2010 and contain additional
weighted average anti-dilution protection if we issue certain securities at a price per share less
than $1.23.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Anti-Takeover
Effects of Delaware Law, our Certificate of Incorporation and our Bylaws</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are subject to Section&nbsp;203 of the General Corporation Law of the State of Delaware. Subject to
certain exceptions, Section&nbsp;203 prevents a publicly held Delaware corporation from engaging in a
business combination with any interested stockholder for three years following the date that the
person became an interested stockholder, unless the interested stockholder attained such status
with the approval of our board of directors or unless the business combination is approved in a
prescribed manner. A business combination includes, among other things, a merger or consolidation
involving us and the interested stockholder and the sale of more than 10% of our assets. In
general, an interested stockholder is any entity or person beneficially owning 15% or more of our
outstanding voting stock and any entity or person affiliated with or controlling or controlled by
such entity or person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In addition, our certificate of incorporation and our bylaws provide that directors may be removed
only for cause and only by the affirmative vote of the holders of 75% of our shares of capital
stock present in person or by proxy and entitled to vote. Under our certificate of incorporation
and bylaws, any vacancy on our board of directors, including a vacancy resulting from an
enlargement of our board of directors, may be filled only by vote of a majority of our directors
then in office. The limitations on the ability of our stockholders to remove directors and fill
vacancies could make it more difficult for a third-party to acquire, or discourage a third-party
from seeking to acquire, control of our company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our certificate of incorporation and our bylaws provide that any action required or permitted to be
taken by our stockholders at an annual meeting or special meeting of stockholders may only be taken
if it is properly brought before such meeting. Our stockholders may also take any action by
written consent in lieu of a meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our certificate of incorporation and our bylaws also provide that, except as otherwise required by
law, special meetings of the stockholders can only be called by our Chairman of the Board, our
chief executive officer or our Board. In addition, our bylaws establish an advance notice
procedure for stockholder proposals to be brought before an annual meeting of stockholders,
including proposed nominations of candidates for election to our Board. Stockholders at an annual
meeting may only consider proposals or nominations specified in the notice of meeting or brought
before the meeting by or at the direction of our Board, or by a stockholder of record on the record
date for the meeting who is entitled to vote at the meeting and who has delivered timely written
notice in proper form to our secretary of the stockholder&#146;s intention to bring such business before
the meeting. These provisions could have the effect of delaying until the next stockholder meeting
stockholder actions that are favored by the holders of a majority of our outstanding voting
securities.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-70-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The authorization in our certificate of incorporation of undesignated preferred stock makes it
possible for our Board, without obtaining further stockholder approval, to issue preferred stock
with voting rights or other rights or preferences that could impede the success of any attempt to
take control of us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The General Corporation Law of the State of Delaware provides generally that the affirmative vote
of a majority of the shares entitled to vote on any matter is required to amend a corporation&#146;s
certificate of incorporation or bylaws, unless a corporation&#146;s certificate of incorporation or
bylaws, as the case may be, requires a greater percentage. Our bylaws may be amended or repealed
by a majority vote of our Board. In addition, the affirmative vote of the holders of at least
three-fourths of the votes which all our stockholders would be entitled to cast in any election of
directors is required to amend or repeal or to adopt any provisions inconsistent with any of the
provisions of our certificate of incorporation described in the prior two paragraphs.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-71-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLAN OF DISTRIBUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The purpose of this prospectus is to permit the selling stockholder to offer and resell up to an
aggregate of 12,000,000 shares of our common stock at such times and at such places as they choose.
In this section of the prospectus, the term &#147;selling stockholder&#148; includes the partners, pledgees,
donees, transferees or other successors-in-interest of the selling stockholder, which may sell
shares received after the date of this prospectus from the selling stockholder as a pledge, gift,
partnership or similar distribution or other non-sale related transfer. To the extent required, we
may amend and supplement this prospectus from time to time to describe a specific plan of
distribution. The decision to sell any shares offered pursuant to this prospectus is within the
sole discretion of the selling stockholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The distribution of the common stock by the selling stockholder may be effected from time to time
in one or more transactions. Any of the common stock may be offered for sale, from time to time,
by the selling stockholder at prices and on terms then obtainable, at fixed prices, at prices then
prevailing at the time of sale, at prices related to such prevailing prices, or in negotiated
transactions at negotiated prices or otherwise. The common stock may be sold by one or more of the
following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>On the OTC Bulletin Board or any other national common stock exchange or automated
quotation system on which our common stock is traded, which may involve transactions solely
between a broker-dealer and its customers which are not traded across an open market and
block trades.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Through one or more dealers or agents (which may include one or more underwriters),
including, but not limited to:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">o</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Block trades in which the broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this prospectus.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">o</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">o</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Ordinary brokerage transactions.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">o</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Transactions in which the broker solicits purchasers.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Directly to one or more purchasers.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><FONT style="font-family: Wingdings">&#216;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A combination of these methods.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Dutchess and any broker-dealers who act in connection with the sale of its shares are
&#147;underwriters&#148; within the meaning of the Securities Act, and any discounts, concessions or
commissions received by them and profit on any resale of the shares as principal may be deemed to
be underwriting discounts, concessions and commissions under the Securities Act. Because the
selling stockholder is an &#147;underwriter&#148; within the meaning of the Securities Act, it will be
subject to the prospectus delivery requirements of the Securities Act, including Rule&nbsp;172
thereunder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The selling stockholder or its underwriters, dealers or agents may sell the common stock to or
through underwriters, dealers or agents, and such underwriters, dealers or agents may receive
compensation in the form of discounts or concessions allowed or reallowed. Underwriters, dealers,
brokers or other agents engaged by the selling stockholder may arrange for other such persons to
participate. Any fixed public offering price and any discounts and concessions may be changed from
time to time. Underwriters, dealers and agents who participate in the distribution of the common
stock may be deemed to be underwriters within the meaning of the Securities Act, and any discounts
or commissions received by them or any profit on the resale of shares by them may be deemed to be
underwriting discounts and commissions thereunder. The proposed amounts of the common stock, if
any, to be purchased by underwriters and the compensation, if any, of underwriters, dealers or
agents will be set forth in a prospectus supplement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Unless granted an exemption by the Commission from Regulation&nbsp;M under the Exchange Act, or unless
otherwise permitted under Regulation&nbsp;M, the selling stockholder will not engage in any
stabilization activity in connection with our common stock, will furnish each broker or dealer
engaged by the selling stockholder and each other participating broker or dealer the number of
copies of this prospectus required by such broker or dealer, and will not
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-72-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">bid for or purchase any common stock of our or attempt to induce any person to purchase any of the
common stock other than as permitted under the Exchange Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We will not receive any proceeds from the sale of these shares of common stock offered by the
selling stockholder. We shall use our reasonable efforts to prepare and file with the Commission
such amendments and supplements to the registration statement and this prospectus as may be
necessary to keep such registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of the common stock covered by the registration
statement for the period required to effect the distribution of such common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are paying certain expenses (other than commissions and discounts of underwriters, dealers or
agents) incidental to the offering and sale of the common stock to the public, which are estimated
to be approximately $38,000. If we are required to update this prospectus during such period, we
may incur additional expenses in excess of the amount estimated above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In order to comply with certain state securities laws, if applicable, the common stock will be sold
in such jurisdictions only through registered or licensed brokers or dealers. In certain states the
shares of common stock may not be sold unless they have been registered or qualify for sale in such
state or an exemption from registration or qualification is available and is complied with.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-73-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXPERTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements as of December&nbsp;31, 2008 and 2007, and for each of the three
years in the period ended December&nbsp;31, 2008, and for the period from August&nbsp;8, 2002 (inception)&nbsp;to
December&nbsp;31, 2008 included in this Prospectus have been audited by Deloitte &#038; Touche LLP, an
independent registered public accounting firm, as stated in their report appearing herein. Such
consolidated financial statements have been so included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
</DIV>
<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>LEGAL MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain legal matters in connection with the securities will be passed upon for us by the law firm
of Pepper Hamilton LLP.
</DIV>
<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None.
</DIV>
<DIV align="left">
<A name="124"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>COMMISSION&#146;S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a Delaware corporation. Article&nbsp;Seventh of our Amended and Restated Certificate of
Incorporation provides to the fullest extent permitted under the Delaware General Corporation Law
(&#147;DGCL&#148;), that our directors or officers will not be personally liable to us or our stockholders
for damages for breach of such director&#146;s or officer&#146;s fiduciary duty. Section&nbsp;145 of the DGCL
provides that a corporation may indemnify directors, officers, employees and agents against
expenses (including attorneys&#146; fees), judgments, fines, and amounts paid in settlement in
connection with specified actions, suits, or proceedings whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation &#151; a &#147;derivative action&#148;),
if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the
case of derivative actions, except that indemnification is permitted only for expenses (including
attorneys&#146; fees) incurred in connection with the defense or settlement of such action, and the
statute requires court approval before there can be any indemnification for expenses where the
person seeking indemnification has been found liable to the corporation. The statute provides that
it is not exclusive of other indemnification that may be granted by a corporation&#146;s charter,
bylaws, disinterested director vote, stockholder vote, agreement, or otherwise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Article&nbsp;VIII of our bylaws provides that we shall indemnify and hold harmless, to the fullest
extent permitted by applicable law as it presently exists or may hereafter be amended, any person
who was or is made or is threatened to be made a party or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that
he, or a person for whom he is the legal representative, is or was a director or officer of ours,
or is or was serving at our written request as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans, against all liability and loss suffered and
expenses (including attorneys&#146; fees as incurred) reasonably incurred by him.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Insofar as indemnification for liabilities arising under the Securities Act may be permitted to
directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise,
we have been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
</DIV>
<DIV align="left">
<A name="125"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>ADDITIONAL INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have filed with the SEC a Registration Statement on Form S-1 under the Securities Act covering
the sale by the selling stockholder of the securities offered by this prospectus. This prospectus,
which is a part of the Registration Statement, does not contain all of the information in the
Registration Statement and the exhibits filed with it, portions of which have been omitted as
permitted by the SEC rules and regulations. For further information concerning us and the
securities offered by this prospectus, please refer to the Registration Statement and to the
exhibits filed therewith.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Registration Statement, including all exhibits, may be inspected without charge at the SEC&#146;s
Public Reference Room at the SEC&#146;s principal office at Room&nbsp;1580, 100 F Street, N.E., Washington,
D.C. 20549. You may obtain information on the operation of this public reference room by calling
1-800-SEC-0330. The Registration Statement, including all exhibits and schedules and amendments,
has been filed with the SEC through the Electronic Data Gathering Analysis and Retrieval system and
is available to the public from the SEC&#146;s web site at <U>http://www.sec.gov</U>.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-74-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>POLYMEDIX, INC.<BR>
(A DEVELOPMENT STAGE COMPANY)<BR>
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS<BR>
AS OF MARCH 31, 2009 AND<BR>
FOR THE QUARTERS ENDED MARCH 31, 2009 AND 2008<BR>
AND FOR THE PERIOD<BR>
AUGUST 8, 2002 (INCEPTION)&nbsp;TO MARCH 31, 2009</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="94%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<tr style="font-size: 10pt">
    <TD>&nbsp;</TD>
</tr>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">Condensed Consolidated Balance Sheets (Unaudited) &#151; as of March&nbsp;31, 2009 and December&nbsp;31, 2008</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#301">Condensed Consolidated Statements Of Operations (Unaudited) &#151; for the Three-Months Ended
March&nbsp;31, 2009 and 2008 and for the Period from August&nbsp;8, 2002 (Inception) to March&nbsp;31, 2009</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#302">Condensed Consolidated Statements Of Cash Flows (Unaudited)- for the Three-Months Ended March
31, 2009 and 2008 and for the Period from August&nbsp;8, 2002 (Inception) to March&nbsp;31, 2009</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#303">Notes To Condensed Consolidated Financial Statements (Unaudited)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-5</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-1 <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PolyMedix, Inc.<BR>
(A Development Stage Company)</B>
</DIV>

<DIV align="left">
<A name="300"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Condensed Consolidated Balance Sheets</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(unaudited)</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(in thousands, except per share amounts)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="9" align="center"><B>ASSETS</B><BR></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,206</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,900</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,814</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,513</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Property and Equipment:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Computers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Office furniture and lab equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">774</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(500</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(447</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total property and equipment</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>511</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>564</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><B>TOTAL ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>13,325</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>16,077</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD colspan="9" align="center"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B><BR></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,069</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,072</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">674</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">933</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term portion of capital lease obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,811</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,109</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">825</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,664</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,934</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Stockholders&#146; Equity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred Stock ($0.001 par value; 10,000
shares authorized; 0 issued and outstanding at
March&nbsp;31, 2009 and December&nbsp;31, 2008)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common Stock ($0.001 par value; 250,000 shares
authorized; 59,845 issued and outstanding at
March&nbsp;31, 2009 and December&nbsp;31, 2008)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,379</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,930</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deficit accumulated during the development stage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,779</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,859</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gain on available for sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total stockholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,661</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,143</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><B>TOTAL LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>13,325</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>16,077</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these condensed consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-2 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PolyMedix, Inc.<BR>
(A Development Stage Company)</B>
</DIV>

<DIV align="left">
<A name="301"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Condensed Consolidated Statements of Operations</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(unaudited)</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(in thousands, except per share amounts)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>For the period</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>August 8, 2002</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(Inception) to</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 0px solid #000000"><B>Three-Months Ended March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>March 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenues:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Grant and research revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,519</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>991</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,519</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Expenses:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,675</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,726</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26,266</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,277</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,155</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,551</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total operating expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,952</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,881</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>44,817</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income and other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,519</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total other income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>26</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>67</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,519</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(2,920</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(2,823</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(39,779</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beneficial conversion feature, conversion inducement and dividends on preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,118</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss attributable to common stockholders</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(2,920</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(2,823</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(50,897</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss per common share &#151; basic and diluted</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(0.05</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(0.09</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Weighted average common shares outstanding &#151; basic and diluted</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>59,845</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>32,105</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these condensed consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-3 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PolyMedix, Inc.<BR>
(A Development Stage Company)</B>
</DIV>

<DIV align="left">
<A name="302"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Condensed Consolidated Statements of Cash Flows</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(unaudited)</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(in thousands)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>For the period</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>August 8, 2002</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Three-Months Ended March 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(Inception) to</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>March 31, 2009</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Operating Activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,920</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,823</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(39,779</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net loss to net cash used in operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accretion of discount on investment secutities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(455</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,293</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase in prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(28</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(874</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(435</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase (decrease)&nbsp;in accounts payable, accrued expenses and deferred rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(183</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">458</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,566</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><B>Net cash used in operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(2,642</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(2,867</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(31,211</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Investing Activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid for property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(766</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,898</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32,141</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from maturities of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,698</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><B>Net cash provided by (used in) investing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,987</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,000</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(2,209</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Financing Activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of stock, net of financing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(308</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,764</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from warrant and stock option exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">398</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Principal payments on capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(32</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(263</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><B>Net cash provided by (used in) financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(72</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(340</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43,899</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net increase (decrease)&nbsp;in cash and cash equivalents</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,273</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(1,207</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>10,479</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents &#151; beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents &#151; end of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>10,479</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,729</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>10,479</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-Cash Investing Activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and equipment acquired under capital lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures acquired on account</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-Cash Financing Activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion inducement and dividends on Series&nbsp;1 Preferred Stock and Beneficial conversion feature on Series&nbsp;2008 Preferred Stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Warrants issued to placement agent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued financing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital lease obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these condensed consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-4 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PolyMedix, Inc.<BR>
(A Development Stage Company)</B>
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Notes to Unaudited Condensed Consolidated Financial Statements</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In these condensed consolidated financial statements, &#147;PolyMedix,&#148; &#147;we,&#148; &#147;us&#148; and &#147;our&#148; refer to
PolyMedix, Inc. and its wholly owned subsidiary PolyMedix Pharmaceuticals, Inc., and &#147;common stock&#148;
refers to the common stock, par value $0.001 per share of PolyMedix, Inc..
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>1 &#151; Organization and Business Activities</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a development stage biotechnology company focused on treating life threatening, serious
infectious diseases and acute cardiovascular disorders with synthetic small molecule compounds that
mimic the activity of large natural protein molecules, compounds referred to as biomimetics. Using
our proprietary computational drug design technology, we have created novel defensin mimetic
antibiotic compounds, heparin antagonist compounds (or &#147;heptagonist&#148;) and other drug compounds
intended for human therapeutic use. Since 2002, we have been a development stage enterprise, and
accordingly, our operations have been directed primarily toward developing business strategies,
raising capital, research and development activities, conducting pre-clinical testing and human
clinical trials of our product candidates, exploring marketing channels and recruiting personnel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have incurred operating losses since inception, have not generated any product sales revenues
and have not achieved profitable operations. Our deficit accumulated during the development stage
through March&nbsp;31, 2009 aggregated $39,779,000, and we expect to continue to incur substantial
losses in future periods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">None of our product candidates have received regulatory approval for commercial sale and our
product candidates may never be commercialized. In addition, all of our product candidates are in
the early stages of development and several programs are on hold pending sufficient additional
financing. The progress and results of our current and any future clinical trials or future
pre-clinical testing are uncertain, and if our product candidates do not receive regulatory
approvals, our business, operating results, financial condition and cash flows will be materially
adversely affected. Our development programs require a significant amount of cash to support the
development of product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are highly dependent on the success of our research, development and licensing efforts and,
ultimately, upon regulatory approval and market acceptance of our products under development. Our
short and long-term capital requirements depend upon a variety of factors, including market
acceptance for our technologies and product candidates and various other factors. We anticipate
that in order to achieve our operational objectives, including our plans during 2009 for starting
and completing Phase 1b studies as well as beginning preparation for Phase 2 studies for each of
our PMX-30063 and PMX-60056 product candidates, our expenses and cash requirements will increase
from historical levels and we will need to raise additional capital during 2009 in order to fully
fund the research and development of our product candidates. We believe that our current cash and
investment balances can fund our planned Phase 1 studies for PMX-30063 and PMX-60056 and can fund
our operations for at least the next twelve months; however, due to the continued deterioration of
the capital markets and prospects for securing additional financing, in order to prolong our cash
runway we will scale back and delay some of our activities and do not plan to commence a Phase 1b
clinical trial for PMX-60056 until the third quarter of 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our current cash and investment balances are not sufficient to fund the Phase 2 clinical or other
development activities of either of our two lead product candidates. We do not plan to initiate
our Phase 2 development activities for both PMX-30063 and PMX-60056 until additional financing is
secured. We expect to seek additional funds through equity or debt financing, among other sources.
In addition, we may actively seek funds through government grants and contracts. However, as a
result of current conditions in the equity and debt markets, we may not be able to obtain
additional funding on favorable terms, if at all. In addition, if we choose to apply for
government grants and contracts, there is no guarantee of acceptance of our applications. If
additional capital resources are not obtained during the first half of 2009, we will scale-back,
postpone or eliminate certain of our research, drug discovery or development programs until such
additional capital resources have been obtained, and as a result, our business may be materially
and adversely affected. In the absence of adequate additional funding, we believe that we have the
ability to scale our operations such that our current cash and investment balances can fund our
operations into the second half of 2010.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-5 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Global market and economic conditions have been, and continue to be, disruptive and volatile. In
particular, the cost of raising money in the debt and equity capital markets has increased
substantially while the availability of funds from those markets has diminished significantly. If
funding is not available when needed, or is available only on unfavorable terms, meeting our
capital needs or otherwise taking advantage of business opportunities may become challenging, which
could have a material adverse effect on our business plans.<BR>
Interim Financial Information
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The condensed consolidated financial statements include the accounts of PolyMedix, Inc. and its
wholly-owned subsidiary, PolyMedix Pharmaceuticals, Inc. All intercompany accounts and
transactions have been eliminated in consolidation. The information as of March&nbsp;31, 2009 and for
the periods ended March&nbsp;31, 2009 and 2008 and the period from August&nbsp;8, 2002 (Inception) to March
31, 2009 is unaudited but includes all adjustments (consisting only of normal recurring
adjustments) which, in our opinion, are necessary to state fairly the financial information set
forth in accordance with accounting principles generally accepted in the United States of America.
The interim results are not necessarily indicative of the results to be expected for the full
fiscal year. These condensed consolidated financial statements should be read in conjunction with
the audited consolidated financial statements for the year ended December&nbsp;31, 2008 included in our
annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on March&nbsp;23,
2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Use of Estimates</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts in the financial statements and accompanying notes. Actual results could
differ from those estimates. Significant estimates include the value of our common stock, preferred
stock, stock options and warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2 &#151; Recent Accounting Pronouncements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2006, the Financial Accounting Standards Board (&#147;FASB&#148;) issued Statement of Financial
Accounting Standards (&#147;SFAS&#148;) No.&nbsp;157, &#147;Fair Value Measurements&#148; (&#147;SFAS 157&#148;). SFAS 157 defines
fair value, establishes a framework and gives guidance regarding the methods used for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November&nbsp;15, 2007, and interim periods
of those fiscal years. In February&nbsp;2008, the FASB released a FASB Staff Position (FSP FAS
157-2&#151;Effective Date of FASB Statement No.&nbsp;157) which delayed, to fiscal years beginning after
November&nbsp;15, 2008, the effective date of SFAS 157 for all non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). Effective January&nbsp;1, 2008, we adopted SFAS 157
as it applies to our financial instruments. Effective January&nbsp;1, 2009, we adopted SFAS 157 for our
non-financial assets and non-financial liabilities, without impact to our condensed consolidated
financial statements or related footnotes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides the assets and liabilities carried at fair value measured on a
recurring basis as of March&nbsp;31, 2009 (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Fair Value Measurements at March 31, 2009</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Significant other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Significant</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quoted prices in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>observable</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>unobservable</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>value as of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>active markets</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>inputs</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>inputs</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>March 31, 2009</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Level 1)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Level 2)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Level 3)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our short-term investments, generally fixed income government agency securities, are measured at
fair value using models derived principally from or corroborated by observable market data by
correlation or other means and are classified within Level 2 of the valuation hierarchy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2008, the FASB issued FASB Staff Position No.&nbsp;EITF 03-6-1, &#147;Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,&#148; (&#147;FSP EITF 03-6-1&#148;). FSP
EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are
participating securities prior to
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-6 <!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">vesting and, therefore need to be included in the earnings allocation in computing earnings per
share, or EPS, under the two-class method described in paragraphs 60 and 61 of FASB Statement
No.&nbsp;128, &#147;Earnings per Share&#148; (&#147;SFAS No.&nbsp;128&#148;). FSP EITF 03-6-1 applies to the calculation of EPS
under SFAS No.&nbsp;128 for share-based payment awards with rights to dividends or dividend equivalents.
FSP EITF 03-6-1 clarifies that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities
and shall be included in the computation of EPS pursuant to the two class method. FSP EITF 03-6-1
is effective for financial statements issued for fiscal years beginning after December&nbsp;15, 2008,
and interim periods within those years. All prior-period EPS data presented must be adjusted
retrospectively (including interim financial statements, summaries of earnings and selected
financial data) to conform with the provisions of FSP EITF 03-6-1. Early adoption is not permitted.
The adoption of EITF 03-6-1 did not have an impact on our consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2008, the FASB ratified the consensus reached on EITF Issue No.&nbsp;07-05, &#147;Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entity&#146;s Own Stock&#148; (&#147;EITF No.&nbsp;07-05&#148;). EITF
No.&nbsp;07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed
to an entity&#146;s own stock, which would qualify as a scope exception under SFAS No.&nbsp;133, Accounting
for Derivative Instruments and Hedging Activities. EITF No.&nbsp;07-05 is effective for financial
statements issued for fiscal years beginning after December&nbsp;15, 2008. Early adoption for an
existing instrument is not permitted. The adoption of EITF No.&nbsp;07-05 did not have an impact on our
consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>3 &#151; Comprehensive Loss</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;130, &#147;Reporting Comprehensive Income,&#148; establishes standards for the reporting of
comprehensive income and its components. Comprehensive income consists of reported net income or
loss and unrealized gains or losses on available for sale securities. The comprehensive loss for
each of the periods presented approximates the net loss in the condensed consolidated statements of
operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>4 &#151; Short-Term Investments</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short-term investments consist of investment grade fixed income securities with original maturities
of greater than three months. All investments are classified as &#147;available for sale&#148;, and are
considered current assets. As of March&nbsp;31, 2009, all short-term investments had maturities of less
than one year.
<BR>
<BR style="font-size: 6pt">
The following summarizes the short-term investments as of March&nbsp;31, 2009 and December&nbsp;31, 2008,
respectively, which were invested solely in U.S. government obligations (in thousands):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Gross</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amortized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Fair Value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">March&nbsp;31, 2009
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1,899</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1,900</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>

<tr style="font-size: 10pt">
    <TD>&nbsp;</TD>
</tr>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">December&nbsp;31, 2008
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">7,888</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">12</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$&#151;
</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">7,900</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>5 &#151; Stock-Based Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We maintain equity compensation plans under which grants of incentive stock options, nonqualified
stock options, stock appreciation rights, stock awards, stock units and other stock-based awards
are granted to employees, non-employee directors and key advisors. Since our inception on August
8, 2002, we have recognized equity compensation expense over the requisite service period using the
Black-Scholes-Merton formula to estimate the fair value of stock options. Beginning January&nbsp;1,
2006, we adopted SFAS No.&nbsp;123(R) &#147;Share-Based Payment&#148; under the modified-prospective approach. The
following table summarizes the total stock-based compensation expense included in our unaudited
condensed consolidated statements of operations (in thousands):
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-7 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Period from</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6">Three-Months Ended</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">August 8, 2002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000">March 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(Inception) to</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">March 31, 2009</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and Development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">164</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">123</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,965</TD>
    <TD>&nbsp;</TD>
</TR>

<tr style="font-size: 10pt">
    <TD>&nbsp;</TD>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">285</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,328</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stock-based
compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">449</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">346</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,293</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the three-months ended March&nbsp;31, 2009, 164,000 stock options were awarded to certain
directors and a key consultant at a combined grant date fair value of $99,000. There have been no
significant changes to the assumptions used to calculate fair value from those which were disclosed
in our 2008 Annual Report on Form 10-K. As of March&nbsp;31, 2009, there were 10,374,000 shares of
common stock issuable upon exercise of outstanding stock options and 15,719,000 shares of common
stock available for issuance of future equity compensation awards in connection with our equity
compensation plans. As of March&nbsp;31, 2009, there was $3,298,000 of total unrecognized compensation
cost related to non-vested stock options, which will be amortized over the weighted average
remaining service period of approximately 1.27&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>6 &#151; Stockholders&#146; Equity</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Common Stock</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are authorized to issue 250,000,000 shares of common stock, with a par value of $0.001, of which
59,845,065 were issued and outstanding at both March&nbsp;31, 2009 and December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2008, our then outstanding 608,834 shares of Series&nbsp;2008 Convertible Preferred Stock
(&#147;Series&nbsp;2008 Preferred Stock&#148;), originally issued in September&nbsp;2008, automatically converted to
6,088,340 shares of common stock. See Preferred Stock section immediately below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2008, we completed a registered offering of 21,428,000 units. Each unit consisted of one
share of our common stock and a Series&nbsp;A Warrant to purchase one share of our common stock. Each
unit was sold for $0.70 per unit and each Series&nbsp;A Warrant has an exercise price of $1.00 per
share. We received gross proceeds of $15,000,000 in the registered offering before fees and
expenses. In connection with this registered offering, we incurred commission fees and expenses of
approximately $1,496,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Preferred Stock</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.001, of
which no shares were issued and outstanding at March&nbsp;31, 2009 and December&nbsp;31, 2008, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2008, we completed a private placement offering of 608,834 units. Each unit consisted
of one share of our Series&nbsp;2008 Preferred Stock and a Series&nbsp;B Warrant. Each unit was sold for
$7.00 per unit. As explained immediately above under common stock, during December&nbsp;2008, each share
of Series&nbsp;2008 Preferred Stock automatically converted into 10 shares of common stock and the
Series&nbsp;B Warrants became exercisable for common stock immediately, and without any action on the
part of the holder of such shares of Series&nbsp;2008 Preferred Stock or Series&nbsp;B Warrants, upon the
effectiveness of an amendment to our Amended and Restated Certificate of Incorporation, as amended
(the &#147;Certificate of Incorporation&#148;), to increase the number of shares of common stock authorized
for issuance by us under the Certificate of Incorporation to an amount sufficient to cover the
issuance of shares of common stock upon conversion of the Series&nbsp;2008 Preferred Stock and the
issuance of shares of common stock issuable after such conversion upon exercise of all of the
Series&nbsp;B Warrants. We received gross proceeds of $4,262,000 in the private placement before fees
and expenses. In connection with this private placement, we incurred commission fees and expenses
of approximately $401,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Warrants</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the private placement and subsequent conversion of the Series&nbsp;2008 Preferred
Stock (described above), investors in the private placement received Series&nbsp;B Warrants presently
exercisable for 6,088,340 shares of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-8 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">common stock and the placement agent and dealer received Series&nbsp;B Warrants presently exercisable
for 279,583 shares of common stock. The Series&nbsp;B Warrants have an exercise price of $1.00 per
share and that expire in July&nbsp;2013. The fair value of the warrants at the time of issuance was
$3,991,000, which was estimated using the Black-Scholes-Merton option-pricing model with the
following assumptions: no dividends; risk-free interest rate of 3.03%; estimated life of five
years and volatility of 71%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the registered offering completed in July&nbsp;2008 (described above), we issued
Series&nbsp;A Warrants to purchase 21,428,000 shares of common stock to investors and Series&nbsp;A Warrants
to purchase 1,071,000 shares of common stock to the placement agents and dealer at an exercise
price of $1.00 per share and that expire in September&nbsp;2013. The fair value of the warrants at the
time of issuance was $11,807,000, which was estimated using the Black-Scholes-Merton option-pricing
model with the following assumptions: no dividends; risk-free interest rate of 3.2% to 3.35%;
estimated life of five years and volatility of 72% to 75%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the registered offering completed in December&nbsp;2007, we issued warrants to
purchase 2,943,000 shares of common stock at an exercise price of $1.10 per share. These warrants
expire in December&nbsp;2012. The fair value of the warrants at the time of issuance was $2,015,000,
which was estimated using the Black-Scholes-Merton option-pricing model with the following
assumptions: no dividends; risk-free interest rate of 3.58%; estimated life of five years and
volatility of 73%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2005 and 2006, we issued warrants to purchase 4,119,000 shares of common stock in connection
with the private placement of Series&nbsp;1 preferred stock at an exercise price of $1.23 per share, as
adjusted for weighted average anti-dilution protection. These warrants expire in November&nbsp;2010 and
contain weighted average anti-dilution protection if we issue certain securities at a price per
share less than $1.23 per share. The fair value of the warrants at the time of issuance was
$2,149,000, which was estimated using the Black-Scholes-Merton option-pricing model with the
following assumptions: no dividends; risk-free interest rate of 4.45%; estimated life of five
years and volatility of 60%.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-9 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>POLYMEDIX, INC.<BR>
(A DEVELOPMENT STAGE COMPANY)<BR>
CONSOLIDATED FINANCIAL STATEMENTS<BR>
AS OF DECEMBER 31, 2008 AND 2007 AND<BR>
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006<BR>
AND FOR THE PERIOD<BR>
AUGUST 8, 2002 (INCEPTION)&nbsp;TO DECEMBER 31, 2008</B>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><U><B>CONTENTS</B></U>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="94%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Page</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#500">Report of Independent Registered Public Accounting Firm</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#501">PolyMedix, Inc. Consolidated Balance Sheets as of December&nbsp;31, 2008 and 2007</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#502">PolyMedix, Inc. Consolidated Statements of Operations for the Years Ended
December&nbsp;31, 2008, 2007 and 2006, and for the Period from August&nbsp;8, 2002
(Inception) to December&nbsp;31, 2008</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-13</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#503">PolyMedix, Inc. Consolidated Statements of Changes in Stockholders&#146; Equity
from August&nbsp;8, 2002 (Inception) to December&nbsp;31, 2008</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-14</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#504">Consolidated Statements of Cash Flows for the Years Ended December&nbsp;31,
2008, 2007 and 2006, and for the Period from August&nbsp;8, 2002 (Inception) to
December&nbsp;31, 2008</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-15</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#505">Notes to Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-16</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-10 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="500"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">To the Board of Directors and Stockholders of<BR>
PolyMedix, Inc.<BR>
Radnor, Pennsylvania

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have audited the accompanying consolidated balance sheets of PolyMedix, Inc. and its
subsidiary (a development stage company) (the &#147;Company&#148;) as of December&nbsp;31, 2008 and 2007, and the
related consolidated statements of operations, changes in stockholders&#146; equity, and cash flows for
each of the three years in the period ended December&nbsp;31, 2008, and for the period from August&nbsp;8,
2002 (Inception) to December&nbsp;31, 2008. These financial statements are the responsibility of the
Company&#146;s management. Our responsibility is to express an opinion on these financial statements
based on our audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December&nbsp;31, 2008 and 2007, and the results
of its operations and its cash flows for each of the three years in the period ended December&nbsp;31,
2008, and for the period from August&nbsp;8, 2002 (Inception) to December&nbsp;31, 2008, in conformity with
accounting principles generally accepted in the United States of America.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">/s/ Deloitte &#038; Touche LLP
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Philadelphia, Pennsylvania<BR>
March&nbsp;23, 2009

</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-11 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>POLYMEDIX, INC.<BR>
(A DEVELOPMENT STAGE COMPANY)</B>
</DIV>

<DIV align="left">
<A name="501"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED BALANCE SHEETS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>DECEMBER 31, 2008 AND 2007</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Assets:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,967</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses and other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">407</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total current assets</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>15,513</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>8,945</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Property and Equipment:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Computers</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">243</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Office furniture and lab equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">774</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(447</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(240</TD>
    <TD nowrap>)</TD>
</TR>

<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total property and equipment</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>564</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>777</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><B>TOTAL ASSETS</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>16,077</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>9,722</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:15px; text-indent:-15px"><B>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Current Liabilities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,072</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,341</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,372</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Short-term portion of capital lease obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total current liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,109</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,844</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deferred rent and other accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">825</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">640</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Long-term portion of capital lease obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total liabilities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,934</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>4,588</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Commitments and contingencies</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Stockholders&#146; Equity:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred Stock ($0.001 par value; 10,000 shares
authorized; 0 and 0 issued and outstanding at
December&nbsp;31, 2008 and 2007, respectively)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Common Stock ($0.001 par value; 250,000 shares
authorized; 59,845 and 32,039 issued and
outstanding at December&nbsp;31, 2008 and 2007,
respectively)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,930</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,973</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deficit accumulated during the development stage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(36,859</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,873</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized gain on available for sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total stockholders&#146; equity</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,143</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,134</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><B>TOTAL LIABILITIES AND STOCKHOLDERS&#146; EQUITY</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>16,077</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>9,722</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-12 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>POLYMEDIX, INC.<BR>
(A DEVELOPMENT STAGE COMPANY)</b></div>


<DIV align="left">
<A name="502"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>
CONSOLIDATED STATEMENTS OF OPERATIONS</B></div>


<DIV align="center" style="font-size: 10pt; margin-top: 0pt"><B>
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 AND<BR>
PERIOD FROM AUGUST 8, 2002 (INCEPTION)&nbsp;THROUGH DECEMBER 31, 2008<BR>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>For the period</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>August 8, 2002</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(Inception) to</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Years Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Revenues:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Grant and research revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">821</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,513</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total revenues</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,066</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,126</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>821</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,513</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Operating Expenses:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,401</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,591</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">4,875</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,174</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,274</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total operating expenses</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,276</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>13,801</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,480</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>41,865</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Other Income:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income and other expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">511</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">693</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,493</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px"><B>Total other income</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>224</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>511</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>693</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,493</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(10,986</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(12,164</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(5,966</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(36,859</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Beneficial conversion feature, conversion inducement and
dividends on preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,845</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,247</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,899</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,118</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss attributable to common stockholders</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(16,831</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(14,411</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(8,865</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(47,977</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net loss per common share &#151; basic and diluted</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(0.40</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(0.61</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(0.72</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Weighted average common shares outstanding &#151; basic and diluted</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>42,007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>23,771</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,240</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-13 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>POLYMEDIX, INC.<BR>
(A DEVELOPMENT STAGE COMPANY)</B>
</DIV>

<DIV align="left">
<A name="503"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS&#146; EQUITY</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>FROM AUGUST 8, 2002 (INCEPTION)&nbsp;THROUGH DECEMBER 31, 2008</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(IN THOUSANDS)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 7pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Deficit</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unrealized</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Accumulated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Gain/Loss on</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Unearned Stock-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>During the</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Available for</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Common Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>Preferred Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Based</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Development</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Sale</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Stockholders&#146;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Description</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Paid-In Capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Stage</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Equity</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance at August&nbsp;8, 2002</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Series&nbsp;A preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">229</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of restricted common stock grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,152</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">28</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(162</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(162</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="35" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance at December&nbsp;31, 2002</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,952</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>920</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>276</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(27</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(162</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>90</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Series&nbsp;A-1 preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">224</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">225</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Series&nbsp;A preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">124</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Series&nbsp;B preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,328</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,659</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,660</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of restricted common stock grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,227</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,227</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="35" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance at December&nbsp;31, 2003</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,611</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,745</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2,298</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(24</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1,389</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>892</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Series&nbsp;B preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,312</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,097</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,100</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock grants to non-employees in exchange for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">518</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">336</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,590</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,590</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="35" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance at December&nbsp;31, 2004</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,129</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,057</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>6,731</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(16</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(2,979</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>3,746</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from Series&nbsp;B subscription receivable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">40</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock grants to non-employees in exchange for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">325</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of stock option grants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,855</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,855</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,235</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of Series&nbsp;A and B preferred stock to common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,057</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,057</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock for net assets of PolyMedix, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Series&nbsp;1 preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,589</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,140</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,146</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,764</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,764</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="35" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance at December&nbsp;31, 2005</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,382</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>12</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>5,589</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>6</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>24,216</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1,636</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(7,743</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>14,855</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Reclassification of unearned compensation on nonvested stock balance upon adoption of SFAS No.&nbsp;123(R)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,636</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Series&nbsp;1 preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,466</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,719</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,720</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock grants to non-employees in exchange for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">45</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,093</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,093</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of Series&nbsp;1 preferred stock to common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends paid on Series&nbsp;1 preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized loss on available on sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,966</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,966</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="35" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance at December&nbsp;31, 2006</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>12,480</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>12</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,483</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>7</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>27,437</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(13,709</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(1</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>13,746</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of Series&nbsp;1 preferred stock to common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,483</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(7</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(9</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock grants to non-employees in exchange for services</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,189</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,189</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from exercise of common stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">122</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock to employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock, net of issuance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,481</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,106</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gain on available for sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,164</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,164</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="35" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance at December&nbsp;31, 2007</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>32,039</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>32</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>30,973</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(25,873</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>5,134</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of Series&nbsp;2008 preferred stock, net of issuance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">609</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,856</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,857</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion of Series&nbsp;2008 preferred stock to common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,089</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(609</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Amortization of stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,378</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,378</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds from exercise of common stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock to employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">26</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common stock, net of issuance costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,428</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,483</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,505</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized gain on available for sale securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,986</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,986</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="35" nowrap align="left" style="border-top: 1px solid #000000">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Balance at December&nbsp;31, 2008</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>59,845</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>60</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>49,930</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>&#151;</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>$</B></TD>
    <TD align="right"><B>(36,859</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>12</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>13,143</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-14 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>POLYMEDIX, INC.<BR>
(A DEVELOPMENT STAGE COMPANY)</B>
</DIV>

<DIV align="left">
<A name="504"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 AND</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>PERIOD FROM AUGUST 8, 2002 (INCEPTION)&nbsp;THROUGH DECEMBER 31, 2008</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>(IN THOUSANDS)</B></DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>For the period</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>August 8, 2002</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>(Inception) to</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Years Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000"><B>December 31,</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2006</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Operating Activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(10,986</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(12,164</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,966</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(36,859</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Adjustments to reconcile net loss to net cash
used in operating activities:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">213</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">195</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">523</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accretion of discount on cash equivalents and
investment securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(254</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(118</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(442</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Stock-based compensation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">(Increase) decrease in prepaid expenses and
other current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(365</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(407</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase (decrease)&nbsp;in accounts payable, accrued expenses and deferred rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,122</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,657</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,785</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss on disposal of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><B>Net cash used in operating activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(10,926</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(8,266</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(4,319</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(28,569</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Investing Activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash paid for property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(266</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(274</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(751</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,553</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(9,880</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,810</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,243</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from maturities of investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,700</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,098</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,798</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><B>Net cash provided by (used in) investing
activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3,853</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>1,952</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6,084</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(8,196</B></TD>
    <TD nowrap><B>)</B></TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash Flows from Financing Activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of stock, net of
financing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">16,966</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,558</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,720</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">43,800</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from warrant and stock option
exercises</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">214</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">398</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Principal payments on capital lease obligations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(131</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(93</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(227</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:60px; text-indent:-15px"><B>Net cash provided by financing activities</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>17,049</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,649</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>3,717</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>43,971</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Net increase (decrease)&nbsp;in cash and cash
equivalents</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>2,270</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(3,665</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right"><B>(6,686</B></TD>
    <TD nowrap><B>)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right"><B>7,206</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents &#151; beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,601</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Cash and cash equivalents &#151; end of period</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>7,206</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>4,936</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>8,601</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left"><B>$</B></TD>
    <TD align="right"><B>7,206</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-Cash Investing Activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and equipment acquired under capital
lease</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital expenditures acquired on account</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Non-Cash Financing Activities:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion inducement and dividends on Series
Preferred Stock and Beneficial conversion
feature on Series&nbsp;2008 Preferred Stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,845</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,026</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">11,118</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Warrants issued to placement agent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,932</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued financing costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">452</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">51</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Capital lease obligation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">331</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying notes are an integral part of these consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-15 <!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>POLYMEDIX, INC.<BR>
(A DEVELOPMENT STAGE COMPANY)</B>
</DIV>

<DIV align="left">
<A name="505"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
AS OF DECEMBER 31, 2008 AND 2007 AND<br>
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006<br>
AND FOR THE PERIOD<br>
AUGUST 8, 2002 (INCEPTION)&nbsp;TO DECEMBER 31, 2008</B></DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In these consolidated financial statements, &#147;PolyMedix,&#148; &#147;we,&#148; &#147;us&#148; and &#147;our&#148; refer to PolyMedix,
Inc. and its wholly owned subsidiary PolyMedix Pharmaceuticals, Inc. and &#147;common stock&#148; refers to
PolyMedix&#146;s common stock, par value $0.001 per share
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 1 &#151; ORGANIZATION AND BUSINESS ACTIVITIES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are a development stage biotechnology company focused on treating life threatening, serious
infectious diseases and acute cardiovascular disorders with synthetic small molecule compounds that
mimic the activity of large natural protein molecules, compounds referred to as biomimetics. Using
our proprietary computational drug design technology, we have created novel defensin mimetic
antibiotic compounds, heparin antagonist compounds and other drug compounds intended for human
therapeutic use. Since 2002, we have been a development stage enterprise, and accordingly, our
operations have been directed primarily toward developing business strategies, raising capital,
research and development activities, conducting pre-clinical testing and human clinical trials of
our product candidates, exploring marketing channels and recruiting personnel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have incurred operating losses since inception, have not generated any product sales revenues
and have not achieved profitable operations. Our deficit accumulated during the development stage
through December&nbsp;31, 2008 aggregated $36,859,000, and we expect to continue to incur substantial
losses in future periods. None of our product candidates have received regulatory approval for
commercial sale and our product candidates may never be commercialized. In addition, all of our
product candidates are in the early stages of development and several programs are on hold pending
additional financing. The progress and results of our current and any future clinical trials or
future pre-clinical testing are uncertain, and if our product candidates do not receive regulatory
approvals, our business, operating results, financial condition and cash flows will be materially
adversely affected. Our development programs require a significant amount of cash to support the
development of product candidates.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are highly dependent on the success of our research, development and licensing efforts and,
ultimately, upon regulatory approval and market acceptance of our products under development. Our
short and long-term capital requirements depend upon a variety of factors, including market
acceptance for our technologies and product candidates and various other factors. We anticipate
that in order to achieve our operational objectives, including our plans during 2009 for starting
and completing Phase 1b studies as well as beginning preparation for Phase 2 studies for each of
our PMX-30063 and PMX-60056 product candidates, our expenses and cash requirements will increase
from historical levels and we anticipate the need to raise additional capital during 2009 in order
to fully fund the research and development of our product candidates. We believe that our current
cash and investment balances will fund our planned Phase 1 studies for PMX-30063 and PMX-60056 and
can fund our operations for at least the next twelve months.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our current cash and investment balances are not sufficient to fund the Phase 2 development of
either of our two lead product candidates. We do not plan to initiate our Phase 2 development
activities until additional financing is secured. We expect to seek additional funds through
equity or debt financing, among other sources. In addition, we may actively seek funds through
government grants and contracts. However, as a result of current conditions in the equity and debt
markets, we may not be able to obtain additional funding on favorable terms, if at all. In
addition, we if we choose to apply for government grants and contracts, there is no guarantee of
acceptance of our applications. If additional capital resources are not obtained by the end of the
second quarter of 2009, we will scale-back, postpone or eliminate certain of our research, drug
discovery or development programs until such additional capital resources have been obtained, and
as a result, our business may be materially and adversely affected.. In the absence of adequate
additional funding, we believe that we
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-16 <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">have the ability to scale our operations such that our current cash and investment balances can
fund our operations into the second half of 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Global market and economic conditions have been, and continue to be, disruptive and volatile. In
particular, the cost of raising money in the debt and equity capital markets has increased
substantially while the availability of funds from those markets has diminished significantly. If
funding is not available when needed, or is available only on unfavorable terms, meeting our
capital needs or otherwise taking advantage of business opportunities may become challenging, which
could have a material adverse effect on our business plans.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Principles of Consolidation</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements include the accounts of PolyMedix, Inc. and its wholly owned
subsidiary PolyMedix Pharmaceuticals, Inc. All intercompany accounts and transactions have been
eliminated in consolidation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Development Stage Company</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are considered to be in the development stage as defined in Statements of Financial Accounting
Standards (SFAS)&nbsp;No.7, <I>Accounting and Reporting by Development Stage Enterprises</I>. We have devoted
substantially all of our efforts to business planning, research and development, recruiting
management and technical staff, acquiring operating assets and raising capital.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Use of Estimates</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts in the financial statements and accompanying notes. Actual results could
differ from those estimates. Significant estimates include the value of our common stock, preferred
stock, stock options and warrants.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Cash and Cash Equivalents</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We consider all highly liquid investments purchased with a maturity of three months or less at the
time of purchase to be cash equivalents. Cash and cash equivalents consist of cash in banks and
money market funds.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Short-Term Investments</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Investments purchased with a maturity of more than three months, and which mature less than twelve
months from the balance sheet date, are classified as short-term investments. We generally hold
investments to maturity, however, since we may, from time to time, sell securities to meet cash
requirements, we classify our investments as available-for-sale as defined by Statement of
Financial Accounting Standards (&#147;SFAS&#148;), No.&nbsp;115, <I>Accounting for Certain Investments in Debt and
Equity Securities</I>&#148; Available-for-sale securities are carried at market value with unrealized gains
and losses reported as a separate component of Stockholders&#146; Equity.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Property and Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property and equipment are stated at cost. Depreciation is computed using the straight-line method
over the estimated useful life of the assets; three years for computer equipment and related
software, seven years for office furniture and five years for lab equipment. When property and
equipment are sold or otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts and the resulting gain or loss is included in operating expenses.
Depreciation expense was $213,000, $195,000, $64,000 and $523,000 for the years ended December&nbsp;31,
2008, 2007 and 2006 and for the period from August&nbsp;8, 2002 (Inception) to December&nbsp;31, 2008
respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Impairment of Long-Lived Assets</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate
that the basis of an asset may not be recoverable. In accordance with SFAS No.&nbsp;144, <I>Accounting for
the Impairment or Disposal of Long-Lived Assets, </I>impairment is assessed by measuring the carrying
amount of
</DIV>


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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the assets against the estimated undiscounted future cash flows associated with them. If the
expected future cash flows are less than the carrying value, an impairment loss is recognized for
the amount by which the carrying value exceeds the fair value of the assets.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Grant and Research Revenue</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Sponsored grant and research revenues are recognized pursuant to the terms of the related
agreements as work is performed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Research and Development Expense</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Research and development costs are expensed as incurred.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Income Taxes</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We recognize deferred tax assets and liabilities for temporary differences between the financial
reporting basis and the tax basis of our assets and liabilities and the expected benefits of using
net operating loss carryforwards. The impact of changes in tax rates and laws on deferred taxes, if
any, applied during the years in which temporary differences are expected to be settled, is
reflected in the consolidated financial statements in the period of enactment. The measurement of
deferred tax assets is reduced, if necessary, if, based on weight of the evidence, it is more
likely than not that some, or all, of the deferred tax assets will not be realized. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in the period that such
tax rate changes are enacted. At December&nbsp;31, 2008 and 2007, we have concluded that a full
valuation allowance is necessary for deferred tax assets. (See Note 5).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We adopted the provisions of FIN 48, &#147;Accounting for Uncertainty in Income Taxes &#151; an
Interpretation of FASB Statement No.&nbsp;109&#148; on January&nbsp;1, 2007. FIN 48 prescribes the recognition
threshold and measurement attribute for the financial statement recognition and measurement of
uncertain tax positions taken or expected to be taken in a tax return. We had no material amounts
recorded for uncertain tax positions, interest or penalties in the accompanying consolidated
financial statements. See Note 5 for the impact of the adoption of FIN 48.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Loss per Share of Common Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We calculate our loss per share under the provisions of SFAS No.&nbsp;128, <I>Earnings Per Share</I>. SFAS No.
128 requires a dual presentation of &#147;basic&#148; and &#147;diluted&#148; loss per share on the face of the income
statement. Basic loss per share is computed by dividing loss by the weighted average number of
shares of common stock outstanding during each period. Diluted loss per share includes the effect,
if any, from the potential exercise or conversion of securities, such as unvested restricted stock,
convertible preferred stock, stock options and warrants, which would result in the issuance of
incremental shares of common stock. In computing the basic and diluted net loss per share allocable
to common stockholders the weighted average number of shares remains the same for both calculations
due to the fact that when a net loss exists, dilutive shares are not included in the calculation.
Potentially dilutive securities include unvested restricted stock, convertible preferred stock, and
options and warrants to purchase our common stock. These potentially dilutive securities are more
fully described in Note 6.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Comprehensive Loss</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS No.&nbsp;130, &#147;Reporting Comprehensive Income,&#148; establishes standards for the reporting of
comprehensive income and its components. Comprehensive loss consists of reported net income or loss
and unrealized gains or losses on available for sale securities. The comprehensive loss for each of
the periods presented approximates the net loss in the consolidated statements of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Segment Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We report segment information in accordance with SFAS No.&nbsp;131, <I>Disclosure About Segments of an
Enterprise and Related Information</I>. We have one reportable segment operating within the United
States.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Reclassification</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Certain prior year amounts have been reclassified to conform to current year presentation.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-18 <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Fair Value of Financial Instruments and Credit Risk</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents,
investments, accounts payable and accrued expenses approximate fair value because of the immediate
or short-term maturity of these financial instruments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We invest our cash in accordance with a policy objective that seeks to ensure both liquidity and
safety of principal. The policy limits investments to instruments issued by the U.S. government and
commercial institutions with strong investment grade credit ratings and places restrictions on
maturity terms and concentrations by type and issuer.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock-Based Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We currently sponsor equity compensation plans. Refer to Note 6. From our inception, August&nbsp;8,
2002, we applied the fair value recognition provisions of Statement of Financial Accounting
Standards (&#147;SFAS&#148;) No.&nbsp;123, <I>Accounting for Stock-Based Compensation</I>. Beginning January&nbsp;1, 2006, we
adopted SFAS No.&nbsp;123(R), <I>Share-based Payment </I>(&#147;SFAS No.&nbsp;123(R)&#148;) using the modified-prospective
transition method, and as such, prior periods have not been restated. Compensation expense is
recognized over the requisite service period. The total stock-based compensation expense was
$1,404,000, $1,259,000, $1,139,000, and $5,844,000 for the years ended December&nbsp;31, 2008, 2007 and
2006 and for the period from August&nbsp;8, 2002 (Inception) to December&nbsp;31, 2008, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Recently Issued and Adopted Accounting Standards</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2006, the Financial Accounting Standards Board (or &#147;FASB&#148;) issued Statement of
Financial Accounting Standards (or &#147;SFAS&#148;) No.&nbsp;157, <I>Fair Value Measurements </I>(&#147;SFAS 157&#148;). SFAS 157
clarifies the definition of fair value, establishes a framework for measuring fair value and
expands disclosures on fair value measurements. SFAS 157 was effective for financial statements
issued for fiscal years beginning after November&nbsp;15, 2007 and interim periods within those fiscal
years; however, the FASB did provide a one-year deferral for the implementation of SFAS 157 for
other nonfinancial assets and liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to
measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level
1 inputs are quoted prices (unadjusted)&nbsp;in active markets for identical assets or liabilities.
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs
that are observable for the asset or liability, either directly or indirectly through market
corroboration, for substantially the full term of the financial instrument. Level 3 inputs are
unobservable inputs based on management&#146;s own assumptions used to measure assets and liabilities at
fair value. A financial asset or liability&#146;s classification within the hierarchy is determined
based on the lowest level input that is significant to the fair value measurement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table provides the assets and liabilities carried at fair value measured on a
recurring basis as of December&nbsp;31, 2008 (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>Fair Value Measurements at December 31, 2008</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Total Carrying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Significant other</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Significant</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>value as of</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Quoted prices in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>observable</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>unobservable</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>December</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>active markets</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>inputs</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>inputs</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>31, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Level 1)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Level 2)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(Level 3)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,900</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our short-term investments, generally fixed income government agency securities, are measured at
fair value using models derived principally from or corroborated by observable market data by
correlation or other means and are classified within Level 2 of the valuation hierarchy. The
adoption of SFAS 157 did not have any impact on our consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2007, the FASB issued SFAS No.&nbsp;159 <I>The Fair Value Option for Financial Assets and
Financial Liabilities </I>(&#147;SFAS 159&#148;). SFAS 159 permits entities to choose to measure many financial
assets
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-19 <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and financial liabilities at fair value. Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings. SFAS 159 was effective for fiscal years
beginning after November&nbsp;15, 2007. We did not elect the fair value option available under SFAS 159
for any financial assets or liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2007, the FASB ratified the consensus reached in EITF Issue No.&nbsp;07-03, <I>Accounting for
Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and
Development Activities </I>(Issue No.&nbsp;07-03). Issue No.&nbsp;07-03 requires that non-refundable advance
payments for future research and development activities should be deferred and recognized as an
expense as goods are delivered or the related services are performed. Issue No.&nbsp;07-03 is effective
for fiscal years beginning after December&nbsp;15, 2007. Issue No.&nbsp;07-03 was adopted effective January
1, 2008 and did not have a material impact on our consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2008, the FASB issued FASB Staff Position No.&nbsp;EITF 03-6-1, <I>Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities, </I>(&#147;FSP EITF 03-6-1&#148;). FSP
EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore need to be included in the earnings
allocation in computing earnings per share, or EPS, under the two-class method described in
paragraphs 60 and 61 of FASB Statement No.&nbsp;128, <I>Earnings per Share </I>(&#147;SFAS No.&nbsp;128&#148;). FSP
EITF 03-6-1 applies to the calculation of EPS under SFAS No.&nbsp;128 for share-based payment awards
with rights to dividends or dividend equivalents. FSP EITF 03-6-1 clarifies that unvested
share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in the computation of
EPS pursuant to the two class method. FSP EITF 03-6-1 is effective for financial statements issued
for fiscal years beginning after December&nbsp;15, 2008, and interim periods within those years. All
prior-period EPS data presented must be adjusted retrospectively (including interim financial
statements, summaries of earnings and selected financial data) to conform with the provisions of
FSP EITF 03-6-1. Early adoption is not permitted. We do not expect EITF 03-6-1 to have a material
impact on our consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2008, the FASB ratified the consensus reached on EITF Issue No.&nbsp;07-05, <I>Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entity&#146;s Own Stock </I>(&#147;EITF No.&nbsp;07-05&#148;). EITF
No.&nbsp;07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed
to an entity&#146;s own stock, which would qualify as a scope exception under SFAS No.&nbsp;133, Accounting
for Derivative Instruments and Hedging Activities. EITF No.&nbsp;07-05 is effective for financial
statements issued for fiscal years beginning after December&nbsp;15, 2008. Early adoption for an
existing instrument is not permitted. We are currently evaluating the impact of the pending
adoption of EITF No.&nbsp;07-05 on our consolidated financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 3 &#151; SHORT-TERM INVESTMENTS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Short-term investments consist of investment grade fixed income securities with original maturities
of greater than three months. All investments are classified as &#147;available for sale&#148;, and are
considered current assets. As of December&nbsp;31, 2008, all short-term investments had maturities of
less than one-year.
<BR>
<BR style="font-size: 6pt">
The following summarizes the short-term investments as of December&nbsp;31, 2008 and December&nbsp;31, 2007,
which were invested solely in U.S. government obligations (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Gross</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Amortized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Unrealized</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Cost</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Gains</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Losses</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">Fair Value</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,888</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,900 </TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,965</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,967</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 4 &#151; ACCRUED EXPENSES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2008 and 2007, accrued expenses consisted of the following (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payroll related costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">479</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">280</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development related costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">318</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">827</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">136</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">933</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,372</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-20 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 5 &#151; PROVISION FOR INCOME TAXES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We account for income taxes using the asset and liability approach as required by FASB No.&nbsp;109.
Deferred income taxes are provided for the differences between the tax bases of assets or
liabilities and their reported amounts in the financial statements. This method also requires the
recognition of future tax benefits, such as net operating loss carryforwards and research and
development credits, to the extent that realization of such benefits is more likely than not. At
December&nbsp;31, 2008 and 2007, deferred tax assets consisted of the following (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred tax assets:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating loss carryforward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">11,710</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">7,998</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,592</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,163</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Contribution carryforward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">R &#038; D credit carryforward</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,373</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">998</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(70</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(57</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Straight-line rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">254</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">265</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross deferred tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,244</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,654</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(15,244</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(10,654</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net deferred tax asset</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We believe there is not sufficient evidence that future taxable income will be adequate to permit
the realization of the future tax deductions embedded in this asset. As such, in accordance with
SFAS No.&nbsp;109, &#147;Accounting for Income Taxes&#148;, we have established a valuation allowance to reduce
the deferred tax asset since it is more likely than not that the deferred tax asset will not be
realized.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-21 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The difference between the provision for (benefit from) income taxes and the amount computed by
applying the federal statutory income tax rate to income (loss)&nbsp;before provision for (benefit from)
income taxes is explained below (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Period from</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">August 8,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">2002</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="3">(Inception)</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">to</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">December</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Years ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000">31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss before provision for income
taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(10,986</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,164</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(5,966</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(36,859</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax at federal statutory rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(3,735</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,138</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,028</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,533</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State taxes, net of federal benefit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(883</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(908</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(390</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(2,692</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development credits</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(290</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(348</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(159</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(959</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other permanent differences</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">113</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">74</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">210</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">476</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">730</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,590</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,271</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,081</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,244</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Provision for income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have available at December&nbsp;31, 2008, approximately $29,000,000 in unused federal and state
operating loss carryforwards that expire between 2022 and 2028. We also have available at December
31, 2008, approximately $1,400,000 unused federal research and development credit carryforwards
that may provide future tax benefits and expire between 2024 and 2028.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Tax Reform Act of 1986 contains provisions that may limit the NOL and research and development
credit carryforwards available to be used in any given year upon the occurrence of certain events,
including significant changes in ownership interest. Generally, a change in ownership of a company
of greater than 50% within a three-year period results in an annual limitation on that company&#146;s
ability to utilize its NOL carryforwards and tax credits from the tax periods prior to the
ownership change. A study needs to be performed to determine if we have undergone a change in
ownership, however, we believe that we have undergone an ownership change and are subject to an
annual limitation on the use of our NOL carryforwards pursuant to these provisions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2006, the FASB issued FASB Interpretation No.&nbsp;48, &#147;Accounting for Uncertainty in Income
Taxes<I>,</I>&#148; or FIN 48, which is applicable for fiscal years beginning after December&nbsp;15, 2006. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an enterprise&#146;s financial
statements in accordance with SFAS No.&nbsp;109, &#147;Accounting for Income Taxes.&#148; FIN 48 prescribes a
recognition threshold and measurement for financial statement recognition and measurement of a tax
position reported or expected to be reported on a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure,
and transition. On January&nbsp;1, 2007, we adopted FIN 48. Prior to the adoption of FIN 48, our policy
was to recognize tax benefits of uncertain tax positions unless it was probable that a position
would not be sustained. FIN 48 requires application of a &#147;more likely than not&#148; threshold to the
recognition and derecogntion of tax positions. As a result of the adoption of FIN 48, no
adjustments were made to retained earnings for unrecognized tax benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We file income tax returns in the U.S. federal jurisdiction and Pennsylvania. Our policy is to
record interest and penalties on uncertain tax positions as income tax expense. The tax years back
to 2002 remain open to examination by the major taxing jurisdictions where we file. Net operating
loss and credit carryforwards from earlier periods also remain open to examination by taxing
authorities, and will for a period post utilization. We do not reasonably estimate that the
unrecognized tax benefit will change significantly within the next twelve months. Any changes in
the future would also have no impact on the effective tax rate due
to the existence of a full valuation allowance. As of December&nbsp;31, 2008, we had no
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-22 <!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">material amounts
recorded for uncertain tax positions, interest or penalties in the accompanying consolidated
financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 6 &#151; STOCKHOLDERS&#146; EQUITY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Common Stock</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are authorized to issue 250,000,000 shares of common stock, with a par value of $0.001, of which
59,845,000 and 32,039,000 were issued and outstanding at December&nbsp;31, 2008 and 2007, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2008, our then outstanding 608,834 shares of Series&nbsp;2008 Convertible Preferred Stock
(&#147;Series&nbsp;2008 Preferred Stock&#148;), originally issued in September&nbsp;2008, automatically converted to
6,088,340 shares of common stock. See Preferred Stock section below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2008, we completed a registered offering of 21,428,000 units. Each unit consisted of one
share of our common stock and a Series&nbsp;A Warrant to purchase one share of our common stock. Each
unit was priced at $0.70 per unit with the exercise price of the Series&nbsp;A Warrants issued at $1.00
per share. We received gross proceeds of $15,000,000 in the registered offering before fees and
expenses. In connection with this registered offering, we incurred commission fees and expenses of
approximately $1,496,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2007, we completed a registered offering of 2,943,000 units. Each unit consisted of one
share of our common stock and a warrant to purchase one share of our common stock. Each unit was
priced at a $1.10 per unit and the exercise price of the warrants issued is also $1.10. We received
gross proceeds of $3,238,000 in the registered offering before fees and expenses. In connection
with this registered offering, we paid commission fees and expenses of $1,132,000.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Preferred Stock</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.001, of
which no shares were issued and outstanding at December&nbsp;31, 2008 and 2007, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In September&nbsp;2008, we completed a private placement offering of 608,834 units. Each unit consisted
of one share of our 2008 Preferred Stock and a Series&nbsp;B Warrant. Each unit was priced at a $7.00
per unit. During December&nbsp;2008, each share of 2008 Preferred Stock automatically converted into 10
shares of common stock and the Series&nbsp;B Warrants became exercisable for common stock immediately,
and without any action on the part of the holder of such shares of 2008 Preferred Stock or Series&nbsp;B
Warrants, upon the effectiveness of an amendment (the &#147;Certificate Amendment&#148;) to our Amended and
Restated Certificate of Incorporation, as amended (the &#147;Certificate&#148;), to increase the number of
shares of common stock authorized for issuance by us under the Certificate to an amount sufficient
to cover the issuance of shares of common stock upon conversion of the 2008 Preferred Stock and the
issuance of shares of common stock issuable after such conversion upon exercise of all of the
Series&nbsp;B Warrants. The conversion of the Series&nbsp;2008 Preferred Stock triggered the recognition of a
beneficial conversion feature of approximately $5,845,000, which was included in our net loss in
arriving at net loss attributable to common stockholders. We received gross proceeds of $4,262,000
in the private placement before fees and expenses. In connection with this private placement, we
incurred commission fees and expenses of approximately $401,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the second quarter of 2007, our stockholders voted to approve an amendment to our Series&nbsp;1
Preferred Stock certificate of designations to provide for the automatic and immediate conversion
of each share of Series&nbsp;1 Preferred stock into 2.247 shares of our common stock. The fair value of
the additional shares paid to the then Series&nbsp;1 Preferred stockholders was approximately
$2,247,000, which has been deducted from our net loss in arriving at net loss attributable to
common stock holders. In addition, notwithstanding the conversion, these former holders of Series&nbsp;1
preferred stock maintained their weighted average anti-dilution protection through December&nbsp;31,
2007. As a result of the registered offering of common stock in December&nbsp;2007, which closed during
the fourth quarter of 2007 and in satisfaction of the
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-23 <!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">weighted average anti-dilution protection then in place, we issued to the former holders of Series
1 preferred stockholders 538,000 shares of common stock.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Warrants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the private placement and subsequent conversion of the Series&nbsp;2008 Preferred
Stock (described above), investors in the private placement received Series&nbsp;B Warrants presently
exercisable for 6,088,340 shares of common stock and the placement agent and dealer received Series
B Warrants presently exercisable for 279,583 shares of common stock. The Series&nbsp;B Warrants have an
exercise price of $1.00 per share and that expire in July&nbsp;2013. The December&nbsp;2008 conversion of
the Series&nbsp;2008 Preferred Stock triggered the recognition of a beneficial conversion feature of
approximately $2,218,000, which was included in our net loss in arriving at net loss attributable
to common stockholders. The fair value of the warrants at the time of issuance was $3,991,000,
which was estimated using the Black-Scholes-Merton option-pricing model with the following
assumptions: no dividends; risk-free interest rate of 3.03%; estimated life of five years and
volatility of 71%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the registered offering completed in July&nbsp;2008 (described above), we issued
Series&nbsp;A Warrants to purchase 21,428,000 shares of common stock to investors and Series&nbsp;A Warrants
to purchase 1,071,000 shares of common stock to the placement agents and dealer at an exercise
price of $1.00 per share and expire in September&nbsp;2013. The fair value of the warrants at the time
of issuance was $11,807,000, which was estimated using the Black-Scholes-Merton option-pricing
model with the following assumptions: no dividends; risk-free interest rate of 3.2% to 3.35%;
estimated life of five years and volatility of 72% to 75%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In connection with the registered offering completed in December&nbsp;2007 (described above), we issued
warrants to purchase 2,943,000 shares of common stock at an exercise price of $1.10 per share.
These warrants expire in December&nbsp;2012. The fair value of the warrants at the time of issuance was
$2,015,000, which was estimated using the Black-Scholes-Merton option-pricing model with the
following assumptions: no dividends; risk-free interest rate of 3.58%; estimated life of five
years and volatility of 73%.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2005 and 2006, we issued warrants to purchase 4,119,000 shares of common stock in connection
with the private placement of Series&nbsp;1 preferred stock at an exercise price of $1.23 per share, as
adjusted for weighted average anti-dilution protection. These warrants expire in November&nbsp;2010 and
contain weighted average anti-dilution protection if we issue certain securities at a price per
share less than $1.23 per share. The fair value of the warrants at the time of issuance was
$2,149,000, which was estimated using the Black-Scholes-Merton option-pricing model with the
following assumptions: no dividends; risk-free interest rate of 4.45%; estimated life of five
years and volatility of 60%.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock-Based Compensation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We maintain equity compensation plans under which grants of incentive stock options, nonqualified
stock options, stock appreciation rights, stock awards, stock units and other stock-based awards
are granted to selected employees, non-employee directors and key advisors. Since our inception on
August&nbsp;8, 2002, we have recognized equity compensation expense over the requisite service period
using the Black-Scholes-Merton formula to estimate the fair value of stock options. Beginning
January&nbsp;1, 2006, we adopted SFAS No.&nbsp;123(R) under the modified-prospective transition approach.
The following table summarizes the total stock-based compensation expense included in our
Consolidated Statements of Operations (in thousands):
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-24 <!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Period from</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">August 8, 2002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(Inception) to</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Years Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">440</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">323</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">205</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,801</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">General and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">936</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,043</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stock-based
compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,404</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,139</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During the year ended December&nbsp;31, 2008, approximately 4,807,000 stock options were awarded to
non-employee directors, officers, employees and consultants. As of December&nbsp;31, 2008, there were
10,210,000 shares of common stock issuable upon exercise of outstanding stock options and 565,000
shares of common stock available for issuance of future equity compensation awards in connection
with our equity compensation plans.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stock Options</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As of December&nbsp;31, 2008, there was approximately $3,645,000 of total unrecognized compensation cost
related to non-vested stock options, which will be amortized over the weighted average remaining
service period of approximately 1.37&nbsp;years. This expected cost does not include the impact of any
future stock option awards. Options granted are generally exercisable for a period of up to ten
years from the date of grant at an exercise price which is not less than the fair value on the date
of grant and generally vest over terms ranging from immediately to four years. A summary of the
status of our stock options as of December&nbsp;31, 2008 and changes during the year ended December&nbsp;31,
2008 is presented below (in thousands, except per share amounts):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Weighted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Average</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Remaining</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Aggregate</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 0px solid #000000">Exercise Price</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Contractual</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Intrinsic</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Options</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">per share</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Life (in years)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Value</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at beginning of
period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<tr style="font-size: 10pt">
    <TD>&nbsp;</TD>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<tr style="font-size: 10pt">
    <TD>&nbsp;</TD>
</tr>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<tr style="font-size: 10pt">
    <TD>&nbsp;</TD>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<tr style="font-size: 10pt">
    <TD>&nbsp;</TD>
</tr>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.65</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<tr style="font-size: 10pt">
    <TD>&nbsp;</TD>
</tr>

<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Outstanding at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.44</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8.46</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">836</TD>
    <TD>&nbsp;</TD>
</TR>

<tr style="font-size: 10pt">
    <TD>&nbsp;</TD>
</tr>

<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercisable at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,040</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.61</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">189</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The aggregate intrinsic value in the preceding tables represent the total pretax intrinsic value
that would have been received by the option holders had all option holders exercised their options
on the last day of 2008. Intrinsic value is determined by calculating the difference between the
value of our stock on the last day of the year and the exercise price, multiplied by the number of
options.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes the fair value of options granted during the years ended December
31, 2008, 2007 and 2006 and for the period from August&nbsp;8, 2002 (Inception) to December&nbsp;31, 2008,
respectively (in thousands, except per share amounts):
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-25 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Period from</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">August 8, 2002</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">(Inception) to</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000">Years Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">December 31,</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">2008</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value of options granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">3,210</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,228</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">8,768</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fair value of options granted (per share)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.91</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1.20</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.81</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The fair value of options granted is amortized over the requisite service period. The fair value
of each option grant is estimated on the date of grant using the Black-Scholes-Merton formula with
the following weighted average assumptions:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Year Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Year Ended</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">Year Ended</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">December 31, 2008</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">December 31, 2007</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000">December 31, 2006</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Range of risk free interest rates</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">1.37% &#150; 3.25%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">3.84% &#150; 4.85%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">4.30% &#150; 4.96%</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividend yield</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">0%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">0%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
   <TD nowrap align="center">0%</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">69% &#150; 75%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">63% &#150; 71%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">41% &#150; 60%</TD>
    <TD nowrap></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected life of options (in
years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Forfeitures</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">0%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">0%</TD>
    <TD nowrap></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="center">0%</TD>
    <TD nowrap></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Expected volatility and expected life for the years ended December&nbsp;31, 2008, 2007 and 2006 were
estimated based upon historical activity, when available, and our benchmark analysis of selected
companies. The risk-free interest rate is calculated using the U.S. Treasury yield curves in
effect at the time of grant. We currently estimate that all of our outstanding options will vest.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Restricted Common Stock Grants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have also issued shares of restricted common stock to selected employees, non-employee directors
and key advisors. During the three-year period ended December&nbsp;31, 2008, there were no grants of
restricted stock As of December&nbsp;31, 2008, there was no unrecognized compensation cost related to
non-vested restricted stock grants. The restriction period for restricted stock awards was for a
four year vesting period, commencing from the grant date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">A summary of the status of our unvested restricted stock awards as of December&nbsp;31, 2008, 2007 and
2006 and changes during the years ended December&nbsp;31, 2008, 2007 and 2006, and for the period from
August&nbsp;8, 2002 (Inception) to December&nbsp;31, 2008, respectively, are presented below (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="52%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">Period from</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">August 8, 2002</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(Inception) to</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000">Years Ended December 31,</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">December 31,</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2006</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">2008</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted common
stock &#151; beginning
of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Awards Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,464</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Awards Vested</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(279</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,379</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Awards Forfeited</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted common
stock &#151; end of
period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-26 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The total grant date fair value of these restricted stock awards was $34,000. All restricted
shares awarded have grant date fair values of $0.025 per share.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Common Stock Grants</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We also issued common stock grants to selected employees, non-employee directors and key advisors.
For the years ended December&nbsp;31, 2006, and for the period from August&nbsp;8, 2002 (Inception) to
December&nbsp;31, 2008, we issued common stock grants of 30,000 and 1,244,000 shares, respectively. The
fair value and expense recognized from the issuance of common stock grants for the years ended
December&nbsp;31, 2008, 2007, and 2006 and for the period from August&nbsp;8, 2002 (Inception) to December
31, 2008, were $0, $0, $45,000, and $834,000, respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Additionally, during January&nbsp;2008, and December, 2007, in connection with agreements with certain
terminated employees, we granted 50,000 and 25,000 shares, respectively, of common stock as a
one-time termination benefit to certain employees. These shares were issued ratably over the first
five-months following the grant date. During 2007, we also issued 12,500 shares to UMass in
connection with our license agreement. We recognized $26,000 and $70,000, in 2008 and 2007,
respectively, in equity based compensation costs associated with these shares which is included in
research and development costs on our Consolidated Statements of Operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 7 &#151; COMMITMENTS AND CONTINGENCIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Capital Lease</B>

</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have entered into lease agreements for laboratory equipment. The initial obligation under these
capital leases was $331,000. The value of the laboratory equipment acquired in connection with
these leases was $398,000 and the depreciation associated with these assets is included along with
that of other owned property and equipment. These equipment leases have terms of up to three
years, at interest rates ranging from 9.5% to 11.5% and contain bargain purchase options. In
connection with these capital leases, we will pay $108,000 during 2009, $4,000 of which will be for
interest. These capital leases end during 2009.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Operating Lease</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In June&nbsp;2006, we entered into an operating lease agreement for 24,223 square feet of combined
office and laboratory space located in Radnor, Pennsylvania. The initial term of the lease is 12
years. Payments under the lease commenced on December&nbsp;1, 2006. Our annual future minimum lease
payments under this non-cancelable operating lease are as follows (in thousands):
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000">Operating Leases</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">497</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">589</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">667</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2012</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">686</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2013</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">705</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Thereafter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,610</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total minimum lease payments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,754</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Prior to the commencement of our current operating lease for our Radnor Facility, we leased
approximately 3,500 square feet of combined office and laboratory space on a month-to-month basis
in Philadelphia, Pennsylvania. Rent expense was $598,000, $598,000 and $559,000 and $1,877,000 for
the years ended December&nbsp;31, 2008, 2007, and 2006, and for the period from August&nbsp;8, 2002
(Inception) to December&nbsp;31, 2008, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Patent License Agreements</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>University of Pennsylvania</I>. In January&nbsp;2003, we entered into a Patent License Agreement with the
University of Pennsylvania, or Penn. Under the terms of the agreement, we were granted an
exclusive, worldwide royalty-bearing license to make and sell products utilizing seven of Penn&#146;s
issued or pending patents for the life of such patents. One issued patent and five patent
applications cover the composition of
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->F-27 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">matter on antimicrobial compounds, including small molecules, oligomers and polymers. One patent
application covers the composition and use of polycationic compounds for treating cancer. If a
change-of-control event occurs, in which we transfer the license to these patents to a third party,
we are acquired by another company, or we conduct an initial public offering of our securities, we
are required to pay a 3% royalty on the gross sales for licensed products that are sold as
pharmaceuticals and a 1.5% royalty on products sold as coatings for use in medical devices. We are
permitted to sublicense the patents provided that (a)&nbsp;the sublicensee is prohibited from further
licensing of the patents and (b)&nbsp;the sublicensee is subject to all of the terms of the original
license granted to us. In addition, we are required to share with Penn any consideration we receive
from sublicensing our patents to a third party.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>University of Massachusetts</I>. In January&nbsp;2004, we entered into a five-year sponsored research
agreement with UMass. Under the terms of this agreement, we have the exclusive option to license
any intellectual property that may be generated by Dr.&nbsp;Gregory Tew pursuant to research sponsored
under the agreement. We may exercise this option by issuing 7,500 shares of our common stock to
UMass for each $100,000 of research conducted by Dr.&nbsp;Tew. If we exercise this option, we are also
required to reimburse UMass for direct patent costs incurred by it for the patents licensed by us.
During 2007, we issued 12,500 shares to UMass in connection with this agreement. We sponsored
$36,000 and $107,000, $118,000 of Dr.&nbsp;Tew&#146;s research for 2008, 2007 and 2006, respectively.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Agreements with Employees</I>. We have entered into employment agreements with various executives.
These agreements provide for severance arrangements and accelerated vesting of equity compensation
awards in the event that the executive is terminated by us other than for cause or disability or if
the executive resigns for good reason.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Credit Line</I>. In April&nbsp;2006, we entered into a line of credit agreement with a financial
institution. This line of credit provides for monthly interest-only payments at a variable per
annum rate of 3% plus the 30-day LIBOR rate. The amount available under this line of credit ranges
from 85% to 92% of cash and investments pledged as collateral, based upon the amount and security
type. There is currently no outstanding balance on this line of credit. In June&nbsp;2006, we entered
into a letter of credit agreement with the same financial institution to secure our payment
obligations under our facility operating lease. This letter of credit is for $1,400,000, expires
on December&nbsp;1, 2009 and is secured by our credit line.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Termination Benefits</I>. During January, 2008, and December, 2007, in connection with agreements with
certain terminated employees, we granted 50,000 and 25,000 shares, respectively, of common stock as
a one-time termination benefit to certain employees. These shares will be issued ratably over the
first five-months following the grant date. We recognized $26,000 and $58,000, in 2008 and 2007,
respectively, in equity based compensation costs associated with these shares which is included in
research and development costs on our Consolidated Statements of Operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>NOTE 8 &#151; QUARTERLY FINANCIAL INFORMATION (UNAUDITED)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following tables set forth certain unaudited financial information for each of the quarters in
the years ended December&nbsp;31, 2008 and 2007. This unaudited quarterly information has been prepared
on the same basis as the audited financial statements and includes all necessary adjustments,
consisting only of normal recurring adjustments that we consider necessary for a fair presentation
of the unaudited quarterly results when read in conjunction with the audited financial statements
and notes. We believe that quarter-to-quarter comparisons of financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance (in thousands,
except per share amounts).
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-28 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>Q1</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>Q2</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>Q3</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>Q4</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>Year</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2008:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Grant and research revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">991</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,066</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,881</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,950</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,055</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">2,390         </TD>
    <TD nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,276</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,823</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,904</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,955</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,304)        </TD>
    <TD nowrap>*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,986</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss per common share
&#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.09</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.09</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.15</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.40</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>2007:</B></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Grant and research revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">233</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">168</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">126</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,126</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,351</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,686</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">4,169        </TD>
    <TD nowrap>**</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,801</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,949</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,284</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,973</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,958)       </TD>
    <TD nowrap>**</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,164</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss per common share
&#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.24</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.10</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.14</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.61</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>includes adjustment of $126,000, which resulted from our reduced estimated bonus accrual<BR></TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>includes adjustment of $439,000, which resulted from our reduced estimated bonus accrual</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-29 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II &#151; INFORMATION NOT REQUIRED IN PROSPECTUS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;13.</B><B><I><FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Other<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Expenses<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>
of<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Issuance<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>and<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Distribution.<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT></I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table sets forth the costs and expenses, other than underwriting discounts and
commissions, if any, payable by the Company relating to the sale of common stock being registered.
All amounts are estimates except the SEC registration fee:
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">SEC Registration Fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">455</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Printing and Engraving Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal Fees and Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">24,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounting Fees and Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Miscellaneous Expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,045</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">38,000</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;14. </B><B><I>Indemnification<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>of<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Directors<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>and<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Officers.<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT></I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Section&nbsp;102 of the General Corporation Law of the State of Delaware permits a corporation to
eliminate the personal liability of directors of a corporation to the corporation or its
stockholders for monetary damages for a breach of fiduciary duty as a director, except where the
director breached his duty of loyalty, failed to act in good faith, engaged in intentional
misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an improper personal benefit. The
Company&#146;s Amended and Restated Certificate of Incorporation, as amended, provides that a director
of the Company shall not be personally liable to it or its stockholders for monetary damages for
any breach of fiduciary duty as a director, except to the extent that such exemption from liability
or limitation thereof is not permitted under the General Corporation Law of the State of Delaware
as currently in effect or as the same may hereafter be amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Section&nbsp;145 of the General Corporation Law of the State of Delaware provides that a corporation has
the power to indemnify a director, officer, employee, or agent of the corporation and other persons
serving at the request of the corporation in related capacities against expenses (including
attorneys&#146; fees), judgments, fines and amounts paid in settlements actually and reasonably incurred
by the person in connection with an action, suit or proceeding to which he is or is threatened to
be made a party by reason of such position, if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the corporation, and, in any
criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except
that, in the case of actions brought by or in the right of the corporation, no indemnification
shall be made with respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery
or other adjudicating court determines that, despite the adjudication of liability but in view of
all of the circumstances of the case, such person is fairly and reasonably entitled to indemnify
for such expenses which the Court of Chancery or such other court shall deem proper.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s Amended and Restated Certificate of Incorporation provides that the Company will
indemnify and advance expenses upon request to any person who is or was a party or threatened to be
made a party to any threatened, pending or completed action, suit, proceeding or claim, whether
civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or
has agreed to become, a director, officer or employee of the Company or, at the election of the
Company&#146;s board of directors, an agent of the Company or is or was serving at the request of the
Company as a director, officer or employee or, at the election of the Company&#146;s board of directors,
agent of any other corporation, partnership, joint venture, trust or other enterprise against any
and all expenses (including attorneys&#146; fees), judgments, fines, penalties and amounts paid in
settlement or incurred in connection with the investigation, preparation to defend or defense or
such action, suit, proceeding or claim.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company has purchased certain liability insurance for its officers and directors.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-1 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;15.</B><B><I><FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Recent<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Sales<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>of<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Unregistered<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Securities.
<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT></I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table provides information about the sales of unregistered securities for the
past three years.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Total Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Exemption from</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Date of Sale</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title of Security</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Amount</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Price</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Purchasers</B></TD>
    <TD style="border-bottom: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Registration Claimed</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sept. 2008
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">units consisting of
Series&nbsp;2008
Convertible
Preferred Stock and
Series&nbsp;B Warrants
to Purchase Capital
Stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">608,834 units
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">$4,261,838
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accredited<BR>
investors (8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Section&nbsp;4(2) of the
Securities Act
of 1933 and Rule&nbsp;506
promulgated
thereunder</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Sept. 2008
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Series&nbsp;B Warrants
to Purchase Capital
Stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">279,583 shares
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151; (1)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accredited<BR>
investor (8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Securities Act
of 1933 and Rule&nbsp;506
promulgated
thereunder</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jan. 2008
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">options to purchase
common stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">220,000 shares
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151; (2)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Directors,
officers, employees
and
consultants
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Section&nbsp;4(2) of the
Securities Act
of 1933
</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Oct. 2007
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">common stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">12,500 shares
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151; (3)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accredited<BR>
investors (8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Section&nbsp;4(2) of the
Securities Act of 1933 and Rule&nbsp;506
promulgated
thereunder
</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Dec. 2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Series&nbsp;1 Preferred
Convertible Stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">462,294 shares
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151; (4)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accredited<BR>
investors (8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Section&nbsp;4(2) of the
Securities Act of 1933 and Rule&nbsp;506
promulgated
thereunder
</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Nov. 2005 &#151; Dec 2007
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">warrant to purchase
common stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4,119,194 shares
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151; (5)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accredited<BR>
investor (8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Section&nbsp;4(2) of the
Securities Act of 1933 and Rule&nbsp;506
promulgated
thereunder</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Aug. 2005 &#151; Dec.
2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">common stock and
options to purchase
common stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>4,305,667 shares
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151; (6)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Directors,
officers,
employees and
consultants
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Rule&nbsp;701 promulgated
under the
Securities Act of
1933</TD>
</TR>
<TR valign="top"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top" nowrap><DIV style="margin-left:0px; text-indent:-0px">Jan. 2005 &#151; Dec.
2006
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">common stock
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>596,000 shares
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151; (7)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Directors,
officers,
employees and
consultants
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Section&nbsp;4(2) of the
Securities Act
of 1933 and Rule&nbsp;506
promulgated
thereunder</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Issued to Emerging Growth Equities Ltd. and Carter Securities, LLC as partial
consideration for placement agent services rendered in connection with the 2008 Private
Placement.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-2 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents options to purchase common stock issued to our directors, officers, employees
and consultants. We received no cash consideration for the incentive grants. Options issued
have a range of exercise prices between $1.10 and $3.50 per share and expire ten years from
their grant date.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Issued to the University of Massachusetts in exchange for the exclusive right and license
to use, develop, manufacture, market and exploit certain intellectual property owned by the
University of Massachusetts.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents unregistered securities issued as dividends on Series&nbsp;1 Preferred Stock.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Issued to Fordham Financial Management, Inc., as partial consideration for placement agent
services rendered in connection with our private placement of Series&nbsp;1 Preferred Stock,
warrants to purchase 4,119,194 shares of common stock at an exercise price of $1.23 per share,
as adjusted during the for weighted average anti-dilution protection. These warrants expire
on November&nbsp;8, 2010.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Issued pursuant to the PolyMedix, Inc. 2002 Equity Compensation Plan and the PolyMedix,
Inc. 2005 Omnibus Equity Compensation Plan as an incentive to our directors, officers,
employees and consultants. We received no cash consideration for the incentive grants.
Options issued have exercise prices of between $1.50 and $4.10 per share and expire ten years
from their respective grant date.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents common and restricted common stock incentive grants to our directors, officers,
employees and consultants. We received no cash consideration for the incentive grants.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>As defined in Rule&nbsp;501 of Regulation&nbsp;D promulgated under the Securities Act.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-3 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">






<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;16.</B><B><I><FONT style="font-family: WP MultinationalA Roman">&#032;</FONT></I></B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Exhibits.<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT></I></B></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description of Exhibit</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">2.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement and Plan of Merger and Reorganization dated October&nbsp;6, 2005, among the Registrant,
PolyMedix Merger Sub, Inc., PolyMedix Pharmaceuticals, Inc. and those stockholders of Registrant
identified on Exhibit&nbsp;A thereto.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Certificate of Incorporation of Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Designations of Registrant&#146;s Series&nbsp;1 Convertible Preferred Stock.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to the Amended and Restated Certificate of Incorporation of Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Bylaws of Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Amended and Restated Bylaws of Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to the Amended and Restated Certificate of Incorporation of Registrant, as
amended.<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to the Designations of Registrant&#146;s Series&nbsp;1 Convertible Preferred Stock.<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Designations of Registrant&#146;s Series&nbsp;2008 Convertible Preferred Stock.<SUP style="font-size: 85%; vertical-align: text-top"> (3)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Amendment to Amended and Restated Certificate of Incorporation of Registrant, as
amended.<SUP style="font-size: 85%; vertical-align: text-top"> (4)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">3.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Designation of Registrant&#146;s Series&nbsp;C Preferred Stock.<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of common stock Purchase Warrant issued to Fordham Financial Management, Inc. on November&nbsp;8,
2005, December&nbsp;8, 2005, January&nbsp;10, 2006 and February&nbsp;15, 2006.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of common stock Purchase Warrant.<SUP style="font-size: 85%; vertical-align: text-top"> (6)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registration Rights Substitution Agreement.<SUP style="font-size: 85%; vertical-align: text-top">(7)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Amendment No.&nbsp;1 to Registration Rights Substitution Agreement.<SUP style="font-size: 85%; vertical-align: text-top">(8)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.5</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Amendment No.&nbsp;2 to Registration Rights Substitution Agreement.<SUP style="font-size: 85%; vertical-align: text-top">(9)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.6</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Series&nbsp;A Warrant Agreement (including Series&nbsp;A Warrant certificate).<SUP style="font-size: 85%; vertical-align: text-top">(10)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.7</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Placement Agent Warrant.<SUP style="font-size: 85%; vertical-align: text-top">(11)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.8</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Securities Purchase Agreement as executed by the Registrant and the Investors.<SUP style="font-size: 85%; vertical-align: text-top">
(3)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Series&nbsp;B Warrant to Purchase Capital Stock.<SUP style="font-size: 85%; vertical-align: text-top"> (3)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rights Agreement, dated May&nbsp;12, 2009, between the Registrant and American Stock Transfer &#038; Trust
Company, LLC, as Rights Agent.<SUP style="font-size: 85%; vertical-align: text-top">(5)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">5.1*</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Legal Opinion of Pepper Hamilton LLP</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.1</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Patent License Agreement, dated January&nbsp;3, 2003, between the Registrant and the University of
Pennsylvania.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.2</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letter Agreement, dated December&nbsp;23, 2003, amending the Patent License Agreement, dated January&nbsp;3,
2003, between the Registrant and the University of Pennsylvania.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.3</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Software License Agreement, dated May&nbsp;30, 2003, between the Registrant and the University of
Pennsylvania.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.4</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Exclusive License Agreement, dated January&nbsp;2, 2005, between the Registrant and the University of
Massachusetts.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.5**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated July&nbsp;30, 2002, between Nicholas Landekic and the
Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.6**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated December&nbsp;5, 2005, between Edward Smith and the
Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.7**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated May&nbsp;21, 2003, between Dawn P. Eringis and the Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.8**</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated March&nbsp;28, 2003, between Richard Scott, Ph.D. and the
Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.9</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letter Agreement, dated February&nbsp;25, 2004, between Dr.&nbsp;William DeGrado and the
Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.10</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Lab/Office Space License Agreement for 3701 Market Street, dated February&nbsp;22, 2006, between the
Registrant and the University City Science Center.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<!-- End Table Body -->
</TABLE></DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-4 <!-- /Folio --></DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="90%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>No.</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Description of Exhibit</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.11
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Pennsylvania Full-Service Lease Agreement for 170 N. Radnor-Chester Road; Suite&nbsp;300, Radnor, PA
19087, dated May&nbsp;26, 2006, between the Registrant and the Radnor Properties&#151; SDC,
L.P.<SUP style="font-size: 85%; vertical-align: text-top">(11)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.12
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Financial Consulting Agreement, dated November&nbsp;8, 2005, between the Registrant and Fordham
Financial Management, Inc.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.13**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated 2005 Omnibus Equity Compensation Plan of the Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(12)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.14**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2002 Equity Compensation Plan of the Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(13)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.15**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Incentive Stock Option Agreement.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.16**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Nonqualified Stock Option Agreement.<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.17
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Sponsored Research Agreement, dated January&nbsp;5, 2004, between the Registrant and the University of
Massachusetts.<SUP style="font-size: 85%; vertical-align: text-top">(14)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.18
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Merrill Lynch Loan Management Account Agreement, dated April&nbsp;13, 2006, between the Registrant and
Merrill Lynch Bank USA.<SUP style="font-size: 85%; vertical-align: text-top">(11)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.19**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Employment Agreement, dated October&nbsp;19, 2006, between R. Eric McAllister and the
Registrant.<SUP style="font-size: 85%; vertical-align: text-top">(14)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.20**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer Letter to Bozena Korczak, Ph.D.<SUP style="font-size: 85%; vertical-align: text-top">(15)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Amended and Restated Co-Placement Agent Agreement by and among the Registrant, Carter
Securities, LLC and Fordham Financial Management, Inc.<SUP style="font-size: 85%; vertical-align: text-top"> (9)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.22**
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer Letter to J. Gregory Ford.<SUP style="font-size: 85%; vertical-align: text-top">(16)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.23
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Investment Agreement, dated May&nbsp;20, 2009, between the Registrant and Duchess Equity Fund,
LP.<SUP style="font-size: 85%; vertical-align: text-top">(17)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">10.24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement, dated May&nbsp;20, 2009, between the Registrant and Duchess Equity Fund,
LP.<SUP style="font-size: 85%; vertical-align: text-top">(17)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">21
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of Subsidiaries.<SUP style="font-size: 85%; vertical-align: text-top">(18)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1*
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Deloitte &#038; Touche LLP</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Pepper Hamilton, LLP.<SUP style="font-size: 85%; vertical-align: text-top">(18)</SUP></TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">24
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney.<SUP style="font-size: 85%; vertical-align: text-top">(19)</SUP></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Filed herewith.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Management contract or compensatory arrangement.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Registration Statement on Form 10-SB (File No.&nbsp;000-51895) filed on
April&nbsp;5, 2006 and incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Current Report on Form 8-K filed on June&nbsp;5, 2007 and incorporated
herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Current Report on Form 8-K filed on September&nbsp;24, 2008 and
incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Current Report on Form 8-K filed on December&nbsp;12, 2008 and
incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Current Report on From 8-K filed on May&nbsp;14, 2009 and incorporated
herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Amendment No.&nbsp;5 to the Registration Statement on Form SB-2 (File No.
333-146180) on November&nbsp;30, 2007 and incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Registration Statement on Form SB-2 (File No.&nbsp;333-146180) on
September&nbsp;19, 2007 and incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Amendment No.&nbsp;1 to the Registration Statement on Form SB-2 (File
No.&nbsp;333-146180) on October&nbsp;4, 2007 and incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Amendment No.&nbsp;2 to the Registration Statement on Form SB-2 (File
No.&nbsp;333-146180) on October&nbsp;16, 2007 and incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Amendment No.&nbsp;1 to the Registration Statement on Form S-1 (File No.
333-151084) and incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to Amendment No.&nbsp;2 to the Registration Statement on Form 10-SB/A (File No.
000-51895) filed on June&nbsp;19, 2006 and incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(12)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as Appendix&nbsp;A to the Registrant&#146;s Definitive Proxy Statement filed on April&nbsp;10, 2008 and
incorporated herein by reference.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-5 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">





<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(13)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Registration Statement on Form S-8 (File No.&nbsp;333-139686) and
incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(14)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Annual Report on Form 10-KSB filed on March&nbsp;19, 2007 and
incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(15)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Current Report on Form 8-K filed on November&nbsp;16, 2007 and
incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(16)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Current Report on Form 8-K filed on December&nbsp;4, 2008 and
incorporated herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(17)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed as an Exhibit to the Current Report on Form 8-K filed on May&nbsp;22, 2009 and incorporated
herein by reference.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(18)</TD>
    <TD>&nbsp;</TD>
    <TD>Included with Exhibit&nbsp;5.1.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(19)</TD>
    <TD>&nbsp;</TD>
    <TD>Included on signature page to the Registration Statement filed with the SEC on Form S-1 on
December&nbsp;31, 2008.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;17.</B><B><I><FONT style="font-family: WP MultinationalA Roman">&#032;</FONT>Undertakings.<FONT style="font-family: WP MultinationalA Roman">&#032;</FONT></I></B>
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The undersigned registrant hereby undertakes:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(i)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To include any prospectus required by Section&nbsp;10(a)(3) of the
Securities Act of 1933, as amended;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(ii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20&nbsp;percent change in the maximum aggregate offering price set
forth in the &#147;Calculation of Registration Fee&#148; table in the effective
registration statement;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="6%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(iii)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial <I>bona fide </I>offering thereof.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>That, for the purpose of determining liability under the Securities Act of
1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->II-6 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #textcolor#; background: #bgcolor#">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>statement relating to an offering, other than registration statements relying on
Rule&nbsp;430B or other than prospectuses filed in reliance on Rule&nbsp;430A, shall be
deemed to be part of and included in the registration statement as of the date it
is first used after effectiveness. <I>Provided, however</I>, that no statement made in a
registration statement or prospectus that is part of the registration statement or
made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such document
immediately prior to such date of first use.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Insofar as indemnification for liabilities arising under the Securities Act of 1933, may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of
the SEC, such indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is against public
policy as expressed in the Securities Act and will be governed by the final adjudication of
such issue.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->II-7 <!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="left">
<A name="126"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this
registration statement to be signed on its behalf by the undersigned, in Radnor, Pennsylvania on
June&nbsp;10, 2009.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left"><B>POLYMEDIX, INC.</B></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>


<tr style="font-size: 10pt">
    <TD>&nbsp;</TD>
</tr>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:<BR>
Name:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">/s/ Nicholas Landekic
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Nicholas Landekic
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Title:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President &#038; Chief Executive Officer<br>
(principal executive officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates indicated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Nicholas Landekic and Edward F. Smith and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities (including his capacity as a director and/or
officer of Polymedix, Inc.) to sign any or all amendments (including post-effective amendments) to
this registration statement and any and all additional registration statements pursuant to rule
462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the SEC, granting unto each said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement
has been signed below by the following persons in the capacities and on the dates indicated.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="37%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Name/Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Nicholas Landekic
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Nicholas Landekic
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">President, Chief Executive Officer
and Director (principal executive
officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;10, 2009</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Edward F. Smith
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Edward F. Smith
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Financial Officer (principal
financial officer and principal
accounting officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;10, 2009</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Frank Slattery, Jr.
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Frank Slattery, Jr.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board of Directors&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;10, 2009</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Brian Anderson
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Brian Anderson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;10, 2009</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Richard W. Bank, M.D.
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Richard W. Bank, M.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;10, 2009</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ William N. Kelley, M.D.
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
William N. Kelley, M.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;10, 2009</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Michael E. Lewis, Ph.D.
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Michael E. Lewis, Ph.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;10, 2009</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Stefan Loren, Ph.D.
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Stefan Loren, Ph.D.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;10, 2009</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ Shaun F. O&#146;Malley
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Shaun F. O&#146;Malley
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">June&nbsp;10, 2009</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-8 <!-- /Folio -->
</DIV>

</BODY>
</HTML>
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sv1
As
filed with the Securities and Exchange Commission on June 10, 2009
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POLYMEDIX, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
2834
(Primary Standard Industrial
Classification Code Number)
27-0125925
(I.R.S. Employer
Identification No.)
170 N. Radnor-Chester Road, Suite 300
Radnor, Pennsylvania 19087
(484) 598-2400
(Address, including zip code and telephone number, including area code, of Registrant's principal executive offices)
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware
(302) 658-7581
(Name, address, including zip code and telephone number, including area code, of agent for service)
Copies to:
Nicholas Landekic
Edward Smith
PolyMedix, Inc.
170 N. Radnor-Chester Road
Suite 300
Radnor, PA 19087
(484) 598-2400
Jeffrey P. Libson, Esq.
Pepper Hamilton LLP
400 Berwyn Park
899 Cassatt Road
Berwyn PA, 19312-1183
(610) 640-7800
Approximate date of commencement of proposed sale to the public:
As soon as practicable after
this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated file, or a smaller reporting company. See the definitions of "large accelerated
filer," "accelerated file" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
þ
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Proposed Maximum
Title of Class of Securities
Amount to
Offering Price Per
Aggregate Offering
Amount of
to be Registered
be Registered(1)
Share(2)
Price
Registration Fee
Common Stock, $0.001 par value
12,000,000
$
0.67
$
8,040,000
$
448.63
Series C Preferred Stock
Purchase Rights (3)
12,000,000
N/A
N/A
N/A
(1)
Pursuant to Rule 416 under the Securities Act, the shares being registered hereunder include
such indeterminate number of shares of common stock as may be issuable with respect to the
shares being registered hereunder as a result of stock splits, stock dividends or similar
transactions.
(2)
Estimated solely for the purpose of calculating the amount of the registration fee pursuant
to Rule 457(c) of the Securities Act of 1933 based upon the last sale price of the common
stock of the Registrant as reported on the OTC Bulletin Board on
June 8, 2009.
(3)
This prospectus also relates to the rights to purchase shares of Series C Preferred Stock of
the registrant, which are attached to all shares of common stock issued, pursuant to the terms
of the registrant's Rights Agreement dated May 12, 2009. Until the occurrence of prescribed
events, the rights are not exercisable and will be transferred with and only with shares of
our common stock.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY
TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY
STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
The information in this prospectus is not complete and may be changed. The
securities offered pursuant to this prospectus may not be sold until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
SUBJECT
TO COMPLETION, DATED JUNE 10, 2009
PROSPECTUS
12,000,000 SHARES OF COMMON STOCK
This prospectus relates to the offer and resale of up to 12,000,000 shares of our common stock, par
value $0.001 per share, by the selling stockholder, Dutchess Equity Fund, L.P., or "Dutchess,"
which Dutchess has agreed to purchase pursuant to the investment agreement dated May 20, 2009,
between Dutchess and us. Subject to the terms and conditions of such investment agreement, which
is referred to in this prospectus as the "Investment Agreement," we have the right to put up to
$10.0 million in shares of our common stock to Dutchess. This arrangement is sometimes referred to
as an "Equity Line." For more information on the selling stockholder, please see the section of
this prospectus entitled "Selling Stockholder" beginning on page 20.
We will not receive any proceeds from the resale of these shares of common stock offered by
Dutchess. We will, however, receive proceeds from the sale of shares to Dutchess pursuant to the
Equity Line. When we put an amount of shares to Dutchess, the per share purchase price that
Dutchess will pay to us in respect of such put will be determined in accordance a formula set forth
in the Investment Agreement. Generally, in respect of each put, Dutchess will pay us a per share
purchase price equal to ninety-five percent (95%) of the volume weighted average price, or "VWAP,"
of our common stock during the five consecutive trading day period beginning on the trading day
immediately following our put notice.
Dutchess may sell the shares of common stock from time to time at the prevailing market price on
the Over-the Counter (OTC) Bulletin Board, or on an exchange if our shares of common stock become
listed for trading on such an exchange, or in negotiated transactions. Dutchess is an
"underwriter" within the meaning of the Securities Act of 1933, as amended (the "Securities Act")
in connection with the resale of our common stock under the Equity Line. For more information,
please see the section of this prospectus entitled "Plan of
Distribution" on pages 72 through 73.
Our common stock is quoted on the OTC Bulletin Board under the symbol "PYMX". The last reported
sale price of our common stock on the OTC Bulletin Board on June 4, 2009 was $0.68 per share.
Investing in the offered securities involves risks, including those set forth in the "Risk Factors"
section of this prospectus beginning on page 7, as well as those set forth in any prospectus
supplement.
We will be responsible for all fees and expenses incurred in connection with the preparation and
filing of this registration statement, provided, however, we will not be required to pay any
underwriters' discounts or commissions relating to the securities covered by the registration
statement.
You should read this prospectus and any prospectus supplement carefully before you decide to
invest. You should not assume that the information in this prospectus is accurate as of any date
other than the date on the front of this document.
Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense.
The date of this prospectus is
, 2009.
TABLE OF CONTENTS
PAGE
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
1
PROSPECTUS SUMMARY
2
THE OFFERING
6
RISK FACTORS
7
USE OF PROCEEDS
20
SELLING STOCKHOLDER
20
OUR BUSINESS
21
EMPLOYEES
39
DESCRIPTION OF PROPERTY
39
LEGAL PROCEEDINGS
39
MANAGEMENT
40
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
44
EXECUTIVE COMPENSATION
47
DIRECTOR COMPENSATION
52
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
54
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
62
CORPORATE GOVERNANCE
64
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
65
DESCRIPTION OF SECURITIES
67
PLAN OF DISTRIBUTION
72
EXPERTS
74
LEGAL MATTERS
74
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
74
COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
74
ADDITIONAL INFORMATION
74
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Some of the statements included in this prospectus and any prospectus supplement contain
forward-looking statements made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. All statements other than statements of historical facts contained
in this prospectus and any prospectus supplement, including statements regarding our plans,
objectives, goals, strategies, future events, capital expenditures, future results, our competitive
strengths, our business strategy and the trends in our industry are forward-looking statements. The
words "believe," "may," "could," "estimate," "continue," "anticipate," "intend," "should," "plan,"
"expect," "appear," "future," "likely," "probably," "suggest," "goal," "potential" and similar
expressions, as they relate to our Company, are intended to identify forward-looking statements.
All statements, other than statements of historical fact, included in this prospectus and any
prospectus supplement regarding our financial position, business strategy and plans or objectives
for future operations are forward looking statements.
Forward-looking statements reflect only our current expectations. In any forward-looking statement,
where we express an expectation or belief as to future results or events, such expectation or
belief is expressed in good faith and believed to have a reasonable basis, but there can be no
assurance that the statement of expectation or belief will be achieved or accomplished. Our actual
results, performance or achievements could differ materially from those expressed in, or implied
by, the forward-looking statements due to a number of uncertainties, many of which are unforeseen,
including:
Ø
our need for, and the availability of, substantial capital in the future to fund our
operations and planned clinical trials;
Ø
the conditions in the capital markets and the biopharmaceutical industry that make
raising capital or entering into strategic arrangements difficult and expensive;
Ø
the timing of our product development and evaluation;
Ø
the timing and magnitude of expenditures we may incur in connection with our ongoing
research and development activities;
Ø
the results of our preclinical and clinical trials, including regulatory approvals;
Ø
the maintenance of our existing licenses with the University of Pennsylvania and the
University of Massachusetts;
Ø
the success, timing and financial consequences of our formation of new business
relationships and alliances; and
Ø
the timing and volume of sales of products for which we obtain marketing approval.
In addition, you should refer to the "Risk Factors" section of this prospectus beginning on page 7
for a discussion of other factors that may cause our actual results to differ materially from those
implied by our forward-looking statements. As a result of these factors, we cannot assure you that
the forward-looking statements in this prospectus and any prospectus supplement will prove to be
accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may
be material. In light of the significant uncertainties in these forward-looking statements, you
should not regard these statements as a representation or warranty by us or any other person that
we will achieve our objectives and plans in any specified time frame, if at all. Accordingly, you
should not place undue reliance on these forward-looking statements. All subsequent written and
oral forward looking statements attributable to us or the persons acting on our behalf are
expressly qualified in their entirety by the applicable cautionary statements. We undertake no
obligation to update any of these forward looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable law or regulation.
PROSPECTUS SUMMARY
The following summary highlights selected information contained in this prospectus. Because it is a
summary, it does not contain all the information you should consider before investing in our common
stock. Before making any investment decision, you should read the entire prospectus carefully,
including the "Risk Factors" section of this prospectus beginning on page 7, the financial
statements and the notes to the financial statements. Unless stated otherwise, references in this
prospectus to the "Company," "we," "us," or "our" refer to PolyMedix, Inc., a Delaware corporation.
The Company
We are a biotechnology company focused on treating life threatening, serious, infectious diseases
and acute cardiovascular disorders with synthetic small molecule compounds that mimic the activity
of large natural protein molecules, compounds referred to as biomimetics. Using our proprietary
computational drug design technology, we have created novel defensin mimetic antibiotic compounds,
heparin antagonist compounds (or "heptagonists") and other drug compounds intended for human
therapeutic use. The following chart illustrates the current stage of development of our
internally developed pipeline along with planned development timings for our two lead programs that
are in clinical development:
*
Program on hold pending additional financing
**
Investigational New Drug Application (or "IND") or equivalent Canadian Clinical Trial
Application
***
Unfractionated heparin ("UFH") and low molecular weight heparin ("LMWH")
Clinical Stage Compounds
:
Defensin mimetic antibiotics
are compounds that have a novel mechanism-of-action that mimics the
antimicrobial activity of host defense proteins, a group of proteins naturally found in most higher
forms of life including humans, which provide the first line of defense against bacterial
infections. We believe that bacteria are less likely to develop resistance to antibiotic products
with this mechanism-of-action than currently marketed antibiotics. Most antibiotics exert their
activity by interacting with a specific biochemical molecular target or pathway, such as an
-2-
enzyme. Bacteria can often develop mutations in these molecular targets in a process called "target
mutation", which renders the antibiotic drug unable to interact with its intended biochemical
target. Additionally, bacteria can sense that a foreign chemical has entered its cell and can pump
it out before it can bind to its intended biochemical target, through a process called efflux.
Both of these factors can cause bacteria to become drug-resistant. Instead of relying on a
specific molecular target that can mutate, our product candidates target the entire bacterial cell
membrane. Our defensin mimetic antibiotic product candidates destabilize the bacterial cell
membrane and cause either leakage of cellular content or complete disruption of the membrane, which
results in bacterial cell death. Additionally, because our product candidates target the bacterial
cell membrane and do not have to enter the cell, the opportunity for bacterial efflux is reduced.
We believe this mechanism-of-action makes it unlikely for bacteria to develop resistance to our
defensin mimetic antibiotic product candidates.
Worldwide, the hospital antibiotic market is $8 billion, treating approximately seven million
patients per year and the total worldwide antibiotic market is $26 billion, treating approximately
49 million patients per year. According to the Centers for Disease Control and Prevention, or CDC,
bacterial infections are the fourth leading cause of death in the U.S. and are one of the fastest
growing causes of death. Because of the increasing rate of bacterial resistance and the
corresponding death rate, we believe there is a significant medical and market need for a new class
of antibiotics, defensin mimetics, with a novel mechanism of action designed to make it unlikely
for bacteria to develop resistance. Our first product candidate will be an i.v. formulation
intended to treat complicated skin and soft tissue infections, including gynecological infections,
caused by strains of
Staph
bacteria. We anticipate that the bacterial targets of PMX-30063 will
include drug resistant strains, particularly broadly targeting the various strains of
Staph
bacteria. In the future, we also hope to expand indications to also potentially include other
bacterial strains.
In December 2008, we completed and announced positive results from our single dose escalation
clinical study of healthy volunteers receiving PMX-30063 at various dose levels (Phase 1A). This
ascending single-dose intravenous pharmacokinetic and safety study met the necessary Phase 1 goals
of defining both a limiting single dose and the plasma distribution/elimination kinetics. In this
study, the dose was not limited by any measurable clinical or laboratory parameters. A subjective
syndrome of parasthesias was identified, appearing only at the higher dosages and consisting of
abnormal neuronal sensations often likened to dental anesthesia. These effects were graded as mild
to moderate by investigators or subjects, but their reproducibility and dose-proportionality
allowed dose-escalation to be successfully concluded after achieving levels well in excess of the
expected therapeutic range. The effects were temporary and resolved on their own. The same study
provided detailed information on the time course of the drug during and after dosing. These
pharmacokinetics appear favorable for therapeutic use of the drug. The half-time for elimination
from the plasma was approximately 15 hours, allowing for flexibility in dosing to obtain optimal
peak and trough drug levels.
During the second quarter of 2009 we commenced an ascending  multi-dose intravenous pharmacokinetic and safety study of healthy volunteers who will
receive PMX-30063 at various dose levels (Phase 1B). The primary endpoint for the two Phase 1
studies is a safety assessment. We have and plan to continue to conduct the Phase 1 studies to
United States standards, submit an IND with the FDA before commencing Phase 2 studies in the United
States, and ultimately seek regulatory approval in the United States.
Heptagonists
such as PMX-60056, our second development program, are compounds that bind to and
thereby reverse the anticoagulant effects of both Unfractionated heparin (or UFH) and Low Molecular
Weight Heparins (or LMWH). UFH is a class of commonly used blood clot prevention drugs used in
numerous surgical applications, such as cardiothoracic procedures. LMWH is another class of
commonly used blood clot prevention drugs used in patients under longer-term administration,
because of their ease of administration and longer half-life. Overdoses of UFH or LMWH are
dangerous due to potentially life-threatening bleeding. While widely used, UFH and LMWH have the
possibility of adverse bleeding side effects, which requires frequent monitoring. Protamine is the
only available reversing agent for UFH. It is used as both an antidote in the event of overdose
and, more commonly, in standard treatment following coronary artery bypass grafts in which
post-operative treatment involves administering protamine to counter the action of UFH, which is to
prevent blood clots while a patient is on a heart-lung support machine. While widely used to
reverse UFH, protamine has a number of adverse side effects, including bleeding, difficulty and
complexity in dose titration, allergic reactions, immunogenicity, and abnormal clot formation, all
of which require frequent monitoring and follow up. As a result, there is a significant medical
and market need for a safer UFH reversing agent. Additionally, there is currently no approved
reversing agent agent for LMWH.
Worldwide, we estimate that approximately two million extracorporeal blood procedures, including
cardiothoracic procedures, are performed per year that utilize heparin and may require UFH
reversal, and approximately twelve million patients receive LMWH per year for a variety of uses,
including deep vein thrombosis, post heart attack, cancer, and atrial fibrillation. There have
been several published studies which demonstrate that up to 20% of LMWH patients experience
clinically significant bleeding, and up to 4% of cases are considered to be serious or life
threatening. The availability of an antidote to LMWH would allow patients experiencing a LMWH
bleeding event to be pharmaceutically treated. Additionally, the availability of a reversing agent
for LMWH could allow LMWH to be used in cardiothoracic surgical procedures or in patients who may
need to undergo re-operation. Thus, an LMWH antagonist could substantially increase the market and
sales of LMWH drugs.
-3-
In March 2009, we successfully completed our first-in-man clinical study with the novel heparin
antagonist drug PMX-60056. This ascending single-dose intravenous pharmacokinetic and safety study
met the necessary Phase 1 goals of defining both a limiting single dose for ten-minute infusions
and also the plasma distribution/elimination kinetics for the drug in the absence of heparin. This
first study has demonstrated that PMX-60056 can be given safely in the absence of heparin if
ten-minute infusions include less than 0.4 mg/kg. The data suggest that the limiting side effect of
hypotension is related to peak plasma drug level, which means that slower infusions could allow
delivery of more drug. To investigate this possibility, PolyMedix plans to study slower infusions,
of twenty and potentially thirty minutes, in an extension of this study. These longer infusions are
expected to allow higher doses to be given, and will add support for potential clinical studies for
the reversal of LMWH, which may require greater total amounts of drug to be administered. Analysis
of the plasma-level assays indicates that a single-compartment model is consistent with the
observed data, and the plasma elimination half-time is 1.5 to 2.5 minutes in the dosage range
administered.
During the third quarter of 2009, we plan to commence a study of heparinized subjects who receive
PMX-60056 at various increasing dose levels (Phase 1B). While the primary endpoint is a safety
assessment, we will be able to gather efficacy data in this Phase 1B study.
Pre-Clinical Stage Compounds
:
In order to achieve the best balance of financial rate of return with risk and timing to market, we
also intend, pending sufficient additional financing, to conduct pre-clinical development of our
antibiotic compounds for both topical and oral antibiotic applications. The initial topical
application we plan to pursue is an ophthalmic antibiotic for the treatment of eye infections, and
the initial oral application we are investigating is a non-absorbed antibiotic for the treatment of
gastrointestinal infections such as
Clostridium difficile
. Pending sufficient additional
financing, we hope to advance pre-clinical development and file additional IND applications for the
ophthalmic topical and non-absorbed oral antibiotic indications.
We are also evaluating our antibiotic compounds for a number of other topical applications,
including use for skin structure infections, oral healthcare applications for treatment of
periodontal disease, a type of gum disease, topical treatment for ear infections, topical treatment
of fungal infections, topical treatment of acne, and a variety of non-therapeutic applications in
personal care and materials applications.
Summary Financial Data
Because this is only a summary of our financial information, it does not contain all of the
financial information that may be important to you. Therefore, you should carefully read all of
the information in this prospectus and any prospectus supplement, including the financial
statements and their explanatory notes and the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations," before making a decision to invest in
our common stock. The information contained in the following summary are derived from our
financial statements for the quarters ended March 31, 2009 and 2008 and the years ended December
31, 2008 and 2007 (in thousands).
Quarters ended
Years ended
March 31,
December 31,
2009
2008
2008
2007
Statement of Operations Data:
Grant and research revenues
$
6
$
991
$
1,066
$
1,126
Operating expenses
2,952
3,881
12,276
13,801
Net loss
(2,920
)
(2,823
)
(10,986
)
(12,164
)
Balance Sheet Data:
Total cash and investments
$
12,379
$
5,725
$
15,106
$
8,903
Total assets
13,325
7,370
16,077
9,722
Stockholders' equity
10,661
2,659
13,143
5,134
Business History
PolyMedix, Inc. (formerly known as BTHC II Acquisition Corp.) was originally organized in the State
of Texas as BTHC II LLC, a public shell company. On September 29, 2004, BTHC II LLC and its sister
companies filed an amended petition under Chapter 11 of the United States Bankruptcy Code. On
November 22, 2004, the court
-4-
approved BTHC II LLC's Amended Plan of Reorganization. On March 24,
2005, and in accordance with its Amended Plan of Reorganization, BTHC II LLC changed its state of
organization from Texas to Delaware by merging with and into BTHC II Acquisition Corp., a Delaware
corporation formed solely for the purpose of effecting the reincorporation. After this merger,
BTHC II Acquisition Corp. became the public shell company.
PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) was incorporated on August 8,
2002 in the State of Delaware as PolyMedix, Inc. to serve as a biotechnology company focused on
treating infectious diseases. On October 6, 2005, the former BTHC II Acquisition Corp. entered
into an Agreement and Plan of Merger and Reorganization with the former PolyMedix, Inc., pursuant
to which the stockholders of the former PolyMedix, Inc. exchanged their equity ownership interests
in the former PolyMedix, Inc. for an aggregate 94% equity ownership interest in the former BTHC II
Acquisition Corp. Pursuant to the Agreement and Plan of Merger and Reorganization, the former
PolyMedix, Inc. merged with a wholly-owned subsidiary of the former BTHC II Acquisition Corp. and,
as such, became a wholly-owned subsidiary of the former BTHC II Acquisition Corp.
At the time of the merger, the former BTHC II Acquisition Corp. had no operations and no assets or
liabilities. Because the stockholders of the former PolyMedix, Inc. exchanged their equity
ownership interests in the former PolyMedix, Inc. for an aggregate 94% equity ownership interest in
the former BTHC II Acquisition Corp., the former PolyMedix, Inc. was, for accounting purposes, the
surviving entity of the merger. Accordingly, all financial information included in this annual
report for the periods prior to the merger is for the former PolyMedix, Inc.
On February 24, 2006, the former BTHC II Acquisition Corp. changed its corporate name to PolyMedix,
Inc., and the former PolyMedix, Inc. changed its corporate name to PolyMedix Pharmaceuticals, Inc.
Our Principal Executive Offices
Our principal executive offices are located at 170 N. Radnor-Chester Road; Suite 300, Radnor,
Pennsylvania 19087. Our telephone number is (484) 598-2400 and our website address is
www.polymedix.com. Information included or referred to on our website is not a part of this
prospectus.
-5-
THE OFFERING
This prospectus relates to the resale of up to 12,000,000 shares of our common stock by Dutchess.
Dutchess will obtain our common stock pursuant to the terms and conditions of the Investment
Agreement.
The Investment Agreement with Dutchess provides that Dutchess is committed to purchase up to
$10,000,000 of our common stock, over the course of thirty-six months. We may draw on the facility
from time to time, as and when we determine appropriate in accordance with the terms and conditions
of the Investment Agreement. When we put an amount of shares to Dutchess, the per share purchase
price that Dutchess will pay to us in respect of such put will be determined in accordance with a
formula set forth in the Investment Agreement. Generally, in respect of each put, Dutchess will
pay us a per share purchase price equal to ninety-five percent (95%) of the VWAP of our common
stock during the five consecutive trading day period beginning on the trading day immediately
following our put notice. The maximum number of shares issuable by us and purchasable by Dutchess
under the Investment Agreement is 12,000,000.
Securities Offered
Up to 12,000,000 shares of our common stock by the
selling stockholder.
Offering Price
To be determined by the prevailing market price for the
shares at the time of the sale or in negotiated
transactions.
Use of Proceeds
We will not receive any proceeds from the sale of shares
by the selling stockholder. However, we will receive
proceeds from the Equity Line. See "Use of Proceeds."
Risk Factors
An investment in our common stock involves a high degree of
risk. See "Risk Factors" beginning on page 7 and the other
information in this prospectus for a discussion of the
factors you should consider before you decide to invest in
the units.
OTC Bulletin Board Symbol
PYMX
The total number of shares of our common stock outstanding as of June 4, 2009 is 59,845,065, and
excludes:
Ø
12,000,000 shares of common stock reserved for issuance upon puts to
Dutchess pursuant to the Equity Line;
Ø
10,724,000 shares of common stock issuable upon exercise of
outstanding stock options at a
weighted average exercise price of $1.41 per share;
Ø
4,119,194 additional shares of common stock reserved for issuance under various
outstanding warrant agreements, at an exercise price of $1.23, as the
same may be adjusted as a consequence of
the weighted average anti-dilution provisions contained in such warrant agreements;
Ø
2,943,222 additional shares of common stock reserved for issuance under various
outstanding warrant agreements, at an exercise price of $1.10;
Ø
28,653,495 additional shares of common stock reserved for issuance under the
Series A and Series B Warrants, including placement agent warrants, at an exercise
price of $1.00; and
Ø
15,369,194 additional shares of common stock reserved for future issuance under
our stock plans subject to available authorized shares.
Unless otherwise specifically stated, information throughout this prospectus does not assume the
exercise of outstanding options or warrants to purchase shares of our common stock.
-6-
RISK FACTORS
In addition to the other information included in this prospectus and any prospectus supplement, the
following factors should be carefully considered in evaluating our business, financial position and
future prospects. Any of the following risks, either alone or taken together, could materially and
adversely affect our business, financial position or future prospects. If one or more of these or
other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect,
our actual results may vary materially from what we have projected. There may be additional risks
that we do not presently know or that we currently believe are immaterial which could also
materially adversely affect our business, financial position or future prospects.
Risks Related to Our Business
We have incurred losses since inception and anticipate that we will continue to incur losses for
the foreseeable future.
We are a development stage company with a limited operating history. As of March 31, 2009, we had
an accumulated deficit of approximately $39,779,000. We expect to continue to incur significant
and increasing operating losses, in the aggregate and on a per share basis, for the next several
years. These losses, among other things, have had and will continue to have an adverse effect on
our stockholders' equity, net current assets and working capital.
Because of the numerous risks and uncertainties associated with developing new drugs, we are unable
to predict the extent of any future losses or when we will become profitable, if at all.
Currently, we have no products available for commercial sale, and, to date, we have not generated
any product revenue. We have financed our operations and internal growth primarily through the
sale of equity securities. We have devoted substantially all of our efforts to research and
development, including cGMP manufacturing and cGLP compliant toxicology, safety pharmacology,
genotoxicity studies and clinical studies for our clinical product candidates.
If we are unable to meet our needs for additional funding in the future, we will be required to
limit, scale-back or cease operations.
We do not currently have the funding resources necessary to carry out all of our short and
long-term operating activities. We believe that our current cash and
investment  balances, exclusive of any cash to be generated from the
Equity Line, will be sufficient to  fund
our planned Phase 1 studies for PMX-30063 and PMX-60056 and can fund our operations for at least
the next 12 months; however, due to the continued deterioration of the capital markets and
prospects for securing additional financing, in order to prolong our cash runway we will scale back
and delay some of our activities and do not plan to commence a Phase 1B clinical trial for
PMX-60056 until the third quarter of 2009. In addition, our current cash and investment balances
are not sufficient to fund the Phase 2 clinical or other development activities of either of these
product candidates. We plan to seek additional funding beyond the
Equity Line during 2009 in one or more financings.
However, if we are unable to secure adequate additional funding during 2009, we
will delay, scale-back or eliminate certain of our future research, drug discovery or development
activities or certain other aspects of our operations and our business until such time as we are
successful in securing adequate additional funding. Our future capital requirements will depend on
many factors, including:
Ø
success of our clinical trials for PMX-30063 and PMX-60056;
Ø
continued progress of and increased spending related to our research and
development activities, including our plan to hire additional research and
development employees;
Ø
the conditions in the capital markets and the biopharmaceutical industry
that make raising capital or entering into strategic arrangements difficult and
expensive;
Ø
progress with preclinical experiments and clinical trials;
Ø
ongoing general and administrative expenses related to our being a reporting company;
Ø
the cost, timing, and results of regulatory reviews and approvals;
Ø
the maintenance of our existing licenses with the University of Pennsylvania
and the University of Massachusetts;
Ø
the success, timing, and financial consequences of any future collaborative,
licensing and other arrangements that we may establish;
-7-
Ø
the cost of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights;
Ø
the costs of commercializing any of our other product candidates;
Ø
technological and market developments;
Ø
the cost of manufacturing development; and
Ø
timing and volume of sales of products for which we obtain marketing approval.
These factors could result in variations from our currently projected operating and liquidity
requirements. Additional funds may not be available when needed, or, if available, we may not be
able to obtain such funds on terms acceptable to us. If adequate funds are unavailable, we may be
required, among other things, to:
Ø
delay, reduce the scope of or eliminate one or more of our research or
development programs;
Ø
license rights to technologies, product candidates or products at an earlier
stage than otherwise would be desirable or on terms that are less favorable to us
than might otherwise be available; or
Ø
obtain funds through arrangements that may require us to relinquish rights to
product candidates or products that we would otherwise seek to develop or
commercialize by ourselves.
Funding, especially on terms acceptable to us, may not be available to meet our future capital
needs because of the deterioration of the credit and capital markets.
Global market and economic conditions have been, and continue to be, disruptive and volatile. The
debt and equity capital markets have been impacted by significant write-offs in the financial
services sector and the re-pricing of credit risk in the broadly syndicated market, among other
things. These events have negatively affected general economic conditions and it is uncertain when
the credit and capital markets will stabilize or improve.
In particular, the cost of raising money in the debt and equity capital markets has increased
substantially while the availability of funds from those markets has diminished significantly.
Also, as a result of concern about the stability of financial markets generally and the solvency of
counterparties specifically, the cost of obtaining money from the credit markets has increased as
many lenders and institutional investors have increased interest rates, enacted tighter lending
standards and reduced and, in some cases, ceased to provide funding to borrowers. Low valuations
and decreased appetite for equity investments, among other factors, may make the equity markets
difficult to access on terms or unavailable altogether.
If funding is not available when needed, or is available only on unfavorable terms, meeting our
capital needs or otherwise taking advantage of business opportunities may become challenging, which
could have a material adverse effect on our business plans.
Development of our proposed product candidates is a lengthy, expensive and uncertain process that
requires investment of substantial amounts of time and money that may not yield viable products
which may cause our business and results of operations to suffer.
We face the risks of failure inherent in developing drugs based on new technologies. None of our
product candidates have received regulatory approval for commercial sale and our product candidates
may never be commercialized. In addition, all of our product candidates are in the early stages of
development and several programs are on hold pending additional financing. During the third
quarter of 2008, we commenced clinical trials for the first time with our lead product candidates,
PMX-30063 and PMX-60056. The progress and results of these and any future clinical trials or
future pre-clinical testing are uncertain, and if our product candidates do not receive regulatory
approvals, our business, operating results, financial condition and cash flows will be materially
adversely affected. Our product candidates are not expected to be commercially available for
several years, if at all.
Our development programs require a significant amount of cash to support the development of product
candidates. We estimate that it will cost $65 to $85 million in research, drug development and
clinical development costs over 36-48 months to file an NDA for each of PMX-30063 and PMX-60056,
assuming adequate and timely financing.
-8-
We may not be able to obtain additional financing on terms
acceptable to us or at all to allow us to fully fund our product candidates through the regulatory
approval process.
In addition, a number of potential drugs have shown promising results in early testing but failed
in subsequent clinical trials and/or failed to obtain necessary regulatory approvals. Data
obtained from tests are susceptible to varying interpretations, which may delay, limit or prevent
regulatory approval. Regulatory authorities may refuse or delay approval as a result of many other
factors, including changes in regulatory policy during the period of product development.
Completion of clinical trials may take many years. The length of time required varies
substantially according to the type, complexity, novelty and intended use of the product candidate.
The FDA monitors the progress of each phase of testing, and may require the modification,
suspension, or termination of a trial if it is determined to present excessive risks to patients.
The clinical trial process may also be accompanied by substantial delay and expense and the data
generated in these studies ultimately may not be sufficient for marketing approval by the FDA. Our
rate of commencement and completion of clinical trials may be delayed by many factors, including:
Ø
our inability to manufacture sufficient quantities of materials for use in clinical trials;
Ø
variability in the number and types of patients available for each study;
Ø
difficulty in maintaining contact with patients after treatment, resulting in incomplete data;
Ø
unforeseen safety issues or side effects;
Ø
poor or unanticipated effectiveness of products during the clinical trials; and/or
Ø
government or regulatory delays.
Notwithstanding the submission of any requested additional information, the FDA ultimately may
decide that the application does not satisfy the regulatory criteria for approval and refuse to
approve the application by issuing a "not approvable" letter. Furthermore, the FDA may prevent us
from marketing a product candidate under a label for its desired indications or place other
conditions, including restrictive labeling, on distribution as a condition of any approvals, which
may impair commercialization of the product.
We are a development stage company, which makes it difficult to evaluate our existing business and
business prospects and increases the risk that the value of any investment in our Company may
decline.
We are a development stage company and to date, our only revenues have been from research grants.
We will not be able to generate revenue from product sales or royalties unless and until we receive
regulatory approval and begin commercialization of our product candidates or otherwise out-license
our compounds. We are not certain of when, if ever, that will occur. Although we intend to
introduce new products, we may not do so. Because the market for our products is relatively new,
uncertain and evolving, and because we are a development stage company, it is difficult to assess
or predict the growth rate, if any, and the size of this market. We may not develop additional
products, a market for our products may not develop, and/or our products may not achieve market
acceptance.
If our product candidates are not demonstrated to be sufficiently safe and effective in clinical
trials, they will not receive regulatory approval and we will be unable to commercialize them and
our business and results of operations will suffer.
Our product candidates must satisfy rigorous standards of safety and efficacy before they can be
approved by the FDA and/or other foreign regulatory authorities for commercial use. The FDA and
foreign regulatory authorities have full discretion over this approval process. We will need to
conduct significant additional research, involving testing in animals and in humans, before we can
file applications for product approval. Typically, in the pharmaceutical industry there is a high
rate of attrition for product candidates in pre-clinical testing and clinical trials. Also,
satisfaction of regulatory requirements typically takes many years, is dependent upon the type,
complexity and novelty of the product and requires the expenditure of substantial resources.
Success in pre-clinical testing and early clinical trials does not ensure that later clinical
trials will be successful. For example, a number of companies in the pharmaceutical industry,
including biotechnology companies, have suffered significant setbacks in advanced clinical trials,
even after promising results in earlier trials and in interim analyses. In addition, delays or
rejections may be encountered based upon additional government regulation, including any changes in
FDA policy, during the process of product development, clinical trials and regulatory approvals.
-9-
If we are not able to retain our current management and advisory team and attract and retain
qualified scientific, technical and business personnel, our business will suffer.
We are highly dependent on our executive officers and other key management and technical personnel,
including Nicholas Landekic, Richard Scott, Ph.D., Eric McAllister, M.D., Ph.D., Edward Smith, Greg
Ford and Bozena Korczak, Ph.D., as well as key members of our advisory team, including William
DeGrado, Ph.D., Michael Klein, Ph.D. and Gregory Tew, Ph.D. The loss of any of them could have a
material adverse effect on our future operations. We presently do not maintain "key person" life
insurance policies on any of our personnel.
Our success is also dependent on our ability to attract, retain and motivate highly trained
technical, marketing, sales and management personnel for the development, maintenance and expansion
of our activities. We may not be able to retain our existing personnel or attract additional
qualified employees. The loss of key personnel or the inability to hire and retain additional
qualified personnel in the future could have a material adverse effect on our business, financial
condition and results of operation.
Our success is dependent on the continuation of certain licensing arrangements and other strategic
relationships with third parties. These arrangements and relationships may not continue and we may
not be successful in entering into other similar arrangements and relationships.
All of our product candidates are licensed from or based upon licenses from either the University
of Pennsylvania or the University of Massachusetts. If either or any of these license agreements
are properly terminated, our ability to advance our current product candidates or develop new
product candidates will be materially adversely affected.
In addition to these licensing arrangements, we rely on the expertise of Dr. William DeGrado, a
Professor of Biochemistry and Biophysics at the University of Pennsylvania, and Dr. Gregory Tew, an
Assistant Professor in the Polymer Science and Engineering Department at the University of
Massachusetts. If our agreements with either or both of Drs. DeGrado and Tew, were terminated, our
ability to advance our current product candidates or develop new product candidates may be
adversely affected.
We depend, and will continue to depend, on these arrangements, and potentially on other licensing
arrangements and/or strategic relationships with third parties for the research, development,
manufacturing and commercialization of our product candidates. If any of our licenses or
relationships are terminated or breached, we may:
Ø
lose our rights to develop and market our product candidates;
Ø
lose patent and/or trade secret protection for our product candidates;
Ø
experience significant delays in the development or commercialization of our
product candidates;
Ø
not be able to obtain any other licenses on acceptable terms, if at all; and/or
Ø
incur liability for damages.
Licensing arrangements and strategic relationships in the pharmaceutical and biotechnology
industries can be very complex, particularly with respect to intellectual property rights.
Disputes may arise in the future regarding ownership rights to technology developed by or with
other parties. These and other possible disagreements between us and third parties with respect to
our licenses or our strategic relationships could lead to delays in the research, development,
manufacture and commercialization of our product candidates. These third parties may also pursue
alternative technologies or product candidates either on their own or in strategic relationships
with others in direct competition with us. These disputes could also result in litigation or
arbitration, both of which are time-consuming and expensive, and could require significant time and
attention from our management.
Our i.v. antibiotic product candidate or any of our other eligible product candidates may not be
granted any of the accelerated development or approval paths by the FDA and, even if any of our
product candidates receive such status, development of the product candidate may not be
accelerated.
We believe that our i.v. antibiotic product candidate, which is a systemic antibiotic drug, may be
eligible for one of the accelerated development or approval paths under FDA procedures, such as
"fast track," "priority review" or "accelerated approval." We have not yet applied for any of these
designations for our i.v. antibiotic product candidate or any of our other product candidates. Our
product candidates may not receive any such consideration. If granted, some of these paths may
help to abbreviate the size and scope of the trials required for submission and approval of an NDA
and/or to shorten the review time of any such filing. If the FDA grants any of these designations
to any of our product candidates, we may then make an application with the FDA with respect to any
further development program and corresponding regulatory strategy.
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Even in the event that one of our product candidates is designated for "fast track," "priority
review" or "accelerated approval" status, such a designation does not necessarily mean a faster
development process or regulatory review process or necessarily confer any advantage with respect
to approval compared to conventional FDA procedures. Any accelerated designation status may be
withdrawn by the FDA if the FDA believes that this designation is no longer supported by emerging
data from our clinical development program or for patient safety reasons. Receiving "fast track,"
"priority review" or "accelerated approval" status from the FDA does not guarantee that we will
qualify for or be able to take advantage of any accelerated development or approval procedures.
Even if the accelerated development or approval procedures are available to us, depending on the
results of clinical trials, we may elect to follow the more traditional approval processes for
strategic and marketing reasons, since drugs approved under "accelerated approval" procedures may
be more likely to be subjected to post-approval Phase 4 clinical studies to provide confirmatory
evidence that they are safe and effective. If we fail to conduct any such required post-approval
studies or if the studies fail to verify that any of our product candidates are safe and effective,
our FDA approval could be revoked. It can be difficult, time-consuming and expensive to enroll
patients in Phase 4 clinical trials because physicians and patients are less likely to participate
in a clinical trial to receive a drug that is already commercially available.
Even if regulatory authorities approve our product candidates, they may not be commercially
successful.
Our product candidates may not be commercially successful because physicians, government agencies
and other third-party payors may not accept them. Third parties may develop superior products or
have proprietary rights that preclude us from marketing our products. We also expect that most of
our product candidates will be very expensive, if approved. If we do obtain regulatory approval
for any of our product candidates, we will need to achieve patient acceptance and demand in order
to be commercially successful. Patient acceptance of and demand for any product candidates will
depend upon many factors, including but not limited to, the extent, if any, of reimbursement of
drug and treatment costs by government agencies and other third-party payors, pricing, the safety
and effectiveness of alternative products, and the prevalence and severity of side effects
associated with our products. If we do not achieve product acceptance and sufficient demand, we
will not be able to sell our products and our operating results and financial condition will be
materially adversely affected.
We do not currently have sales, marketing or distribution capabilities. If we fail to effectively
sell, market and distribute any product candidate for which we receive regulatory approval, our
business and results of operations will suffer.
If we are unable to create sales, marketing and distribution capabilities or enter into agreements
with third parties to perform these functions, we will not be able to successfully commercialize
any of our product candidates that receive regulatory approval in the future. We currently have no
sales, marketing or distribution capabilities. In order to successfully commercialize any of our
product candidates, we must either internally develop sales, marketing and distribution
capabilities or make arrangements with third parties to perform these services.
If we do not develop a marketing and sales force with technical expertise and supporting
distribution capabilities, we will be unable to market any of our products directly. To promote
any of our products through third parties, we will have to locate acceptable third parties for
these functions and enter into agreements with them on acceptable terms and we may not be able to
do so. In addition, any third-party arrangements we are able to enter into may result in lower
revenues than we could have achieved by directly marketing and selling our products.
We may suffer losses from product liability claims.
Any of our product candidates could cause adverse events to patients, such as immunologic or
allergic reactions. These reactions may not be observed in clinical trials, but may nonetheless
occur after commercialization. If any of these reactions occur, they may render our product
candidates ineffective in some patients and our sales would suffer.
We may be susceptible to product liability lawsuits, from events arising out of the use of product
candidates in clinical studies. If product liability lawsuits are brought against us, we may incur
substantial liabilities and may be required to limit commercialization of our products. Our
business exposes us to potential product liability risks, which are inherent in the testing,
manufacturing, marketing and sale of pharmaceutical products. We may not be able to avoid product
liability claims. Product liability insurance for the pharmaceutical and biotechnology industries
is generally expensive, if available at all. If we are unable to protect against potential product
liability claims, we may be unable to commercialize our product candidates. A successful product
liability claim brought against us in excess of our insurance coverage may cause us to incur
substantial liabilities and, as a result, our business may fail.
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Due to our reliance on third-party manufacturers, suppliers and research organizations, we may be
unable to implement our manufacturing, supply and clinical operations strategies, which would
materially harm our business.
If our current and future licensing, manufacturing and supply strategies are unsuccessful, then we
may be unable to complete any future preclinical or clinical trials and/or commercialize our
product candidates in a timely manner, if at all. Completion of any potential future pre-clinical
trials and commercialization of our product candidates will require access to, or development of,
facilities to manufacture a sufficient supply of our product candidates, or the ability to license
them to other companies to perform these functions. We do not have the resources, facilities or
experience to manufacture our product candidates on our own and do not intend to develop or acquire
facilities for the manufacture of product candidates for pre-clinical trials, clinical trials or
commercial purposes in the foreseeable future. We intend to continue to license technology and/or
rely on contract manufacturers to produce sufficient quantities of our product candidates necessary
for any pre-clinical or clinical testing we undertake in the future. Such contract manufacturers
may be the sole source of production and may have limited experience at manufacturing, formulating,
analyzing, filling and finishing our types of product candidates.
We also intend to rely on third parties to supply the components that we will need to develop, test
and commercialize all of our product candidates. There may be a limited supply of these
components. We might not be able to enter into agreements that assure us of the availability of
such components in the future from any supplier. Our potential suppliers may not be able to
adequately supply us with the components necessary to successfully conduct our pre-clinical and
clinical trials and/or to commercialize our product candidates. If we cannot acquire an acceptable
supply of components to produce our product candidates, we will not be able to complete
pre-clinical and clinical trials and will not be able to commercialize our product candidates.
In addition, we rely on contract research organizations in conducting clinical trials for our
product candidates. We do not have the resources, facilities or experience to conduct clinical
studies for our product candidates on our own and do not intend to develop or acquire such
resources, facilities or experience in the foreseeable future. The quality, cost and timing of
work performed by our contracted contract research organizations has a significant impact on our
clinical programs and our business.
If we make technology or product acquisitions, we may incur a number of costs, may have integration
difficulties and may experience other risks that could harm our business and results of operations.
All of our product candidates are licensed from, or based upon technologies licensed from, third
parties. We may acquire and/or license additional product candidates and/or technologies in the
future. Any product candidate or technology we license or acquire will likely require additional
development efforts prior to commercial sale, including extensive clinical testing and approval by
the FDA and applicable foreign regulatory authorities, if any. All product candidates are prone to
risks of failure inherent in technology product development, including the possibility that the
product candidate or product developed based on licensed technology will not be shown to be
sufficiently safe and effective for approval by regulatory authorities. In addition, we cannot
assure you that any product candidate that we develop based on acquired or licensed technology that
is granted regulatory approval will be manufactured or produced economically, successfully
commercialized or widely accepted in the marketplace. Moreover, integrating any newly acquired
product could be expensive and time-consuming. If we cannot effectively manage these aspects of
our business strategy, our business may not succeed.
Furthermore, proposing, negotiating and implementing an economically viable acquisition or license
can be a lengthy, costly and complex process. Other companies, including those with substantially
greater financial, marketing and sales resources, may compete with us for the acquisition or
license of product candidates and/or technologies. We may not be able to acquire the rights to
alternative product candidates and/or technologies on terms that we find acceptable, or at all.
Our failure to acquire or license alternative products and/or technologies could have a material
adverse effect on our business, prospects and financial condition.
Failure to effectively manage our growth may have a material adverse effect on our business,
results of operations and financial condition.
If we commence Phase 2 clinical trials for our two lead product candidates, PMX-30063 and
PMX-60056, of which there can be no assurance as to the availability of sufficient adequate
additional funding needed in order to commence such trials, we will need to expand our operations,
including hiring of additional personnel. However, we may not be able to effectively grow and
expand our business. Successful implementation of our business plan will require management of
growth, which will result in an increase in the level of responsibility for management personnel.
To manage growth effectively, we will be required to continue to implement and improve our
operating and financial systems and controls to expand, train and manage our employee base. The
management, systems and controls currently in place or to be implemented may not be adequate for
such growth, and the steps taken to hire
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personnel and to improve such systems and controls might
not be sufficient. If we are unable to manage our growth effectively, it will have a material
adverse effect on our business, results of operations and financial condition.
We rely on third parties to provide software necessary to the future success of our business.
Currently, we rely on a non-exclusive license from the University of Pennsylvania to use, copy,
perform, display, distribute, modify and prepare derivative works based on three software packages,
which include a suite of proprietary computational algorithms that we use in the development,
refinement, and testing of our product candidates. If this license agreement is properly
terminated by the University of Pennsylvania, our ability to advance our current product candidates
or develop new product candidates may be adversely affected.
In the future, we expect to rely upon the software programs licensed from the University of
Pennsylvania, as well as software licensed from other third parties, including software that might
be integrated with our internally developed software and used to perform key functions. If we
license such third-party software, it is likely that certain of these licenses may not contain
favorable terms for us, including duration for limited terms, can be renewed only by mutual consent
and may be terminated if we breach the terms of the license and fail to cure the breach within a
specified period of time. Such licenses may not be available to us on commercially reasonable
terms, if at all. The loss of or inability to maintain or obtain licenses on such third party
software could result in the discontinuation of, or delays or reductions in, product shipments
unless and until equivalent technology is identified, licensed and integrated with our software.
Any such discontinuation, delay or reduction would harm our business, results of operations and
financial condition. In addition, financial or other difficulties that may be experienced by such
third-party vendors may have a material adverse effect upon the technologies that may be
incorporated into our products. If such technologies become unavailable, we may not be able to
find suitable alternatives, which could harm our business, operating results, and financial
condition.
Our executive officers and directors have the ability to significantly influence matters submitted
to our stockholders for approval.
Our executive officers and directors, in the aggregate, beneficially own shares representing
approximately 14% of our common stock. Beneficial ownership includes shares over which an
individual or entity has investment or voting power and includes shares that could be issued upon
the exercise of options and warrants within 60 days after the date of determination. On matters
submitted to our stockholders for approval, holders of our common stock are entitled to one vote
per share. If our executive officers and directors choose to act together, they would have
significant influence over all matters submitted to our stockholders for approval, as well as our
management and affairs. For example, these individuals, if they chose to act together, would have
significant influence on the election of directors and approval of any merger, consolidation or
sale of all or substantially all of our assets. This concentration of voting power could delay or
prevent an acquisition of our company on terms that other stockholders may desire.
Risks Related to our Intellectual Property
The obstacles to procurement and enforcement of our intellectual property and proprietary rights
could harm our competitive position by allowing competitors access to our proprietary technology
and to introduce competing products.
We regard our product candidates as proprietary and rely primarily on a combination of patents,
trademarks, copyrights, and trade secrets and other methods to protect our proprietary rights. We
maintain confidentiality agreements with our employees, consultants and current and potential
affiliates, customers and business partners.
If we fail to secure and then enforce patents and other intellectual property rights underlying our
product candidates and technologies, we may be unable to compete effectively. The pharmaceutical
industry places considerable importance on obtaining patent and trade secret protection for new
technologies, products and processes. Our success will depend, in part, on our ability, and the
ability of our licensors, to obtain and to keep protection for our products and technologies under
the patent laws of the U.S. and other countries, so that we can stop others from using our
inventions. Our success also will depend on our ability to prevent others from using our trade
secrets.
Our pending U.S. and foreign patent applications may not issue as patents or may not issue in a
form that will be advantageous to us. If we do not receive patents for these applications or do
not receive adequate protections, our developments will not have any proprietary protection and
other entities will be able to make the products and compete with us. Also, any patents we have
obtained or do obtain may be challenged by reexamination, opposition or other administrative
proceeding, or may be challenged in litigation, and such challenges could result in a determination
that the patent is invalid or unenforceable. In addition, competitors may be able to design
alternative methods or devices that avoid infringement of our patents. To the extent our
intellectual property protection offers
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inadequate protection, or is found to be invalid, we are
exposed to a greater risk of direct competition. Both the patent application process and the
process of managing patent disputes can be time consuming and expensive and may require significant
time and attention from our management. Furthermore, the laws of some foreign countries may not
protect our intellectual property rights to the same extent as do the laws of the United States.
In addition, the standards that the United States Patent and Trademark Office, or the U.S. PTO,
uses to grant patents can change. Consequently, we may be unable to determine the type and extent
of patent claims that will be issued to us or to our licensors in the future, if any patent claims
are issued at all. In addition, if the U.S. PTO and/or other patent offices where we file our
patent applications increase the fees associated with filing and prosecuting patent applications we
would incur higher expenses and our intellectual property strategy could be adversely affected.
The confidentiality agreements we require of our employees and those which we enter into with other
parties may not provide adequate protection for our trade secrets, know-how or other confidential
information or prevent any unauthorized use or disclosure or the unlawful development by others.
If any of our confidential intellectual property is disclosed, our business may suffer. Such
agreements may not be enforceable or may not provide meaningful protection for our trade secrets or
other proprietary information in the event of unauthorized use or disclosure or other breaches of
the agreements, and we may not be able to prevent such unauthorized disclosure. Monitoring
unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent
such disclosure are, or will be, adequate.
We may have to engage in costly litigation to enforce or protect our proprietary technology, which
may harm our business, results of operations, financial condition and cash flows.
The pharmaceutical field is characterized by a large number of patent filings involving complex
legal and factual questions, and, therefore, we cannot predict with certainty whether any patents
or in-licensed patents will be enforceable. Additionally, we may not be aware of all of the
patents potentially adverse to our interests that may have been issued to others. Should third
parties file patent applications, or be issued patents, claiming technology also claimed by us in
pending applications, we may be required to participate in interference proceedings in the U.S. PTO
to determine priority of invention. We, or our licensors, also could be required to participate in
interference proceedings involving our issued patents and pending applications of another entity.
In the event a competitor infringes upon our patent or other intellectual property rights,
litigation to enforce our intellectual property rights or to defend our patents against challenge,
even if successful, could be expensive and time consuming and could require significant time and
attention from our management. We may not have sufficient resources to enforce our intellectual
property rights or to defend any patents against challenges from others. If our intellectual
property does not provide adequate protection against our competitors' products, our competitive
position and business could be adversely affected.
Our commercial success depends significantly on our ability to develop and commercialize our
products without infringing the intellectual property rights of third parties.
Our commercial success will depend, in part, on our not infringing the patents or proprietary
rights of third parties. Third parties that believe we are infringing on their rights could bring
actions against us claiming damages and seeking to enjoin clinical testing, manufacturing and
marketing of the affected product or products.
If we become involved in any litigation, it could consume a substantial portion of our resources,
regardless of the outcome of the litigation. If any of these actions are successful, we could be
required, in addition to any potential liability for damages, to obtain a license to continue to
manufacture or market the affected product, in which case we may be required to pay substantial
royalties or grant cross-licenses to our patents. However, any such license may not be available
on acceptable terms or at all. Ultimately, we could be prevented from commercializing a product,
or forced to cease some aspect of our business operations, as a result of patent infringement
claims, which would harm our business.
We may enter into licensing agreements with third party intellectual property owners for use of
their property in connection with our products in order to ensure that such third party's rights
are not infringed. Although we are not aware that any of our intended products would materially
infringe the rights of others, a claim of infringement may be asserted against us and any such
assertion may result in costly litigation or may require us to obtain a license in order to make,
use, or sell our products. Third parties may assert infringement claims against us in the future
with respect to current or future products. Any such claims or litigation, with or without merit,
could be costly and a diversion of management's attention, which could have a material adverse
effect on our business, operating results and financial condition. Adverse determinations in such
claims or litigation could harm our business, operating results and financial condition.
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We may be unable to protect the intellectual property rights of the third parties from whom we
license certain of our intellectual property or with whom we have entered into other strategic
relationships, which may harm our business.
We are, and will continue to be, reliant upon such third parties to protect their intellectual
property rights to this technology. Such third parties may determine not to protect the
intellectual property rights that we license from them and we may be unable defend such
intellectual property rights on our own or we may have to undertake costly litigation to defend the
intellectual property rights of such third parties. We may not continue to have proprietary rights
to the intellectual property that we license from such third parties or otherwise have the right to
use through similar strategic relationships. Any loss or limitations on use with respect to our
right to use such intellectual property licensed from third parties or otherwise obtained from
third parties with whom we have entered into strategic relationships could have a material adverse
effect on our business, operating results and financial condition.
Many countries, including certain countries in Europe, have compulsory licensing laws under which a
patent owner may be compelled to grant licenses to third parties. In addition, most countries
limit the enforceability of patents against government agencies or government contractors. In
these countries, the patent owner may be limited to monetary relief and may be unable to enjoin
infringement, which could materially diminish the value of the patent. Compulsory licensing of
life-saving products is also becoming increasingly popular in developing countries, through either
direct legislation or international initiatives. Such compulsory licenses could be extended to
include some of our product candidates, which may limit our potential revenue opportunities.
International patent protection is particularly uncertain, and if we are involved in opposition
proceedings in foreign countries, we may have to expend substantial sums and management resources.
Patent law outside the U.S. is even more uncertain than in the U.S. and is currently undergoing
review and revision in many countries. Further, the laws of some foreign countries may not protect
our intellectual property rights to the same extent as U.S. laws. For example, certain countries
do not grant patent claims that are related to the treatment of humans. We may participate in
opposition proceedings to determine the validity of our foreign patents or our competitors' foreign
patents, which could result in substantial costs and diversion of our management's efforts.
Risks Related to our Industry
We may experience delays in obtaining required regulatory approvals in the U.S. to market our
proposed product candidates.
Delays in regulatory approval, limitations in regulatory approval and withdrawals of regulatory
approval may have a negative impact on our results of operations. If we experience significant
delays in testing or approvals, our product development costs, or our ability to license product
candidates, will increase. If the FDA grants regulatory approval of a product, this approval will
be limited to those disease states and conditions for which the product has been demonstrated
through clinical trials to be safe and effective. Any product approvals that we receive in the
future could also include significant restrictions on the use or marketing of our products.
Product approvals, if granted, can be withdrawn for failure to comply with regulatory requirements
or upon the occurrence of adverse events following commercial introduction of the products.
Failure to comply with applicable FDA or other applicable regulatory requirements may result in
criminal prosecution, civil penalties, recall or seizure of products, total or partial suspension
of production or injunction, as well as other regulatory action against our product candidates or
us. If approvals are withdrawn for a product, or if a product were seized or recalled, we would be
unable to sell or license that product and our revenues would suffer. In addition, outside the
U.S., our ability to market any of our potential products is contingent upon receiving market
application authorizations from the appropriate regulatory authorities and these foreign regulatory
approval processes include all of the risks associated with the FDA approval process described
above.
If competitors develop and market products that offer advantages as compared to our product
candidates, our commercial opportunities will be limited.
Other companies have product candidates in development to treat the conditions we are seeking to
ultimately treat. If these competitors are able to develop products that are more effective, have
fewer side effects, are less expensive or offer other advantages as compared to our product
candidates, our commercial opportunities will be limited. Furthermore, if our competitors
commercialize competing products before we do, then our ability to penetrate the market and sell
our products may be impaired.
Our competitors include fully integrated pharmaceutical companies and biotechnology companies,
universities and public and private research institutions. Many of the organizations competing
with us have substantially greater capital resources, larger research and development staffs and
facilities, greater experience in drug development and
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in obtaining regulatory approvals, and
greater manufacturing and marketing capabilities than we do. These organizations also compete with
us to:
Ø
attract parties for acquisitions, joint ventures or other collaborations;
Ø
license proprietary technology that is competitive with the technology we are practicing;
Ø
attract funding; and
Ø
attract and hire scientific talent.
In the antibiotic market, many major pharmaceutical companies, such as GlaxoSmithKline, Pfizer,
Bayer, Merck and Sanofi Aventis have already established significant positions. Additionally, many
smaller companies, such as Cubist Pharmaceuticals, Oscient Therapeutics, NovaBay Pharmaceuticals,
Inc., Ceragenix and Inhibitex either have marketed, or are attempting to enter this market by
developing, novel and more potent antibiotics that are intended to be effective against
drug-resistant bacterial strains. In the UFH antagonist market, protamine is the only available
antidote for and antagonist to UFH and, as such, protamine currently dominates this market.
Because of protamine's virtual monopoly of the UFH antidote/antagonist market, we believe that it
may be difficult for our future UFH antidote/antagonist products to penetrate this market. There
may be additional competitive products about which we are not aware.
Healthcare reform measures could adversely affect our business.
The business and financial condition of pharmaceutical companies is affected by the efforts of
governmental and third party payors to contain or reduce the costs of healthcare. In the U.S. and
in foreign jurisdictions there have been, and we expect that there will continue to be, a number of
legislative and regulatory proposals aimed at changing the healthcare system. For example, in some
countries other than the U.S., pricing of prescription drugs is subject to government control, and
we expect proposals to implement similar controls in the U.S. to continue. The implementation of
such additional controls could have the effect of reducing the prices that we are able to charge
for any products we develop and sell through these plans. Prescription drug legislation and
related amendments or regulations could also cause third-party payors other than the federal
government, including the states under the Medicaid program, to discontinue coverage for any
products we develop or to lower reimbursement amounts that they pay.
Further federal, state and foreign healthcare proposals and reforms are likely. While we cannot
predict the legislative or regulatory proposals that will be adopted or what effect those proposals
may have on our business, including the future reimbursement status of any of our product
candidates, the pendency or approval of such proposals could result in a decrease in our stock
price or limit our ability to raise capital or to obtain strategic partnerships or licenses.
Because our activities may involve the use of hazardous materials, we may be subject to claims
relating to improper handling, storage or disposal of these materials that could be time consuming
and costly.
If we use biological and hazardous materials in a manner that causes injury, we may be liable for
damages. Our research and development activities may involve the controlled use of potentially
harmful biological materials as well as hazardous materials, chemicals and various radioactive
compounds. We cannot completely eliminate the risk of accidental contamination or injury from the
use, storage, handling or disposal of these materials. In the event of contamination or injury, we
could be held liable for damages that result, and any liability could exceed our resources. We are
subject to federal, state and local laws and regulations governing the use, storage, handling and
disposal of these materials and specified waste products. The cost of compliance with these laws
and regulations could be significant.
Risks Related to our Capital Stock and this Offering
We
are registering the resale of a maximum  of 12,000,000 shares of common stock which may be
issued to Dutchess under the Equity Line. The resale of such shares by Dutchess could depress the
market price of our common stock.
We are registering the resale of a maximum  of 12,000,000 shares of common stock under the
registration statement of which this prospectus forms a part. We may issue up to that number of
shares to Dutchess pursuant to the Equity Line. The sale of these shares into the public market by
Dutchess could depress the market price of our common stock. As of May 31, 2009, there were
59,845,065 shares of our common stock issued and outstanding.
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Existing stockholders could experience substantial dilution upon the issuance of common stock
pursuant to the Equity Line.
Our Equity Line with Dutchess contemplates our issuance of up to 12,000,000 shares of our common
stock to Dutchess, subject to certain restrictions and obligations. If the terms and conditions of
the Equity Line are satisfied, and we choose to exercise our put rights to the fullest extent
permitted and sell 12,000,000 shares of our common stock to Dutchess, our existing stockholders'
ownership will be diluted by such sales.
Dutchess will pay less than the then-prevailing market price for our common stock under the Equity Line.
The common stock to be issued to Dutchess pursuant to the Investment Agreement will be purchased at
a 5% discount to the volume weighted average price (VWAP) of our common stock during the five
consecutive trading day period beginning on the trading day immediately following the date of
delivery of a put notice by us to Dutchess, subject to certain exceptions. Dutchess has a financial
incentive to sell our common stock upon receiving the shares to realize the profit equal to the
difference between the discounted price and the market price. If Dutchess sells the shares, the
price of our common stock could decrease.
We may not be able to access sufficient funds under the Equity Line when needed.
Our ability to put shares to Dutchess and obtain funds under the Equity Line is limited by the
terms and conditions in the Investment Agreement, including restrictions on when we may exercise
our put rights, restrictions on the amount we may put to Dutchess at any one time, which is
determined in part by the trading volume of our common stock, and a limitation on Dutchess's
obligation to purchase if such purchase would result in Dutchess's beneficial ownership of
PolyMedix exceeding 4.99%. In addition, we do not expect the Equity Line to satisfy all of our
funding needs, even if we are able and choose to take full advantage of the Equity Line.
Our common stock is thinly traded and the price of our common stock may be negatively impacted by
factors that are unrelated to our operations.
Our common stock is currently quoted on the OTC Bulletin Board. Trading of our stock through the
OTC Bulletin Board is frequently thin and highly volatile. The market price of our common stock
could fluctuate substantially due to a variety of factors, including market perception of our
ability to achieve our business objectives, the results of our clinical trials, trading volume in
our common stock, changes in general conditions in the economy and the financial markets, or other
developments which affect us or our industry. In addition, the stock market is subject to extreme
price and volume fluctuations. This volatility has had a significant effect on the market price of
securities issued by many companies for reasons unrelated to their operating performance and could
have the same effect on our common stock.
A decline in the price of our common stock could affect our ability to raise further working
capital and adversely impact our ability to continue operations.
A prolonged decline in the price of our common stock could result in a reduction in the liquidity
of our common stock and a reduction in our ability to raise capital. Because a significant portion
of our operations has been and will continue to be financed through the sale of equity securities,
a decline in the price of our common stock could be especially detrimental to our liquidity and our
operations. Such reductions may force us to reallocate funds from other planned uses and may have
a significant negative effect on our business plans and operations, including our ability to
develop our product candidates and continue our current operations. If our stock price declines,
it may be more difficult to raise additional capital. If we are unable to raise sufficient capital
in the future, and we are unable to generate funds from operations sufficient to meet our
obligations, we will not be able to have the resources to continue our normal operations.
The market price for our common stock may also be affected by our ability to meet or exceed
expectations of analysts or investors. Any failure to meet these expectations, even if minor, may
have a material adverse effect on the market price of our common stock.
When we issue additional shares in the future, it will likely result in the dilution of our
existing stockholders.
Our certificate of incorporation authorizes the issuance of up to 250,000,000 shares of common
stock with a $0.001 par value and 10,000,000 preferred shares with a par value of $0.001, of which
59,845,065 common shares were issued and outstanding as of March 31, 2009. We may need to increase
our authorized share count in order to issue additional shares of common stock in the future. From
time to time we also will increase the number of shares available for issuance in connection with
our equity compensation plans. Our board of directors may fix and
-17-
determine the designations,
rights, preferences or other variations of each class or series within each class of preferred
stock and may choose to issue some or all of such shares to provide additional financing or acquire
more businesses in the future.
Moreover, in the past, we issued warrants and options to acquire shares of common stock. As of
March 31, 2009, we had warrants and options to purchase an aggregate of 46,089,911 shares of our
common stock. Warrants to purchase 4,119,194 shares of our common stock have weighted average
anti-dilution protection if we sell certain securities at a price per share less than $1.23 per
share.
The issuance of any shares for acquisition, licensing or financing efforts, upon conversion of any
preferred stock or exercise of warrants and options, pursuant to our equity compensation plans, or
otherwise may result in a reduction of the book value and market price of the outstanding shares of
our common stock. If we issue any such additional shares, such issuance will cause a reduction in
the proportionate ownership and voting power of all current stockholders. Further, such issuance
may result in a change of control of our corporation.
Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit a
stockholder's ability to buy and sell our common stock.
FINRA has adopted rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customer's
financial status, tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative low priced
securities will not be suitable for at least some customers. FINRA requirements make it more
difficult for broker-dealers to recommend that their customers buy our common stock, which may
limit your ability to buy and sell our stock and have an adverse effect on the market for our
shares.
We have never paid dividends on our common stock and do not anticipate paying any in the
foreseeable future.
We have never declared or paid a cash dividend on our common stock and we do not expect to pay cash
dividends in the foreseeable future. If we do have available cash, we intend to use it to grow our
business.
Sales of a substantial number of shares of our common stock into the public market may result in
significant downward pressure on the price of our common stock and could affect your ability to
realize the current trading price of our common stock.
Sales of a substantial number of shares of our common stock in the public market could cause a
reduction in the market price of our common stock. To the extent stockholders sell shares of
common stock, the price of our common stock may decrease due to the additional shares of common
stock in the market.
Any significant downward pressure on the price of our common stock as stockholders sell their
shares could encourage short sales of our common stock. Any such short sales could place further
downward pressure on the price of our common stock.
Delaware law, our stockholder rights plan and our amended and restated certificate of incorporation
and amended and restated bylaws contain provisions that could delay and discourage takeover
attempts that stockholders may consider favorable.
Certain provisions of our amended and restated certificate of incorporation and our amended and restated bylaws and
applicable provisions of Delaware corporate law may make it more difficult for or prevent a third
party from acquiring control of us or changing our board of directors and management. These
provisions include:
Ø
the ability of our board of directors to issue preferred stock with voting or
other rights or preferences;
Ø
limitations on the ability of stockholders to amend our charter documents,
including stockholder supermajority voting requirements;
Ø
requirements that special meetings of our stockholders may only be called by the
chairman of our board of directors, our president, or upon a resolution adopted by,
or an affirmative vote of, a majority of our board of directors; and
-18-
Ø
advance notice procedures our stockholders must comply with in order to nominate
candidates for election to our board of directors or to place stockholders'
proposals on the agenda for consideration at meetings of stockholders.
We will also be afforded the protections of Section 203 of the Delaware General Corporation Law,
which will prevent us from engaging in a business combination with a person who acquires at least
15% of our common stock for a period of three years from the date such person acquired such common
stock, unless board or stockholder approval were obtained.
We review these provisions from time to time. Any delay or prevention of a change of control
transaction or changes in our board of directors or management could deter potential acquirers or
prevent the completion of a transaction in which our stockholders could receive a substantial
premium over the then current market price for their shares.
In addition, we have a stockholder rights plan pursuant to which we distributed rights to purchase
shares of our Series C Preferred Stock. The rights become exercisable upon the earlier of ten
business days after a public announcement that a person or group of affiliated or associated
persons has acquired, or obtained the right to acquire, 15% or more of our common stock then
outstanding or ten business days after the commencement of a tender or exchange offer that would
result in a person or group beneficially owning 15% or more of our common stock then outstanding.
These rights may cause substantial dilution to a person or group that attempts to acquire us (or
which otherwise acquires 15% or more of our common stock) on terms or in a manner not approved by
the Board, except pursuant to an offer conditioned upon the negation, purchase or redemption of
these rights. Accordingly, these rights could delay or discourage someone from acquiring our
business, even if doing so would benefit our stockholders.
-19-
USE OF PROCEEDS
We will not receive any proceeds from the resale of our common stock offered by Dutchess. However,
we will receive proceeds from the sale of our common stock to Dutchess pursuant to the Investment
Agreement. The proceeds from our exercise of the put option pursuant to the Investment Agreement
will be used to support the commercialization of our current and future product candidates, to fund
our research and development activities, for general working capital needs, or for other purposes
that our board of directors, in its good faith, deems to be in our best interest.
SELLING STOCKHOLDER
The information provided in the table and discussions below has been obtained from the selling
stockholder. The selling stockholder may have sold, transferred or otherwise disposed of, or may
sell, transfer or otherwise dispose of, at any time or from time to time since the date on which it
provided the information regarding the shares, all or a portion of the shares of common stock
beneficially owned in transactions exempt from the registration requirements of the Securities Act.
As used in this prospectus, "selling stockholder" includes the person or persons listed in the table below, and the donees, pledgees, transferees or other
successors in interest selling shares of our common stock received from the named selling
stockholder as a gift, pledge, distribution or other non sale-related transfer.
Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the Securities
and Exchange Commission under the Exchange Act. Unless otherwise noted, each person or group
identified possesses sole voting and investment power with respect to the shares, subject to
community property laws where applicable.
Beneficial Ownership of Common Shares Prior to
Number of
Beneficial Ownership of Common
this Offering
Shares to be
Shares After this Offering
Sold Under this
Selling
Prospectus
Number of
Stockholder
Number of Shares
Percent of Class
Shares
(1)
Percent of Class
Dutchess Equity
Fund, L.P. (2)
—
—
12,000,000
(3)
—
—
(1)
These numbers assume the selling stockholder sells all of its shares being offered pursuant to this prospectus.
(2)
Dutchess is a Delaware limited partnership. Michael Novielli and Douglas H. Leighton are
directors of Dutchess with voting and investment power over the shares.
(3)
Represents the maximum number of shares issuable by us and purchasable by Dutchess under the Investment Agreement, all of which are being offered by the selling stockholder under this prospectus.
-20-
OUR BUSINESS
We are a biotechnology company focused on treating life threatening, serious, infectious diseases
and acute cardiovascular disorders with synthetic small molecule compounds that mimic the activity
of large natural protein molecules, compounds referred to as biomimetics. Using our proprietary
computational drug design technology, we have created novel defensin mimetic antibiotic compounds,
heparin antagonist compounds (or "heptagonists") and other drug compounds intended for human
therapeutic use. The following chart illustrates the current stage of development of our
internally developed pipeline along with planned development timings for our two lead programs that
are in clinical development:
*
Program on hold pending additional financing
**
Investigational New Drug Application (or "IND") or equivalent Canadian Clinical Trial
Application
***
Unfractionated heparin ("UFH") and low molecular weight heparin ("LMWH")
CLINICAL PROGRAMS
Defensin Mimetic Antibiotic Product Candidates
Market Opportunity
Worldwide, more than seven million patients are hospitalized each year for bacterial infections,
with approximately 49 million total patients being treated for infections annually. In 2002, the
estimated number of healthcare associated infections (HAI's) in U.S. hospitals, adjusted to include
federal facilities, was approximately 1.7 million with 99,000 deaths according to a 2007 Public
Health Report issued by the Centers for Disease Control. According to a 2001 article published in
Emergin
g
Infectious Diseases
, healthcare-acquired infections cost approximately $4.5 billion
annually in the U.S. The same article estimates that drug-resistant bacteria cause more than 70%
of healthcare-acquired infections. A February 2008 report from the Association for Professionals
in Infection Control
-21-
and Epidemiology estimates that 70% of infections may now be resistant to antibiotics. As drug-resistance continues to spread, the need for potent novel antibiotic drugs
increases.
According to DataMonitor, a provider of healthcare market analysis data, the world's antibiotic
market was approximately $25.5 billion in 2005 after growing at a compound annual growth rate of
5.1% between 2001 and 2005 and the hospital antibiotic market across the world's seven major
markets was $7.9 billion in 2006 (MIDAS sales data, IMS Health, March, 2007). DataMonitor further
estimates that the U.S. market for all antibiotic drugs was approximately $10.8 billion in 2004.
The portion of the antibiotic market that we initially intend to target is the North American
acute-care hospital market. This market includes intravenous or subcutaneously infused products
that are administered, or at least prescribed, in the hospital. According to IMS Health, another
leading provider of healthcare market analysis data, the size of this market during the twelve
months ended August 2004 was approximately $3 billion.
Host Defense Proteins
Our small molecule defensin mimetic antibiotic product candidates mimic the activity of host
defense proteins. Host defense proteins are part of the innate immune system. In the human body,
host defense proteins primarily exist in the respiratory tract, the urogenital tract, the
gastrointestinal track and the epidermal tissues under the skin, all locations where microbial
pathogens first enter the human body, and represent a first line of defense against bacterial
attack. Host defense proteins act rapidly against bacteria, unlike other parts of the immune
system that take longer to work.
Host defense proteins use a simple, but effective method for killing bacteria by targeting
bacterial membranes and disrupting them. At low doses, these antimicrobial proteins associate in
membranes causing membrane thinning and formation of transient pores leading to membrane
permeabilization and leakage of cellular ions and metabolites, which results in the killing of the
bacterial cell. At higher doses, they cause generalized disruption of the bilayer structure of the
membrane, leading to the complete breakdown of the bacterial membrane and leakage of cellular
contents, which results in the killing of the bacterial cell.
Antibiotics on the market today generally target specific molecular targets in bacteria and many
must enter the bacteria cell to work. Bacterial cells can become resistant to antibiotics through:
Ø
genetic mutations that modify the molecular targets themselves, rendering them
invulnerable to the antibiotic in question; or
Ø
metabolic responses that cause the cell to pump out foreign agents, preventing
the antibiotics from accessing the molecular targets.
By contrast, host defense proteins physically disrupt the cell from the outside. The mechanism of
action of the host defense proteins makes it difficult for bacteria to develop resistance because
of several reasons:
Ø
they do not have to enter the bacterial cell to work;
Ø
they act quickly, killing bacteria within minutes of exposure, thereby limiting
the bacterial response time; and
Ø
in order to develop effective defenses, the bacteria would have to alter the
structure of its cell membrane, which is a highly complex multi-step response that
would likely reduce the ability of the newly mutated bacteria to grow and survive
in a natural environment due to changes in membrane transport of essential
nutrients and wastes.
It has been documented in many studies published by the American Society of Microbiology and others
that susceptible bacteria do not readily develop resistance to host defense proteins under
experimental conditions where resistance readily develops against conventional antibiotics.
Furthermore, bacteria remain sensitive to the host defense proteins despite hundreds of millions of
years of evolution in which bacteria have been exposed to host defense proteins' antimicrobial
mechanism of action.
Another favorable attribute of host defense proteins is that they selectively target bacteria and
not mammalian cells, by recognizing the differences in the composition of bacterial and mammalian
cell membranes. The outer surface of bacterial cell membranes is more negatively charged than
mammalian cells. Bacterial cell membranes also lack cholesterol, an essential component of all
mammalian membranes. Host defense proteins specifically target
-22-
membranes that lack cholesterol and have a high degree of negative electrical charge. Therefore, they selectively attack bacterial
cell membranes while mitigating harm to mammalian cells.
We believe that the host defense proteins provide an attractive mechanistic approach for the
development of a new type of antibiotic therapeutic drug due to their strong antimicrobial
activity, unique mechanism of action for which bacterial resistance appears less likely to develop,
and selective targeting of bacteria but not mammalian cells. Attempts were made in the past by
other companies to develop natural host defense proteins as novel antibiotics. Those products
lacked robust activity in models of systemic infection, and were studied for niche topical
applications, likely as a result of their limited systemic availability. None of them has been
successfully commercialized to date because of difficulties relating to some of the inherent
complexities associated with protein drugs: a lack of systemic bioavailability and stability. For
systemic applications, all protein drugs have a number of limitations, including often not being
bioavailable with either injectable or oral administration, often expensive to produce, often
unstable even with intravenous administration, and at risk of eliciting immunological reactions
which can neutralize their activity.
Our Approach
We have developed PMX-30063, our lead defensin mimetic antibiotic product candidate, and other
novel small molecule defensin mimetic antibiotics that mimic the activity of host defense proteins.
We are seeking to commercialize these defensin mimetic compounds as antibiotics in a variety of
forms to combat drug-resistant bacterial infections. PMX-30063 and our other defensin mimetic
antibiotic product candidates are completely synthetic, which make them easier and less expensive
to produce than proteins. Importantly, our small molecule compounds demonstrate activity in animal
models of systemic infection, activity that was lacking in others' past attempts to develop natural
host defense proteins. These defensin mimetic antibiotic product candidates may be developed in a
variety of formulations, including injectable, tablet and topical, for a wide range of antibiotic
applications. The results of our preclinical experiments for PMX-30063 and our other defensin
mimetic antibiotic product candidates suggest several advantages compared to other marketed
antibiotics. Such advantages include:
Ø
Broad spectrum of activity, including against resistant bacterial strains
. By
acting on bacterial cell membranes, we believe our antibiotics will be effective
against a broad range of Gram-positive and Gram-negative pathogens. In our in
vitro efficacy studies, our defensin mimetic antibiotic product candidates as a
class demonstrated potent antibacterial activity on hundreds of common bacterial
pathogens. To support our initial clinical target of broad treatment of
Staphylococcus
infections, we have also demonstrated activity against 148 different
strains and species of
Staph,
including 89 drug-resistant strains. The
antibacterial activity of our defensin mimetic antibiotic product candidates has
also been demonstrated in animal models of systemic infections.
Ø
Lower likelihood for the development of drug-resistance
. It is very difficult
for bacteria to develop drug resistance to natural antimicrobial host defense
proteins because these proteins act on bacterial membranes rather than on a single,
mutable molecular target, such as an enzyme. Because our defensin mimetic
antibiotic product candidates are designed to have the same mechanism of action as
host defense proteins, we anticipate they will have a similar lower likelihood of
developing bacterial resistance compared to conventional antibiotics. This reduced
likelihood of bacterial resistance has been demonstrated in laboratory serial
passage experimental studies.
Ø
Potentially faster acting than other antibiotics
. In time-kill studies, our
defensin mimetic antibiotic product candidates act quickly when bacteria are
exposed to them. We observed bactericidal activity in a matter of minutes after
exposure to our defensin mimetic antibiotic product candidates. In contrast, many
currently marketed drugs can take hours or even several days to show effect.
PMX-30063 Clinical Development
We have scaled up synthesis of drug substance and manufactured clinical supplies for our lead
antibiotic compound, PMX-30063, under current Good Manufacturing Practice ("cGMP") conditions. The
current Good Laboratory Practice ("cGLP") compliant toxicology, safety pharmacology and
genotoxicity studies have been completed, which indicate that an effective therapeutic index for
PMX-30063 may be achieved. Our first product candidate will be an i.v. formulation intended to
treat complicated skin and soft tissue infections, including gynecological infections, caused by
strains of
Staph
bacteria. We anticipate that the bacterial targets of PMX-30063 will include drug
resistant strains, particularly broadly targeting the various strains of
Staph
bacteria. In the
future, we also hope to expand indications to also potentially include other bacterial strains.
-23-
Clinical Experiments to Date
In December 2008, we completed and announced positive results from our single dose escalation
clinical study of healthy volunteers receiving PMX-30063 at various dose levels (Phase 1A). This
ascending single-dose intravenous pharmacokinetic and safety study met the necessary Phase 1 goals
of defining both a limiting single dose and the plasma distribution/elimination kinetics. In this
study, the dose was not limited by any measurable clinical or laboratory parameters. A subjective
syndrome of parasthesias was identified, appearing only at the higher dosages and consisting of
abnormal neuronal sensations often likened to dental anesthesia. These effects were graded as mild
to moderate by investigators or subjects, but their reproducibility and dose-proportionality
allowed dose-escalation to be successfully concluded after achieving levels well in excess of the
expected therapeutic range. The effects were temporary and resolved on their own. The same study
provided detailed information on the time course of the drug during and after dosing. These
pharmacokinetics appear favorable for therapeutic use of the drug. The half-time for elimination
from the plasma was approximately 15 hours, allowing for flexibility in dosing to obtain optimal
peak and trough drug levels.
Planned Clinical Studies
During the second quarter of 2009 we commenced a multi-dose study of healthy volunteers who will
receive PMX-30063 at various dose levels (Phase 1B). The primary endpoint for the two Phase 1
studies is a safety assessment. We have and plan to continue to conduct the Phase 1 studies to
United States standards, submit an IND with the FDA before commencing Phase 2 studies in the United
States, and ultimately seek regulatory approval in the United States.
After Phase 1, our plan is to investigate and pursue one of the accelerated development and/or
review processes, which may be granted by the FDA to speed up the review process for products that
address an unmet medical need. These paths include: "fast track," which is based on recognition by
the FDA of medical need; "priority review," which provides for a six-month review time after filing
of a New Drug Application ("NDA") and "accelerated approval," under which drugs for serious or life
threatening disorders for which there is an unmet medical need may be approved based on Phase 2
clinical data or surrogate clinical markers, with a requirement to complete studies and show
clinical outcomes. If a compound is granted one of these designations, it may help to abbreviate
the size and scope of the trials required for submission and approval of an NDA and may help
shorten the review time of any such filing. Drugs to treat HIV, the virus that causes AIDS, are
examples of agents that have been approved under "accelerated approval" provisions.
Further, each of the last three antibiotic drugs that targeted methicillin-sensitive
Staphylococcus
aureus
, or MRSA, drug resistant
Staph
infections, one of the anticipated clinical targets of
PMX-30063, and applied to be granted "fast track" status received such status. We believe that use
of PMX-30063 as an antibiotic would address an unmet medical need; however, the FDA may not grant
PMX-30063 any of these designations that would allow for accelerated development and/or review
status. See the section entitled "Risk Factors" for a further discussion of the risks associated
with our intention to apply for such accelerated development and/or review status.
If PMX-30063 is not granted accelerated approval status, we estimate that it will cost $65 to $85
million in research, drug development and clinical development costs over 36-48 months to file an
NDA for this product candidate. In the event that we are granted "fast track," "priority review"
or "accelerated development" status by the FDA, it is possible that both the time and cost to file
an NDA could be significantly less than these estimates. The exact extent of these potential time
and cost savings can only be determined based on future discussions with the FDA. In any case, we
do not currently have the funding resources necessary to carry out all of our short and long-term
operating activities. While we believe that our current cash and
investment balances, exclusive of any cash to be generated from the
Equity Line, will be sufficient to  fund our
planned Phase 1 studies for PMX-30063 and PMX-60056 and can fund our operations for at least the
next twelve months; however, due to the continued deterioration of the capital markets and
prospects for securing additional financing, in order to prolong our cash runway we will scale back
and delay some of our activities and do not plan to commence a Phase 1B clinical trial for
PMX-60056 until the third quarter of 2009.
We plan to
seek additional funding beyond the Equity Line during 2009 in one or more financings. If we are unable to
secure adequate additional funding, we may delay, scale-back or eliminate certain of our research, drug discovery or development activities or certain other aspects of our operations and
our business related to this program until such time as we are successful in securing adequate
additional funding.
In April 2004, we received a Small Business Innovation Research, or SBIR, grant of $238,000 from
the National Institute of Health (NIH) to conduct animal testing of our product candidates.
Research under this grant was completed and, in March 2006, we received a Phase 2 SBIR grant of
$2.9 million over three years in support of our development of an i.v. antibiotic product
candidate.
-24-
Preclinical Experiments
Our preclinical research indicates that PMX-30063, our lead defensin mimetic antibiotic product
candidate, has a number of favorable attributes, including relatively low molecular weight, potent
and broad spectrum antibacterial activity, low cytotoxicity, good tolerance in acute toxicity and
repeat dose animal experiments and strong efficacy in animal models of bacterial infection. Our
defensin mimetic antibiotic product candidates have demonstrated efficacy in preclinical
experiments against strains of bacteria that are currently resistant to one or more classes of
currently available antibiotics. Due to the novel mechanism of action of our product candidates
and the results of our preclinical research, we believe it is less likely that resistance will
develop against our defensin mimetic antibiotic product candidates compared with conventional
antibiotic drugs. The results of certain of our preclinical experiments for PMX-30063 are
discussed below.
Bacterial Resistance
We employed a serial passage method to measure the potential development of bacterial drug
resistance to PMX-30063. In serial passage experiments, bacteria are repeatedly exposed to
sub-lethal concentrations of a drug, which accelerates the over-growth of mutant forms of bacteria
that are resistant to the action of an antibiotic drug. In our experiments, we compared PMX-30063
with norfloxacin, a widely used broad-spectrum antibiotic drug. Resistance by
Staph
bacteria,
including MRSA, was readily observed for norfloxacin, whereas no resistance was observed for
PMX-30063. In similar studies performed by a contract research organization, no resistance
developed to PMX-30063, or to our other defensin mimetic antibiotic compounds, when bacterial
strains that were resistant to other antibiotics were used in the test. These results are
consistent with those that have been previously demonstrated with host defense proteins.
Pharmacokinetics
Pharmacokinetics is the study of how a compound behaves in the body. Efficacy studies determine
how effective a compound is for its intended use, in this case, PMX-30063 as an antibiotic agent.
Pharmacokinetic and efficacy studies are performed to establish the most effective dosage levels.
Pharmacokinetic analysis has been completed for PMX-30063 in a mouse model. In these experiments,
blood samples were collected at nine time points over 24 hours and quantified. One of the
important measurements in these blood sample studies is half-life, which measures the time it takes
for half of an administered dose of compound to be cleared from the body. These measurements guide
how often a compound needs to be administered. PMX-30063 generally exhibited half-lives in the
range of 0.81 hours to 2.66 hours in animals, which is comparable to the half-life in rodents of
several antibiotics widely used in the hospital setting.
Proteins and other components in blood can have significant effects on the activities of drug
candidates, such as loss of antimicrobial activity. Our preclinical research suggests that
PMX-30063 is stable and the antimicrobial activity is maintained in the presence of blood serum.
These serum-effect profiles compare very favorably with many marketed antibiotic drugs.
In Vitro Activity
PMX-30063 has demonstrated potent and selective in vitro antibacterial activity. In our
preclinical experiments, PMX-30063 demonstrated potent activity against both Gram-positive and
Gram-negative bacteria, two general classes of bacteria, as well as fungi. Potent activity is
found against bacteria isolated from human infections including three important hospital pathogens,
MRSA, vancomycin-resistant S. aureus, and vancomycin resistant enterococcus. Additionally,
PMX-30063 was active against Staphylococcal isolates that were no longer susceptible to daptomycin
or linezolid. Overall, our defensin mimetic antibiotic compounds as a class have demonstrated in
the pre-clinical studies antimicrobial activity against a broad spectrum of over 100 strains of
bacteria, including clinical isolates of Gram-positive and Gram-negative bacteria.
In Vitro Metabolism
Metabolism studies seek to determine what happens to a compound after it has been administered to a
body, if it is changed in the body, and how it may be eliminated from the body. PMX-30063 has been
tested for stability in the presence of mouse and human liver hepatocytes to investigate the extent
to which liver metabolism could be a factor upon compound administration. PMX-30063 demonstrated
high stability in the presence of liver hepatocytes. PMX-30063 was also stable in blood plasma
from rats, dogs and humans. These data suggest that PMX-30063 should be metabolically stable.
Animal Efficacy and Toxicology Studies
The following animal efficacy and toxicology data provides important proof-of-concept information
that we believe supports development of PMX-30063 as a novel antibacterial agent for systemic
infections. We have conducted
-25-
additional efficacy studies in both mice and rats using intravenous
infusions to examine the activity of PMX-30063 in validated models of bacterial infection to find a
dosing regimen that would maximize the tolerability of PMX-30063. Additional pharmacokinetic,
toxicology and safety pharmacology studies were also conducted to evaluate PMX-30063.
Thigh burden model
. The thigh burden model is a widely used and accepted animal model for
evaluating antibacterial activity of antibiotic drugs, such as PMX-30063, in animals. Mice were
inoculated in the thigh muscle with
S
.
aureu
s and then treated with PMX-30063 by intravenous bolus
administration. PMX-30063 significantly reduced the bacterial burden in thighs compared to the
inoculated control treatment of saline even when first administered one hour after inoculation with
bacteria.
Sepsi
s
model
. We also tested the antibacterial efficacy of PMX-30063 in a mouse sepsis model. In
our studies, we infected mice with
S
.
aureu
s at 100 times the lethal dose through injections into
the body cavity. These animals were then treated with either vancomycin or PMX-30063. All animals
were observed for mortality over seven days following treatment. This is a stringent test of a
compound as it involves a severe infection and the drug must both work quickly, and be able to
reach many body compartments from the bloodstream at sufficiently high concentrations to kill the
infectious bacteria for the animals to survive. When left untreated, the infected mice all died
within one to two days. Mice treated with PMX-30063 demonstrated comparable to superior survival
rates to mice treated with vancomycin. These studies demonstrate that when delivered
intravenously, PMX-30063 can be distributed throughout the body and reach the compartments needed
to effectively treat bacterial infection.
Toxicolog
y
Testing
. Toxicology studies are done to determine the difference between the dose at
which a compound is effective and the dose at which it demonstrates toxicity. These studies and
measurements are done to determine the ratio between the toxic and effective doses. This ratio is
referred to as the therapeutic index or selectivity ratio. The cGLP compliant toxicology, safety
pharmacology and genotoxicity studies have been completed, which indicate that an effective
therapeutic index for PMX-30063 may be achieved.
Heptagonist Product Candidate
UFH and LMWH are blood clot prevention drugs, which are commonly used in numerous post-surgical
applications as anti-coagulants. Overdoses of UFH or LMWH are dangerous due to potentially
life-threatening bleeding. While widely used, UFH and LMWH have the risk of adverse bleeding side
effects, which requires frequent monitoring.
Market Opportunity
Unfractionated Heparin (UFH)
Protamine is the only available reversing agent for UFH. Protamine is used both as an antidote in
the event of overdose, and more commonly in standard treatment as a reversing agent following
coronary artery bypass grafts (CABG, or "bypass" procedures), in which standard practice involves
administering UFH while the patient is on the heart-lung bypass machine to prevent blood clots from
forming in the machine and which could then cause problems when the blood is re-infused to the
patient. However, protamine has many significant potential adverse effects, including:
Ø
unpredictable efficacy
, resulting in variable inter-patient activity;
Ø
anticoagulant activity
of protamine can actually increase and worsen the
anticoagulant activity of UFH, and which requires complex dose-titration and
careful administration of often several doses;
Ø
allergic anaphylactic reactions
in some patients due to the fact that protamine
is a biological product derived from fish sperm;
Ø
inferior fibrokinetics
, or clot formation, can result in leaky clots and in more
serious cases rebound bleeding may occur; and
Ø
immunogenic reactions
with antibodies formed after sensitization to protamine in
patients who have previously received protamine can impact efficacy and result in
severe reaction; some patients, such as diabetic patients receiving zinc insulin,
or males who have undergone vasectomy, may have pre-existing antibodies that could
pre-dispose them to sensitivity to protamine.
As a result, we believe there is a significant medical and market need for a safer UFH antagonist.
Worldwide, we estimate approximately two million extracorporeal blood procedures, including
cardiothoracic procedures, are
-26-
performed that utilize heparin and may require UFH reversal, and
eight million doses of protamine are used annually (IMS data). We believe our hepatagonists will
be a safer alternative to protamine.
Low Molecular Weight Heparin (LMWH)
The LMWHs are often used for longer term prevention of blood clots (thrombophylaxis), in
indications such as deep vein thrombosis (DVT), in patients who have had heart attacks (post MI),
and in cancer patients. All of these patient groups are at risk of developing potentially
life-threatening blood clots, and are given anti-clotting drugs including LMWHs to prevent
dangerous clot formation. Because of their benefits, LMWHs are being increasingly used, with
worldwide sales of approximately $4 billion in 2005 (according to IMS/RDN Insight), and we estimate
are used by approximately 12 million patients annually.
While having favorable risk/benefit characteristics, a number of clinical studies have shown that
there is a significant incidence of bleeding in patients who receive LMWHs. Most studies generally
show that 1%-4% of patients experience serious, life-threatening bleeding, and up to 20% may
experience clinically significant bleeding. Protamine is not considered reliably effective and is
not approved for reversal of LMWH. In patients who experience bleeding problems while on LMWH,
current care may involve hospitalization, blood transfusions, and surgery, which can be expensive
and unreliable.
LMWHs are not currently used in acute surgical settings, such as cardiothoracic procedures, because
of the lack of a reversing agent. The long half-life of LMWH products of up to 24 hours, while an
advantage for longer-term administration, can be a major disadvantage if a patient has a major
bleeding episode or must be re-operated on shortly after surgery. If clotting time is prolonged
due to systemic LMWH, re-operation may not be possible. There currently are no antidotes for LMWH
on the market. The availability of an antidote to LMWH could allow these drugs to be used in
cardiothoracic surgical procedures, as well as used in patients who are currently contraindicated
for LMWH or who may need to undergo re-operation. Thus, an LMWH antagonist could substantially
increase the market and sales of LMWH drugs, thereby also increasing the need and market for a LMWH
antagonist such as our heptagonist product candidate.
Product Opportunity
We believe that an antagonist to UFH and LMWH is an attractive product opportunity for the
following reasons:
Ø
Unmet medical need
. We believe that a safer antagonist to UFH and an effective
and safe antagonist for LMWH would address a large unmet medical need;
Ø
Ease of clinical trials
. The reversal of the blood clotting effects of UFH and
LMWH provides an effective and easily measured end point for human trials;
Ø
Attractive companion product for an LMWH
. An LMWH-antagonist offers the
possibility to increase market share of a proprietary brand of LMWH and also
provide significant differentiating advantages versus other LMWH products without a
companion antagonist;
Ø
Predictiv
e
preclinical models
. The method and laboratory measurement of
clotting time in animals is identical to the methodology needed in human clinical
trials and should be predictive of efficacy;
Ø
Pricing
. If our product candidates are approved by the FDA and marketed, we
believe that such products would have reasonable cost of goods and attractive gross
margins; and
Ø
Focused acute care markets.
Use of UFH and LMWH is concentrated in hospitals,
which could be addressed by a small sales force.
Our Approach
UFH and LMWH are composed of sulfated polysaccharides, which provide an attractive target for the
structure based design of novel molecules. Based on a model for the three-dimensional structure of
these molecules, we have produced a series of compounds that bind very tightly to the critical
pentasaccharide site found on both UFH and LMWH. In preclinical experiments, our compounds have
demonstrated efficacy at sub-micromolar concentrations, and the ability to reverse the effect of
both UFH and LMWH in whole human blood. Furthermore, we believe these compounds function with a
high degree of specificity. We have synthesized and screened a number of compounds that
demonstrate reversal of both UFH and LMWH resulting in the normalization of blood clotting time.
-27-
Our objectives in this program are to develop a product that:
Ø
is as effective as protamine in reversing the anticoagulant effect of UFH;
Ø
is safer than protamine;
Ø
is easy to use;
Ø
has superior fibrokinetic activity (less deleterious impact on clot formation than protamine);
Ø
is less sensitizing than protamine; and
Ø
is effective in reversing the anticoagulant effect of LMWH.
We believe that a heptagonist with these attributes could replace protamine for its current uses,
expand the heparin reversal market by introducing a reversing agent for LMWH, provide a new
treatment for patients receiving LMWH and who experience bleeding complications and require
reversal, and further expand the LMWH market by allowing physicians to more widely use LMWH.
PMX-60056 Clinical Development
We have scaled up synthesis of drug substance and manufactured clinical supplies for PMX-60056,
under cGMP conditions. cGLP compliant toxicology, safety pharmacology and genotoxicity studies
have been completed, which indicate that an effective therapeutic index for PMX-60056 may be
achieved. During the third quarter of 2009, we plan to commence a study of heparinized subjects
who receive PMX-60056 at various increasing dose levels (Phase 1B). While the primary endpoint is
a safety assessment, we will be able to gather efficacy data in this Phase 1B study.
Clinical Experiments to Date
In March 2009, we successfully completed our first-in-man clinical study with the novel heparin
antagonist drug PMX-60056. This ascending single-dose intravenous pharmacokinetic and safety study
met the necessary Phase 1 goals of defining both a limiting single dose for ten-minute infusions
and also the plasma distribution/elimination kinetics for the drug in the absence of heparin. This
first study has demonstrated that PMX-60056 can be given safely in the absence of heparin if
ten-minute infusions include less than 0.4 mg/kg. The data suggest that the limiting side effect of
hypotension is related to peak plasma drug level, which means that slower infusions could allow
delivery of more drug. To investigate this possibility, PolyMedix plans to study slower infusions,
of twenty and potentially thirty minutes, in an extension of this study. These longer infusions are
expected to allow higher doses to be given, and will add support for potential clinical studies for
the reversal of LMWH, which may require greater total amounts of drug to be administered. Analysis
of the plasma-level assays indicates that a single-compartment model is consistent with the
observed data, and the plasma elimination half-time is 1.5 to 2.5 minutes in the dosage range
administered.
Planned Clinical Studies
We estimate that it will cost $65 to $85 million in research, drug development and clinical
development costs over 36-48 months to file an NDA for this product candidate. We do not currently
have the funding resources necessary to carry out all of our short and long-term operating
activities. While we believe that our current cash and investment balances, exclusive of any cash
to be generated from the Equity Line, will be sufficient to fund our planned
Phase 1 studies for PMX-60056, our current cash and investment balances are not sufficient to fund
the Phase 2 development of PMX-60056. In addition, due to the continued deterioration of the
capital markets and prospects for securing additional financing, in order to prolong our cash
runway we will scale back and delay some of our activities and do not plan to commence a Phase 1B
clinical trial for PMX-60056 until the third quarter of 2009.
We plan to secure additional funding
beyond the Equity Line during 2009 in one or more financings. If we are unable to
secure adequate additional funding during 2009, we will delay,
scale-back or eliminate certain of our research, drug discovery or development activities or
certain other aspects of our operations and our business related to this program until such time as
we are successful in securing adequate additional funding.
-28-
In October 2007, we received a Small Business Innovation Research, or SBIR, grant of $100,000 from
the National Institute of Health (NIH) to support the development of biomimetic compounds, such as
PMX-60056, as anti-coagulant antagonists.
Preclinical Experiments
One laboratory model used to evaluate the activity of an antagonist to a blood clot prevention drug
(UFH or LMWH) is the measurement of time it takes for blood or plasma to clot, with and without
antagonist (PMX-60056), in the presence of the blood clot prevention drug. PMX-60056 was able to
neutralize the activity of both UFH and LMWH products, as measured by normalization of clotting
time or normalization of various enzyme activities involved in clot formation. For example, in one
experiment normal untreated blood required 28 seconds to clot. When UFH was added to the human
plasma, clotting time increased to more than 300 seconds. When PMX-60056 was added to plasma that
had been treated with UFH, the clotting time was normalized. PMX-60056 was also able to neutralize
UFH in whole human blood. Normalization of clotting time with PMX-60056 occurred at similar
concentrations as that for protamine, indicating comparable potencies for antagonism of UFH in
human plasma and blood between PMX-60056 and protamine. PMX-60056 also effectively reversed the
anti-coagulant activities of several different clinical preparations of LMWH in human plasma or
whole blood.
In pre-clinical studies, PMX-60056 has been shown to have distinct potential advantages over
protamine in two safety and efficacy-related assays. Protamine significantly impaired the
aggregation of platelets (necessary for normal clot formation) whereas PMX-60056 had little effect
on platelet aggregation. Furthermore, when PMX-60056 reversed the effects of UFH or LMWH it also
restored the normal rate and extent of clot formation. However, when protamine was used to reverse
UFH or the LMWHs, normal rates and extent of clot formation were not achieved. In the selection
of a safe and effective compound to control and prevent bleeding in the presence of an
anti-coagulant, we believe that platelet aggregation and restoration of normal clot formation will
be critically important factors for choosing the preferred agent.
PMX-60056 rapidly restored normal clotting time in UFH-treated rats and dogs. For example, when
rats were administered UFH at an i.v. dose of 75 U/kg, clotting time was greater than 120 seconds.
Treatment with PMX-60056 after UFH administration restored clotting time to normal (approximately
12-15 seconds) within 1 minute after PMX-60056 treatment at an i.v. dose of 2 mg/kg. In other
experiments with UFH-treated rats, normal clotting time was rapidly restored at i.v. dosages of 0.5
and 1.0 mg/kg of PMX-60056. In dogs treated with 300 U/kg UFH, clotting time was greater than 120
seconds. Treatment with an i.v. dose of 4 mg/kg PMX-60056 restored normal clotting time by the
first time point examined, which was 5 minutes after compound administration.
Our belief that the safety of PMX-60056 is supported by in vitro hemolysis assays where the
sensitivity, or lysis, of human erythrocytes (red blood cells) was examined in the presence of
increasing concentrations of PMX-60056. In these assays, PMX-60056 was not hemolytic at
concentrations that far exceed the expected therapeutic levels. Single dose toxicity studies in
mice demonstrated that PMX-60056 was well tolerated, indicating that an effective therapeutic
index, which measures the difference between effective doses and toxic doses, may be achieved.
Other safety studies measuring hemodynamic effects (heart rate and blood pressures) in the rat and
cardiovascular responses (EKG, heart rate and blood pressures) in dogs also indicated that an
effective therapeutic index for PMX-60056 may be achieved.
Toxicology Testing. Toxicology studies are done to determine the difference between the dose at
which a compound is effective and the dose at which it demonstrates toxicity. These studies and
measurements are done to determine the ratio between the toxic and effective doses. This ratio is
referred to as the therapeutic index or selectivity ratio. The cGLP compliant toxicology, safety
pharmacology and genotoxicity studies indicated that an effective therapeutic index for PMX-30063
may be achieved.
PRECLINICAL PROGRAMS
:
In addition to our clinical programs for PMX-30063 and PMX-60056, we have conducted preclinical
studies for other product candidates that are described below. These preclinical programs are
either currently on hold or are not actively being pursued until such time as we secure adequate
additional funding. Further, we may consider expanding or initiating other development activities
pending additional funding.
Defensin Mimetic Antibiotics
In order to achieve the best balance of financial rate of return with risk and timing to market, we
also intend to resume pre-clinical development of PMX-30063 and other defensin mimetic antibiotic
compounds for both topical and oral antibiotic applications. These programs are currently on hold
pending additional financing. The initial topical application we are pursuing is an ophthalmic
topical antibiotic for the treatment of eye infections, and the
-29-
initial oral application is a
non-absorbed oral antibiotic for the treatment of gastrointestinal infections such as Clostridium
difficile. With additional financing, we plan to advance pre-clinical development and file
additional INDs for the ophthalmic topical and non-absorbed oral antibiotic indications in the
future.
We are also evaluating our defensin mimetic antibiotic compounds for a number of other topical and
local applications, including topical antibiotic use for skin structure infections, oral healthcare
applications for treatment of periodontal disease, a type of gum disease, topical treatment for ear
infections, topical treatment of fungal infections, topical treatment of acne, and a variety of
non-therapeutic applications in personal care and materials applications.
We are also exploring the potential use of our defensin-mimetic antibiotics for the treatment of
other infectious diseases. In particular, recent pre-clinical studies by PolyMedix and our academic
collaborators have shown activity of certain of our compounds for potential use against
tuberculosis and malaria. We intend to seek grants and other funding sources to continue the
development of compounds for these applications.
Medical Device, Industrial and Consumer Applications
We have conducted preliminary experiments which demonstrate that polymer derivatives of our
compounds, such as PMX-70004 and PMX-50003, which we refer to as our antimicrobial polymers, may be
used as effective antimicrobial agents as additives to materials. In one experiment, we coated
glass slides with a polyurethane plastic film. One of our antimicrobial polymers (0.1%
concentration) was then infiltrated into the polyurethane material using solvent and dried. The
slides were placed in a bacteria-rich nutrient broth for 72 hours to ascertain growth of bacterial
colonies on the submerged surfaces. After 72 hours, uncoated glass slides and slides coated with
polyurethane alone were covered with many bacterial colonies. In contrast, slides coated with
polyurethane film containing our antimicrobial polymer showed no bacterial growth.
Similar experiments have been performed in which solid polyurethane plastic disks were created with
one of our antimicrobial polymers directly mixed into the polyurethane plastic matrix. These disks
were then immersed in bacteria-rich broth for 24 hours. After 24 hours, plain polyurethane plastic
disks were covered with bacteria, whereas disks incorporating our polymer were devoid of bacterial
growth. When the disks treated with our antimicrobial polymer were stored at room temperature for
up to 45 days either dry or submerged in a large excess of water, there was little to no loss of
antibacterial activity. Experiments employing longer storage times are now being conducted to
determine the stability of the polymer-formulated plastics under a variety of environmental
conditions. When our polymers are incorporated into the plastic of intravenous catheter tubing or
the plastics used in sutures and exposed to a high inoculum of bacteria, significant anti-bacterial
activity is observed with the polymer-derivatized catheter and suture plastics but not with the
untreated plastics.
Based on these and other preliminary experiments, we believe that our antimicrobial polymers can
effectively be used as additives to materials, such as various medical devices to prevent certain
healthcare-acquired infection. Additionally, they may be added to paint, plastic or ceramic
materials to create a self-sterilizing environment against certain bacteria in hospitals or other
areas that may benefit from a clean, bacterial resistant environment.
Another potential application of our antimicrobial polymers is to combat
Stachybotry
s
chartarum
, or
Black Mold, that causes significant household and commercial building damage in the U.S. Several
of our compounds have shown potent activity against Black Mold as well as other problematic
environmental molds. Polymers can be used as additives to paints, drywall, and other construction
materials to prevent growth of this troublesome and unhealthy fungus.
We do not currently plan to conduct advanced development of any medical device, industrial or
consumer application of our antimicrobial polymers. We intend to focus on generating a limited
core of basic enabling data to support our efforts to license our antimicrobial polymers to
out-licensing partners who will continue research and development efforts in developing marketable
products. We intend to pursue these out-licensing opportunities with minimal use of our resources.
Our antimicrobial polymers and the out-licensing opportunities they present serve as a possible
avenue to accelerate revenue generation, thereby helping us to fund development of our more
advanced product candidates, including PMX-60056 and PMX-30063.
Biodefense
In recent years, improving our nation's defense against bioterrorism has become an increasingly
important task. The Department of Homeland Security Appropriation Act signed by President Bush in
October 2003 includes $5.6 billion through 2013 for medical countermeasures against bioterrorism
threats. One of the major components of spending is focused on the development of antibiotic
compounds to treat biowarfare agents, including the highly infectious bacteria that cause anthrax,
tularemia and plague.
-30-
Antibiotic activity against anthrax and other biowarfare pathogens, with a mechanism by which
resistance is unlikely to develop, has commercial, medical and national security value.
Preliminary data from our preclinical experiments indicates that our product candidates have potent
activity against biowarfare agents that cause anthrax, tularemia and plague.
As a result of this preliminary data, we are pursuing funding from government sources, such as the
Department of Defense, the Defense Advanced Research Projects Agency and other military and
security agencies to further test and advance our product candidates for indications important to
national security. In November 2004, we received a Phase 1 SBIR grant of $168,000 to support
preliminary research in the biodefense area. In June 2009, we were awarded a $1.6 million contract
with the Defense Threat Reduction Agency to develop new defensin-mimetic antibiotic compounds to
combat biowarfare pathogens.
Anti-Tuberculosis
Tuberculosis is a highly contagious disease that affects one-third of the world's population today.
Approximately, 1.7 billion people are infected worldwide, including 15 million cases in the United
States. There are 8 million newly reported cases each year and 3.1 million people die from the
disease annually. Tuberculosis is the leading cause of death of women, AIDs patients and the young
in the world and there are more deaths from tuberculosis than any other single infectious disease.
Mycobacterium tuberculosis is the primary infectious agent for tuberculosis and drug resistance has
become a paramount issue, accounting for over 50 million infections. The drug-resistant forms of
the disease are significantly more difficult to treat, leading to higher mortality rates and
escalating costs of care. PolyMedix compounds, including PMX-10070, have demonstrated encouraging
in vitro specificity for tuberculosis versus mammalian cells.
Anti-Malaria Agents
Recent pre-clinical studies with PolyMedix's defensin mimetic antibiotics show encouraging activity
for the potential treatment of the malaria parasite, Plasmodium falciparum, the infectious agent
for the most prevalent and deadly forms of malaria. P. falciparum accounts for 80% of all human
malarial infections and 90% of deaths from such infections. More than 120 million clinical cases
of malaria and between 1 to 1.5 million deaths occur worldwide every year. Current therapies for
malaria are plagued by rapid resistance, which has become endemic in certain regions of the world.
Two of our compounds, PMX-70008 and PMX-30024, have demonstrated encouraging
in vitro
specificity
for the parasite versus mammalian cells.
Antifungal Agents
Our compounds, such as PMX-10098, have demonstrated promising activity against fungus strains that
often cause human infectious diseases. In preclinical experiments, certain of our compounds have
demonstrated effectiveness at inhibiting fungal growth and, for certain strains of fungus,
effectiveness was achieved at lower concentrations than that of fluconazole, a commonly used
antifungal agent. We intend to continue to investigate the potential of our compounds as novel
treatments for human fungal infections.
As a result of this preliminary data, we are pursuing funding from government sources, such as the
National Institutes of Health to further test and advance our product candidates. In May 2008, we
received a Phase 1 SBIR grant of $126,000 to support preliminary research for antifungal defensin
mimetic applications.
Angiogenesis Inhibitor
Our angiogenesis inhibitor compounds, such as PMX-20005, have demonstrated promising activity in
in
vitro
and animal models of inhibition of angiogenesis, the abnormal growth of blood vessels. An
angiogenesis inhibitor may be effective in treating age related macular degeneration (or AMD); a
common form of blindness caused by excessive and abnormal growth of blood vessels in the back of
the eye. If additional financing is secured, we hope to continue to investigate the potential of
our compounds as novel treatments of AMD and other angiogenesis related diseases.
Our Strategy
Our goal is to discover and develop novel agents for the treatment of serious infectious diseases
and cardiovascular disorders using biomimetics. To achieve this objective, we are implementing the
following strategies:
-31-
Advance the Development of our Lead Product Candidates
. We believe our current financial resources
provide us with sufficient funding to support the continued development of two programs through
Phase 1B clinical trials: PMX-30063 as our i.v. antibiotic product candidate and PMX-60056 as our
heptagonist product candidate. To advance other potential indications for our defensin-mimetics,
such as tuberculosis and malaria, or other programs into clinical development, we will require
additional financial resources.
Retain Rights to Market Hospital-Based Products to Hospitals in North America
. We have exclusive
commercial rights to all of our current programs and in addition have either exclusive ownership
rights or options to obtain exclusive license rights to any new products that result from our
academic relationships. Our objective is to generate maximum value from sales of our product
candidates if regulatory approval is achieved. To achieve this goal, we intend to build our own
specialty sales force to market hospital-based therapeutics, such as PMX-30063 and PMX-60056, to
hospitals in North America. Additionally, we plan to collaborate with third parties to
commercialize our products in the primary care markets and in international markets.
Pursue Near-Term Revenue Opportunities through Out-Licensing and Partnership Agreements
. We intend
to out-license selected product candidates from internal programs that are not part of our
strategic focus. For example, polymer derivatives of our antibiotic product candidates may be used
as additives to medical device, industrial and consumer materials to create self-sterilizing
surfaces and bactericidal products. We are pursuing strategic alliances with leading
pharmaceutical and biotechnology companies to design biomimetic compounds for targets selected by
our partners. Such collaborations could generate multiple sources of revenue, such as up-front
fees, research funding, milestone payments and royalties.
Utilize our Technology to Pursue Additional Drug Development Programs for Other Therapeutic Areas
.
Using our computational drug design tools, we have already identified potential product candidates
for other therapeutic areas, including angiogenesis inhibitors. If sufficient resources become
available, we plan to pursue development in these areas through partnerships or on our own in order
to expand our product pipeline.
Strengthen Collaborations with Existing Partners and Enter into Agreements with Potential New
Partners
. We have entered into collaborations and agreements with leading academic institutions.
We are actively pursuing additional agreements that would provide for license fees, research
funding and milestone payments and royalties to PolyMedix from research results and subsequent
product development and commercialization. Through our collaborations with academic institutions,
we gain cost effective access to new technologies and expertise important to the further
development of our technology and products. Our network of academic advisors and collaborators
consists of respected experts in computational chemistry and drug design technology.
Research and Development
We incurred research and development expenses of $1,675,000 and 2,726,000 for the three month
period ended March 31, 2009 and 2008, respectively, and $7,401,000, $9,328,000 and $3,306,000 for
the years ended December 31, 2008, 2007 and 2006, respectively.
Proprietary Rights
University of Pennsylvania
In January 2003, we entered into a Patent License Agreement with the University of Pennsylvania, or
Penn. Under the terms of the agreement, we were granted an exclusive, worldwide royalty-bearing
license to use, make and sell products utilizing seven of Penn's issued patents or pending patent
applications for the life of such patents. These patents and applications cover our clinical and
preclinical stage product candidates, as well as future product candidates utilizing the licensed
patents and applications. The licensed patents and applications include:
Ø
two issued U.S. patents and four pending U.S. patent applications covering the
composition of matter on antimicrobial compounds, including small molecules,
oligomers and polymers. The first issued patent expires in 2017, the second issued
patent expires in 2022, and the other patents, if issued, will expire at varying
times from 2022 to 2025. There are corresponding foreign applications to one of
the issued U.S. patents and to each of the four pending U.S. patent applications.
Ø
one U.S. patent application and two corresponding foreign patent applications
covering polycationic compounds and their use for treating cancer. The patent, if
issued, will expire in 2026.
-32-
Penn may terminate the licenses if:
Ø
we are more than 60 days late in paying to Penn royalties, expenses, or any
other undisputed amounts due under the agreement and we do not pay such amounts
within 30 days' written notice of such delinquency;
Ø
we become insolvent, enter into bankruptcy or a similar proceeding or call a
meeting of our creditors in order to arrange adjustment of our debts; or
Ø
we otherwise materially breach the agreement.
If this license agreement is properly terminated by Penn, we may not be able to execute our
strategy to develop and commercialize our i.v. antibiotic product candidate, our heptagonist
product candidate, our oral antibiotic product candidates, our antimicrobial polymers for
biomaterials applications, or to develop and commercialize future product candidates utilizing the
licensed patents.
We also entered into a Software License Agreement with Penn in May 2003. Under the terms of the
agreement, Penn granted us a non-exclusive, royalty-free license to use three software programs and
an exclusive, royalty-free license to three patent applications relating to such software programs.
The software programs and patents covered by the agreement include a suite of proprietary
computational algorithms that we use in the development, refinement and testing of our product
candidates. The licenses expire contemporaneously with our Patent License Agreement with Penn.
The patents relating to the software licenses, if issued, will expire at varying times in 2023 and
2024. Penn may terminate the agreement if:
Ø
we are more than 60 days late in paying to Penn any undisputed amounts due under
the agreement and we do not pay such amounts within 30 days' written notice of such
delinquency;
Ø
we become insolvent, enter into bankruptcy or a similar proceeding or call a
meeting of our creditors in order to arrange adjustment of our debts; or
Ø
we otherwise materially breach the agreement.
If this license agreement is properly terminated by Penn, our ability to advance our current
product candidates or develop new product candidates may be adversely affected.
We also sponsor certain research by Dr. William DeGrado, a Professor of Biochemistry and Biophysics
at Penn. Any discoveries made under this arrangement are intended to be covered by our Patent
License Agreement with Penn or a new license agreement with Penn containing substantially the same
terms. Dr. DeGrado's current research for us focuses on further development of our antimicrobial
and hepatagonists applications. For these services, we pay Dr. DeGrado a consulting fee of $7,000
per month. In addition, we have granted stock options in the past to Dr. DeGrado. Dr. DeGrado
also serves as Chairman of our Scientific Advisory Board. Either we or Dr. DeGrado may terminate
his consulting arrangement at any time. If Dr. DeGrado terminates his consulting arrangement, our
ability to advance our antimicrobial and hepatagonists programs may be adversely affected.
University of Massachusetts
In January 2004, we entered into a Sponsored Research Agreement with the University of
Massachusetts, or UMass. Under the terms of this agreement, as amended, we have agreed to sponsor
certain research of Dr. Gregory Tew, an Assistant Professor in the Polymer Science and Engineering
Department at UMass, through March 2009, and have the exclusive option to license any intellectual
property generated by such research. We may exercise this option by issuing 7,500 shares of our
common stock to UMass for each $100,000 of research conducted by Dr. Tew. During 2007, we issued
12,500 shares to UMass in connection with this agreement. Dr. Tew's research focuses on methods to
add our antibiotic agents to biomaterials, testing the physical properties of our antibiotic agents
and safety evaluation of our antimicrobial agents. The agreement will terminate if Dr. Tew leaves
UMass or ceases work in the antimicrobial field of research. In addition, UMass may terminate the
agreement including any licenses granted thereunder if we materially breach the agreement,
including by nonpayment of amounts due under the agreement. If the Sponsored Research Agreement or
any license thereunder is properly terminated by UMass, our ability to advance our antimicrobial
program or develop new product candidates may be adversely affected.
In January 2005, we entered into an Exclusive License Agreement with UMass, pursuant to which UMass
granted us an exclusive, worldwide license to use, make and sell products under one U.S. patent
application and seven corresponding foreign patent applications covering polynorborene co-polymers
and methods of use for the life of such patents. The patents, if issued, will expire in 2025.
UMass may terminate the license agreement if we materially breach the agreement, including by
nonpayment of amounts due under the agreement or in the case of a change in our ownership or
control. If the license agreement is properly terminated by UMass, we may not be able
-33-
to execute our strategy to develop and commercialize our antimicrobial polymers for biomaterials
applications or to develop and commercialize future product candidates utilizing the licensed
patents.
Our Technology
We initiate the design of our product candidates using our proprietary computational drug design
technology that is licensed from Penn. There are several computational methods used to assist the
drug design process, which includes the capabilities to:
Ø
the ability to model molecular interactions in the presence of solvent, such as
an aqueous environment, rather than in a vacuum, which more closely resembles the
real-life characteristics of how molecules interact with each other;
Ø
the ability to simulate molecular interactions for hundreds of microseconds
which are time frames much longer than possible with previous molecular dynamics
technologies; and
Ø
the ability to design compounds which target the bacterial cell membrane,
instead of a biochemical cell target.
Our innovative and proprietary
de novo
drug design approach starts with protein targets with
well-understood physical structures and biological activity, and designs small molecule compounds
that mimic or regulate the activity of these targets. This biomimetic approach of regulating
biological activities by mimicking nature itself with synthetic small molecule compounds allows us
to rationally design novel product candidates that we believe greatly improve the efficiency of new
drug discovery.
Intellectual Property
We rely on a combination of patents and trade secrets, as well as confidentiality and non-use
agreements to protect our intellectual property. Our patent strategy is designed to facilitate
commercialization of our current and future product candidates; and create barriers to entry. Our
intellectual property portfolio currently consists of three provisional applications, two patent
applications (U.S. and foreign) owned by us, two issued U.S. patents we exclusively license from
Penn and eight U.S. patent applications we exclusively license from Penn and/or UMass (as well as
foreign counterparts thereof). Our patent applications and the ten issued patents and pending
patent applications we exclusively license from Penn and/or UMass include:
Ø
seven U.S. patent applications that have been filed (as well as foreign
counterparts thereof) covering the composition of matter on 11 classes of
antimicrobial compounds, including small molecules, oligomers and polymers. Two
U.S. patents have been granted on two of these applications;
Ø
one patent application covering the use of claimed oligomers for treating
ophthalmic and otic infections;
Ø
one patent application covering the use of claimed oligomers for treating mycobacterium;
Ø
one patent application covering the use of claimed oligomers for treating malarial infections;
Ø
one patent application covering synthetic mimetics of host defense proteins and their use;
Ø
one patent application covering the combination of claimed compounds and
polymers with sesquiterpenoid enhancing agents;
Ø
one patent application covering novel angiogenesis inhibitors with a wide range
of therapeutic uses;
Ø
one patent application covering the use of claimed oligomers for treating
cancer; and
Ø
three patent applications covering our proprietary, computational algorithms and
models, such as the coarse grain model and a new force field. These patent
applications do not disclose the specific computer code, which either will be
copyrighted or kept as a proprietary trade secret.
-34-
We expect to continue to expand our intellectual property portfolio with additional filings of both
composition of matter and method of use patent applications. A number of new patent applications
are currently in process.
We attempt to protect our trade secrets by entering into confidentiality agreements with third
parties, employees and consultants. Our employees and consultants also sign agreements requiring
that they assign to us their interests in patents and other intellectual property arising from
their work for us. All employees sign an agreement not to engage in any conflicting employment or
activity during their employment with us and not to disclose or misuse confidential information.
In addition, we have received trademark protection for "PolyMedix."
COMPETITION
Defensin Mimetic Antibiotic Product Candidate Competition
The pharmaceutical industry is highly competitive. We face significant competition from
pharmaceutical companies and biotechnology companies that are researching and selling products
designed to treat bacterial infections. Many major pharmaceutical companies, such as
GlaxoSmithKline, Pfizer, Bayer, Merck and Sanofi Aventis have already established significant
positions in the antibiotic market. Additionally, many smaller companies, such as Cubist
Pharmaceuticals, Oscient Therapeutics, Ceragenix, NovaBay Pharmaceuticals, Inc. and Inhibitex have
either marketed antibiotics and/or are attempting to enter this market by developing novel and more
potent antibiotics that are intended to be effective against drug-resistant bacterial strains.
These companies, as well as potential entrants into the antibiotic market, have longer operating
histories, larger customer or use bases, greater brand recognition and significantly greater
financial, marketing and other resources than we do. Many of these current or potential
competitors can devote substantially greater resources to the development and promotion of their
products than we can.
Additionally, there has been consolidation within the pharmaceutical industry and larger,
well-established and well-financed entities may continue to acquire, invest in or form joint
ventures to gain access to additional technology or products. Any of these trends would increase
the competition we face and could adversely affect our business and operating results.
Heptagonist Product Candidate Competition
There are currently no products available in the marketplace as an antidote for and antagonist to
LWMH, while protamine is the only available antidote for and antagonist to UFH and, as such,
protamine currently dominates this market. Because of protamine's potentially problematic side
effect profile, we believe that our heptagonist products may penetrate into the UFH antagonist
market.
Government Regulation
Government authorities in the U.S., at the federal, state, and local level, and foreign countries
extensively regulate, among other things, the following areas relating to our product candidates:
Ø
research and development;
Ø
testing, manufacture, labeling and distribution;
Ø
advertising, promotion, sampling and marketing; and
Ø
import and export.
All of our product candidates will require regulatory approvals by government agencies prior to
commercialization, but none of our product candidates has received these approvals. In particular,
human therapeutic products are subject to rigorous preclinical and clinical trials to demonstrate
safety and efficacy and other approval procedures of the FDA and similar regulatory authorities in
foreign countries. Various federal, state, local, and foreign statutes and regulations also govern
testing, manufacturing, labeling, distribution, storage and record keeping related to such products
and their promotion and marketing. The process of obtaining these approvals and the compliance
with federal, state, local, and foreign statutes and regulations require the expenditure of
substantial time and financial resources. In addition, the current regulatory and political
environment at the FDA could lead to increased testing and data requirements that could impact
regulatory timelines and costs.
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U.S. Government Regulation
In the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act and
implementing regulations. If we fail to comply with the applicable requirements at any time during
the product development process, approval process, or after approval, we may become subject to
administrative or judicial sanctions. These sanctions could include:
Ø
refusal to approve pending applications;
Ø
withdrawals of approvals;
Ø
clinical holds;
Ø
warning letters;
Ø
product recalls and product seizures; and
Ø
total or partial suspension of our operations, injunctions, fines, civil
penalties or criminal prosecution.
Any agency enforcement action could have a material adverse effect on us.
Currently there is a substantial amount of congressional and administration review of the FDA and
the regulatory approval process for drug candidates in the U.S. As a result, there may be
significant changes made to the regulatory approval process in the U.S.
The steps required before a drug may be marketed in the U.S. include:
Ø
preclinical laboratory tests, animal studies and formulation studies;
Ø
submission to the FDA of an IND, which must become effective before human
clinical trials may begin;
Ø
execution of adequate and well-controlled clinical trials to establish the
safety and efficacy of the product for each indication for which approval is
sought;
Ø
submission to the FDA of an NDA, or biologics license application, or BLA;
Ø
satisfactory completion of an FDA inspection of the manufacturing facility or
facilities at which the product is produced to assess compliance with cGMP; and
Ø
FDA review and approval of the NDA or BLA, or any supplements thereto,
including, if applicable, a determination of its controlled substance schedule.
Preclinical studies generally are conducted in laboratory animals to evaluate the potential safety
and activity of a product. Violation of the FDA's good laboratory practices regulations can, in
some cases, lead to invalidation of the studies, requiring these studies to be replicated. In the
U.S., drug developers submit the results of preclinical trials, together with manufacturing
information and analytical and stability data, to the FDA as part of the IND, which must become
effective before clinical trials can begin in the U.S. An IND becomes effective 30 days after
receipt by the FDA unless before that time the FDA raises concerns or questions about the proposed
clinical trials outlined in the IND. In that case, the IND sponsor and the FDA must resolve any
outstanding FDA concerns or questions before clinical trials can proceed. If these concerns or
questions are unresolved, the FDA may not allow the clinical trials to commence.
Clinical trials involve the administration of the investigational product candidate or approved
products to human subjects under the supervision of qualified investigators. Clinical trials are
conducted under protocols detailing, among other things, the objectives of the study and the
parameters to be used in assessing the safety and the effectiveness of the drug. Typically,
clinical evaluation involves a time-consuming and costly three-phase sequential process, but the
phases may overlap. Each trial must be reviewed, approved and conducted under the auspices of an
independent institutional review board, and each trial must include each patient's informed
consent. The following sets forth a brief description of the typical phases of clinical trials:
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Phase 1
Refers typically to closely monitored clinical trials and includes
the initial introduction of an investigational new drug into human
patients or healthy volunteer subjects. Phase 1 clinical trials
are designed to determine the safety, metabolism and pharmacologic
actions of a drug in humans, the potential side effects of the
product candidates associated with increasing drug doses and, if
possible, to gain early evidence of the product candidate's
effectiveness. Phase 1 trials also include the study of
structure-activity relationships and mechanism of action in
humans, as well as studies in which investigational drugs are used
as research tools to explore biological phenomena or disease
processes. During Phase 1 clinical trials, sufficient information
about a drug's pharmacokinetics and pharmacological effects should
be obtained to permit the design of well-controlled,
scientifically valid Phase 2 studies. The total number of
subjects and patients included in Phase 1 clinical trials varies,
but is generally in the range of 20 to 80 people.
Phase 2
Refers to controlled clinical trials conducted to evaluate
appropriate dosage and the effectiveness of a drug for a
particular indication or indications in patients with a disease or
condition under study and to determine the common short-term side
effects and risks associated with the drug. These clinical trials
are typically well controlled, closely monitored and conducted in
a relatively small number of patients, usually involving no more
than several hundred subjects. Phase 2 studies can be sequenced
as Phase 2a or Phase 2b.
Phase 3
Refers to expanded controlled and uncontrolled clinical trials.
These clinical trials are performed after preliminary evidence
suggesting effectiveness of a drug has been obtained. Phase 3
clinical trials are intended to gather additional information
about the effectiveness and safety that is needed to evaluate the
overall benefit-risk relationship of the drug and to provide an
adequate basis for physician labeling. Phase 3 trials usually
include from several hundred to several thousand subjects.
Phase 4
Refers to trials conducted after approval of a new drug and which
explore approved uses and approved doses of the product. These
trials must also be approved and conducted under the auspices of
an institutional review board. Phase 4 studies may be required as
a condition of approval.
Clinical testing may not be completed successfully within any specified time period, if at all.
The FDA closely monitors the progress of each of the first three phases of clinical trials that are
conducted in the U.S. and may, at its discretion, reevaluate, alter, suspend or terminate the
testing based upon the data accumulated to that point and the FDA's assessment of the risk/benefit
ratio to the patient. The FDA can also provide specific guidance on the acceptability of protocol
design for clinical trials. The FDA or we may suspend or terminate clinical trials at any time for
various reasons, including a finding that the subjects or patients are being exposed to an
unacceptable health risk. The FDA can also request additional clinical trials be conducted as a
condition to product approval. During all clinical trials, physicians monitor the patients to
determine effectiveness and to observe and report any reactions or other safety risks that may
result from use of the drug candidate.
Assuming successful completion of the required clinical trial, drug developers submit the results
of preclinical studies and clinical trials, together with other detailed information including
information on the chemistry, manufacture and control of the product, to the FDA, in the form of an
NDA or BLA, requesting approval to market the product for one or more indications. In most cases,
the NDA/BLA must be accompanied by a substantial user fee. The FDA reviews an NDA/BLA to
determine, among other things, whether a product is safe and effective for its intended use.
Before approving an application, the FDA will inspect the facility or facilities where the product
is manufactured. The FDA will not approve the application unless cGMP compliance is satisfactory.
The FDA will issue an approval letter if it determines that the application, manufacturing process
and manufacturing facilities are acceptable. If the FDA determines that the application,
manufacturing process or manufacturing facilities are not acceptable, it will outline the
deficiencies in the submission and will often request additional testing or information.
Notwithstanding the submission of any requested additional information, the FDA ultimately may
decide that the application does not satisfy the regulatory criteria for approval and refuse to
approve the application by issuing a "not approvable" letter.
The testing and approval process requires substantial time, effort and financial resources, which
may take several years to complete. The FDA may not grant approval on a timely basis, or at all.
We may encounter difficulties or unanticipated costs in our efforts to secure necessary
governmental approvals, which could delay or preclude us from marketing our products. Furthermore,
the FDA may prevent a drug developer from marketing a product under a label for its desired
indications or place other conditions, including restrictive labeling, on distribution as a
condition of any approvals, which may impair commercialization of the product. After approval,
some types of changes to the approved product, such as adding new indications, manufacturing
changes and additional labeling claims, are subject to further FDA review and approval.
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If the FDA approves the NDA/BLA, the drug can be marketed to physicians to prescribe in the U.S.
After approval, the drug developer must comply with a number of post-approval requirements,
including delivering periodic reports to the FDA, submitting descriptions of any adverse reactions
reported, biological product deviation reporting, and complying with drug sampling and distribution
requirements. The holder of an approved NDA/BLA is required to provide updated safety and efficacy
information and to comply with requirements concerning advertising and promotional labeling. Also,
quality control and manufacturing procedures must continue to conform to cGMP after approval. Drug
manufacturers and their subcontractors are required to register their facilities and are subject to
periodic unannounced inspections by the FDA to assess compliance with cGMP, which imposes
procedural, and documentation requirements relating to manufacturing, quality assurance and quality
control. Accordingly, manufacturers must continue to expend time, money and effort in the area of
production and quality control to maintain compliance with cGMP and other aspects of regulatory
compliance. The FDA may require post-market testing and surveillance to monitor the product's
safety or efficacy, including additional studies to evaluate long-term effects.
In addition to studies requested by the FDA after approval, a drug developer may conduct other
trials and studies to explore use of the approved drug for treatment of new indications, which
require submission of a supplemental or new NDA and FDA approval of the new labeling claims. The
purpose of these trials and studies is to broaden the application and use of the drug and its
acceptance in the medical community.
Foreign Regulation
Whether or not we obtain FDA approval for a product, we must obtain approval of a clinical trial or
product by the comparable regulatory authorities of foreign countries before we can commence
clinical trials or marketing of the product in those countries. The approval process varies from
country to country, and the time may be longer or shorter than that required for FDA approval. The
requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement
also vary greatly from country to country. Although governed by the applicable country's
regulations, clinical trials conducted outside of the U.S. typically are administered with the
three-phase sequential process that is discussed above under "U.S. Government Regulation."
However, the foreign equivalent of an IND is generally not a prerequisite to performing pilot
studies or Phase 1 clinical trials.
Furthermore, regulatory approval of prices is required in most countries other than the U.S. We
face the risk that the resulting prices would be insufficient to generate an acceptable return to
us or our collaborators.
Business History
PolyMedix, Inc. (formerly known as BTHC II Acquisition Corp.) was originally organized in the State
of Texas as BTHC II LLC, a public shell company. On September 29, 2004, BTHC II LLC and its sister
companies filed an amended petition under Chapter 11 of the United States Bankruptcy Code. On
November 22, 2004, the court approved BTHC II LLC's Amended Plan of Reorganization. On March 24,
2005, and in accordance with its Amended Plan of Reorganization, BTHC II LLC changed its state of
organization from Texas to Delaware by merging with and into BTHC II Acquisition Corp., a Delaware
corporation formed solely for the purpose of effecting the reincorporation. After this merger,
BTHC II Acquisition Corp. became the public shell company.
PolyMedix Pharmaceuticals, Inc. (formerly known as PolyMedix, Inc.) was incorporated on August 8,
2002 in the State of Delaware as PolyMedix, Inc. to serve as a biotechnology company focused on
treating infectious diseases. On October 6, 2005, the former BTHC II Acquisition Corp. entered
into an Agreement and Plan of Merger and Reorganization with the former PolyMedix, Inc., pursuant
to which the stockholders of the former PolyMedix, Inc. exchanged their equity ownership interests
in the former PolyMedix, Inc. for an aggregate 94% equity ownership interest in the former BTHC II
Acquisition Corp. Pursuant to the Agreement and Plan of Merger and Reorganization, the former
PolyMedix, Inc. merged with a wholly-owned subsidiary of the former BTHC II Acquisition Corp. and,
as such, became a wholly-owned subsidiary of the former BTHC II Acquisition Corp.
At the time of the merger, the former BTHC II Acquisition Corp. had no operations and no assets or
liabilities. Because the stockholders of the former PolyMedix, Inc. exchanged their equity
ownership interests in the former PolyMedix, Inc. for an aggregate 94% equity ownership interest in
the former BTHC II Acquisition Corp., the former PolyMedix, Inc. was, for accounting purposes, the
surviving entity of the merger. Accordingly, all financial information included in this report for
the periods prior to the merger is for the former PolyMedix, Inc.
On February 24, 2006, the former BTHC II Acquisition Corp. changed its corporate name to PolyMedix,
Inc., and the former PolyMedix, Inc. changed its corporate name to PolyMedix Pharmaceuticals, Inc.
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EMPLOYEES
We currently have 16 employees, including one M.D. and six employees with Ph.D. degrees. Nine of
our employees are focused on research and development and seven are focused on general
administration. We also utilize a number of consultants to assist with research and development
and commercialization activities.
DESCRIPTION OF PROPERTY
We currently lease 24,223 square feet of office and laboratory facilities at 170 N. Radnor-Chester
Road, Suite 300 in Radnor, Pennsylvania, pursuant to a twelve-year lease. All of our tangible
personal property, consisting mainly of computers, office furniture and lab equipment, is located
at our leased office and laboratory facilities and is in good operating condition and repair
(subject to normal wear and tear).
LEGAL PROCEEDINGS
To our knowledge, we are not a party to any pending or threatened material legal proceedings. To
our knowledge, no governmental authority is contemplating commencing a legal proceeding in which we
would be named as a party.
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MANAGEMENT
The following table sets forth the respective names, ages and positions of our executive
officers and directors as of June 9, 2009:
Name
Age
Position(s)
Nicholas Landekic
50
President, Chief Executive Officer and Director
James Gregory Ford
47
Vice President, Business Development
Bozena Korczak
56
Vice President, Drug Development
R. Eric McAllister, M.D., Ph.D.
67
Vice President, Clinical Development and Chief
Medical Officer
Richard W. Scott, Ph.D.
56
Vice President, Research
Edward F. Smith
38
Vice President, Finance, Chief Financial
Officer and Secretary
Frank P. Slattery, Jr.
71
Chairman of the Board of Directors
Brian Anderson
62
Director
Richard W. Bank, M.D.
75
Director
William N. Kelley, M.D.
69
Director
Michael E. Lewis, Ph.D.
57
Director
Stefan Loren, Ph.D.
45
Director
Shaun F. O'Malley
73
Director
Douglas J. Swirsky
39
Nominee for Director at our 2009 Annual
Meeting of Stockholders
Executive Officers and Directors
Nicholas Landekic
has served as
President, Chief Executive Officer and Director
of PolyMedix, Inc.
since November 2005 and of PolyMedix Pharmaceuticals, Inc. where he served in the same capacity
since inception in August 2002. Mr. Landekic has more than 20 years of pharmaceutical experience.
From 2000 to 2002, he was President and Chief Executive Officer of Locus Discovery. From 1995 to
2000, Mr. Landekic was Senior Vice President of Corporate Development & Investor Relations at
Guilford Pharmaceuticals. From 1991 to 1995, Mr. Landekic served as Senior Director of Business
Development at Cephalon and, from 1988 to 1991, served as Senior Manager for Strategic Marketing at
Bristol-Myers Squibb. He also held positions in Finance and Business Development at Johnson &
Johnson Corporation (McNeil Pharmaceutical) from 1985 to 1988 and positions in the research
laboratories at the Mt. Sinai Medical Center from 1982 to 1983. Mr. Landekic received an M.B.A.
from the State University of New York at Albany, an M.A. in Biology from Indiana University and a
B.S. in Biology from Marist College.
J. Gregory Ford
has served as
Vice President, Business Development
of PolyMedix, Inc. since
December 2008. Mr. Ford has over 20 years of biotechnology and pharmaceutical experience. Prior
to joining PolyMedix, Mr. Ford was Vice President, Business Development and Strategic Planning for
CollaGenex Pharmaceuticals, Inc., from August 2004 until November 2008. Prior to CollaGenex
Pharmaceuticals, Inc., Mr. Ford served as Vice President, Global Business Development of SkyePharma
US Inc. from February 2003 to April 2004. Prior to SkyePharma US Inc., Mr. Ford served in various
positions of increasing responsibility at SkyePharma Canada, Inc. and its predecessor RTP Pharma
Inc., Boehringer Ingelheim Pharmaceuticals, Inc., Mylan Laboratories, Inc., and Mylan
Pharmaceuticals, Inc. Mr. Ford received an M.B.A and a B.S. in Industrial Engineering from West
Virginia University.
Bozena Korczak, Ph.D.
has served as
Vice President, Drug Development
of PolyMedix, Inc. since
November 2007. Dr. Korczak has over 20 years of experience in discovery, pre-clinical and clinical
research at burgeoning biotechnology organizations. Prior to joining PolyMedix, Dr. Korczak was a
consultant for PharmaReach, Ltd., a private drug development consulting company, from October 2005
to November 2007. From September 2001 to October 2005, Dr. Korczak was Vice President of Research
and Development of Cytochroma, Inc., a private biotechnology company. Prior to Cytochroma, Inc.,
Dr. Korczak served in various positions of increasing responsibility at Glycodesign, Inc., Allelix
Biopharmaceutical, Inc. and Mount Sinai Hospital. She is an author of thirty-five peer review
scientific papers and holds a Ph.D. in biochemistry from the Polish Academy of Science.
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R. Eric McAllister, M.D., Ph.D.
has served as
Vice President, Clinical Development and Chief
Medical Officer
of PolyMedix, Inc. since November 2006. Dr. McAllister has over 25 years of
industry and clinical trials experience, most recently from October 2004 to October 2006 as Sr.
Vice President of Clinical Development at CombinatoRx Inc. Prior to that, from May 2002 to October
2004, Dr. McAllister was Vice President, Clinical Research with Sicor Pharmaceuticals, Inc. Dr.
McAllister has held various clinical development positions with TAP Pharmaceuticals, Inc.,
Cholestech Inc., Bristol-Myers Squibb, Co., G.D. Searle and Company, and Syntex Pharmaceuticals
Ltd. Dr. McAllister also spent seven years as a clinical investigator with MedStudies. He has
worked on the development of such major pharmaceutical products as Lupron, Pravachol, Capoten,
Kerlone, Cardene, Calan, Avandia, Actos, Teveten, and Atacand. Dr. McAllister received his M.D.
from Dalhousie University, and D. Phil. (Ph.D.) degree from Oxford University, and was also a
Rhodes Scholar.
Richard W. Scott, Ph.D.
has served as
Vice President, Research
of PolyMedix, Inc. since November
2005 and of PolyMedix Pharmaceuticals, Inc. since November 2002. Dr. Scott has approximately 20
years of biopharmaceutical industry experience. Most recently, he was Vice President of Biology at
Cephalon, Inc. where he held positions of increasing responsibility from 1991 to 2001. From 1985
to 1990, Dr. Scott worked at the research laboratories of DuPont and Company. Dr. Scott has
authored more than 45 papers and book chapters, and is named on six patents. Dr. Scott holds a
Ph.D. in Microbiology from the University of Pennsylvania and a B.S. in Biology from Muhlenberg
College.
Edward F. Smith
, has served as
Vice President, Finance and Chief Financial Officer
of PolyMedix,
Inc. since January 2006. Mr. Smith has approximately 15 years of combined biopharmaceutical
industry and financial management experience. From 2000 to 2005, he was Executive Director of
Finance at InKine Pharmaceutical Company, Inc. (acquired by Salix Pharmaceuticals, Ltd. in 2005).
From 1993 to 1999, Mr. Smith held various positions of increasing responsibility in public
accounting, most recently as a manager in the audit practice at Deloitte & Touche LLP. Mr. Smith
is licensed as a Certified Public Accountant in Pennsylvania and holds a B.S. degree in Business
Administration from the University of Hartford.
Frank Slattery, Jr.
has served as
Chairman of the Board of Directors
of PolyMedix, Inc. since
November 2005 and was a co-founder of PolyMedix Pharmaceuticals, Inc. where he served in the same
capacity since inception in August 2002. Frank Slattery is the President and founder of Quintus
Corporation, a consulting company, a position he has held since 1995, and Executive Director and
Chief Executive Officer of the Philadelphia Orchestra, a position he has held since January 2009.
Mr. Slattery was the President, Chief Executive Officer and Director of LFC Financial Corp. from
1969 to 1994. Mr. Slattery was formerly Chairman of the Main Line Health Systems, Inc. and has
founded and currently serves as the Chairman of the Board of Directors of several privately held
companies, including GelMed Inc., Probaris Technologies, Inc., Franklin Fuel Cells, Inc., Knite,
Inc., MinusNine Technologies, Inc. and NanoSelect, Inc. He also currently serves as Vice Chairman
and Trustee of the Jefferson Health Systems and a director of Clarient, Inc., a publicly held
company. Mr. Slattery holds an A.B. from Princeton University and a J.D. from the Law School of
the University of Pennsylvania.
Brian Anderson
has served as a
Director
of PolyMedix, Inc. since January 2008. Since March 2007 he
has served as an advisor to companies involved in the health care industry. From January 2006
until March 2007 Mr. Anderson was employed by Alkermes, Inc., in a market development capacity.
Prior to that, from April 2004 to September 2005, Mr. Anderson was Chief Business officer for
MediciNova,Inc., a publicly traded specialty pharmaceutical company. Mr. Anderson was an advisor
to Montridge, Inc., a boutique investor relations firm from September 2002 to January 2004. He was
President and CEO of Cognetix, Inc., a biotechnology company, from 1998 to 2002. Prior to that,
from 1995 to 1998, Mr. Anderson was Senior Vice President for Commercial Development at Indevus
(formerly Interneuron) Pharmaceuticals, a publicly traded biopharmaceutical company. Mr. Anderson
has held various senior level positions in sales, marketing and business development at
Bristol-Myers Squibb and Pharmacia (later Pharmacia & Upjohn). Mr. Anderson graduated from the
University of Manitoba where he received his Bachelors degree.
Richard W. Bank, M.D.
has served as a
Director
of PolyMedix, Inc. since July 2008. Dr. Bank is
currently the President of BioVest Advisors, a consulting company, and has served in such capacity
since July 2006. Dr. Bank has served as Senior Portfolio Manager, Managing Director, and Senior
Vice President of the Liberty View Health Sciences Fund, a division of Liberty View Capital
Management, a Lehman Brothers company, from July 2004 to July 2006. Dr. Bank has served as
President and Managing Director of First-Tier Biotechnology Partners from February 1995 until its
acquisition by Lehman Brothers in July 2004. From February 1995 through April 1996, Dr. Bank
served as President and Secretary of Biomedical Sciences, Incorporated. He has also served as
President and Secretary of BioVest Health Sciences, Incorporated since its organization in April
1996 to July 2004. Dr. Bank was Senior Research Analyst Director/Biotechnology SBC Warburg Dillon
Read from 1998 to 1999. He was also Entrepreneur-In-Residence in Life Sciences for Tucker Anthony
Sutro for 2000 through 2001. Dr. Bank has served as Professor of Medicine at the University of
Southern California and was Medical Commissioner for the 1984 Olympic Games. Dr. Bank received his
B.S. from Washington & Lee University and his M.D. from Finch University of Health Sciences, The
Chicago Medical School.
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William N. Kelley, M.D.
has served as a
Director
of PolyMedix, Inc. since November 2005 and of
PolyMedix Pharmaceuticals, Inc. since August 2005. Dr. Kelley will not be standing for re-election
to the Board of Directors at the Company's 2009 Annual Meeting of Stockholders on June 30, 2009.
Dr. Kelley has served as Professor of Medicine and Professor of Biochemistry and Biophysics at the
School of Medicine of the University of Pennsylvania since 1989. From 1989 to 2000, Dr. Kelley
served as Executive Vice President of the University of Pennsylvania with responsibilities as Chief
Executive Officer for the Medical Center (and Health Systems upon its formation in 1993), Dean of
the School of Medicine, and the Robert G. Dunlop Professor of Medicine and Biochemistry and
Biophysics. From 1975 to 1989, Dr. Kelley was the John G. Searle Professor and Chair of the
Department of Internal Medicine and Professor of Biological Chemistry at the University of
Michigan. Prior to joining the faculty at the University of Michigan, Dr. Kelley was Professor of
Medicine at Duke University Medical Center. Dr. Kelley currently serves as a director of Merck &
Co., Beckman Coulter, Inc. and GenVec, Inc., which are all publicly held companies, and Advanced
Bio-Surfaces, Inc., a privately held company. During his career, Dr. Kelley has also served on the
editorial boards of 13 medical journals and his bibliography includes over 260 publications,
including 17 books. Dr. Kelley holds an M.D. from Emory University.
Michael E. Lewis, Ph.D.
has served as a
Director
of PolyMedix, Inc. since November 2005 and of
PolyMedix Pharmaceuticals, Inc. since its inception. Dr. Lewis has more than 30 years of
scientific experience in academic and government laboratories and in several major pharmaceutical
and biotechnology companies. Since 1994, Dr. Lewis has served as President of BioDiligence
Partners, Inc., where he co-founded three other biotechnology companies, Cara Therapeutics, Inc.,
Arena Pharmaceuticals, Inc. and Adolor Corporation. Dr. Lewis has served as Chief Scientific
Advisor and a director of Cara Therapeutics, Inc. since its inception in 2004. He has also served
as a director of Aeolus Pharmaceuticals, Inc. since 2004. After serving as Chief Scientific
Advisor of Adolor Corporation from 1994 to 1997, Dr. Lewis served as Chief Scientific Advisor of
Arena Pharmaceuticals, Inc. from 1997 to 2003, and as a director from 1997 to 2000. Dr. Lewis is a
co-founder of Cephalon, Inc. and served at Cephalon as Senior Scientist, Director of Pharmacology,
and then as Senior Director of Scientific Affairs from 1988 to 1993. He supervised a molecular
pharmacology research laboratory at the E.I. DuPont Co. from 1985 to 1987, and received
postdoctoral training in pharmacology at the National Institutes of Health, the University of
Michigan, and at the University of Cambridge. He received a Ph.D. from Clark University in 1977.
Stefan D. Loren, Ph.D.
has served as a
Director
of PolyMedix, Inc. since July 2008. Dr. Loren is
currently a Managing Director of Westwicke Partners, a consulting company and a consultant to MTB
Investment Advisors, a family of equity funds, and has held these positions since August, 2008.
Prior to that, Dr. Loren was Analyst/Portfolio Manager with Perceptive Advisors, a health care
hedge fund, from May 2007 to August, 2008 and MTB Investment Advisors, a family of equity funds,
from August 2005 to May 2007. From July 1997 to August 2005, Dr. Loren was a Managing Director in
the healthcare group at Legg Mason. Prior to that, Dr. Loren was a Research Chemist at the
advanced technologies division of Abbott Laboratories and a research fellow at the Scripps Research
Institute. Dr. Loren received his B.A. from the University of California, San Diego, and his Ph.D.
from University of California, Berkeley.
Shaun F. O'Malley
has served as a
Director
of PolyMedix, Inc. since January 2006. Mr. O'Malley is
currently the Chairman Emeritus of Price Waterhouse LLP, a title he has held since July 1995.
Prior to 1995, he served as Chairman and Senior Partner of Price Waterhouse LLP. He currently
serves as a member of the Boards of Directors of the Finance Company of Pennsylvania, Monell
Chemical Senses Center and The Philadelphia Contributionship. Mr. O'Malley holds a B.S. in
Economics from the Wharton School of the University of Pennsylvania.
Douglas J. Swirsky
has been nominated to stand for election as a
Director
of PolyMedix, Inc. at the
Company's 2009 Annual Meeting of Stockholders on June 30, 2009. Mr. Swirsky presently serves as
Senior Vice President, Chief Financial Officer, Treasurer, and Corporate Secretary of GenVec, Inc.,
a biopharmaceutical company, a position he has held since 2006. Prior to joining GenVec, Mr.
Swirsky was a Managing Director and the Head of Life Sciences Investment Banking at Stifel Nicolaus
and held the same position at Legg Mason prior to Stifel Financial's acquisition of the Legg Mason
Capital Markets business in 2005. Mr. Swirsky, a Certified Public Accountant and a CFA
charterholder, has also previously held investment banking positions at UBS, PaineWebber, and
Morgan Stanley. His experience also includes positions in public accounting and consulting. Mr.
Swirsky received his B.S. in Business in Administration from Boston University and his M.B.A. from
the Kellogg School of Management at Northwestern University.
Executive officers of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc. are appointed by the
board of directors of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc., respectively. The Chief
Executive Officer, Treasurer and Secretary of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc.
are elected annually by the board of directors of PolyMedix, Inc. and PolyMedix Pharmaceuticals,
Inc., respectively, at its first meeting following the annual meeting of stockholders. Other
officers of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc. may be appointed by the board of
directors of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc., respectively, at any meeting.
Such officers shall hold office until his or her successor is elected and qualified, unless a
different term is specified in the resolution electing or appointing such officer, or until such
officer's earlier death, resignation or removal.
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All directors of PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc. are elected at each annual
meeting of the stockholders of the PolyMedix, Inc. and PolyMedix Pharmaceuticals, Inc.,
respectively, to hold office until the next annual meeting of stockholders and until their
successor is elected and qualified, or until such director's earlier death, resignation or removal.
-43-
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows information known to us about beneficial ownership of our common stock by:
Ø
each of our directors and director nominees;
Ø
each of our Named Executive Officers as identified in the Summary Compensation Table;
Ø
all of our directors and executive officers as a group; and
Ø
each person known by us to beneficially own 5% or more of our common stock.
Beneficial ownership and percentage ownership are determined in accordance with the rules of the
SEC. Under these rules, beneficial ownership generally includes any shares as to which the
individual or entity has sole or shared voting power or investment power and includes any shares
that an individual or entity has the right to acquire beneficial ownership of within 60 days of
June 4, 2009, through the exercise of any option, warrant, conversion privilege or similar right.
In computing the number of shares beneficially owned by a person and the percentage ownership of
that person, shares of our common stock that could be issued upon the exercise of outstanding
options and warrants that are exercisable within 60 days of June 4, 2009 are considered to be
outstanding. These shares, however, are not considered outstanding as of June 4, 2009 when
computing the percentage ownership of each other person.
To our knowledge, except as indicated in the footnotes to the following table and subject to state
community property laws where applicable, all beneficial owners named in this table have sole
voting and investment power with respect to all shares shown as beneficially owned by them.
Percentage of ownership is based on 59,845,065 shares of common stock outstanding as of June 4,
2009.
Amount and Nature of
Percent of
Beneficial Ownership
Common
Name and Address of Beneficial Owner (1)
of common stock
Stock
Directors and Named Executive Officers
Nicholas Landekic
3,386,722
(2)
5.5
%
Frank P. Slattery, Jr.
2,159,350
(3)
3.6
%
Richard W. Scott, Ph.D.
895,933
(4)
1.5
%
Michael E. Lewis, Ph.D.
779,250
(5)
1.3
%
R. Eric McAllister, M.D., Ph.D.
477,778
(6)
*
Edward F. Smith
409,722
(7)
*
Shaun F. O'Malley
342,110
(8)
*
William N. Kelley, M.D.
329,250
(5)
*
Bozena Korczak, Ph.D.
250,000
(9)
*
Stefan D. Loren, Ph.D.
93,000
(10)
*
Brian Anderson
50,000
(11)
*
Richard W. Bank, M.D.
50,000
(11)
*
J. Gregory Ford
30,000
*
Douglas J. Swirsky
—
—
All Directors and Executive Officers as a Group (13 persons):
9,253,115
(12)
14.2
%
Five Percent Stockholders
(excludes Directors and Executive
Officers set forth above):
Act Capital Management, LLLP
2 Radnor Corporate Center, Suite 111
Radnor, PA 19087
6,095,642
(13)
9.9
%
Jeffrey H. Porter
300 Drakes Landing Road, Suite 175
Greenbrae, CA 94904
3,355,000
(14)
5.5
%
Stephen A. Springer
345 E. 57
th
Street, 8A
New York, NY 10022
3,306,401
(15)
5.4
%
-44-
*
Less than 1%.
(1)
Unless otherwise indicated, the address of all individuals and entities listed above is
PolyMedix, Inc., 170 N. Radnor Chester Rd., Suite 300, Radnor, Pennsylvania 19087.
(2)
Includes 2,214,722 shares of common stock issuable upon exercise of options.
(3)
Includes 299,250 shares of common stock issuable upon exercise of options and 429,000
shares of common stock issuable upon exercise of warrants. The warrants and 477,000 shares of
common stock are held in the name of Kate Partners XX, L.P. ("Kate Partners"). Mr. Slattery
owns a controlling interest in Kate Partners; therefore, he may be deemed to beneficially own
these shares and warrants. Mr. Slattery disclaims beneficial ownership of these securities
except to the extent of his pecuniary interest in Kate Partners.
(4)
Includes 358,333 shares of common stock issuable upon exercise of options.
(5)
Includes 299,250 shares of common stock issuable upon exercise of options.
(6)
Includes 477,778 shares of common stock issuable upon exercise of options.
(7)
Includes 409,722 shares of common stock issuable upon exercise of options.
(8)
Includes 299,250 shares of common stock issuable upon exercise of options and 21,430
shares of common stock issuable upon exercise of warrants.
(9)
Includes 250,000 shares of common stock issuable upon exercise of options.
(10)
Includes 50,000 shares of common stock issuable upon exercise of options and 21,500 shares
of common stock issuable upon exercise of warrants.
(11)
Includes 50,000 shares of common stock issuable upon exercise of options.
(12)
Includes 5,057,255 shares of common stock issuable upon exercise of options and 471,930
shares of common stock issuable upon exercise of warrants.
(13)
We understand that Amir L. Ecker and Carol G. Frankenfield are the General Partners of ACT
Capital Management, LLLP and Act Capital Partners, LP and that voting and investment decisions
made on behalf of ACT Capital Management, LLLP are made primarily by its General Partners.
This figure does not include 3,339,958 shares of common stock issuable upon exercise of
outstanding warrants which are not currently exercisable as a result of aggregate holdings
limitations set forth in the warrants. Also includes 66,000 shares of common stock held in
various accounts of which Mr. Ecker personally has sole investment and voting power, 15,000
shares of common stock held by Ms. Frankenfield, 10,000 shares of common stock held jointly by
Ms. Frankenfield and her husband, and 2,100 shares of common stock held by Ms. Frakenfeld's
husband. Also includes 960,000 shares of common stock acquired upon the conversion of the
Series 2008 Convertible Preferred Stock, as well as 1,180,000 shares of common stock issuable
upon exercise of outstanding Series B Warrants at an exercise price of $1.00 per share.
(14)
Mr. Porter is the General Partner for Porter Partners, L.P. and Ben Joseph Partners. Porter
Partners, L.P. beneficially owns 2,995,000 shares of common stock, of which approximately
1,325,000 such shares are issuable upon exercise of outstanding warrants. The beneficial
ownership of Porter Partners, L.P. does not include approximately 75,000 shares of common
stock issuable upon exercise of outstanding warrants which are not currently exercisable as a
result of aggregate holdings limitations set forth in the warrants. Ben Joseph Partners
beneficially owns 285,000 shares of common stock, of which 142,500 such shares are issuable
upon exercise of outstanding warrants.
-45-
(15)
Includes 409,046 shares of common stock issuable upon exercise of outstanding warrants but
does not include approximately 2,203,097 shares of common stock issuable upon exercise of
outstanding warrants which are not currently exercisable as a result of aggregate holdings
limitations set forth in the warrants.
-46-
EXECUTIVE COMPENSATION
The following summary compensation table sets forth information concerning compensation for
services rendered in all capacities for the years ended December 31, 2008 and 2007 awarded to,
earned by, or paid to: (i) Nicholas Landekic, who served as our President and Chief Executive
Officer (our CEO) during 2008 and 2007, (ii) Edward F. Smith, who served as our Vice President,
Finance, Chief Financial Officer and Corporate Secretary (our CFO) during 2008 and 2007 and (iii)
our three most highly paid executive officers (as determined based on total compensation) other
than our CEO and CFO as of December 31, 2008. These individuals are referred to in this report as
the Named Executive Officers (or "NEOs").
Option
All Other
Salary
Bonus
Awards
Compensation
Total
Name and Principal Position
Year
($)
($) (3)
($) (4)
($)
($)
Nicholas Landekic
2008
380,000
101,750
393,879
(5)
—
875,629
President, Chief Executive
2007
368,333
111,000
249,853
(6)
—
729,186
Officer and Director
Edward F. Smith
2008
225,000
56,250
105,902
(7)
—
387,152
Vice President, Finance, Chief
2007
222,917
45,000
83,389
(8)
—
351,306
Financial Officer and
Secretary
R. Eric McAllister, M.D., Ph.D.
2008
280,000
63,000
192,112
(9)
—
535,112
Vice President, Clinical
2007
280,000
42,000
151,544
(10)
29,329
(15)
502,873
Development, Chief Medical
Officer
(1)
Richard W. Scott, Ph.D.
2008
265,000
46,375
33,330
(11)
—
344,705
Vice President, Research
2007
263,750
26,500
19,323
(12)
—
309,573
Bozena Korczak, Ph.D.
2008
230,000
51,750
48,721
(13)
—
330,471
Vice President, Drug
2007
32,436
30,000
4,293
(14)
—
62,436
Development
(2)
(1)
Dr. McAllister joined PolyMedix in November 2006.
(2)
Dr. Korczak joined PolyMedix in November 2007.
(3)
Represents performance bonus awards. The 2007 bonus award was paid in 2008 and the 2008
bonus award was paid in 2009.
(4)
This column reflects the dollar amount recognized for financial accounting reporting
purposes, in accordance with SFAS 123(R), pursuant to our equity compensation plans and,
therefore, includes amounts from awards granted in and prior to the applicable fiscal year.
These amounts reflect our accounting expense for these awards, and do not correspond to the
actual value that will be recognized by the Named Executive Officer. The assumptions used in
the calculation of these amounts are described in footnote 6 to our audited financial
statements for the year ended December 31, 2008 and our discussion of stock-based compensation
in our annual report on Form 10-K filed with the Securities and Exchange Commission under
"Management's Discussion and Analysis Of Financial Condition and Results of
Operations—Critical Accounting Policies and Practices" for the year ended December 31, 2008.
-47-
(5)
This amount reflects the compensation expense incurred by us in fiscal year 2008 in
connection with option grants to Mr. Landekic to purchase 500,000 shares of common stock on
December 2, 2005, 231,000 shares of common stock on February 5, 2007, 600,000 shares of common
stock on January 23, 2008, and 1,000,000 shares of common stock on December 30, 2008 pursuant
to our 2005 Omnibus Equity Compensation Plan.
(6)
This amount reflects the compensation expense incurred by us in fiscal year 2007 in
connection with option grants to Mr. Landekic to purchase 500,000 shares of common stock on
December 2, 2005 and 231,000 shares of common stock on February 5, 2007 pursuant to our 2005
Omnibus Equity Compensation Plan.
(7)
This amount reflects the compensation expense incurred by us in fiscal year 2008 in
connection with option grants to Mr. Smith to purchase 250,000 shares of common stock on
January 2, 2006, 30,000 shares of common stock on February 5, 2007, 125,000 shares of common
stock on January 23, 2008, and 325,000 shares of common stock on December 30, 2008 pursuant to
our 2005 Omnibus Equity Compensation Plan.
(8)
This amount reflects the compensation expense incurred by us in fiscal year 2007 in
connection with option grants to Mr. Smith to purchase 250,000 shares of common stock on
January 2, 2006 and 30,000 shares of common stock on February 5, 2007 pursuant to our 2005
Omnibus Equity Compensation Plan.
(9)
This amount reflects the compensation expense incurred by us in fiscal year 2008 in
connection with option grants to Dr. McAllister to purchase 400,000 shares of common stock on
November 13, 2006, 200,000 shares of common stock on January 23, 2008, and 500,000 shares of
common stock on December 30, 2008 pursuant to our 2005 Omnibus Equity Compensation Plan.
(10)
This amount reflects the compensation expense incurred by us in fiscal year 2007 in
connection with option grants to Dr. McAllister to purchase 400,000 shares of common stock on
November 13, 2006 pursuant to our 2005 Omnibus Equity Compensation Plan.
(11)
This amount reflects the compensation expense incurred by us in fiscal year 2008 in
connection with an option grant to Dr. Scott to purchase 40,000 shares of common stock on
February 5, 2006, 50,000 shares of common stock on January 23, 2008, and 225,000 shares of
common stock on December 30, 2008 pursuant to our 2005 Omnibus Equity Compensation Plan.
(12)
This amount reflects the compensation expense incurred by us in fiscal year 2007 in
connection with an option grant to Dr. Scott to purchase 40,000 shares of common stock on
February 5, 2006, pursuant to our 2005 Omnibus Equity Compensation Plan.
(13)
This amount reflects the compensation expense incurred by us in fiscal year 2008 in
connection with option grants to Dr. Korczak to purchase 250,000 shares of common stock on
November 13, 2007 and 500,000 shares of common stock on December 30, 2008 pursuant to our 2005
Omnibus Equity Compensation Plan.
(14)
This amount reflects the compensation expense incurred by us in fiscal year 2007 in
connection with option grants to Dr. Korczak to purchase 250,000 shares of common stock on
November 13, 2007 pursuant to our 2005 Omnibus Equity Compensation Plan.
(15)
This amount represents reimbursement of certain relocation expenses to Dr. McAllister as
provided in Dr. McAllister's offer letter dated October 19, 2006.
Narrative Disclosure to Summary Compensation Table
In 2008, the Compensation Committee of the Board awarded cash bonuses to each of our NEOs. These
awards are reflected in the column titled "Bonus" in the Summary Compensation Table above. Such
awards were made by the Compensation Committee in its sole discretion at the end of the year after
reviewing the recommendations of our Chief Executive Officer for each NEO other than himself,
individual goals and targets, the performance of each NEO in the applicable fiscal year, evaluating
other components of each NEO's total compensation package, including the balance of equity to
non-equity compensation, each NEO's total compensation package relative to executives in benchmark
peer group companies holding similar positions, the report of the Compensation Committee's
consultant, and our cash position. For benchmarking executive compensation, the Compensation
-48-
Committee engaged a compensation consulting firm which assisted in establishing a peer group of
companies, analyzing peer company compensation data and comparing our compensation programs with
the practices of the companies represented in the compensation data reviewed. For 2008, the
Compensation Committee's consulting firm, Compensation Resources, Inc. established a peer group of
35 publicly traded biotechnology companies of similar size to us. The Compensation Committee's
primary consideration in awarding the cash bonuses for 2008 was to bring each NEO's total
compensation package in line with the benchmarks established for executives in peer group companies
holding similar positions.
Outstanding Equity Awards
The following table provides information on all stock option awards held by our NEOs as of
December 31, 2008. All outstanding equity awards are in shares of our common stock.
Outstanding Equity Awards at 2008 Fiscal Year-End
Option Awards (1)
Number
of
Number of Securities
Securities Underlying
Underlying
Unexercised Options
Unexercised Options
Option Exercise
(#)
(#)
Price
Option Expiration
Name
Exercisable
Unexercisable
($)
Date
Nicholas Landekic
1,000,000
(2)
—
1.50
08/10/2015
President, Chief
500,000
(3)
—
1.50
12/01/2015
Executive Officer and Director
141,167
(3)
89,833
2.85
02/04/2016
183,333
(3)
416,667
1.10
01/22/2018
—
(3)
1,000,000
1.18
12/29/2018
Edward F. Smith
243,056
(3)
6,944
1.50
01/01/2016
Vice President, Finance, Chief Financial
18,333
(3)
11,667
2.85
02/04/2016
Officer and Secretary
38,194
(3)
86,806
1.10
01/22/2018
—
(3)
325,000
1.18
12/29/2018
R. Eric McAllister, M.D., Ph.D.
208,333
(4)
191,667
3.50
11/12/2016
Vice President, Clinical Development,
61,111
(3)
138,889
1.10
01/22/2018
Chief Medical Officer
—
(3)
500,000
1.18
12/29/2018
Richard W. Scott, Ph.D.
250,000
(2)
—
1.50
08/10/2015
Vice President, Research
24,444
(3)
15,556
2.85
02/04/2016
15,278
(3)
34,722
1.10
01/22/2018
—
(3)
225,000
1.18
12/29/2018
Bozena Korczak, Ph.D.
90,278
(3)
159,722
0.98
11/12/2017
Vice President, Drug Development x
—
(3)
500,000
1.18
12/29/2018
(1)
There are no restricted stock awards outstanding for any of the NEOs.
(2)
Grants with an expiration date of August 10, 2015 have a stated term of ten years and vest
50% on the date of grant and 50% on the one-year anniversary of the grant.
(3)
Grants with expiration dates of December 1, 2015, January 1, 2016, February 4, 2016, January
22, 2018, November 12, 2017 and December 29, 2018 have a stated term of ten years and vest in
monthly installments over a three-year period beginning after the date of grant. If a "change
in control" (as defined in our 2005
Omnibus Equity Compensation Plan) were to occur, these options would become immediately
exercisable in full.
-49-
(4)
Grants with expiration dates of November 12, 2016 have a stated term of ten years and vest in
50% on the two-year anniversary of the grant and the remaining 50% vests in monthly
installments over a two-year period beginning after the two-year anniversary of the grant. If
a "change in control" (as defined in our 2005 Omnibus Equity Compensation Plan) were to occur,
these options would become immediately exercisable in full.
Employment Contracts and Termination of Employment and Change-in-Control Arrangements
Nicholas Landekic
We extended the offer of employment to Nicholas Landekic for the position of President and Chief
Executive Officer pursuant to an offer letter dated July 30, 2002, which provided that his annual
salary will be at least $250,000 per year. Mr. Landekic's base salary was increased to $350,000 as
of January 1, 2006 and further increased to $380,000 as of February 2007. Mr. Landekic is eligible
to receive additional compensation depending upon achievement of performance goals as established
by the Board. As an "at-will" employee, Mr. Landekic's employment can be terminated by us or by
him, at any time and for any reason. In the event Mr. Landekic is terminated by us other than for
"cause" or other than by reason of his "disability," or he resigns for "good reason" (each as
defined in his offer letter), Mr. Landekic will be entitled to full vesting of all unvested stock
options and restricted stock previously granted to him and a cash payment equal to two-years of his
then current base salary.
Edward Smith
We extended the offer of employment to Edward Smith for the position of Vice President Finance,
Chief Financial Officer and Corporate Secretary pursuant to an offer letter dated December 5, 2005,
which provides that his annual salary will be at least $200,000 per year. Mr. Smith's base salary
was increased to $225,000 as of February 2007 and increased to $245,000 effective January 1, 2009.
Mr. Smith is eligible to receive additional compensation depending upon achievement of performance
goals as established by the Board. As an "at-will" employee, Mr. Smith's employment can be
terminated by us or by him, at any time and for any reason. In the event Mr. Smith is terminated
by us other than for "cause" or other than by reason of his "disability" (each as defined in his
offer letter), Mr. Smith will be entitled to full vesting of all unvested stock options previously
granted to him and a cash payment equal to one-year of his then current base salary.
R. Eric McAllister, M.D., Ph.D.
We extended the offer of employment to R. Eric McAllister, M.D., Ph.D., for the position of Vice
President, Clinical Development and Chief Medical Officer pursuant to an offer letter dated October
19, 2006, which provides that his annual salary will be at least $280,000 per year. Dr. McAllister
received an initial grant of 400,000 stock options upon joining us, which vested at 50% on Dr.
McAllister's second anniversary date with the remainder vesting monthly over his third and fourth
years. In addition, Dr. McAllister is eligible to receive a discretionary cash bonus based on his
performance and our performance. Dr. McAllister is eligible to receive additional compensation
depending upon achievement of performance goals as established by the Board. As an "at-will"
employee, Dr. McAllister's employment can be terminated by us or by him, at any time and for any
reason. In the event Dr. McAllister is terminated by us other than for "cause" or other than by
reason of his "disability" (each as defined in his offer letter), Dr. McAllister will be entitled
to full vesting of all unvested stock options previously granted to him and a cash payment equal to
one-year of his then current base salary. Further, Dr. McAllister received various relocation
benefits.
-50-
Richard Scott, Ph.D.
We extended the offer of employment to Richard Scott for the position of Vice President, Research
pursuant to an offer letter dated September 23, 2002, which provides that his annual salary will be
at least $150,000 per year. Dr. Scott's base salary was increased to $250,000 effective January 1,
2006 and further increased to $265,000 as of February 2007. Dr. Scott is eligible to receive
additional compensation depending upon achievement of performance goals as established by the
Board. As an "at-will" employee, Dr. Scott's employment can be terminated by us or by him, at any
time and for any reason. In the event Dr. Scott is terminated by us other than for "cause" or
other than by reason of his "disability" (each as defined in his offer letter), Dr. Scott will be
entitled to full vesting of all unvested stock options and restricted stock previously granted to
him and a cash payment equal to one-year of his then current base salary.
Bozena Korczak, Ph.D.
We extended the offer of employment to Bozena Korczak for the position of Vice President Finance,
Drug Development pursuant to an offer letter dated November 5, 2007, which provides that her annual
salary will be at least $230,000 per year. Dr. Korczak's base salary increased to $245,000
effective January 1, 2009. Dr. Korczak received an initial grant of 250,000 stock options upon
joining us, which vest in equal monthly installments over a three-year period. Dr. Korczak is
eligible to receive additional compensation depending upon achievement of performance goals as
established by the Board. As an "at-will" employee, Dr. Korczak's employment can be terminated by
us or by her, at any time and for any reason. In the event Dr. Korczak is terminated by us other
than for "cause" or other than by reason of her "disability" (each as defined in her offer letter),
Dr. Korczak will be entitled to full vesting of all unvested stock options previously granted to
her and a cash payment equal to one-year of her then current base salary.
James Gregory Ford
We extended the offer of employment to James Gregory Ford for the position of Vice President of
Business Development pursuant to an offer letter dated November 18, 2008, which provides that his
annual salary will be at least $260,000 per year. Mr. Ford received an initial grant of 400,000
stock options, which vest 50% on the second anniversary of the grant date and the remainder vest in
equal monthly installments thereafter for the third and fourth years from the grant date. Mr. Ford
will be eligible to receive a discretionary cash bonus. For 2009, Mr. Ford may receive a maximum
potential bonus of up to 100% of his base salary for deals in which Mr. Ford was the primary and
lead negotiator and essential to concluding and based on (i) one percent (1%) of cash revenues
actually received by us in 2009 for out-licensing deals, (ii) equity investments actually received
in 2009 made by corporate partners as part of a strategic investment or business opportunity, and
(iii) a 35% bonus payment for in-licensing deals of a marketed or clinical stage LMWH product, or a
to be determined amount for any other clinical stage product. As an "at-will" employee, Mr. Ford's
employment can be terminated by us or by him, at any time and for any reason. If Mr. Ford's
employment is terminated as a result of a Qualified Termination (as defined in his offer letter),
then Mr. Ford will be entitled to: (a) continuation of his base salary for one year, (b) Company
payments of COBRA premiums for up to one year following termination, and (c) full vesting of any
unvested stock options. However, if a Qualified Termination occurs within 24 months of the
commencement of Mr. Ford's employment, 200,000 options of his initial grant will vest in lieu of
the schedule in (c) above.
-51-
DIRECTOR COMPENSATION
The following Director Compensation table sets forth information concerning compensation for
services rendered by our independent directors for fiscal year 2008.
Fees Earned or
Paid in
Option
Cash
Awards
Total
Name
($)
($) (3)
($)
Frank P. Slattery, Jr.
29,000
32,100
(4)
61,100
Chairman of the Board
Shaun F. O'Malley
29,000
32,100
(4)
61,100
Chairman, Audit Committee
Brian Anderson
20,000
63,619
(5)
83,619
Chairman, Compensation Committee
William N. Kelley, M.D. (1)
34,000
32,100
(4)
36,100
Chairman, Governance Committee
Richard W. Bank, M.D.
9,000
33,615
(6)
42,615
Frank M. DeLape (2)
11,000
56,869
(4)
67,869
Michael E. Lewis, Ph.D.
23,000
63,619
(4)
86,619
Stefan D. Loren, Ph.D.
11,000
33,615
(6)
44,615
(1)
Dr. Kelley has informed us that he will not stand for re-election to our Board at the Annual
Meeting of Stockholders to be held on June 30, 2009.
(2)
Mr. DeLape retired from the Board of Directors in May 2008.
(3)
This column reflects the dollar amount recognized for financial accounting reporting
purposes, in accordance with SFAS 123(R), pursuant to our equity compensation plans and,
therefore, includes amounts from awards granted in and prior to the applicable fiscal year.
These amounts reflect our accounting expense for these awards, and do not correspond to the
actual value that will be recognized by the Named Executive Officer. The assumptions used in
the calculation of these amounts are described in footnote 6 to our audited financial
statements for the year ended December 31, 2008 and our discussion of stock-based compensation
in our annual report on Form 10-K filed with the Securities and Exchange Commission under
"Management's Discussion and Analysis Of Financial Condition and Results of
Operations—Critical Accounting Policies and Practices" for the year ended December 31, 2008.
(4)
Represents the compensation expense incurred by us in fiscal year 2008 in connection with
option grants to purchase 150,000 shares of common stock on September 11, 2007. As of
December 31, 2008, this director holds options to purchase 330,000 shares of common stock.
(5)
Represents the compensation expense incurred by us in fiscal year 2008 in connection with the
option grant to purchase 150,000 shares of common stock on January 23, 2008. As of December
31, 2008, this director holds options to purchase 150,000 shares of common stock.
(6)
Represents the compensation expense incurred by us in fiscal year 2008 in connection with
option grants to purchase 150,000 shares of common stock on July 31, 2008. As of December 31,
2008, this director holds options to purchase 150,000 shares of common stock.
-52-
Continuing Education of Directors
We are committed to supporting the continuing education of our directors on relevant matters. The
Governance Committee of the Board will decide on a case-by-case basis the appropriate level and
frequency of support to provide.
Compensation of Directors
Directors who are also our employees receive no additional compensation for serving as a director
or as a member of any Committee of the Board. All non-employee directors receive a fee of $1,500
and $1,000 per Board meeting and Committee meeting, respectively, and are reimbursed for expenses
incurred in connection with attending Board and Committee meetings. In addition, our Chairman of
the Board receives an annual retainer of $20,000, the Chairman of the Audit Committee receives an
annual retainer of $16,000, the Chairmen of the Compensation and Nominating and Corporate
Governance Committees receive annual retainers of $14,000 and all other non-employee directors
receive an annual retainer of $12,000.
All new non-employee directors receive an initial grant of options to purchase shares of our common
stock upon first becoming a member of the Board. In addition, each non-employee director may, at
the discretion of the Board or Compensation Committee of the Board, receive additional equity
compensation awards. See the Director Compensation Table below for more details.
-53-
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATION
The following discussion and analysis should be read in conjunction with the consolidated financial
statements including the notes thereto. This discussion and analysis may contain forward-looking
statements based upon current expectations that involve risks and uncertainties. Our actual results
may differ materially as a result of various factors, including those set forth under "Risk
Factors" or elsewhere in this prospectus.
Overview
We are a development stage biotechnology company focused on treating life threatening, serious
infectious diseases and acute cardiovascular disorders with synthetic small molecule compounds that
mimic the activity of large natural protein molecules, compounds referred to as biomimetics. Using
our proprietary computational drug design technology, we have created novel defensin mimetic
antibiotic compounds, heparin antagonist compounds and other drug compounds intended for human
therapeutic use. Since 2002, we have been a development stage enterprise, and accordingly, our
operations have been directed primarily toward developing business strategies, raising capital,
research and development activities, conducting pre-clinical testing and human clinical trials of
our product candidates, exploring marketing channels and recruiting personnel.
We have incurred operating losses since inception, have not generated any product sales revenues
and have not achieved profitable operations. Our deficit accumulated during the development stage
through March 31, 2009 aggregated $39,779,000, and we expect to continue to incur substantial
losses in future periods. None of our product candidates have received regulatory approval for
commercial sale and our product candidates may never be commercialized. In addition, all of our
product candidates are in the early stages of development and several programs are on hold pending
sufficient additional financing. The progress and results of our current and any future clinical
trials or future pre-clinical testing are uncertain, and if our product candidates do not receive
regulatory approvals, our business, operating results, financial condition and cash flows will be
materially adversely affected. Our development programs require a significant amount of cash to
support the development of product candidates.
We are highly dependent on the success of our research, development and licensing efforts and,
ultimately, upon regulatory approval and market acceptance of our products under development. Our
short and long-term capital requirements depend upon a variety of factors, including market
acceptance for our technologies and product candidates and various other factors. We anticipate
that in order to achieve our operational objectives, including our plans during 2009 for starting
and completing Phase 1B studies as well as beginning preparation for Phase 2 studies for each of
our PMX-30063 and PMX-60056 product candidates, our expenses and cash requirements will increase
from historical levels and we will need to raise additional capital during 2009 in order to fully
fund the research and development of our product candidates. We believe that our current cash and
investment balances, exclusive of any cash to be generated from
the Equity Line, will be sufficient to fund our planned Phase 1 studies for PMX-30063 and PMX-60056 and can fund
our operations for at least the next twelve months; however, due to the continued deterioration of
the capital markets and prospects for securing additional financing, in order to prolong our cash
runway we will scale back and delay some of our activities and do not plan to commence a Phase 1B
clinical trial for PMX-60056 until the third quarter of 2009.
Our current cash and investment balances are not sufficient to fund
the Phase 2 clinical or other
development activities of either of our two lead product candidates. We do not plan to initiate
our Phase 2 development activities for both PMX-30063 and PMX-60056 until additional financing is
secured. We expect to seek additional funds beyond the Equity Line through equity or debt financing, among other sources.
In addition, we may actively seek funds through government grants and contracts. However, as a
result of current conditions in the equity and debt markets, we may not be able to obtain
additional funding on favorable terms, if at all. In addition, if we choose to apply for
government grants and contracts, there is no guarantee of acceptance of our applications. If
additional capital resources are not obtained during 2009, we will scale-back,
postpone or eliminate certain of our research, drug discovery or development programs until such
additional capital resources have been obtained, and as a result, our business may be materially
and adversely affected. In the absence of adequate additional funding, we believe that we have the
ability to scale our operations such that our current cash and investment balances,
exclusive of any cash to be generated from the Equity Line, will be sufficient to fund our
operations for at least the next twelve months.
Global market and economic conditions have been, and continue to be, disruptive and volatile. In
particular, the cost of raising money in the debt and equity capital markets has increased
substantially while the availability of funds from those markets has diminished significantly. If
funding is not available when needed, or is available only on
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unfavorable terms, meeting our capital needs or otherwise taking advantage of business
opportunities may become challenging, which could have a material adverse effect on our business
plans.
The following discussion and analysis provides information that we believe is relevant to an
assessment and understanding of our results of operations for the three-months ended March 31, 2009
and 2008, and financial condition as of March 31, 2009 and December 31, 2008.
Critical Accounting Policies and Practices
The preparation of our Consolidated Financial Statements in conformity with accounting
principles generally accepted in the United States requires management to adopt critical accounting
policies and to make estimates and assumptions that affect the amounts reported in our Consolidated
Financial Statements and accompanying notes. These critical accounting policies and estimates have
been reviewed by our Audit Committee. The principal items in our Consolidated Financial Statements
reflecting critical accounting policies or requiring significant estimates and judgments are as
follows:
Stock-based compensation
From our inception, August 8, 2002, we adopted the fair value recognition provisions of Statement
of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation
and
have, since inception, recognized equity compensation expense over the requisite service period.
Beginning January 1, 2006, we adopted SFAS No. 123(R),
Share-based Payment
using the
modified-prospective transition method. There was no significant impact from switching from
SFAS No. 123 to SFAS No. 123(R). Since inception, we have used the Black-Scholes formula to
estimate the fair value of stock options and have elected to continue to estimate the fair value of
stock options using the Black-Scholes formula. The volatility and expected term assumptions have
the most significant effect on the results obtained from the Black-Scholes option-pricing model. We
have to date assumed that stock options have an expected life of five years, representing about
half of their contractual life, and assumed common stock volatility of between 41% and 75%. Higher
estimates of volatility and expected life of the option increase the value of an option and the
resulting expense. Given the absence of an active market for our common stock in prior periods, the
fair value of our common stock has periodically been estimated using several criteria, including
progress and milestones achieved in our research activities along with the price per share of our
preferred and common stock offerings.
Results of Operations
Three-months ended March 31, 2009 compared to three-months ended March 31, 2008
Revenues and Expenses
Grant and research revenues
were $6,000 and $991,000 for the three-month periods ended March 31,
2009, and 2008, respectively. The decrease in grant and research revenue for the three-month period
ended March 31, 2009 was the result of the timing of our expenditures and subsequent reimbursement
related to our three-year $2,900,000 National Institutes of Health (or "NIH") grant, which was
awarded in April 2006 and completed in March 2009 in support of our development of our i.v.
antibiotic product candidate, PMX-30063.
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Research and development expenses
were $1,675,000 and $2,726,000 for the three-month periods ended
March 31, 2009 and 2008, respectively. The decrease was the result of the delay and scale-back of
certain research, and the delay of certain clinical development costs initiated during 2008.
Pending timely and adequate additional funding, we expect our research and development costs to
increase in the second half of 2009 as a result of increased staff hiring in connection with the
preparation for Phase 2 studies for our PMX-30063 and PMX-60056 product candidates.
General and administrative expenses
were approximately $1,277,000 and $1,155,000 for the
three-month periods ended March 31, 2009 and 2008, respectively. We do not expect our general and
administrative costs to increase substantially over the next twelve months.
Interest income and expense
was $26,000 and $67,000 for the three-month periods ended March 31,
2009 and 2008, respectively. The changes were mostly the result of lower interest rates and
decreased cash and investment balances resulting in less interest income.
Historical Cash Flows
Operating Activities
. Cash used in operating activities during the three-month period ended March
31, 2009 was approximately $2,642,000, compared to approximately $2,867,000 for the three-month
period ended March 31, 2008. The decrease was primarily due to change in prepaid expenses and other
current assets, partially offset by decreases in accounts payable, accrued expenses and deferred
rent.
Investing Activities
. Cash provided by or used in investing activities represents cash paid for the
purchase, and proceeds received from, the maturity of investments and cash paid for property and
equipment. During the three-month period ended March 31, 2009, $1,898,000 was used to purchase
investments. During the three-month period ended March 31, 2009 and 2008, $7,900,000 and
$2,000,000 was received from the maturities of investments, respectively. During the three-month
period ended March 31, 2009, $15,000 was used to purchase property and equipment.
Financing Activities
. To date, we have financed our operating and investing activities primarily
from the proceeds from the sale of equity securities. During the three-month period ended March 31,
2009 we paid $36,000 in financing costs associated with our September 2008 private placement of
Series 2008 preferred stock units and paid $36,000 in principal associated with our capital leases.
During the three-month period ended March 31, 2008 we paid $308,000 in financing costs associated
with our December 2007 registered offering of common stock units and paid $32,000 in principal
associated with our capital leases.
Year ended December 31, 2008 compared to year ended December 31, 2007
Since inception, our only revenues have been from grants and other research arrangements. Grant and
research revenues were $1,066,000 and $1,126,000 for the years ended December 31, 2008 and 2007,
respectively. The decrease in grant and research revenue was attributable to the timing of expenses
and related funds received in connection with our advanced technology grant from the National
Institute of Health, or NIH, in support of our development of our i.v. antibiotic product candidate
and our heptagonist product candidate. We currently have $7,000 remaining available under these
grants.
We incurred research and development expenses of $7,401,000 and $9,328,000 for the years ended
December 31, 2008 and 2007, respectively. The decrease was the result of the delay and scale-back
of certain research and delay of certain clinical development costs during 2008. With the closing
of our third quarter financing activities, costs to bring both PMX-30063 and PMX-60056 through
Phase 1 development were prioritized and deployed. Research and development costs include $440,000
and $323,000 related to stock-based compensation expense for the years ended December 31, 2008 and
2007, respectively. Pending timely and adequate additional funding, we expect our research and
development costs to increase in the second half of 2009 as a result of increased staff hiring in
connection with the start of preparation for Phase 2 studies for our PMX-30063 and PMX-60056
product candidates.
General and administrative expenses were $4,875,000 and $4,473,000 for the years ended December 31,
2008 and 2007, respectively. The overall increase was mostly attributable to increased legal costs
and personnel costs. General and administrative costs include $964,000 and $936,000 related to
stock-based compensation expense for the years ended December 31, 2008 and 2007, respectively.
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Interest income and other expenses were $224,000 and $511,000 for the years ended December 31, 2008
and 2007, respectively. The decrease was due to decreased interest rates on our cash, cash
equivalent and investment balances.
Historical Cash Flows
Operating Activities
. Cash used in operating activities during the year ended December 31, 2008
increased to $10,926,000 as compared to $8,266,000 used for the year ended December 31, 2007. The
increase was primarily due to increased general and administrative expenses and decreased current
liabilities.
Investing Activities
. Cash used for investing activities represents cash paid for purchases of
investments and property and equipment, net of maturities of investments. During the year ended
December 31, 2008 and 2007, we purchased $9,553,000 and $9,880,000 of investments, respectively.
During the year ended December 31, 2008 and 2007, maturities of our investments were $5,700,000 and
$12,098,000, respectively. During the years ended December 31, 2008 and 2007, property and
equipment purchases were $0 and $266,000, respectively.
Financing Activities.
We have financed our operating and investing activities primarily from the
proceeds from the sale of equity securities. During the years ended December 31, 2008 and 2007, we
received $16,966,000 and $2,558,000, respectively, in net proceeds of such issuances of equity
securities. Additionally, during 2008 and 2007 we received $214,000 and $184,000, respectively
from the exercise of stock options.
Year ended December 31, 2007 compared to year ended December 31, 2006
Grant and research revenues were $1,126,000 and $821,000 for the years ended December 31, 2007 and
2006, respectively. The increase in grant and research revenue was attributable to funds received
in connection with our advanced technology grant from the National Institute of Health, or NIH, in
support of our development of our i.v. antibiotic product candidate, which commenced in April 2006.
We incurred research and development expenses of $9,328,000 and $3,306,000 for the years ended
December 31, 2007 and 2006, respectively. The increase was the result of increased headcount and
outside laboratory research costs associated with our preclinical development, GMP compliant
manufacturing and GLP compliant toxicology, safety pharmacology and genotoxicity studies for
PMX-60056 and PMX-30063 planned for 2008. Research and development costs include $323,000 and
$205,000 related to stock-based compensation expense for the years ended December 31, 2007 and
2006, respectively.
General and administrative expenses were $4,473,000 and $4,174,000 for the years ended December 31,
2007 and 2006, respectively. The increase was the result of facility, investor relations and legal
costs. General and administrative costs include $936,000 and $934,000 related stock-based
compensation expense for the years ended December 31, 2007 and 2006, respectively.
Interest income and other expenses were $511,000 and $693,000 for the years ended December 31, 2007
and 2006, respectively. The decrease was a result of our decreased average cash and investment
balances along with declining interest rates.
Historical Cash Flows
Operating Activities
. Cash used in operating activities during the year ended December 31, 2007
increased to $8,266,000 as compared to $4,319,000 used for the year ended December 31, 2006. The
increase is attributed primarily to increased research and development spending and increased
general and administrative expenses.
Investing Activities
. Cash used for investing activities represents cash paid for purchases of
investments and property and equipment, net of maturities of investments. During the year ended
December 31, 2007 and 2006, we purchased $9,880,000 and $10,810,000 of investments, respectively.
During the year ended December 31, 2007 and 2006, maturities of our investments were $12,098,000
and $5,000,000, respectively. During the years ended December 31, 2007 and 2006, property and
equipment purchases were $266,000 and $274,000, respectively.
Financing Activities.
We have financed our operating and investing activities primarily from the
proceeds from the sale of equity securities. During the years ended December 31, 2007 and 2006, we
received $2,558,000 and
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$3,720,000, respectively, in net proceeds of such issuances of equity securities. Additionally,
during 2007 we received $184,000 from the exercise of stock options.
Liquidity and Capital Resources
As of March 31, 2009 and December 31, 2008, we had cash and investment balances of approximately
$12,379,000 and $15,106,000, respectively, and total liabilities of approximately $2,664,000 and
$2,934,000, respectively. The decrease in our cash and investment balances was primarily
attributable to cash used to fund ongoing operations.
The global financial markets have been and continue to be in turmoil, with extreme volatility in
the equity and credit markets and with some financial and other institutions experiencing
significant financial distress. In addition, neither our access to nor the value of our cash
equivalents or short-term investments have been negatively affected by the recent liquidity
problems of financial institutions. Although we have attempted to be prudent in our investment
strategy and in funding our anticipated near term liquidity needs, it is not possible to predict
how the financial market turmoil and the deteriorating economic conditions may affect our financial
position.
These and any future financial institution failures could cause losses to the extent cash amounts
or the values of securities exceed government deposit insurance limits, and could restrict our
access to the public equity and debt markets. In particular, the cost of raising money in the debt
and equity capital markets has increased substantially while the availability of funds from those
markets has diminished significantly. Also, as a result of concern about the stability of financial
markets generally and the solvency of counterparties specifically, the cost of obtaining money from
the credit markets has increased as many lenders and institutional investors have increased
interest rates, enacted tighter lending standards and reduced and, in some cases, ceased to provide
funding to borrowers. Low valuations and decreased appetite for equity investments, among other
factors, may make the equity markets difficult to access on acceptable terms or unavailable
altogether.
We are a development stage company and have not experienced significant revenue generating
activities since our formation. We reached a positive working capital position for the first time
in the fourth quarter of 2005 as a result of our financing activities. We have incurred operating
losses for each year since our inception in 2002. To achieve operating profits, we, alone or with
others, must successfully identify, develop and market product candidates. Our principal
activities, from the beginning of our development stage, have been organizational matters, issuance
of stock, product research and development, fund raising and market research.
In the near-term, we expect to continue to incur significant and increasing operating losses as a
result of the research and development expenses we expect to incur in developing our product
candidates and the general and administrative expenses we incur as a reporting company under the
Securities Exchange Act of 1934, as amended. Additionally, we do not expect to generate any
revenues from sources other than research grants for the foreseeable future.
We believe
that our current cash and investment balances, exclusive of any cash
to be generated from the Equity Line, will be sufficient to fund  our planned Phase 1 studies for
PMX-30063 and PMX-60056 and can fund our operations for at least the next twelve months; however,
due to the continued deterioration of the capital markets and prospects for securing additional
financing, in order to prolong our cash runway we will scale back and delay some of our activities
and do not plan to commence a Phase 1B clinical trial for PMX-60056 until the third quarter of
2009. In addition, our current cash and investment balances are not sufficient to fund the Phase 2
clinical or other development activities of either of these product candidates. We plan to seek
additional funding during 2009 in one or more financings. However, if we are unable to secure
adequate additional funding during the first half of 2009, we will delay, scale-back or eliminate
certain of our future research, drug discovery or development activities or certain other aspects
of our operations and our business until such time as we are successful in securing adequate
additional funding. In the absence of adequate additional funding, we believe that we have the
ability to scale our operations, however, in doing so, our current cash and investment balances can
only fund our operations into the second half of 2010. Our short and long-term capital
requirements depend upon a variety of factors, including market acceptance for our technologies and
product candidates and various other factors, many of which we cannot control, including:
Ø
success of our clinical trials for PMX-30063 and PMX-60056;
Ø
continued progress of and increased spending related to our research and
development activities, including our plan to hire additional research and
development employees;
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Ø
the conditions in the capital markets and the biopharmaceutical industry
that make raising capital or entering into strategic arrangements difficult and
expensive;
Ø
progress with preclinical experiments and clinical trials;
Ø
ongoing general and administrative expenses related to our being a reporting company;
Ø
the cost, timing, and results of regulatory reviews and approvals;
Ø
the maintenance of our existing licenses with the University of Pennsylvania
and the University of Massachusetts;
Ø
the success, timing, and financial consequences of any future collaborative,
licensing and other arrangements that we may establish;
Ø
the cost of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights;
Ø
the costs of commercializing any of our other product candidates;
Ø
technological and market developments;
Ø
the cost of manufacturing development; and
Ø
timing and volume of sales of products for which we obtain marketing approval.
We expect
to seek additional funds beyond the Equity Line through equity or debt financing, collaborative or other
arrangements with corporate partners, and from other sources. For instance, we may actively seek
more funding through government grants and contracts. We may not be able to obtain any additional
financing on terms acceptable to us, if at all, or we may not raise as much as we expect. If
adequate additional funds are not available when required, we will have to delay, scale-back or
eliminate certain of our research, drug discovery or development activities or certain other
aspects of our operations and our business will be materially and adversely affected.
We are subject to many risks associated with development-stage businesses, including the
above-discussed risks associated with the ability to raise capital. Please see the section entitled
"Risk Factors" for more information regarding risks associated with our business.
Off-Balance Sheet Arrangements
We do not have any "off-balance sheet arrangements" as defined in applicable SEC regulations.
Commitments and Contingencies
As described above, we believe our current cash and investment balances are adequate to fund
operations, including the following commitments and contingencies, at least for the next twelve
months. If we are unable to secure adequate additional funding during  2009, we
will delay, scale-back or eliminate certain of our future research, drug discovery or development
activities or certain other aspects of our operations and our business until such time as we are
successful in securing adequate additional funding.
Capital Lease
We have entered into lease agreements for laboratory equipment. The initial obligation under these
capital leases was $331,000. The value of the laboratory equipment acquired in connection with
these leases was $398,000 and the depreciation associated with these assets is included along with
that of other owned property and equipment. These equipment leases have terms of up to three
years, at interest rates ranging from 9.5% to 11.5% and contain bargain purchase options. In
connection with these capital leases, we will pay $108,000 during 2009, $4,000 of which will be for
interest. These capital leases end during 2009.
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Operating Lease
In June 2006, we entered into a lease agreement for 24,223 square feet of combined office and
laboratory space located in Radnor, Pennsylvania. The initial term of the lease is 12 years.
Payments under the lease commenced on December 1, 2006. Our future minimum lease payments under
this non-cancelable operating lease are as follows (in thousands):
Operating Leases
2009
$
497
2010
$
589
2011
$
667
2012
$
686
2013
$
705
Thereafter
$
3,610
Total minimum lease payments
$
6,754
Prior to the commencement of our current operating lease for our Radnor Facility, we leased
approximately 3,500 square feet of combined office and laboratory space on a month-to-month basis
in Philadelphia, Pennsylvania. Rent expense was $598,000, $598,000 and $559,000 and $1,877,000 for
the years ended December 31, 2008, 2007, and 2006, and for the period from August 8, 2002
(Inception) to December 31, 2008, respectively.
Patent License Agreements
University of Pennsylvania
. In January 2003, we entered into a Patent License Agreement with Penn.
Under the terms of the agreement, we were granted an exclusive, worldwide royalty-bearing license
to make and sell products utilizing seven of Penn's issued or pending patents for the life of such
patents. One issued patent and five patent applications cover the composition of matter on
antimicrobial compounds, including small molecules, oligomers and polymers. One patent application
covers the composition and use of polycationic compounds for treating cancer. If a
change-of-control event occurs, in which we transfer the license to these patents to a third party
or we are acquired by another company, we are required to pay a 3% royalty on the gross sales for
licensed products that are sold as pharmaceuticals and a 1.5% royalty on products sold as coatings
for use in medical devices. We are permitted to sublicense the patents provided that (a) the
sublicensee is prohibited from further licensing of the patents and (b) the sublicensee is subject
to all of the terms of the original license granted to us. In addition, we are required to share
with Penn any consideration we receive from sublicensing our patents to a third party.
University of Massachusetts
. In January 2004, we entered into a five-year sponsored research
agreement with UMass. Under the terms of this agreement, we have the exclusive option to license
any intellectual property that may be generated by Dr. Gregory Tew pursuant to research sponsored
under the agreement. We may exercise this option by issuing 7,500 shares of our common stock to
UMass for each $100,000 of research conducted by Dr. Tew. If we exercise this option, we are also
required to reimburse UMass for direct patent costs incurred by it for the patents licensed by us.
During 2007, we issued 12,500 shares to UMass in connection with this agreement. We sponsored
$36,000 and $107,000, $118,000 of Dr. Tew's research for 2008, 2007 and 2006, respectively.
Other
Agreements with Employees
. We have entered into employment agreements with various executives.
These agreements provide for severance arrangements and accelerated vesting of equity compensation
awards in the event that the executive is terminated by us other than for cause or disability or if
the executive resigns for good reason.
Credit Line
. In April 2006, we entered into a line of credit agreement with a financial
institution. This line of credit provides for monthly interest-only payments at a variable per
annum rate of 3% plus the 30-day LIBOR rate. The amount available under this line of credit ranges
from 85% to 92% of cash and investments pledged as collateral, based upon the amount and security
type. There is currently no outstanding balance on this line of credit. In June 2006, we entered
into a letter of credit agreement with the same financial institution to secure our payment
obligations under our facility operating lease. This letter of credit is for $1,400,000, expires
on December 1, 2009 and is secured by our credit line.
Recently Issued Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (or "FASB") issued Statement of
Financial Accounting Standards (or "SFAS") No. 157,
Fair Value Measurements
("SFAS 157"). SFAS 157
clarifies the definition of fair value, establishes a framework for measuring fair value and
expands disclosures on fair value measurements. SFAS 157 was effective for financial statements
issued for fiscal years beginning after November 15,
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2007 and interim periods within those fiscal years; however, the FASB did provide a one-year
deferral for the implementation of SFAS 157 for nonfinancial assets and liabilities.
SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to
measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level
1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs
that are observable for the asset or liability, either directly or indirectly through market
corroboration, for substantially the full term of the financial instrument. Level 3 inputs are
unobservable inputs based on management's own assumptions used to measure assets and liabilities at
fair value. A financial asset or liability's classification within the hierarchy is determined
based on the lowest level input that is significant to the fair value measurement. The adoption of
SFAS 157 did not have any impact on our consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159
The Fair Value Option for Financial Assets and
Financial Liabilities
("SFAS 159"). SFAS 159 permits entities to choose to measure many financial
assets and financial liabilities at fair value. Unrealized gains and losses on items for which the
fair value option has been elected are reported in earnings. SFAS 159 was effective for fiscal
years beginning after November 15, 2007. We did not elect the fair value option available under
SFAS 159 for any financial assets or liabilities.
In June 2007, the FASB ratified the consensus reached in EITF Issue No. 07-03,
Accounting for
Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and
Development Activities
(Issue No. 07-03). Issue No. 07-03 requires that non-refundable advance
payments for future research and development activities should be deferred and recognized as an
expense as goods are delivered or the related services are performed. Issue No. 07-03 is effective
for fiscal years beginning after December 15, 2007. Issue No. 07-03 was adopted effective January
1, 2008 and did not have a material impact on our consolidated financial statements.
In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1,
Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
("FSP EITF 03-6-1"). FSP
EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore need to be included in the earnings
allocation in computing earnings per share, or EPS, under the two-class method described in
paragraphs 60 and 61 of FASB Statement No. 128,
Earnings per Share
("SFAS No. 128"). FSP
EITF 03-6-1 applies to the calculation of EPS under SFAS No. 128 for share-based payment awards
with rights to dividends or dividend equivalents. FSP EITF 03-6-1 clarifies that unvested
share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in the computation of
EPS pursuant to the two class method. FSP EITF 03-6-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within those years. All
prior-period EPS data presented must be adjusted retrospectively (including interim financial
statements, summaries of earnings and selected financial data) to conform with the provisions of
FSP EITF 03-6-1. Early adoption is not permitted. We do not expect EITF 03-6-1 to have a material
impact on our consolidated financial statements.
In June 2008, the FASB ratified the consensus reached on EITF Issue No. 07-05,
Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock
("EITF No. 07-05"). EITF
No. 07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed
to an entity's own stock, which would qualify as a scope exception under SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. EITF No. 07-05 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. Early adoption for an
existing instrument is not permitted. We are currently evaluating the impact of the pending
adoption of EITF No. 07-05 on our consolidated financial statements.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Other than compensation agreements and other arrangements with our executive officers and directors
and the transactions described below, during our last three fiscal years, there has not been, and
there is not currently proposed, any transaction or series of similar transactions to which we were
or will be a party in which the amount involved exceeded or will exceed the lesser of $120,000 or
one percent of the average of our total assets at year-end for the last two completed fiscal years
and in which any of our directors, nominees for director, executive officers, holders of more than
five percent of any class of our voting securities or any member of the immediate family of the
foregoing persons had or will have a direct or indirect material interest.
Fordham Financial Management, Inc.
In June 2008, we entered into an Amended and Restated Co-Placement Agent Agreement with Fordham
Financial, a former 5% stockholder of ours, and Carter Securities, LLC. As consideration for the
placement services rendered by the placement agents, including Fordham Financial, in connection
with our July 2008 public offering, during the period from May 2008 to July 2008 Fordham Financial
received:
Ø
a total of $276,000 in commissions, which represented 7% of the gross proceeds
we received for units placed by Fordham Financial;
Ø
reimbursement of out of pocket expenses in an amount not to exceed $20,000 and
the fees of Fordham Financial's legal counsel of up to $50,000 plus approved
disbursements; and
Ø
warrants to purchase 281,578 shares of common stock, which represented 5% of the
aggregate number of units sold in the offering. The warrants are currently
exercisable, have an exercise price of $1.00 per share and expire July 14, 2013.
Pursuant to the terms and provisions of the Amended and Restated Co-Placement Agent Agreement, we
agreed to indemnify and hold harmless the agents, including Fordham Financial, and any sub-agent
and/or selected dealer, their affiliates, and their respective controlling persons, directors,
officers, stockholders, agents and employees (each referred to as an Indemnified Person) from and
against any and all claims, actions, suits, proceedings (including those of stockholders), damages,
liabilities and expenses incurred by any of them (including the reasonable fees and expenses of
counsel) which were (A) related to or arise out of (i) any actions taken or omitted to be taken
(including any untrue statements made or any statements omitted to be made) by us in the July 2008
public offering, or (ii) any actions taken or omitted to be taken by any Indemnified Person in
connection with our engagement (directly or indirectly) of any agent, including Fordham Financial,
or (B) otherwise relate to or arise out of any agent's, including Fordham Financial's, activities
on our behalf pursuant to the Amended and Restated Co-Placement Agent Agreement.
In December 2007, Fordham Financial served as a selected dealer in connection with our December
2007 public offering. In consideration for the services rendered by Fordham Financial in
connection with the December 2007 public offering, Fordham Financial received a total of $30,720 in
commissions, which represented 7% of the gross proceeds we received for units distributed by
Fordham Financial. In addition, under a placement agent agreement, which covered Fordham
Financial's activities in the December 2007 public offering, we agreed to indemnify and hold
harmless any Indemnified Person, including Fordham Financial, from and against any and all claims,
actions, suits, proceedings (including those of stockholders), damages, liabilities and expenses
incurred by any of them (including the reasonable fees and expenses of counsel) which were (A)
related to or arise out of (i) any actions taken or omitted to be taken (including any untrue
statements made or any statements omitted to be made) by us in the December 2007 public offering,
or (ii) any actions taken or omitted to be taken by any Indemnified Person in connection with our
engagement (directly or indirectly) of any agent, including Fordham Financial, or (B) otherwise
relate to or arise out of any agent's, including Fordham Financial's, activities on our behalf
pursuant to the placement agent agreement.
Private Placement
On September 23, 2008, we entered into Securities Purchase Agreements with certain institutional
and individual accredited investors, including three of our directors, in a private placement of
$4.25 million of units at $7.00 per unit consisting of (i) one share of our Series 2008 Convertible
Preferred Stock and (ii) a Series B Warrant to purchase either shares of our 2008 Convertible
Preferred Stock or, if the Series 2008 Convertible Preferred Stock has been converted into our
common stock, shares of our common stock.
In connection with the private placement, Stefan Loren, a director of ours, purchased 2,150 units
at an aggregate offering price of $15,050; Frank Slattery Jr., a director of ours, purchased 42,900
units at an aggregate offering price
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of $300,300; and Shaun O'Malley, a director of ours, purchased 2,143 units at an aggregate offering
price of $15,001.
Pursuant to the terms of the Securities Purchase Agreements, each share of Series 2008 Convertible
Preferred Stock automatically converted into 10 shares of common stock on December 10, 2008 upon
the effectiveness of an amendment to our certificate of incorporation to increase the number of
shares of common stock authorized for issuance by us to an amount sufficient to cover the issuance
of shares of common stock upon conversion of the 2008 Convertible Preferred Stock and the issuance
of shares of common stock issuable after such conversion upon exercise of all of the Series B
Warrants.
Pursuant to the terms of the Securities Purchase Agreements, we also agreed to file, and filed, a
registration statement on Form S-1 covering the resale of common stock issuable on the conversion
of the 2008 Convertible Preferred Stock and the issuance of common stock issuable upon exercise of
the Series B Warrants.
Each Series B Warrant represents the right to purchase either (a) one share of Series 2008
Convertible Preferred Stock at an exercise price of $10.00 per share or (b) if, at the time the
Series B Warrant is exercised, the Series 2008 Preferred Stock has been converted into shares of
common stock, ten shares of common stock at an exercise price of $1.00 per share. Each Series B
Warrant may be exercised at any time through September 22, 2013. A holder will not have the right
to exercise any portion of a Series B Warrant to the extent that after giving effect to such
issuance after exercise, the holder (together with the holder's affiliates), would beneficially own
in excess of 9.99% of the number of shares of the common stock outstanding immediately after giving
effect to such issuance.
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CORPORATE GOVERNANCE
Our Board currently has eight members. William N. Kelley has informed us that he will not stand for
re-election to our Board at the Annual Meeting of Stockholders to be held on June 30, 2009. Our
Board, upon the recommendation of our Governance Committee, has nominated Douglas Swirsky to stand
for election to the Board at the Annual Meeting of Stockholders to be held on June 30, 2009.
Independence of Directors
In determining the independence of our directors, we apply the definition of "independent director"
provided under the rules of the NYSE Amex (formerly the American Stock Exchange). Pursuant to the
NYSE Amex rules, the Board concluded its annual review of director independence in May 2009.
After considering all relevant facts and circumstances, the Board affirmatively determined that all
of the directors then serving on the Board and those directors nominated for election at the Annual
Meeting of Stockholders to be held on June 30, 2009 are independent pursuant to the NYSE Amex rules
regarding director independence, with the exception of Nicholas Landekic, who serves as our
President and Chief Executive Officer.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Brian Anderson, Richard Bank, William Kelley,
and Michael Lewis. Frank DeLape served on the Compensation Committee until his retirement from the
Board of Directors in May 2008. Except for Mr. DeLape, none of these individuals has ever been an
officer or employee of ours. From August 2005 to November 2005, Mr. DeLape served as the sole
officer as well as director of PolyMedix, Inc., formerly BTHC II Acquisition Corp. In addition,
none of our executive officers serves as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving as a member of our Board of
Directors or the Compensation Committee.
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MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
Since August 18, 2006, our common stock has been traded on the OTC Bulletin Board under the symbol
"PYMX". The market for our common stock is limited and volatile. The following table sets forth the
range of high and low bid quotations or high and low closing prices, as applicable, for our common
stock for each of the periods indicated as reported by the OTC Bulletin Board. The prices quoted on
the OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or
commissions. The OTC Bulletin Board prices listed below may not represent actual transaction
prices.
Year Ended December 31,
2009
High
Low
First Quarter
$
1.24
$
0.63
Second Quarter (April 1, 2009 – June 4, 2009)
$
0.85
$
0.68
Year Ended December 31,
2008
High
Low
First Quarter
$
1.90
$
0.56
Second Quarter
$
1.05
$
0.70
Third Quarter
$
1.05
$
0.52
Fourth Quarter
$
1.45
$
0.68
Year Ended December 31,
2007
High
Low
First Quarter
$
4.00
$
1.60
Second Quarter
$
2.35
$
1.55
Third Quarter
$
2.10
$
0.75
Fourth Quarter
$
2.10
$
0.75
Year Ended December 31,
2006
High
Low
Third Quarter
$
5.00
$
4.46
Fourth Quarter
$
4.60
$
2.50
As of June 4, 2009, the last reported sales price of our common stock on the OTC Bulletin Board was
$0.68 per share.
Holders of Record
As of June 4, 2009, there were approximately 700 holders of record of shares of common stock.
-65-
Dividends
Since our reincorporation in Delaware in March 24, 2005, we have not paid or declared any cash
dividends on our common stock. We currently intend to retain any earnings for future growth and,
therefore, do not expect to pay cash dividends on our common stock in the foreseeable future.
Equity Compensation Plan Information
The following table sets forth, as of December 31, 2008, information concerning equity compensation
plans under which our securities are authorized for issuance. The table does not reflect grants,
awards, exercises, terminations or expirations since that date.
(c)
(a)
Number of securities
Number of securities
(b)
remaining available
to
Weighted-average
for
be issued upon
exercise price of
future issuance
exercise
outstanding
under equity
of outstanding
options,
compensation plan
options,
warrants and
(excluding securities
warrants and rights
rights
reflected column (a))
Equity compensation plans
approved by security holders
(1)
8,890,000
$
1.41
564,500
Equity compensation plans not
approved by security holders
(2)
1,320,000
$
1.60
—
Total:
10,210,000
$
1.44
564,500
(1)
Represents 918,000 and 7,972,000 shares of our common stock issuable under our 2002 Equity
Compensation Plan and our 2005 Omnibus Equity Compensation Plan, respectively, as of December
31, 2008.
(2)
An aggregate of 1,320,000 shares of our common stock represent portions of prior grants that
exceeded the aggregate individual grant limit under our 2002 Equity Compensation Plan or 2005
Omnibus Equity Compensation Plan, as applicable, and are considered to have occurred outside
such plans.
-66-
DESCRIPTION OF SECURITIES
Capital Stock
We are authorized to issue 250,000,000 shares of common stock, par value $0.001 per share, of which
59,845,065 shares were issued and outstanding as of March 31, 2009, and 10,000,000 shares of
preferred stock, par value $0.001 per share, of which no shares were issued and outstanding as of
December 31, 2008.
Common Stock
Holders of common stock are entitled to one vote per share on all matters to be voted upon by the
stockholders and are not entitled to cumulative voting for the election of directors. Holders of
common stock are entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefore subject to the rights of
preferred stockholders. We do not intend to pay any cash dividends to the holders of common stock
and anticipate reinvesting our earnings. In the event of liquidation, dissolution or winding up of
the Company, the holders of common stock are entitled to share ratably in all assets remaining
after payment of liabilities and the preferences of preferred stockholders. Shares of common stock
have no preemptive, conversion or other subscription rights. There are no redemption or sinking
fund provisions applicable to common stock.
Preferred Stock
We are authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.001 per
share, and the Board of Directors is authorized to create one or more series of preferred stock,
and to designate the rights, privileges, restrictions, preferences and limitations of any given
series of preferred stock. Accordingly, the Board of Directors may, without stockholder approval,
issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights that
could adversely affect the voting power or other rights of the holders of common stock.
Stockholder Rights Plan
Each outstanding share of our common stock includes an associated preferred stock purchase right (a "Right") for each outstanding share of our common stock, that
will entitle the registered holder to purchase from us one one-thousandth of a share of Series C
Preferred Stock, par value $0.001 per share, at a purchase price of $15.00 per one one-thousandth
of a share, subject to adjustment.
Because of the nature of the dividend, liquidation and voting rights of Series C Preferred Stock,
the value of the one one-thousandth interest in a share of Series C Preferred Stock purchasable
upon exercise of each Right, should approximate the value of one share of our common stock. The Rights are governed by a Rights Agreement dated as of May 12, 2009 (the "Rights Agreement").
Separation and Distribution of Rights; Exercisability
. Initially, the Rights will be attached to
all shares of our common stock then outstanding, whether or not certificated, and no separate
Rights certificates will be distributed. The Rights will separate from the common stock upon the
earlier of:
•
10 business days following a public announcement that a person or group of
affiliated or associated persons has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of our shares of common stock then outstanding
("Acquiring Person") (subject to certain exceptions set forth in the Rights
Agreement), or such earlier date as the Board becomes aware of the Acquiring
Person's existence; or
•
10 business days (or some later date as determined by the Board) following the
commencement of a tender or exchange offer that would result in a person or group
beneficially owning 15% or more of our shares of common stock then outstanding
(subject to exceptions as set forth in the Rights Agreement).
Until the date that the Rights separate from our common stock (the "Distribution Date"), (i) the
Rights will be evidenced by and transferred with, and only with, the shares of our common stock,
(ii) newly issued shares of our common stock, whether or not certificated, will
contain a notation incorporating the Rights Agreement by reference, and (iii) the surrender for
transfer of any shares of our common stock outstanding will also constitute the transfer of the
Rights associated with such shares of our common stock.
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The Rights are not exercisable until the Distribution Date and will expire at the close of business
on May 12, 2019, unless earlier redeemed by us as described below.
As soon as practicable after the Distribution Date, Rights certificates will be mailed to the
holders of record of our common stock as of the close of business on the Distribution Date and,
after that, the separate Rights certificates will represent the Rights. Except in connection with
shares of our common stock issued or sold pursuant to the exercise of stock options under any
employee plan or arrangements, or upon the exercise, conversion or exchange of securities issued by
us in the future, or as otherwise determined by the Board, only shares of our common stock issued
prior to the Distribution Date will be issued with Rights.
Flip-in Events
. Each holder of a Right (other than the Acquiring Person and any associate or
affiliate thereof) will have the right to receive, upon exercise, shares of our common stock (or,
in some circumstances, cash, property or our other securities) having a value equal to two times
the purchase price of the Right, as the case may be, if:
•
any person becomes an Acquiring Person (except pursuant to specified
exceptions);
•
we are the surviving corporation in a merger with an Acquiring Person and the
common stock is not changed or exchanged; or
•
during the time that there is an Acquiring Person, a merger, reclassification or
similar event occurs that results in increasing the Acquiring Person's beneficial
ownership of shares of our common stock by more than 1%.
Notwithstanding any of the foregoing, following the occurrence of any of the events described in
this paragraph, all Rights that are, or (under some circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person will be null and void. The events
described in this paragraph are referred to as "Flip-in Events."
For example, at a purchase price of $15.00 per Right, each Right not owned by an Acquiring Person
(or by some related parties or transferees) following a Flip-in Event set forth in the preceding
paragraph would entitle its holder to purchase $30.00 worth of our common stock (or other
consideration, as noted above) for $15.00.
Flip-over events
. At any time following the earlier of a public announcement that a person has
become an Acquiring Person or the date that a majority of the Board becomes aware of the existence
of an Acquiring Person (in either case, the "Stock Acquisition Date"), each holder of a Right
(except Rights which previously have been voided as set forth above) will have the right to
receive, upon exercise, common stock of an acquiring company having a value equal to two times the
purchase price of the Right if any of the following occur:
•
we enter into a merger in which we are not the surviving corporation;
•
we are the surviving corporation in a merger pursuant to which all or part of
the outstanding shares of our common stock are changed into or exchanged for stock
or other securities of any other person or cash or any other property; or
•
more than 50% of our combined assets, cash flow or earning power and our
subsidiaries is sold or transferred (in each case other than some consolidations
with, mergers with and into, or sales of assets, cash flow or earning power by or
to our subsidiaries as specified in the Rights Agreement).
The events described in this paragraph are referred to as "Flip-over Events." Flip-in Events and
Flip-over Events are referred to collectively as "Triggering Events."
Anti-dilution Adjustments; Fractional Shares
. The applicable purchase price payable, the number of
shares of Series C Preferred Stock or other securities or property issuable upon the exercise of
the Rights, and the number of applicable Rights outstanding are subject to adjustment from time to
time to prevent dilution, in the event of a stock dividend on, or a subdivision, combination or
reclassification of, Series C Preferred Stock or common stock, or upon the occurrence of certain
other specified dilutive events. No fractional shares of Series C Preferred Stock are required to
be issued (other than fractions which are integral multiples of one one-thousandth of a share of
Series C Preferred Stock) and, in lieu of the issuance of fractional shares, we may make an
adjustment in cash based on the market price of the Series C Preferred Stock on the trading date
immediately prior to the date of exercise.
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Dividend, Liquidation and Redemption Rights of the Series C Preferred Stock
. Each share of Series C
Preferred Stock will be entitled, when, as and if declared, to a minimum preferential quarterly
dividend payment equal to the greater of $0.001 per share and an aggregate amount of 1,000 times
the dividend declared per share of common stock (other than stock dividends payable in common
stock). Upon liquidation, the holders of Series C Preferred Stock will be entitled to the greater
of (1) a minimum preferential liquidation payment of $1,000 per share (plus any accrued but unpaid
dividends) and (2) an aggregate payment equal to 1,000 times the payment to be made per share of
common stock. Each share of Series C Preferred Stock will have 1,000 times the number of votes each
share of the common stock has on matters the respective class is entitled to vote on, which will be
voted together with common stock. Upon any merger, consolidation or other transaction in which
shares of common stock are converted or exchanged, each share of Series C Preferred Stock will be
entitled to receive 1,000 times the amount received per share of common stock. These rights are
protected by customary antidilution provisions.
At any time, or from time to time, the Board may redeem the outstanding shares of Series C
Preferred Stock, in whole but not in part, at a cash price per share equal to 105% of (i) 1,000
(subject to adjustment) times the average market value of common stock plus (ii) all accrued and
unpaid dividends of the Series C Preferred Stock as of the redemption date.
Exchange of the Rights
. At any time after the occurrence of a Flip-in Event and prior to the
acquisition by a person or group of 50% or more of the shares of common stock then outstanding, the
Board may, without payment of the purchase price by the holder, exchange the Rights, in whole or in
part, as follows:
•
each Right (other than the Rights owned by the Acquiring Person or group, which
will become void) may be exchanged for one-half the number of shares of common
stock, one one-thousandth of a share of Series C Preferred Stock or shares or other
units of other property for which a Right is exercisable immediately prior to the
time of the action of the Board to exchange the Rights.
Redemption of the Rights
. At any time prior to the earliest of (i) the Stock Acquisition Date,
(ii) the tenth business day (or such later date as may be determined by action of the Board of
Directors prior to such time as any person or group of affiliated or associated persons becomes an
Acquiring Person) after the commencement of, or announcement of an intention to commence, a tender
offer or exchange offer the consummation of which would result in any person becoming an Acquiring
Person, or (iii) May 12, 2019, we may redeem all, but not less than all, of the Rights at a price
of $0.001 per Right (payable in cash, shares of our common stock or other consideration deemed
appropriate by the Board and subject to adjustment). Immediately upon the action of the Board
ordering redemption of the Rights, the Rights will terminate and the only right of the holders of
these Rights will be to receive the $0.001 redemption price.
No Rights as Stockholder
. Until a Right is exercised, the holder will have no rights as a
stockholder of ours, including, without limitation, the right to vote or to receive dividends.
Amendment of the Rights Agreement
. Other than those provisions relating to the principal economic
terms of the Rights, any of the provisions of the Rights Agreement may be amended by the Board at
any time during the period in which the Rights are redeemable. At any time when the Rights are no
longer redeemable, the provisions of the Rights Agreement may be amended by the Board only if the
amendment does not adversely affect the interest of holders of Rights (excluding the interest of
any Acquiring Person) or cause the Rights to become redeemable again.
Certain Anti-takeover Effects
. The Rights approved by the Board are designed to protect and
maximize the value of our outstanding equity interests in the event of an unsolicited attempt by an
acquirer to take over the Company, in a manner or on terms not approved by the Board. Takeover
attempts frequently include coercive tactics to deprive the Board and its stockholders of a full
opportunity to evaluate an offer in light of our long term prospects. The Rights have been
declared by the Board in order to deter such tactics.
The Rights are not intended to prevent all takeovers of the Company and will not do so. Since,
subject to the restrictions described above, we may redeem the Rights prior to the Distribution
Date, the Rights should not interfere with any merger or business combination approved by the
Board.
-69-
The Rights may have the effect of rendering more difficult or discouraging an acquisition of the
Company deemed undesirable by the Board. The Rights may cause substantial dilution to a person or
group that attempts to acquire us (or which otherwise becomes an Acquiring Person) on terms or in a
manner not approved by the Board, except pursuant to an offer conditioned upon the negation,
purchase or redemption of the Rights.
Warrants
We issued Series B Warrants to purchase 6,088,340 shares of common stock in connection with our
2008 Private Placement at an exercise price of $1.00 per share. These warrants expire on September
22, 2013. In addition, we issued to the placement agents in the 2008 Private Placement Series B
Warrants to purchase 279,583 shares of common stock as partial compensation for services in
connection with the 2008 Private Placement.
We issued Series A Warrants to purchase 21,428,571 shares of common stock, of which 21,214,143 are
currently outstanding, in connection with our July 2008 registered direct offering of units at an
exercise price of $1.00 per share. These warrants expire on July 15, 2013. In addition, we issued
to the placement agents and selected dealers in the offering warrants to purchase 1,071,429 shares
of common stock as partial compensation for services in connection with the offering. These
warrants are substantially similar to the Series A Warrants and expire July 14, 2013.
We issued warrants to purchase 2,943,222 shares of common stock in connection with our December
2007 registered direct offering of units at an exercise price of $1.10 per share. These warrants
expire on December 20, 2012.
We issued warrants to purchase 4,119,194 shares of common stock in connection with our 2006 private
placement of Series 1 preferred stock to the placement agent of our Series 1 Preferred Stock.
These warrants have an exercise price of $1.23 per share, as adjusted for weighted average
anti-dilution protection. These warrants expire on November 8, 2010 and contain additional
weighted average anti-dilution protection if we issue certain securities at a price per share less
than $1.23.
Anti-Takeover
Effects of Delaware Law, our Certificate of Incorporation and our Bylaws
We are subject to Section 203 of the General Corporation Law of the State of Delaware. Subject to
certain exceptions, Section 203 prevents a publicly held Delaware corporation from engaging in a
business combination with any interested stockholder for three years following the date that the
person became an interested stockholder, unless the interested stockholder attained such status
with the approval of our board of directors or unless the business combination is approved in a
prescribed manner. A business combination includes, among other things, a merger or consolidation
involving us and the interested stockholder and the sale of more than 10% of our assets. In
general, an interested stockholder is any entity or person beneficially owning 15% or more of our
outstanding voting stock and any entity or person affiliated with or controlling or controlled by
such entity or person.
In addition, our certificate of incorporation and our bylaws provide that directors may be removed
only for cause and only by the affirmative vote of the holders of 75% of our shares of capital
stock present in person or by proxy and entitled to vote. Under our certificate of incorporation
and bylaws, any vacancy on our board of directors, including a vacancy resulting from an
enlargement of our board of directors, may be filled only by vote of a majority of our directors
then in office. The limitations on the ability of our stockholders to remove directors and fill
vacancies could make it more difficult for a third-party to acquire, or discourage a third-party
from seeking to acquire, control of our company.
Our certificate of incorporation and our bylaws provide that any action required or permitted to be
taken by our stockholders at an annual meeting or special meeting of stockholders may only be taken
if it is properly brought before such meeting. Our stockholders may also take any action by
written consent in lieu of a meeting.
Our certificate of incorporation and our bylaws also provide that, except as otherwise required by
law, special meetings of the stockholders can only be called by our Chairman of the Board, our
chief executive officer or our Board. In addition, our bylaws establish an advance notice
procedure for stockholder proposals to be brought before an annual meeting of stockholders,
including proposed nominations of candidates for election to our Board. Stockholders at an annual
meeting may only consider proposals or nominations specified in the notice of meeting or brought
before the meeting by or at the direction of our Board, or by a stockholder of record on the record
date for the meeting who is entitled to vote at the meeting and who has delivered timely written
notice in proper form to our secretary of the stockholder's intention to bring such business before
the meeting. These provisions could have the effect of delaying until the next stockholder meeting
stockholder actions that are favored by the holders of a majority of our outstanding voting
securities.
-70-
The authorization in our certificate of incorporation of undesignated preferred stock makes it
possible for our Board, without obtaining further stockholder approval, to issue preferred stock
with voting rights or other rights or preferences that could impede the success of any attempt to
take control of us.
The General Corporation Law of the State of Delaware provides generally that the affirmative vote
of a majority of the shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless a corporation's certificate of incorporation or
bylaws, as the case may be, requires a greater percentage. Our bylaws may be amended or repealed
by a majority vote of our Board. In addition, the affirmative vote of the holders of at least
three-fourths of the votes which all our stockholders would be entitled to cast in any election of
directors is required to amend or repeal or to adopt any provisions inconsistent with any of the
provisions of our certificate of incorporation described in the prior two paragraphs.
-71-
PLAN OF DISTRIBUTION
The purpose of this prospectus is to permit the selling stockholder to offer and resell up to an
aggregate of 12,000,000 shares of our common stock at such times and at such places as they choose.
In this section of the prospectus, the term "selling stockholder" includes the partners, pledgees,
donees, transferees or other successors-in-interest of the selling stockholder, which may sell
shares received after the date of this prospectus from the selling stockholder as a pledge, gift,
partnership or similar distribution or other non-sale related transfer. To the extent required, we
may amend and supplement this prospectus from time to time to describe a specific plan of
distribution. The decision to sell any shares offered pursuant to this prospectus is within the
sole discretion of the selling stockholder.
The distribution of the common stock by the selling stockholder may be effected from time to time
in one or more transactions. Any of the common stock may be offered for sale, from time to time,
by the selling stockholder at prices and on terms then obtainable, at fixed prices, at prices then
prevailing at the time of sale, at prices related to such prevailing prices, or in negotiated
transactions at negotiated prices or otherwise. The common stock may be sold by one or more of the
following:
Ø
On the OTC Bulletin Board or any other national common stock exchange or automated
quotation system on which our common stock is traded, which may involve transactions solely
between a broker-dealer and its customers which are not traded across an open market and
block trades.
Ø
Through one or more dealers or agents (which may include one or more underwriters),
including, but not limited to:
o
Block trades in which the broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this prospectus.
o
Purchases by a broker or dealer as principal and resale by such broker
or dealer for its account pursuant to this prospectus.
o
Ordinary brokerage transactions.
o
Transactions in which the broker solicits purchasers.
Ø
Directly to one or more purchasers.
Ø
A combination of these methods.
Dutchess and any broker-dealers who act in connection with the sale of its shares are
"underwriters" within the meaning of the Securities Act, and any discounts, concessions or
commissions received by them and profit on any resale of the shares as principal may be deemed to
be underwriting discounts, concessions and commissions under the Securities Act. Because the
selling stockholder is an "underwriter" within the meaning of the Securities Act, it will be
subject to the prospectus delivery requirements of the Securities Act, including Rule 172
thereunder.
The selling stockholder or its underwriters, dealers or agents may sell the common stock to or
through underwriters, dealers or agents, and such underwriters, dealers or agents may receive
compensation in the form of discounts or concessions allowed or reallowed. Underwriters, dealers,
brokers or other agents engaged by the selling stockholder may arrange for other such persons to
participate. Any fixed public offering price and any discounts and concessions may be changed from
time to time. Underwriters, dealers and agents who participate in the distribution of the common
stock may be deemed to be underwriters within the meaning of the Securities Act, and any discounts
or commissions received by them or any profit on the resale of shares by them may be deemed to be
underwriting discounts and commissions thereunder. The proposed amounts of the common stock, if
any, to be purchased by underwriters and the compensation, if any, of underwriters, dealers or
agents will be set forth in a prospectus supplement.
Unless granted an exemption by the Commission from Regulation M under the Exchange Act, or unless
otherwise permitted under Regulation M, the selling stockholder will not engage in any
stabilization activity in connection with our common stock, will furnish each broker or dealer
engaged by the selling stockholder and each other participating broker or dealer the number of
copies of this prospectus required by such broker or dealer, and will not
-72-
bid for or purchase any common stock of our or attempt to induce any person to purchase any of the
common stock other than as permitted under the Exchange Act.
We will not receive any proceeds from the sale of these shares of common stock offered by the
selling stockholder. We shall use our reasonable efforts to prepare and file with the Commission
such amendments and supplements to the registration statement and this prospectus as may be
necessary to keep such registration statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of the common stock covered by the registration
statement for the period required to effect the distribution of such common stock.
We are paying certain expenses (other than commissions and discounts of underwriters, dealers or
agents) incidental to the offering and sale of the common stock to the public, which are estimated
to be approximately $38,000. If we are required to update this prospectus during such period, we
may incur additional expenses in excess of the amount estimated above.
In order to comply with certain state securities laws, if applicable, the common stock will be sold
in such jurisdictions only through registered or licensed brokers or dealers. In certain states the
shares of common stock may not be sold unless they have been registered or qualify for sale in such
state or an exemption from registration or qualification is available and is complied with.
-73-
EXPERTS
The consolidated financial statements as of December 31, 2008 and 2007, and for each of the three
years in the period ended December 31, 2008, and for the period from August 8, 2002 (inception) to
December 31, 2008 included in this Prospectus have been audited by Deloitte & Touche LLP, an
independent registered public accounting firm, as stated in their report appearing herein. Such
consolidated financial statements have been so included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters in connection with the securities will be passed upon for us by the law firm
of Pepper Hamilton LLP.
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
None.
COMMISSION'S POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
We are a Delaware corporation. Article Seventh of our Amended and Restated Certificate of
Incorporation provides to the fullest extent permitted under the Delaware General Corporation Law
("DGCL"), that our directors or officers will not be personally liable to us or our stockholders
for damages for breach of such director's or officer's fiduciary duty. Section 145 of the DGCL
provides that a corporation may indemnify directors, officers, employees and agents against
expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement in
connection with specified actions, suits, or proceedings whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation — a "derivative action"),
if they acted in good faith and in a manner they reasonably believed to be in or not opposed to the
best interests of the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard is applicable in the
case of derivative actions, except that indemnification is permitted only for expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such action, and the
statute requires court approval before there can be any indemnification for expenses where the
person seeking indemnification has been found liable to the corporation. The statute provides that
it is not exclusive of other indemnification that may be granted by a corporation's charter,
bylaws, disinterested director vote, stockholder vote, agreement, or otherwise.
Article VIII of our bylaws provides that we shall indemnify and hold harmless, to the fullest
extent permitted by applicable law as it presently exists or may hereafter be amended, any person
who was or is made or is threatened to be made a party or is otherwise involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that
he, or a person for whom he is the legal representative, is or was a director or officer of ours,
or is or was serving at our written request as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including
service with respect to employee benefit plans, against all liability and loss suffered and
expenses (including attorneys' fees as incurred) reasonably incurred by him.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to
directors, officers or persons controlling us pursuant to the foregoing provisions, or otherwise,
we have been advised that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
ADDITIONAL INFORMATION
We have filed with the SEC a Registration Statement on Form S-1 under the Securities Act covering
the sale by the selling stockholder of the securities offered by this prospectus. This prospectus,
which is a part of the Registration Statement, does not contain all of the information in the
Registration Statement and the exhibits filed with it, portions of which have been omitted as
permitted by the SEC rules and regulations. For further information concerning us and the
securities offered by this prospectus, please refer to the Registration Statement and to the
exhibits filed therewith.
The Registration Statement, including all exhibits, may be inspected without charge at the SEC's
Public Reference Room at the SEC's principal office at Room 1580, 100 F Street, N.E., Washington,
D.C. 20549. You may obtain information on the operation of this public reference room by calling
1-800-SEC-0330. The Registration Statement, including all exhibits and schedules and amendments,
has been filed with the SEC through the Electronic Data Gathering Analysis and Retrieval system and
is available to the public from the SEC's web site at
http://www.sec.gov
.
-74-
POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2009 AND
FOR THE QUARTERS ENDED MARCH 31, 2009 AND 2008
AND FOR THE PERIOD
AUGUST 8, 2002 (INCEPTION) TO MARCH 31, 2009
CONTENTS
Page
Condensed Consolidated Balance Sheets (Unaudited) — as of March 31, 2009 and December 31, 2008
F-2
Condensed Consolidated Statements Of Operations (Unaudited) — for the Three-Months Ended
March 31, 2009 and 2008 and for the Period from August 8, 2002 (Inception) to March 31, 2009
F-3
Condensed Consolidated Statements Of Cash Flows (Unaudited)- for the Three-Months Ended March
31, 2009 and 2008 and for the Period from August 8, 2002 (Inception) to March 31, 2009
F-4
Notes To Condensed Consolidated Financial Statements (Unaudited)
F-5
F-1
PolyMedix, Inc.
(A Development Stage Company)
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except per share amounts)
March 31,
December 31,
2009
2008
ASSETS
Current Assets:
Cash and cash equivalents
$
10,479
$
7,206
Short-term investments
1,900
7,900
Prepaid expenses and other current assets
435
407
Total current assets
12,814
15,513
Property and Equipment:
Computers
237
237
Office furniture and lab equipment
774
774
Accumulated depreciation
(500
)
(447
)
Total property and equipment
511
564
TOTAL ASSETS
$
13,325
$
16,077
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$
1,069
$
1,072
Accrued expenses
674
933
Short-term portion of capital lease obligation
68
104
Total current liabilities
1,811
2,109
Deferred rent
853
825
Total liabilities
2,664
2,934
Commitments and contingencies
—
—
Stockholders' Equity:
Preferred Stock ($0.001 par value; 10,000
shares authorized; 0 issued and outstanding at
March 31, 2009 and December 31, 2008)
—
—
Common Stock ($0.001 par value; 250,000 shares
authorized; 59,845 issued and outstanding at
March 31, 2009 and December 31, 2008)
60
60
Additional paid-in capital
50,379
49,930
Deficit accumulated during the development stage
(39,779
)
(36,859
)
Unrealized gain on available for sale securities
1
12
Total stockholders' equity
10,661
13,143
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
13,325
$
16,077
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-2
PolyMedix, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(unaudited)
(in thousands, except per share amounts)
For the period
August 8, 2002
(Inception) to
Three-Months Ended March 31,
March 31,
2009
2008
2009
Revenues:
Grant and research revenues
$
6
$
991
$
3,519
Total revenues
6
991
3,519
Operating Expenses:
Research and development
1,675
2,726
26,266
General and administrative
1,277
1,155
18,551
Total operating expenses
2,952
3,881
44,817
Other Income:
Interest income and other expenses
26
67
1,519
Total other income
26
67
1,519
Net loss
$
(2,920
)
$
(2,823
)
$
(39,779
)
Beneficial conversion feature, conversion inducement and dividends on preferred stock
—
—
(11,118
)
Net loss attributable to common stockholders
$
(2,920
)
$
(2,823
)
$
(50,897
)
Net loss per common share — basic and diluted
$
(0.05
)
$
(0.09
)
Weighted average common shares outstanding — basic and diluted
59,845
32,105
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-3
PolyMedix, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in thousands)
For the period
August 8, 2002
Three-Months Ended March 31,
(Inception) to
2009
2008
March 31, 2009
Cash Flows from Operating Activities:
Net loss
$
(2,920
)
$
(2,823
)
$
(39,779
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation
53
53
576
Accretion of discount on investment secutities
(13
)
(27
)
(455
)
Stock-based compensation
449
346
6,293
Increase in prepaid expenses and other current assets
(28
)
(874
)
(435
)
Increase (decrease) in accounts payable, accrued expenses and deferred rent
(183
)
458
2,566
Loss on disposal of fixed assets
—
—
23
Net cash used in operating activities
(2,642
)
(2,867
)
(31,211
)
Cash Flows from Investing Activities:
Cash paid for property and equipment
(15
)
—
(766
)
Purchases of investments
(1,898
)
—
(32,141
)
Proceeds from maturities of investments
7,900
2,000
30,698
Net cash provided by (used in) investing activities
5,987
2,000
(2,209
)
Cash Flows from Financing Activities:
Proceeds from issuance of stock, net of financing costs
(36
)
(308
)
43,764
Proceeds from warrant and stock option exercises
—
—
398
Principal payments on capital lease obligations
(36
)
(32
)
(263
)
Net cash provided by (used in) financing activities
(72
)
(340
)
43,899
Net increase (decrease) in cash and cash equivalents
3,273
(1,207
)
10,479
Cash and cash equivalents — beginning of period
7,206
4,936
—
Cash and cash equivalents — end of period
$
10,479
$
3,729
$
10,479
Non-Cash Investing Activities:
Property and equipment acquired under capital lease
$
—
$
—
$
331
Capital expenditures acquired on account
$
—
$
30
$
15
Non-Cash Financing Activities:
Conversion inducement and dividends on Series 1 Preferred Stock and Beneficial conversion feature on Series 2008 Preferred Stock
$
—
$
—
$
11,118
Warrants issued to placement agent
$
—
$
—
$
2,932
Accrued financing costs
$
15
$
149
$
15
Capital lease obligation
$
—
$
—
$
331
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-4
PolyMedix, Inc.
(A Development Stage Company)
Notes to Unaudited Condensed Consolidated Financial Statements
In these condensed consolidated financial statements, "PolyMedix," "we," "us" and "our" refer to
PolyMedix, Inc. and its wholly owned subsidiary PolyMedix Pharmaceuticals, Inc., and "common stock"
refers to the common stock, par value $0.001 per share of PolyMedix, Inc..
1 — Organization and Business Activities
We are a development stage biotechnology company focused on treating life threatening, serious
infectious diseases and acute cardiovascular disorders with synthetic small molecule compounds that
mimic the activity of large natural protein molecules, compounds referred to as biomimetics. Using
our proprietary computational drug design technology, we have created novel defensin mimetic
antibiotic compounds, heparin antagonist compounds (or "heptagonist") and other drug compounds
intended for human therapeutic use. Since 2002, we have been a development stage enterprise, and
accordingly, our operations have been directed primarily toward developing business strategies,
raising capital, research and development activities, conducting pre-clinical testing and human
clinical trials of our product candidates, exploring marketing channels and recruiting personnel.
We have incurred operating losses since inception, have not generated any product sales revenues
and have not achieved profitable operations. Our deficit accumulated during the development stage
through March 31, 2009 aggregated $39,779,000, and we expect to continue to incur substantial
losses in future periods.
None of our product candidates have received regulatory approval for commercial sale and our
product candidates may never be commercialized. In addition, all of our product candidates are in
the early stages of development and several programs are on hold pending sufficient additional
financing. The progress and results of our current and any future clinical trials or future
pre-clinical testing are uncertain, and if our product candidates do not receive regulatory
approvals, our business, operating results, financial condition and cash flows will be materially
adversely affected. Our development programs require a significant amount of cash to support the
development of product candidates.
We are highly dependent on the success of our research, development and licensing efforts and,
ultimately, upon regulatory approval and market acceptance of our products under development. Our
short and long-term capital requirements depend upon a variety of factors, including market
acceptance for our technologies and product candidates and various other factors. We anticipate
that in order to achieve our operational objectives, including our plans during 2009 for starting
and completing Phase 1b studies as well as beginning preparation for Phase 2 studies for each of
our PMX-30063 and PMX-60056 product candidates, our expenses and cash requirements will increase
from historical levels and we will need to raise additional capital during 2009 in order to fully
fund the research and development of our product candidates. We believe that our current cash and
investment balances can fund our planned Phase 1 studies for PMX-30063 and PMX-60056 and can fund
our operations for at least the next twelve months; however, due to the continued deterioration of
the capital markets and prospects for securing additional financing, in order to prolong our cash
runway we will scale back and delay some of our activities and do not plan to commence a Phase 1b
clinical trial for PMX-60056 until the third quarter of 2009.
Our current cash and investment balances are not sufficient to fund the Phase 2 clinical or other
development activities of either of our two lead product candidates. We do not plan to initiate
our Phase 2 development activities for both PMX-30063 and PMX-60056 until additional financing is
secured. We expect to seek additional funds through equity or debt financing, among other sources.
In addition, we may actively seek funds through government grants and contracts. However, as a
result of current conditions in the equity and debt markets, we may not be able to obtain
additional funding on favorable terms, if at all. In addition, if we choose to apply for
government grants and contracts, there is no guarantee of acceptance of our applications. If
additional capital resources are not obtained during the first half of 2009, we will scale-back,
postpone or eliminate certain of our research, drug discovery or development programs until such
additional capital resources have been obtained, and as a result, our business may be materially
and adversely affected. In the absence of adequate additional funding, we believe that we have the
ability to scale our operations such that our current cash and investment balances can fund our
operations into the second half of 2010.
F-5
Global market and economic conditions have been, and continue to be, disruptive and volatile. In
particular, the cost of raising money in the debt and equity capital markets has increased
substantially while the availability of funds from those markets has diminished significantly. If
funding is not available when needed, or is available only on unfavorable terms, meeting our
capital needs or otherwise taking advantage of business opportunities may become challenging, which
could have a material adverse effect on our business plans.
Interim Financial Information
The condensed consolidated financial statements include the accounts of PolyMedix, Inc. and its
wholly-owned subsidiary, PolyMedix Pharmaceuticals, Inc. All intercompany accounts and
transactions have been eliminated in consolidation. The information as of March 31, 2009 and for
the periods ended March 31, 2009 and 2008 and the period from August 8, 2002 (Inception) to March
31, 2009 is unaudited but includes all adjustments (consisting only of normal recurring
adjustments) which, in our opinion, are necessary to state fairly the financial information set
forth in accordance with accounting principles generally accepted in the United States of America.
The interim results are not necessarily indicative of the results to be expected for the full
fiscal year. These condensed consolidated financial statements should be read in conjunction with
the audited consolidated financial statements for the year ended December 31, 2008 included in our
annual report on Form 10-K filed with the U.S. Securities and Exchange Commission on March 23,
2009.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts in the financial statements and accompanying notes. Actual results could
differ from those estimates. Significant estimates include the value of our common stock, preferred
stock, stock options and warrants.
2 — Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines
fair value, establishes a framework and gives guidance regarding the methods used for measuring
fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007, and interim periods
of those fiscal years. In February 2008, the FASB released a FASB Staff Position (FSP FAS
157-2—Effective Date of FASB Statement No. 157) which delayed, to fiscal years beginning after
November 15, 2008, the effective date of SFAS 157 for all non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually). Effective January 1, 2008, we adopted SFAS 157
as it applies to our financial instruments. Effective January 1, 2009, we adopted SFAS 157 for our
non-financial assets and non-financial liabilities, without impact to our condensed consolidated
financial statements or related footnotes.
The following table provides the assets and liabilities carried at fair value measured on a
recurring basis as of March 31, 2009 (in thousands):
Fair Value Measurements at March 31, 2009
Significant other
Significant
Total Carrying
Quoted prices in
observable
unobservable
value as of
active markets
inputs
inputs
March 31, 2009
(Level 1)
(Level 2)
(Level 3)
Short-term investments
$
1,900
$
—
$
1,900
$
—
Total
$
1,900
$
—
$
1,900
$
—
Our short-term investments, generally fixed income government agency securities, are measured at
fair value using models derived principally from or corroborated by observable market data by
correlation or other means and are classified within Level 2 of the valuation hierarchy.
In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, "Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities," ("FSP EITF 03-6-1"). FSP
EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are
participating securities prior to
F-6
vesting and, therefore need to be included in the earnings allocation in computing earnings per
share, or EPS, under the two-class method described in paragraphs 60 and 61 of FASB Statement
No. 128, "Earnings per Share" ("SFAS No. 128"). FSP EITF 03-6-1 applies to the calculation of EPS
under SFAS No. 128 for share-based payment awards with rights to dividends or dividend equivalents.
FSP EITF 03-6-1 clarifies that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities
and shall be included in the computation of EPS pursuant to the two class method. FSP EITF 03-6-1
is effective for financial statements issued for fiscal years beginning after December 15, 2008,
and interim periods within those years. All prior-period EPS data presented must be adjusted
retrospectively (including interim financial statements, summaries of earnings and selected
financial data) to conform with the provisions of FSP EITF 03-6-1. Early adoption is not permitted.
The adoption of EITF 03-6-1 did not have an impact on our consolidated financial statements.
In June 2008, the FASB ratified the consensus reached on EITF Issue No. 07-05, "Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock" ("EITF No. 07-05"). EITF
No. 07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed
to an entity's own stock, which would qualify as a scope exception under SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. EITF No. 07-05 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. Early adoption for an
existing instrument is not permitted. The adoption of EITF No. 07-05 did not have an impact on our
consolidated financial statements.
3 — Comprehensive Loss
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the reporting of
comprehensive income and its components. Comprehensive income consists of reported net income or
loss and unrealized gains or losses on available for sale securities. The comprehensive loss for
each of the periods presented approximates the net loss in the condensed consolidated statements of
operations.
4 — Short-Term Investments
Short-term investments consist of investment grade fixed income securities with original maturities
of greater than three months. All investments are classified as "available for sale", and are
considered current assets. As of March 31, 2009, all short-term investments had maturities of less
than one year.
The following summarizes the short-term investments as of March 31, 2009 and December 31, 2008,
respectively, which were invested solely in U.S. government obligations (in thousands):
Gross
Gross
Amortized
Unrealized
Unrealized
Cost
Gains
Losses
Fair Value
March 31, 2009
$
1,899
$
1
$—
$
1,900
December 31, 2008
$
7,888
$
12
$—
$
7,900
5 — Stock-Based Compensation
We maintain equity compensation plans under which grants of incentive stock options, nonqualified
stock options, stock appreciation rights, stock awards, stock units and other stock-based awards
are granted to employees, non-employee directors and key advisors. Since our inception on August
8, 2002, we have recognized equity compensation expense over the requisite service period using the
Black-Scholes-Merton formula to estimate the fair value of stock options. Beginning January 1,
2006, we adopted SFAS No. 123(R) "Share-Based Payment" under the modified-prospective approach. The
following table summarizes the total stock-based compensation expense included in our unaudited
condensed consolidated statements of operations (in thousands):
F-7
Period from
Three-Months Ended
August 8, 2002
March 31,
(Inception) to
2009
2008
March 31, 2009
Research and Development
$
164
$
123
$
1,965
General and administrative
285
223
4,328
Total stock-based
compensation expense
$
449
$
346
$
6,293
During the three-months ended March 31, 2009, 164,000 stock options were awarded to certain
directors and a key consultant at a combined grant date fair value of $99,000. There have been no
significant changes to the assumptions used to calculate fair value from those which were disclosed
in our 2008 Annual Report on Form 10-K. As of March 31, 2009, there were 10,374,000 shares of
common stock issuable upon exercise of outstanding stock options and 15,719,000 shares of common
stock available for issuance of future equity compensation awards in connection with our equity
compensation plans. As of March 31, 2009, there was $3,298,000 of total unrecognized compensation
cost related to non-vested stock options, which will be amortized over the weighted average
remaining service period of approximately 1.27 years.
6 — Stockholders' Equity
Common Stock
We are authorized to issue 250,000,000 shares of common stock, with a par value of $0.001, of which
59,845,065 were issued and outstanding at both March 31, 2009 and December 31, 2008.
In December 2008, our then outstanding 608,834 shares of Series 2008 Convertible Preferred Stock
("Series 2008 Preferred Stock"), originally issued in September 2008, automatically converted to
6,088,340 shares of common stock. See Preferred Stock section immediately below.
In July 2008, we completed a registered offering of 21,428,000 units. Each unit consisted of one
share of our common stock and a Series A Warrant to purchase one share of our common stock. Each
unit was sold for $0.70 per unit and each Series A Warrant has an exercise price of $1.00 per
share. We received gross proceeds of $15,000,000 in the registered offering before fees and
expenses. In connection with this registered offering, we incurred commission fees and expenses of
approximately $1,496,000.
Preferred Stock
We are authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.001, of
which no shares were issued and outstanding at March 31, 2009 and December 31, 2008, respectively.
In September 2008, we completed a private placement offering of 608,834 units. Each unit consisted
of one share of our Series 2008 Preferred Stock and a Series B Warrant. Each unit was sold for
$7.00 per unit. As explained immediately above under common stock, during December 2008, each share
of Series 2008 Preferred Stock automatically converted into 10 shares of common stock and the
Series B Warrants became exercisable for common stock immediately, and without any action on the
part of the holder of such shares of Series 2008 Preferred Stock or Series B Warrants, upon the
effectiveness of an amendment to our Amended and Restated Certificate of Incorporation, as amended
(the "Certificate of Incorporation"), to increase the number of shares of common stock authorized
for issuance by us under the Certificate of Incorporation to an amount sufficient to cover the
issuance of shares of common stock upon conversion of the Series 2008 Preferred Stock and the
issuance of shares of common stock issuable after such conversion upon exercise of all of the
Series B Warrants. We received gross proceeds of $4,262,000 in the private placement before fees
and expenses. In connection with this private placement, we incurred commission fees and expenses
of approximately $401,000.
Warrants
In connection with the private placement and subsequent conversion of the Series 2008 Preferred
Stock (described above), investors in the private placement received Series B Warrants presently
exercisable for 6,088,340 shares of
F-8
common stock and the placement agent and dealer received Series B Warrants presently exercisable
for 279,583 shares of common stock. The Series B Warrants have an exercise price of $1.00 per
share and that expire in July 2013. The fair value of the warrants at the time of issuance was
$3,991,000, which was estimated using the Black-Scholes-Merton option-pricing model with the
following assumptions: no dividends; risk-free interest rate of 3.03%; estimated life of five
years and volatility of 71%.
In connection with the registered offering completed in July 2008 (described above), we issued
Series A Warrants to purchase 21,428,000 shares of common stock to investors and Series A Warrants
to purchase 1,071,000 shares of common stock to the placement agents and dealer at an exercise
price of $1.00 per share and that expire in September 2013. The fair value of the warrants at the
time of issuance was $11,807,000, which was estimated using the Black-Scholes-Merton option-pricing
model with the following assumptions: no dividends; risk-free interest rate of 3.2% to 3.35%;
estimated life of five years and volatility of 72% to 75%.
In connection with the registered offering completed in December 2007, we issued warrants to
purchase 2,943,000 shares of common stock at an exercise price of $1.10 per share. These warrants
expire in December 2012. The fair value of the warrants at the time of issuance was $2,015,000,
which was estimated using the Black-Scholes-Merton option-pricing model with the following
assumptions: no dividends; risk-free interest rate of 3.58%; estimated life of five years and
volatility of 73%.
During 2005 and 2006, we issued warrants to purchase 4,119,000 shares of common stock in connection
with the private placement of Series 1 preferred stock at an exercise price of $1.23 per share, as
adjusted for weighted average anti-dilution protection. These warrants expire in November 2010 and
contain weighted average anti-dilution protection if we issue certain securities at a price per
share less than $1.23 per share. The fair value of the warrants at the time of issuance was
$2,149,000, which was estimated using the Black-Scholes-Merton option-pricing model with the
following assumptions: no dividends; risk-free interest rate of 4.45%; estimated life of five
years and volatility of 60%.
F-9
POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2008 AND 2007 AND
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
AND FOR THE PERIOD
AUGUST 8, 2002 (INCEPTION) TO DECEMBER 31, 2008
CONTENTS
Page
Report of Independent Registered Public Accounting Firm
F-11
PolyMedix, Inc. Consolidated Balance Sheets as of December 31, 2008 and 2007
F-12
PolyMedix, Inc. Consolidated Statements of Operations for the Years Ended
December 31, 2008, 2007 and 2006, and for the Period from August 8, 2002
(Inception) to December 31, 2008
F-13
PolyMedix, Inc. Consolidated Statements of Changes in Stockholders' Equity
from August 8, 2002 (Inception) to December 31, 2008
F-14
Consolidated Statements of Cash Flows for the Years Ended December 31,
2008, 2007 and 2006, and for the Period from August 8, 2002 (Inception) to
December 31, 2008
F-15
Notes to Consolidated Financial Statements
F-16
F-10
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
PolyMedix, Inc.
Radnor, Pennsylvania
We have audited the accompanying consolidated balance sheets of PolyMedix, Inc. and its
subsidiary (a development stage company) (the "Company") as of December 31, 2008 and 2007, and the
related consolidated statements of operations, changes in stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 2008, and for the period from August 8,
2002 (Inception) to December 31, 2008. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2008 and 2007, and the results
of its operations and its cash flows for each of the three years in the period ended December 31,
2008, and for the period from August 8, 2002 (Inception) to December 31, 2008, in conformity with
accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Philadelphia, Pennsylvania
March 23, 2009
F-11
POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2008 AND 2007
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2008
2007
ASSETS
Current Assets:
Cash and cash equivalents
$
7,206
$
4,936
Short-term investments
7,900
3,967
Prepaid expenses and other current assets
407
42
Total current assets
15,513
8,945
Property and Equipment:
Computers
237
243
Office furniture and lab equipment
774
774
Accumulated depreciation
(447
)
(240
)
Total property and equipment
564
777
TOTAL ASSETS
$
16,077
$
9,722
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable
$
1,072
$
2,341
Accrued expenses
933
1,372
Short-term portion of capital lease obligation
104
131
Total current liabilities
2,109
3,844
Deferred rent and other accrued expenses
825
640
Long-term portion of capital lease obligation
—
104
Total liabilities
2,934
4,588
Commitments and contingencies
—
—
Stockholders' Equity:
Preferred Stock ($0.001 par value; 10,000 shares
authorized; 0 and 0 issued and outstanding at
December 31, 2008 and 2007, respectively)
—
—
Common Stock ($0.001 par value; 250,000 shares
authorized; 59,845 and 32,039 issued and
outstanding at December 31, 2008 and 2007,
respectively)
60
32
Additional paid-in capital
49,930
30,973
Deficit accumulated during the development stage
(36,859
)
(25,873
)
Unrealized gain on available for sale securities
12
2
Total stockholders' equity
13,143
5,134
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
16,077
$
9,722
The accompanying notes are an integral part of these consolidated financial statements.
F-12
POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 AND
PERIOD FROM AUGUST 8, 2002 (INCEPTION) THROUGH DECEMBER 31, 2008
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
For the period
August 8, 2002
(Inception) to
Years Ended December 31,
December 31,
2008
2007
2006
2008
Revenues:
Grant and research revenues
$
1,066
$
1,126
$
821
$
3,513
Total revenues
1,066
1,126
821
3,513
Operating Expenses:
Research and development
$
7,401
9,328
3,306
24,591
General and administrative
$
4,875
4,473
4,174
17,274
Total operating expenses
12,276
13,801
7,480
41,865
Other Income:
Interest income and other expenses
224
511
693
1,493
Total other income
224
511
693
1,493
Net loss
$
(10,986
)
$
(12,164
)
$
(5,966
)
$
(36,859
)
Beneficial conversion feature, conversion inducement and
dividends on preferred stock
(5,845
)
(2,247
)
(2,899
)
(11,118
)
Net loss attributable to common stockholders
$
(16,831
)
$
(14,411
)
$
(8,865
)
$
(47,977
)
Net loss per common share — basic and diluted
$
(0.40
)
$
(0.61
)
$
(0.72
)
Weighted average common shares outstanding — basic and diluted
42,007
23,771
12,240
The accompanying notes are an integral part of these consolidated financial statements.
F-13
POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FROM AUGUST 8, 2002 (INCEPTION) THROUGH DECEMBER 31, 2008
(IN THOUSANDS)
Deficit
Unrealized
Accumulated
Gain/Loss on
Unearned Stock-
During the
Available for
Total
Common Stock
Preferred Stock
Additional
Based
Development
Sale
Stockholders'
Description
Shares
Amount
Shares
Amount
Paid-In Capital
Compensation
Stage
Securities
Equity
Balance at August 8, 2002
—
$
—
—
$
—
$
—
$
—
$
—
$
—
$
—
Issuance of common stock
800
1
—
—
19
—
—
—
20
Issuance of Series A preferred stock
—
—
920
1
229
—
—
—
230
Issuance of restricted common stock grants
1,152
1
—
—
28
(29
)
—
—
—
Amortization of stock-based compensation
—
—
—
—
—
2
—
—
2
Net loss
—
—
—
—
—
—
(162
)
—
(162
)
Balance at December 31, 2002
1,952
$
2
920
$
1
$
276
$
(27
)
$
(162
)
$
—
$
90
Issuance of Series A-1 preferred stock
—
—
1,000
1
224
—
—
—
225
Issuance of Series A preferred stock
—
—
497
1
124
—
—
—
125
Issuance of Series B preferred stock
—
—
1,328
1
1,659
—
—
—
1,660
Issuance of common stock
432
1
—
—
10
—
—
—
11
Issuance of restricted common stock grants
227
—
—
—
5
(6
)
—
—
(1
)
Amortization of stock-based compensation
—
—
—
—
—
9
—
—
9
Net loss
—
—
—
—
—
—
(1,227
)
—
(1,227
)
Balance at December 31, 2003
2,611
$
3
3,745
$
4
$
2,298
$
(24
)
$
(1,389
)
$
—
$
892
Issuance of Series B preferred stock
—
—
3,312
3
4,097
—
—
—
4,100
Issuance of common stock grants to non-employees in exchange for services
518
—
—
—
336
—
—
—
336
Amortization of stock-based compensation
—
—
—
—
—
8
—
—
8
Net loss
—
—
—
—
—
—
(1,590
)
—
(1,590
)
Balance at December 31, 2004
3,129
$
3
7,057
$
7
$
6,731
$
(16
)
$
(2,979
)
$
—
$
3,746
Proceeds from Series B subscription receivable
—
—
—
—
40
—
—
—
40
Issuance of common stock grants to non-employees in exchange for services
196
—
—
—
127
—
—
—
127
Issuance of common stock grants
500
1
—
—
325
—
—
—
326
Issuance of stock option grants
—
—
—
—
2,855
(2,855
)
—
—
—
Amortization of stock-based compensation
—
—
—
—
—
1,235
—
—
1,235
Conversion of Series A and B preferred stock to common stock
7,057
7
(7,057
)
(7
)
—
—
—
—
—
Issuance of common stock for net assets of PolyMedix, Inc.
1,500
1
—
—
(2
)
—
—
—
(1
)
Issuance of Series 1 preferred stock
—
—
5,589
6
14,140
—
—
—
14,146
Net loss
—
—
—
—
—
—
(4,764
)
—
(4,764
)
Balance at December 31, 2005
12,382
$
12
5,589
$
6
$
24,216
$
(1,636
)
$
(7,743
)
$
—
$
14,855
Reclassification of unearned compensation on nonvested stock balance upon adoption of SFAS No. 123(R)
—
—
—
—
(1,636
)
1,636
—
—
—
Issuance of Series 1 preferred stock
—
—
1,466
1
3,719
—
—
—
3,720
Issuance of common stock grants to non-employees in exchange for services
30
—
—
—
45
—
—
—
45
Amortization of stock-based compensation
—
—
—
—
1,093
—
—
—
1,093
Conversion of Series 1 preferred stock to common stock
68
—
(34
)
—
—
—
—
—
—
Dividends paid on Series 1 preferred stock
—
—
462
—
—
—
—
—
—
Unrealized loss on available on sale securities
—
—
—
—
—
—
—
(1
)
(1
)
Net loss
—
—
—
—
—
—
(5,966
)
—
(5,966
)
Balance at December 31, 2006
12,480
$
12
7,483
$
7
$
27,437
$
—
$
(13,709
)
$
(1
)
$
13,746
Conversion of Series 1 preferred stock to common stock
15,944
16
(7,483
)
$
(7
)
$
(9
)
—
Issuance of common stock grants to non-employees in exchange for services
12
—
—
—
12
—
—
—
12
Amortization of stock-based compensation
—
—
—
—
1,189
—
—
—
1,189
Proceeds from exercise of common stock options
122
1
—
—
183
—
—
—
184
Issuance of common stock to employees
—
—
—
—
58
—
—
—
58
Issuance of common stock, net of issuance costs
3,481
3
—
—
2,103
—
—
—
2,106
Unrealized gain on available for sale securities
—
—
—
—
—
—
—
3
3
Net loss
—
—
—
—
—
—
(12,164
)
—
(12,164
)
Balance at December 31, 2007
32,039
$
32
—
$
—
$
30,973
$
—
$
(25,873
)
$
2
$
5,134
Issuance of Series 2008 preferred stock, net of issuance costs
—
—
609
1
3,856
—
—
—
3,857
Conversion of Series 2008 preferred stock to common stock
6,089
6
(609
)
(1
)
—
5
Amortization of stock-based compensation
—
—
—
—
1,378
—
—
—
1,378
Proceeds from exercise of common stock options
214
—
—
—
214
—
—
—
214
Issuance of common stock to employees
75
—
—
—
26
—
—
—
26
Issuance of common stock, net of issuance costs
21,428
22
—
—
13,483
—
—
—
13,505
Unrealized gain on available for sale securities
—
—
—
—
—
—
—
10
10
Net loss
—
—
—
—
—
—
(10,986
)
—
(10,986
)
Balance at December 31, 2008
59,845
$
60
—
$
—
$
49,930
$
—
$
(36,859
)
$
12
$
13,143
The accompanying notes are an integral part of these consolidated financial statements.
F-14
POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 AND
PERIOD FROM AUGUST 8, 2002 (INCEPTION) THROUGH DECEMBER 31, 2008
(IN THOUSANDS)
For the period
August 8, 2002
(Inception) to
Years Ended December 31,
December 31,
2008
2007
2006
2008
Cash Flows from Operating Activities:
Net loss
$
(10,986
)
$
(12,164
)
$
(5,966
)
$
(36,859
)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation
213
195
64
523
Accretion of discount on cash equivalents and
investment securities
(70
)
(254
)
(118
)
(442
)
Stock-based compensation
1,404
1,259
1,139
5,844
(Increase) decrease in prepaid expenses and
other current assets
(365
)
18
(39
)
(407
)
Increase (decrease) in accounts payable, accrued expenses and deferred rent
(1,122
)
2,657
601
2,785
Loss on disposal of fixed assets
—
23
—
23
Net cash used in operating activities
(10,926
)
(8,266
)
(4,319
)
(28,569
)
Cash Flows from Investing Activities:
Cash paid for property and equipment
—
(266
)
(274
)
(751
)
Purchases of investments
(9,553
)
(9,880
)
(10,810
)
(30,243
)
Proceeds from maturities of investments
5,700
12,098
5,000
22,798
Net cash provided by (used in) investing
activities
(3,853
)
1,952
(6,084
)
(8,196
)
Cash Flows from Financing Activities:
Proceeds from issuance of stock, net of
financing costs
16,966
2,558
3,720
43,800
Proceeds from warrant and stock option
exercises
214
184
—
398
Principal payments on capital lease obligations
(131
)
(93
)
(3
)
(227
)
Net cash provided by financing activities
17,049
2,649
3,717
43,971
Net increase (decrease) in cash and cash
equivalents
2,270
(3,665
)
(6,686
)
7,206
Cash and cash equivalents — beginning of period
4,936
8,601
15,287
—
Cash and cash equivalents — end of period
$
7,206
$
4,936
$
8,601
$
7,206
Non-Cash Investing Activities:
Property and equipment acquired under capital
lease
$
—
$
228
$
103
$
331
Capital expenditures acquired on account
$
—
$
30
$
83
$
30
Non-Cash Financing Activities:
Conversion inducement and dividends on Series
Preferred Stock and Beneficial conversion
feature on Series 2008 Preferred Stock
$
5,845
$
2,247
$
3,026
$
11,118
Warrants issued to placement agent
$
783
$
—
$
446
$
2,932
Accrued financing costs
$
51
$
452
$
—
$
51
Capital lease obligation
$
—
$
228
$
103
$
331
The accompanying notes are an integral part of these consolidated financial statements.
F-15
POLYMEDIX, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2008 AND 2007 AND
FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
AND FOR THE PERIOD
AUGUST 8, 2002 (INCEPTION) TO DECEMBER 31, 2008
In these consolidated financial statements, "PolyMedix," "we," "us" and "our" refer to PolyMedix,
Inc. and its wholly owned subsidiary PolyMedix Pharmaceuticals, Inc. and "common stock" refers to
PolyMedix's common stock, par value $0.001 per share
NOTE 1 — ORGANIZATION AND BUSINESS ACTIVITIES
We are a development stage biotechnology company focused on treating life threatening, serious
infectious diseases and acute cardiovascular disorders with synthetic small molecule compounds that
mimic the activity of large natural protein molecules, compounds referred to as biomimetics. Using
our proprietary computational drug design technology, we have created novel defensin mimetic
antibiotic compounds, heparin antagonist compounds and other drug compounds intended for human
therapeutic use. Since 2002, we have been a development stage enterprise, and accordingly, our
operations have been directed primarily toward developing business strategies, raising capital,
research and development activities, conducting pre-clinical testing and human clinical trials of
our product candidates, exploring marketing channels and recruiting personnel.
We have incurred operating losses since inception, have not generated any product sales revenues
and have not achieved profitable operations. Our deficit accumulated during the development stage
through December 31, 2008 aggregated $36,859,000, and we expect to continue to incur substantial
losses in future periods. None of our product candidates have received regulatory approval for
commercial sale and our product candidates may never be commercialized. In addition, all of our
product candidates are in the early stages of development and several programs are on hold pending
additional financing. The progress and results of our current and any future clinical trials or
future pre-clinical testing are uncertain, and if our product candidates do not receive regulatory
approvals, our business, operating results, financial condition and cash flows will be materially
adversely affected. Our development programs require a significant amount of cash to support the
development of product candidates.
We are highly dependent on the success of our research, development and licensing efforts and,
ultimately, upon regulatory approval and market acceptance of our products under development. Our
short and long-term capital requirements depend upon a variety of factors, including market
acceptance for our technologies and product candidates and various other factors. We anticipate
that in order to achieve our operational objectives, including our plans during 2009 for starting
and completing Phase 1b studies as well as beginning preparation for Phase 2 studies for each of
our PMX-30063 and PMX-60056 product candidates, our expenses and cash requirements will increase
from historical levels and we anticipate the need to raise additional capital during 2009 in order
to fully fund the research and development of our product candidates. We believe that our current
cash and investment balances will fund our planned Phase 1 studies for PMX-30063 and PMX-60056 and
can fund our operations for at least the next twelve months.
Our current cash and investment balances are not sufficient to fund the Phase 2 development of
either of our two lead product candidates. We do not plan to initiate our Phase 2 development
activities until additional financing is secured. We expect to seek additional funds through
equity or debt financing, among other sources. In addition, we may actively seek funds through
government grants and contracts. However, as a result of current conditions in the equity and debt
markets, we may not be able to obtain additional funding on favorable terms, if at all. In
addition, we if we choose to apply for government grants and contracts, there is no guarantee of
acceptance of our applications. If additional capital resources are not obtained by the end of the
second quarter of 2009, we will scale-back, postpone or eliminate certain of our research, drug
discovery or development programs until such additional capital resources have been obtained, and
as a result, our business may be materially and adversely affected.. In the absence of adequate
additional funding, we believe that we
F-16
have the ability to scale our operations such that our current cash and investment balances can
fund our operations into the second half of 2010.
Global market and economic conditions have been, and continue to be, disruptive and volatile. In
particular, the cost of raising money in the debt and equity capital markets has increased
substantially while the availability of funds from those markets has diminished significantly. If
funding is not available when needed, or is available only on unfavorable terms, meeting our
capital needs or otherwise taking advantage of business opportunities may become challenging, which
could have a material adverse effect on our business plans.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of PolyMedix, Inc. and its wholly owned
subsidiary PolyMedix Pharmaceuticals, Inc. All intercompany accounts and transactions have been
eliminated in consolidation.
Development Stage Company
We are considered to be in the development stage as defined in Statements of Financial Accounting
Standards (SFAS) No.7,
Accounting and Reporting by Development Stage Enterprises
. We have devoted
substantially all of our efforts to business planning, research and development, recruiting
management and technical staff, acquiring operating assets and raising capital.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that affect
the reported amounts in the financial statements and accompanying notes. Actual results could
differ from those estimates. Significant estimates include the value of our common stock, preferred
stock, stock options and warrants.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with a maturity of three months or less at the
time of purchase to be cash equivalents. Cash and cash equivalents consist of cash in banks and
money market funds.
Short-Term Investments
Investments purchased with a maturity of more than three months, and which mature less than twelve
months from the balance sheet date, are classified as short-term investments. We generally hold
investments to maturity, however, since we may, from time to time, sell securities to meet cash
requirements, we classify our investments as available-for-sale as defined by Statement of
Financial Accounting Standards ("SFAS"), No. 115,
Accounting for Certain Investments in Debt and
Equity Securities
" Available-for-sale securities are carried at market value with unrealized gains
and losses reported as a separate component of Stockholders' Equity.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using the straight-line method
over the estimated useful life of the assets; three years for computer equipment and related
software, seven years for office furniture and five years for lab equipment. When property and
equipment are sold or otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts and the resulting gain or loss is included in operating expenses.
Depreciation expense was $213,000, $195,000, $64,000 and $523,000 for the years ended December 31,
2008, 2007 and 2006 and for the period from August 8, 2002 (Inception) to December 31, 2008
respectively.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate
that the basis of an asset may not be recoverable. In accordance with SFAS No. 144,
Accounting for
the Impairment or Disposal of Long-Lived Assets,
impairment is assessed by measuring the carrying
amount of
F-17
the assets against the estimated undiscounted future cash flows associated with them. If the
expected future cash flows are less than the carrying value, an impairment loss is recognized for
the amount by which the carrying value exceeds the fair value of the assets.
Grant and Research Revenue
Sponsored grant and research revenues are recognized pursuant to the terms of the related
agreements as work is performed.
Research and Development Expense
Research and development costs are expensed as incurred.
Income Taxes
We recognize deferred tax assets and liabilities for temporary differences between the financial
reporting basis and the tax basis of our assets and liabilities and the expected benefits of using
net operating loss carryforwards. The impact of changes in tax rates and laws on deferred taxes, if
any, applied during the years in which temporary differences are expected to be settled, is
reflected in the consolidated financial statements in the period of enactment. The measurement of
deferred tax assets is reduced, if necessary, if, based on weight of the evidence, it is more
likely than not that some, or all, of the deferred tax assets will not be realized. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in the period that such
tax rate changes are enacted. At December 31, 2008 and 2007, we have concluded that a full
valuation allowance is necessary for deferred tax assets. (See Note 5).
We adopted the provisions of FIN 48, "Accounting for Uncertainty in Income Taxes — an
Interpretation of FASB Statement No. 109" on January 1, 2007. FIN 48 prescribes the recognition
threshold and measurement attribute for the financial statement recognition and measurement of
uncertain tax positions taken or expected to be taken in a tax return. We had no material amounts
recorded for uncertain tax positions, interest or penalties in the accompanying consolidated
financial statements. See Note 5 for the impact of the adoption of FIN 48.
Loss per Share of Common Stock
We calculate our loss per share under the provisions of SFAS No. 128,
Earnings Per Share
. SFAS No.
128 requires a dual presentation of "basic" and "diluted" loss per share on the face of the income
statement. Basic loss per share is computed by dividing loss by the weighted average number of
shares of common stock outstanding during each period. Diluted loss per share includes the effect,
if any, from the potential exercise or conversion of securities, such as unvested restricted stock,
convertible preferred stock, stock options and warrants, which would result in the issuance of
incremental shares of common stock. In computing the basic and diluted net loss per share allocable
to common stockholders the weighted average number of shares remains the same for both calculations
due to the fact that when a net loss exists, dilutive shares are not included in the calculation.
Potentially dilutive securities include unvested restricted stock, convertible preferred stock, and
options and warrants to purchase our common stock. These potentially dilutive securities are more
fully described in Note 6.
Comprehensive Loss
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for the reporting of
comprehensive income and its components. Comprehensive loss consists of reported net income or loss
and unrealized gains or losses on available for sale securities. The comprehensive loss for each of
the periods presented approximates the net loss in the consolidated statements of operations.
Segment Information
We report segment information in accordance with SFAS No. 131,
Disclosure About Segments of an
Enterprise and Related Information
. We have one reportable segment operating within the United
States.
Reclassification
Certain prior year amounts have been reclassified to conform to current year presentation.
F-18
Fair Value of Financial Instruments and Credit Risk
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents,
investments, accounts payable and accrued expenses approximate fair value because of the immediate
or short-term maturity of these financial instruments.
We invest our cash in accordance with a policy objective that seeks to ensure both liquidity and
safety of principal. The policy limits investments to instruments issued by the U.S. government and
commercial institutions with strong investment grade credit ratings and places restrictions on
maturity terms and concentrations by type and issuer.
Stock-Based Compensation
We currently sponsor equity compensation plans. Refer to Note 6. From our inception, August 8,
2002, we applied the fair value recognition provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation
. Beginning January 1, 2006, we
adopted SFAS No. 123(R),
Share-based Payment
("SFAS No. 123(R)") using the modified-prospective
transition method, and as such, prior periods have not been restated. Compensation expense is
recognized over the requisite service period. The total stock-based compensation expense was
$1,404,000, $1,259,000, $1,139,000, and $5,844,000 for the years ended December 31, 2008, 2007 and
2006 and for the period from August 8, 2002 (Inception) to December 31, 2008, respectively.
Recently Issued and Adopted Accounting Standards
In September 2006, the Financial Accounting Standards Board (or "FASB") issued Statement of
Financial Accounting Standards (or "SFAS") No. 157,
Fair Value Measurements
("SFAS 157"). SFAS 157
clarifies the definition of fair value, establishes a framework for measuring fair value and
expands disclosures on fair value measurements. SFAS 157 was effective for financial statements
issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal
years; however, the FASB did provide a one-year deferral for the implementation of SFAS 157 for
other nonfinancial assets and liabilities.
SFAS 157 establishes a valuation hierarchy for disclosure of the inputs to valuation used to
measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level
1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs
that are observable for the asset or liability, either directly or indirectly through market
corroboration, for substantially the full term of the financial instrument. Level 3 inputs are
unobservable inputs based on management's own assumptions used to measure assets and liabilities at
fair value. A financial asset or liability's classification within the hierarchy is determined
based on the lowest level input that is significant to the fair value measurement.
The following table provides the assets and liabilities carried at fair value measured on a
recurring basis as of December 31, 2008 (in thousands):
Fair Value Measurements at December 31, 2008
Total Carrying
Significant other
Significant
value as of
Quoted prices in
observable
unobservable
December
active markets
inputs
inputs
31, 2008
(Level 1)
(Level 2)
(Level 3)
Short-term investments
$
7,900
$
—
$
7,900
$
—
Total
$
7,900
$
—
$
7,900
$
—
Our short-term investments, generally fixed income government agency securities, are measured at
fair value using models derived principally from or corroborated by observable market data by
correlation or other means and are classified within Level 2 of the valuation hierarchy. The
adoption of SFAS 157 did not have any impact on our consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159
The Fair Value Option for Financial Assets and
Financial Liabilities
("SFAS 159"). SFAS 159 permits entities to choose to measure many financial
assets
F-19
and financial liabilities at fair value. Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings. SFAS 159 was effective for fiscal years
beginning after November 15, 2007. We did not elect the fair value option available under SFAS 159
for any financial assets or liabilities.
In June 2007, the FASB ratified the consensus reached in EITF Issue No. 07-03,
Accounting for
Nonrefundable Advance Payments for Goods or Services Received for Use in Future Research and
Development Activities
(Issue No. 07-03). Issue No. 07-03 requires that non-refundable advance
payments for future research and development activities should be deferred and recognized as an
expense as goods are delivered or the related services are performed. Issue No. 07-03 is effective
for fiscal years beginning after December 15, 2007. Issue No. 07-03 was adopted effective January
1, 2008 and did not have a material impact on our consolidated financial statements.
In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1,
Determining Whether Instruments
Granted in Share-Based Payment Transactions Are Participating Securities,
("FSP EITF 03-6-1"). FSP
EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are
participating securities prior to vesting and, therefore need to be included in the earnings
allocation in computing earnings per share, or EPS, under the two-class method described in
paragraphs 60 and 61 of FASB Statement No. 128,
Earnings per Share
("SFAS No. 128"). FSP
EITF 03-6-1 applies to the calculation of EPS under SFAS No. 128 for share-based payment awards
with rights to dividends or dividend equivalents. FSP EITF 03-6-1 clarifies that unvested
share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents
(whether paid or unpaid) are participating securities and shall be included in the computation of
EPS pursuant to the two class method. FSP EITF 03-6-1 is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within those years. All
prior-period EPS data presented must be adjusted retrospectively (including interim financial
statements, summaries of earnings and selected financial data) to conform with the provisions of
FSP EITF 03-6-1. Early adoption is not permitted. We do not expect EITF 03-6-1 to have a material
impact on our consolidated financial statements.
In June 2008, the FASB ratified the consensus reached on EITF Issue No. 07-05,
Determining Whether
an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock
("EITF No. 07-05"). EITF
No. 07-05 clarifies the determination of whether an instrument (or an embedded feature) is indexed
to an entity's own stock, which would qualify as a scope exception under SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities. EITF No. 07-05 is effective for financial
statements issued for fiscal years beginning after December 15, 2008. Early adoption for an
existing instrument is not permitted. We are currently evaluating the impact of the pending
adoption of EITF No. 07-05 on our consolidated financial statements.
NOTE 3 — SHORT-TERM INVESTMENTS
Short-term investments consist of investment grade fixed income securities with original maturities
of greater than three months. All investments are classified as "available for sale", and are
considered current assets. As of December 31, 2008, all short-term investments had maturities of
less than one-year.
The following summarizes the short-term investments as of December 31, 2008 and December 31, 2007,
which were invested solely in U.S. government obligations (in thousands):
Gross
Gross
Amortized
Unrealized
Unrealized
Cost
Gains
Losses
Fair Value
December 31, 2008
$
7,888
$
12
$
—
$
7,900
December 31, 2007
$
3,965
$
2
$
—
$
3,967
NOTE 4 — ACCRUED EXPENSES
At December 31, 2008 and 2007, accrued expenses consisted of the following (in thousands):
2008
2007
Payroll related costs
$
479
$
280
Research and development related costs
318
827
Other costs
136
265
Total accrued expenses
$
933
$
1,372
F-20
NOTE 5 — PROVISION FOR INCOME TAXES
We account for income taxes using the asset and liability approach as required by FASB No. 109.
Deferred income taxes are provided for the differences between the tax bases of assets or
liabilities and their reported amounts in the financial statements. This method also requires the
recognition of future tax benefits, such as net operating loss carryforwards and research and
development credits, to the extent that realization of such benefits is more likely than not. At
December 31, 2008 and 2007, deferred tax assets consisted of the following (in thousands):
2008
2007
Deferred tax assets:
Net operating loss carryforward
$
11,710
$
7,998
Stock compensation expense
1,592
1,163
Contribution carryforward
33
33
R & D credit carryforward
1,373
998
Depreciation
(70
)
(57
)
Straight-line rent
335
254
Other
271
265
Gross deferred tax asset
15,244
10,654
Valuation allowance
(15,244
)
(10,654
)
Net deferred tax asset
$
—
$
—
We believe there is not sufficient evidence that future taxable income will be adequate to permit
the realization of the future tax deductions embedded in this asset. As such, in accordance with
SFAS No. 109, "Accounting for Income Taxes", we have established a valuation allowance to reduce
the deferred tax asset since it is more likely than not that the deferred tax asset will not be
realized.
F-21
The difference between the provision for (benefit from) income taxes and the amount computed by
applying the federal statutory income tax rate to income (loss) before provision for (benefit from)
income taxes is explained below (in thousands):
Period from
August 8,
2002
(Inception)
to
December
Years ended December 31,
31,
2008
2007
2006
2008
Loss before provision for income
taxes
$
(10,986
)
$
(12,164
)
$
(5,966
)
$
(36,859
)
Tax at federal statutory rate
(3,735
)
(4,138
)
(2,028
)
(12,533
)
State taxes, net of federal benefit
(883
)
(908
)
(390
)
(2,692
)
Research and development credits
(290
)
(348
)
(159
)
(959
)
Other permanent differences
113
74
20
210
Other
205
49
476
730
Change in valuation allowance
4,590
5,271
2,081
15,244
Provision for income taxes
$
—
$
—
$
—
$
—
We have available at December 31, 2008, approximately $29,000,000 in unused federal and state
operating loss carryforwards that expire between 2022 and 2028. We also have available at December
31, 2008, approximately $1,400,000 unused federal research and development credit carryforwards
that may provide future tax benefits and expire between 2024 and 2028.
The Tax Reform Act of 1986 contains provisions that may limit the NOL and research and development
credit carryforwards available to be used in any given year upon the occurrence of certain events,
including significant changes in ownership interest. Generally, a change in ownership of a company
of greater than 50% within a three-year period results in an annual limitation on that company's
ability to utilize its NOL carryforwards and tax credits from the tax periods prior to the
ownership change. A study needs to be performed to determine if we have undergone a change in
ownership, however, we believe that we have undergone an ownership change and are subject to an
annual limitation on the use of our NOL carryforwards pursuant to these provisions.
In July 2006, the FASB issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income
Taxes
,
" or FIN 48, which is applicable for fiscal years beginning after December 15, 2006. FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial
statements in accordance with SFAS No. 109, "Accounting for Income Taxes." FIN 48 prescribes a
recognition threshold and measurement for financial statement recognition and measurement of a tax
position reported or expected to be reported on a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure,
and transition. On January 1, 2007, we adopted FIN 48. Prior to the adoption of FIN 48, our policy
was to recognize tax benefits of uncertain tax positions unless it was probable that a position
would not be sustained. FIN 48 requires application of a "more likely than not" threshold to the
recognition and derecogntion of tax positions. As a result of the adoption of FIN 48, no
adjustments were made to retained earnings for unrecognized tax benefits.
We file income tax returns in the U.S. federal jurisdiction and Pennsylvania. Our policy is to
record interest and penalties on uncertain tax positions as income tax expense. The tax years back
to 2002 remain open to examination by the major taxing jurisdictions where we file. Net operating
loss and credit carryforwards from earlier periods also remain open to examination by taxing
authorities, and will for a period post utilization. We do not reasonably estimate that the
unrecognized tax benefit will change significantly within the next twelve months. Any changes in
the future would also have no impact on the effective tax rate due
to the existence of a full valuation allowance. As of December 31, 2008, we had no
F-22
material amounts
recorded for uncertain tax positions, interest or penalties in the accompanying consolidated
financial statements.
NOTE 6 — STOCKHOLDERS' EQUITY
Common Stock
We are authorized to issue 250,000,000 shares of common stock, with a par value of $0.001, of which
59,845,000 and 32,039,000 were issued and outstanding at December 31, 2008 and 2007, respectively.
In December 2008, our then outstanding 608,834 shares of Series 2008 Convertible Preferred Stock
("Series 2008 Preferred Stock"), originally issued in September 2008, automatically converted to
6,088,340 shares of common stock. See Preferred Stock section below.
In July 2008, we completed a registered offering of 21,428,000 units. Each unit consisted of one
share of our common stock and a Series A Warrant to purchase one share of our common stock. Each
unit was priced at $0.70 per unit with the exercise price of the Series A Warrants issued at $1.00
per share. We received gross proceeds of $15,000,000 in the registered offering before fees and
expenses. In connection with this registered offering, we incurred commission fees and expenses of
approximately $1,496,000.
In December 2007, we completed a registered offering of 2,943,000 units. Each unit consisted of one
share of our common stock and a warrant to purchase one share of our common stock. Each unit was
priced at a $1.10 per unit and the exercise price of the warrants issued is also $1.10. We received
gross proceeds of $3,238,000 in the registered offering before fees and expenses. In connection
with this registered offering, we paid commission fees and expenses of $1,132,000.
Preferred Stock
We are authorized to issue 10,000,000 shares of preferred stock, with a par value of $0.001, of
which no shares were issued and outstanding at December 31, 2008 and 2007, respectively.
In September 2008, we completed a private placement offering of 608,834 units. Each unit consisted
of one share of our 2008 Preferred Stock and a Series B Warrant. Each unit was priced at a $7.00
per unit. During December 2008, each share of 2008 Preferred Stock automatically converted into 10
shares of common stock and the Series B Warrants became exercisable for common stock immediately,
and without any action on the part of the holder of such shares of 2008 Preferred Stock or Series B
Warrants, upon the effectiveness of an amendment (the "Certificate Amendment") to our Amended and
Restated Certificate of Incorporation, as amended (the "Certificate"), to increase the number of
shares of common stock authorized for issuance by us under the Certificate to an amount sufficient
to cover the issuance of shares of common stock upon conversion of the 2008 Preferred Stock and the
issuance of shares of common stock issuable after such conversion upon exercise of all of the
Series B Warrants. The conversion of the Series 2008 Preferred Stock triggered the recognition of a
beneficial conversion feature of approximately $5,845,000, which was included in our net loss in
arriving at net loss attributable to common stockholders. We received gross proceeds of $4,262,000
in the private placement before fees and expenses. In connection with this private placement, we
incurred commission fees and expenses of approximately $401,000.
During the second quarter of 2007, our stockholders voted to approve an amendment to our Series 1
Preferred Stock certificate of designations to provide for the automatic and immediate conversion
of each share of Series 1 Preferred stock into 2.247 shares of our common stock. The fair value of
the additional shares paid to the then Series 1 Preferred stockholders was approximately
$2,247,000, which has been deducted from our net loss in arriving at net loss attributable to
common stock holders. In addition, notwithstanding the conversion, these former holders of Series 1
preferred stock maintained their weighted average anti-dilution protection through December 31,
2007. As a result of the registered offering of common stock in December 2007, which closed during
the fourth quarter of 2007 and in satisfaction of the
F-23
weighted average anti-dilution protection then in place, we issued to the former holders of Series
1 preferred stockholders 538,000 shares of common stock.
Warrants
In connection with the private placement and subsequent conversion of the Series 2008 Preferred
Stock (described above), investors in the private placement received Series B Warrants presently
exercisable for 6,088,340 shares of common stock and the placement agent and dealer received Series
B Warrants presently exercisable for 279,583 shares of common stock. The Series B Warrants have an
exercise price of $1.00 per share and that expire in July 2013. The December 2008 conversion of
the Series 2008 Preferred Stock triggered the recognition of a beneficial conversion feature of
approximately $2,218,000, which was included in our net loss in arriving at net loss attributable
to common stockholders. The fair value of the warrants at the time of issuance was $3,991,000,
which was estimated using the Black-Scholes-Merton option-pricing model with the following
assumptions: no dividends; risk-free interest rate of 3.03%; estimated life of five years and
volatility of 71%.
In connection with the registered offering completed in July 2008 (described above), we issued
Series A Warrants to purchase 21,428,000 shares of common stock to investors and Series A Warrants
to purchase 1,071,000 shares of common stock to the placement agents and dealer at an exercise
price of $1.00 per share and expire in September 2013. The fair value of the warrants at the time
of issuance was $11,807,000, which was estimated using the Black-Scholes-Merton option-pricing
model with the following assumptions: no dividends; risk-free interest rate of 3.2% to 3.35%;
estimated life of five years and volatility of 72% to 75%.
In connection with the registered offering completed in December 2007 (described above), we issued
warrants to purchase 2,943,000 shares of common stock at an exercise price of $1.10 per share.
These warrants expire in December 2012. The fair value of the warrants at the time of issuance was
$2,015,000, which was estimated using the Black-Scholes-Merton option-pricing model with the
following assumptions: no dividends; risk-free interest rate of 3.58%; estimated life of five
years and volatility of 73%.
During 2005 and 2006, we issued warrants to purchase 4,119,000 shares of common stock in connection
with the private placement of Series 1 preferred stock at an exercise price of $1.23 per share, as
adjusted for weighted average anti-dilution protection. These warrants expire in November 2010 and
contain weighted average anti-dilution protection if we issue certain securities at a price per
share less than $1.23 per share. The fair value of the warrants at the time of issuance was
$2,149,000, which was estimated using the Black-Scholes-Merton option-pricing model with the
following assumptions: no dividends; risk-free interest rate of 4.45%; estimated life of five
years and volatility of 60%.
Stock-Based Compensation
We maintain equity compensation plans under which grants of incentive stock options, nonqualified
stock options, stock appreciation rights, stock awards, stock units and other stock-based awards
are granted to selected employees, non-employee directors and key advisors. Since our inception on
August 8, 2002, we have recognized equity compensation expense over the requisite service period
using the Black-Scholes-Merton formula to estimate the fair value of stock options. Beginning
January 1, 2006, we adopted SFAS No. 123(R) under the modified-prospective transition approach.
The following table summarizes the total stock-based compensation expense included in our
Consolidated Statements of Operations (in thousands):
F-24
Period from
August 8, 2002
(Inception) to
Years Ended December 31,
December 31,
2008
2007
2006
2008
Research and development
$
440
$
323
$
205
$
1,801
General and administrative
964
936
934
4,043
Total stock-based
compensation expense
$
1,404
$
1,259
$
1,139
$
5,844
During the year ended December 31, 2008, approximately 4,807,000 stock options were awarded to
non-employee directors, officers, employees and consultants. As of December 31, 2008, there were
10,210,000 shares of common stock issuable upon exercise of outstanding stock options and 565,000
shares of common stock available for issuance of future equity compensation awards in connection
with our equity compensation plans.
Stock Options
As of December 31, 2008, there was approximately $3,645,000 of total unrecognized compensation cost
related to non-vested stock options, which will be amortized over the weighted average remaining
service period of approximately 1.37 years. This expected cost does not include the impact of any
future stock option awards. Options granted are generally exercisable for a period of up to ten
years from the date of grant at an exercise price which is not less than the fair value on the date
of grant and generally vest over terms ranging from immediately to four years. A summary of the
status of our stock options as of December 31, 2008 and changes during the year ended December 31,
2008 is presented below (in thousands, except per share amounts):
Weighted
Weighted
Average
Average
Remaining
Aggregate
Exercise Price
Contractual
Intrinsic
Options
per share
Life (in years)
Value
Outstanding at beginning of
period
5,421
$
1.75
Granted
4,807
$
1.10
Exercised
—
—
Expired
—
—
Forfeited
(18
)
$
1.65
Outstanding at end of period
10,210
$
1.44
8.46
$
836
Exercisable at end of period
5,040
$
1.61
7.39
$
189
The aggregate intrinsic value in the preceding tables represent the total pretax intrinsic value
that would have been received by the option holders had all option holders exercised their options
on the last day of 2008. Intrinsic value is determined by calculating the difference between the
value of our stock on the last day of the year and the exercise price, multiplied by the number of
options.
The following table summarizes the fair value of options granted during the years ended December
31, 2008, 2007 and 2006 and for the period from August 8, 2002 (Inception) to December 31, 2008,
respectively (in thousands, except per share amounts):
F-25
Period from
August 8, 2002
(Inception) to
Years Ended December 31,
December 31,
2008
2007
2006
2008
Fair value of options granted
$
3,210
$
1,228
$
1,475
$
8,768
Fair value of options granted (per share)
$
0.67
$
0.91
$
1.20
$
0.81
The fair value of options granted is amortized over the requisite service period. The fair value
of each option grant is estimated on the date of grant using the Black-Scholes-Merton formula with
the following weighted average assumptions:
Year Ended
Year Ended
Year Ended
December 31, 2008
December 31, 2007
December 31, 2006
Range of risk free interest rates
1.37% – 3.25%
3.84% – 4.85%
4.30% – 4.96%
Dividend yield
0%
0%
0%
Expected volatility
69% – 75%
63% – 71%
41% – 60%
Expected life of options (in
years)
5
5
5
Forfeitures
0%
0%
0%
Expected volatility and expected life for the years ended December 31, 2008, 2007 and 2006 were
estimated based upon historical activity, when available, and our benchmark analysis of selected
companies. The risk-free interest rate is calculated using the U.S. Treasury yield curves in
effect at the time of grant. We currently estimate that all of our outstanding options will vest.
Restricted Common Stock Grants
We have also issued shares of restricted common stock to selected employees, non-employee directors
and key advisors. During the three-year period ended December 31, 2008, there were no grants of
restricted stock As of December 31, 2008, there was no unrecognized compensation cost related to
non-vested restricted stock grants. The restriction period for restricted stock awards was for a
four year vesting period, commencing from the grant date.
A summary of the status of our unvested restricted stock awards as of December 31, 2008, 2007 and
2006 and changes during the years ended December 31, 2008, 2007 and 2006, and for the period from
August 8, 2002 (Inception) to December 31, 2008, respectively, are presented below (in thousands):
Period from
August 8, 2002
(Inception) to
Years Ended December 31,
December 31,
2008
2007
2006
2008
Restricted common
stock — beginning
of period
—
12
291
—
Awards Granted
—
—
—
1,464
Awards Vested
—
(12
)
(279
)
(1,379
)
Awards Forfeited
—
—
—
(85
)
Restricted common
stock — end of
period
—
—
12
—
F-26
The total grant date fair value of these restricted stock awards was $34,000. All restricted
shares awarded have grant date fair values of $0.025 per share.
Common Stock Grants
We also issued common stock grants to selected employees, non-employee directors and key advisors.
For the years ended December 31, 2006, and for the period from August 8, 2002 (Inception) to
December 31, 2008, we issued common stock grants of 30,000 and 1,244,000 shares, respectively. The
fair value and expense recognized from the issuance of common stock grants for the years ended
December 31, 2008, 2007, and 2006 and for the period from August 8, 2002 (Inception) to December
31, 2008, were $0, $0, $45,000, and $834,000, respectively.
Additionally, during January 2008, and December, 2007, in connection with agreements with certain
terminated employees, we granted 50,000 and 25,000 shares, respectively, of common stock as a
one-time termination benefit to certain employees. These shares were issued ratably over the first
five-months following the grant date. During 2007, we also issued 12,500 shares to UMass in
connection with our license agreement. We recognized $26,000 and $70,000, in 2008 and 2007,
respectively, in equity based compensation costs associated with these shares which is included in
research and development costs on our Consolidated Statements of Operations.
NOTE 7 — COMMITMENTS AND CONTINGENCIES
Capital Lease
We have entered into lease agreements for laboratory equipment. The initial obligation under these
capital leases was $331,000. The value of the laboratory equipment acquired in connection with
these leases was $398,000 and the depreciation associated with these assets is included along with
that of other owned property and equipment. These equipment leases have terms of up to three
years, at interest rates ranging from 9.5% to 11.5% and contain bargain purchase options. In
connection with these capital leases, we will pay $108,000 during 2009, $4,000 of which will be for
interest. These capital leases end during 2009.
Operating Lease
In June 2006, we entered into an operating lease agreement for 24,223 square feet of combined
office and laboratory space located in Radnor, Pennsylvania. The initial term of the lease is 12
years. Payments under the lease commenced on December 1, 2006. Our annual future minimum lease
payments under this non-cancelable operating lease are as follows (in thousands):
Operating Leases
2009
$
497
2010
589
2011
667
2012
686
2013
705
Thereafter
3,610
Total minimum lease payments
$
6,754
Prior to the commencement of our current operating lease for our Radnor Facility, we leased
approximately 3,500 square feet of combined office and laboratory space on a month-to-month basis
in Philadelphia, Pennsylvania. Rent expense was $598,000, $598,000 and $559,000 and $1,877,000 for
the years ended December 31, 2008, 2007, and 2006, and for the period from August 8, 2002
(Inception) to December 31, 2008, respectively.
Patent License Agreements
University of Pennsylvania
. In January 2003, we entered into a Patent License Agreement with the
University of Pennsylvania, or Penn. Under the terms of the agreement, we were granted an
exclusive, worldwide royalty-bearing license to make and sell products utilizing seven of Penn's
issued or pending patents for the life of such patents. One issued patent and five patent
applications cover the composition of
F-27
matter on antimicrobial compounds, including small molecules, oligomers and polymers. One patent
application covers the composition and use of polycationic compounds for treating cancer. If a
change-of-control event occurs, in which we transfer the license to these patents to a third party,
we are acquired by another company, or we conduct an initial public offering of our securities, we
are required to pay a 3% royalty on the gross sales for licensed products that are sold as
pharmaceuticals and a 1.5% royalty on products sold as coatings for use in medical devices. We are
permitted to sublicense the patents provided that (a) the sublicensee is prohibited from further
licensing of the patents and (b) the sublicensee is subject to all of the terms of the original
license granted to us. In addition, we are required to share with Penn any consideration we receive
from sublicensing our patents to a third party.
University of Massachusetts
. In January 2004, we entered into a five-year sponsored research
agreement with UMass. Under the terms of this agreement, we have the exclusive option to license
any intellectual property that may be generated by Dr. Gregory Tew pursuant to research sponsored
under the agreement. We may exercise this option by issuing 7,500 shares of our common stock to
UMass for each $100,000 of research conducted by Dr. Tew. If we exercise this option, we are also
required to reimburse UMass for direct patent costs incurred by it for the patents licensed by us.
During 2007, we issued 12,500 shares to UMass in connection with this agreement. We sponsored
$36,000 and $107,000, $118,000 of Dr. Tew's research for 2008, 2007 and 2006, respectively.
Other
Agreements with Employees
. We have entered into employment agreements with various executives.
These agreements provide for severance arrangements and accelerated vesting of equity compensation
awards in the event that the executive is terminated by us other than for cause or disability or if
the executive resigns for good reason.
Credit Line
. In April 2006, we entered into a line of credit agreement with a financial
institution. This line of credit provides for monthly interest-only payments at a variable per
annum rate of 3% plus the 30-day LIBOR rate. The amount available under this line of credit ranges
from 85% to 92% of cash and investments pledged as collateral, based upon the amount and security
type. There is currently no outstanding balance on this line of credit. In June 2006, we entered
into a letter of credit agreement with the same financial institution to secure our payment
obligations under our facility operating lease. This letter of credit is for $1,400,000, expires
on December 1, 2009 and is secured by our credit line.
Termination Benefits
. During January, 2008, and December, 2007, in connection with agreements with
certain terminated employees, we granted 50,000 and 25,000 shares, respectively, of common stock as
a one-time termination benefit to certain employees. These shares will be issued ratably over the
first five-months following the grant date. We recognized $26,000 and $58,000, in 2008 and 2007,
respectively, in equity based compensation costs associated with these shares which is included in
research and development costs on our Consolidated Statements of Operations.
NOTE 8 — QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following tables set forth certain unaudited financial information for each of the quarters in
the years ended December 31, 2008 and 2007. This unaudited quarterly information has been prepared
on the same basis as the audited financial statements and includes all necessary adjustments,
consisting only of normal recurring adjustments that we consider necessary for a fair presentation
of the unaudited quarterly results when read in conjunction with the audited financial statements
and notes. We believe that quarter-to-quarter comparisons of financial results are not necessarily
meaningful and should not be relied upon as an indication of future performance (in thousands,
except per share amounts).
F-28
Q1
Q2
Q3
Q4
Year
2008:
Grant and research revenues
$
991
$
18
$
39
$
18
$
1,066
Operating expenses
3,881
2,950
3,055
2,390
*
12,276
Net loss
(2,823
)
(2,904
)
(2,955
)
(2,304)
*
(10,986
)
Net loss per common share
— basic and diluted
$
(0.09
)
$
(0.09
)
$
(0.06
)
$
(0.15
)
$
(0.40
)
2007:
Grant and research revenues
$
233
$
168
$
599
$
126
$
1,126
Operating expenses
2,351
3,595
3,686
4,169
**
13,801
Net loss
(1,949
)
(3,284
)
(2,973
)
(3,958)
**
(12,164
)
Net loss per common share
— basic and diluted
$
(0.14
)
$
(0.24
)
$
(0.10
)
$
(0.14
)
$
(0.61
)
*
includes adjustment of $126,000, which resulted from our reduced estimated bonus accrual
**
includes adjustment of $439,000, which resulted from our reduced estimated bonus accrual
F-29
PART II — INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other
Expenses
of
Issuance
and
Distribution.
The following table sets forth the costs and expenses, other than underwriting discounts and
commissions, if any, payable by the Company relating to the sale of common stock being registered.
All amounts are estimates except the SEC registration fee:
SEC Registration Fee
$
455
Printing and Engraving Expenses
$
1,000
Legal Fees and Expenses
$
24,500
Accounting Fees and Expenses
$
10,000
Miscellaneous Expenses
$
2,045
Total
$
38,000
Item 14.
Indemnification
of
Directors
and
Officers.
Section 102 of the General Corporation Law of the State of Delaware permits a corporation to
eliminate the personal liability of directors of a corporation to the corporation or its
stockholders for monetary damages for a breach of fiduciary duty as a director, except where the
director breached his duty of loyalty, failed to act in good faith, engaged in intentional
misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock
repurchase in violation of Delaware corporate law or obtained an improper personal benefit. The
Company's Amended and Restated Certificate of Incorporation, as amended, provides that a director
of the Company shall not be personally liable to it or its stockholders for monetary damages for
any breach of fiduciary duty as a director, except to the extent that such exemption from liability
or limitation thereof is not permitted under the General Corporation Law of the State of Delaware
as currently in effect or as the same may hereafter be amended.
Section 145 of the General Corporation Law of the State of Delaware provides that a corporation has
the power to indemnify a director, officer, employee, or agent of the corporation and other persons
serving at the request of the corporation in related capacities against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlements actually and reasonably incurred
by the person in connection with an action, suit or proceeding to which he is or is threatened to
be made a party by reason of such position, if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the corporation, and, in any
criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except
that, in the case of actions brought by or in the right of the corporation, no indemnification
shall be made with respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery
or other adjudicating court determines that, despite the adjudication of liability but in view of
all of the circumstances of the case, such person is fairly and reasonably entitled to indemnify
for such expenses which the Court of Chancery or such other court shall deem proper.
The Company's Amended and Restated Certificate of Incorporation provides that the Company will
indemnify and advance expenses upon request to any person who is or was a party or threatened to be
made a party to any threatened, pending or completed action, suit, proceeding or claim, whether
civil, criminal, administrative or investigative, by reason of the fact that he or she is or was or
has agreed to become, a director, officer or employee of the Company or, at the election of the
Company's board of directors, an agent of the Company or is or was serving at the request of the
Company as a director, officer or employee or, at the election of the Company's board of directors,
agent of any other corporation, partnership, joint venture, trust or other enterprise against any
and all expenses (including attorneys' fees), judgments, fines, penalties and amounts paid in
settlement or incurred in connection with the investigation, preparation to defend or defense or
such action, suit, proceeding or claim.
The Company has purchased certain liability insurance for its officers and directors.
II-1
Item 15.
Recent
Sales
of
Unregistered
Securities.
The following table provides information about the sales of unregistered securities for the
past three years.
Total Offering
Exemption from
Date of Sale
Title of Security
Amount
Price
Purchasers
Registration Claimed
Sept. 2008
units consisting of
Series 2008
Convertible
Preferred Stock and
Series B Warrants
to Purchase Capital
Stock
608,834 units
$4,261,838
Accredited
investors (8)
Section 4(2) of the
Securities Act
of 1933 and Rule 506
promulgated
thereunder
Sept. 2008
Series B Warrants
to Purchase Capital
Stock
279,583 shares
— (1)
Accredited
investor (8)
Securities Act
of 1933 and Rule 506
promulgated
thereunder
Jan. 2008
options to purchase
common stock
220,000 shares
— (2)
Directors,
officers, employees
and
consultants
Section 4(2) of the
Securities Act
of 1933
Oct. 2007
common stock
12,500 shares
— (3)
Accredited
investors (8)
Section 4(2) of the
Securities Act of 1933 and Rule 506
promulgated
thereunder
Dec. 2006
Series 1 Preferred
Convertible Stock
462,294 shares
— (4)
Accredited
investors (8)
Section 4(2) of the
Securities Act of 1933 and Rule 506
promulgated
thereunder
Nov. 2005 — Dec 2007
warrant to purchase
common stock
4,119,194 shares
— (5)
Accredited
investor (8)
Section 4(2) of the
Securities Act of 1933 and Rule 506
promulgated
thereunder
Aug. 2005 — Dec.
2006
common stock and
options to purchase
common stock
4,305,667 shares
— (6)
Directors,
officers,
employees and
consultants
Rule 701 promulgated
under the
Securities Act of
1933
Jan. 2005 — Dec.
2006
common stock
596,000 shares
— (7)
Directors,
officers,
employees and
consultants
Section 4(2) of the
Securities Act
of 1933 and Rule 506
promulgated
thereunder
(1)
Issued to Emerging Growth Equities Ltd. and Carter Securities, LLC as partial
consideration for placement agent services rendered in connection with the 2008 Private
Placement.
II-2
(2)
Represents options to purchase common stock issued to our directors, officers, employees
and consultants. We received no cash consideration for the incentive grants. Options issued
have a range of exercise prices between $1.10 and $3.50 per share and expire ten years from
their grant date.
(3)
Issued to the University of Massachusetts in exchange for the exclusive right and license
to use, develop, manufacture, market and exploit certain intellectual property owned by the
University of Massachusetts.
(4)
Represents unregistered securities issued as dividends on Series 1 Preferred Stock.
(5)
Issued to Fordham Financial Management, Inc., as partial consideration for placement agent
services rendered in connection with our private placement of Series 1 Preferred Stock,
warrants to purchase 4,119,194 shares of common stock at an exercise price of $1.23 per share,
as adjusted during the for weighted average anti-dilution protection. These warrants expire
on November 8, 2010.
(6)
Issued pursuant to the PolyMedix, Inc. 2002 Equity Compensation Plan and the PolyMedix,
Inc. 2005 Omnibus Equity Compensation Plan as an incentive to our directors, officers,
employees and consultants. We received no cash consideration for the incentive grants.
Options issued have exercise prices of between $1.50 and $4.10 per share and expire ten years
from their respective grant date.
(7)
Represents common and restricted common stock incentive grants to our directors, officers,
employees and consultants. We received no cash consideration for the incentive grants.
(8)
As defined in Rule 501 of Regulation D promulgated under the Securities Act.
II-3
Item 16.
Exhibits.
Exhibit
No.
Description of Exhibit
2.1
Agreement and Plan of Merger and Reorganization dated October 6, 2005, among the Registrant,
PolyMedix Merger Sub, Inc., PolyMedix Pharmaceuticals, Inc. and those stockholders of Registrant
identified on Exhibit A thereto.
(1)
3.1
Amended and Restated Certificate of Incorporation of Registrant.
(1)
3.2
Certificate of Designations of Registrant's Series 1 Convertible Preferred Stock.
(1)
3.3
Amendment to the Amended and Restated Certificate of Incorporation of Registrant.
(1)
3.4
Amended and Restated Bylaws of Registrant.
(1)
3.5
Amendment to Amended and Restated Bylaws of Registrant.
(1)
3.6
Amendment to the Amended and Restated Certificate of Incorporation of Registrant, as
amended.
(2)
3.7
Amendment to the Designations of Registrant's Series 1 Convertible Preferred Stock.
(2)
3.8
Certificate of Designations of Registrant's Series 2008 Convertible Preferred Stock.
(3)
3.9
Certificate of Amendment to Amended and Restated Certificate of Incorporation of Registrant, as
amended.
(4)
3.10
Certificate of Designation of Registrant's Series C Preferred Stock.
(5)
4.1
Form of common stock Purchase Warrant issued to Fordham Financial Management, Inc. on November 8,
2005, December 8, 2005, January 10, 2006 and February 15, 2006.
(1)
4.2
Form of common stock Purchase Warrant.
(6)
4.3
Form of Registration Rights Substitution Agreement.
(7)
4.4
Form of Amendment No. 1 to Registration Rights Substitution Agreement.
(8)
4.5
Form of Amendment No. 2 to Registration Rights Substitution Agreement.
(9)
4.6
Form of Series A Warrant Agreement (including Series A Warrant certificate).
(10)
4.7
Form of Placement Agent Warrant.
(11)
4.8
Form of Securities Purchase Agreement as executed by the Registrant and the Investors.
(3)
4.9
Form of Series B Warrant to Purchase Capital Stock.
(3)
4.10
Rights Agreement, dated May 12, 2009, between the Registrant and American Stock Transfer & Trust
Company, LLC, as Rights Agent.
(5)
5.1*
Legal Opinion of Pepper Hamilton LLP
10.1
Patent License Agreement, dated January 3, 2003, between the Registrant and the University of
Pennsylvania.
(1)
10.2
Letter Agreement, dated December 23, 2003, amending the Patent License Agreement, dated January 3,
2003, between the Registrant and the University of Pennsylvania.
(1)
10.3
Software License Agreement, dated May 30, 2003, between the Registrant and the University of
Pennsylvania.
(1)
10.4
Exclusive License Agreement, dated January 2, 2005, between the Registrant and the University of
Massachusetts.
(1)
10.5**
Employment Agreement, dated July 30, 2002, between Nicholas Landekic and the
Registrant.
(1)
10.6**
Employment Agreement, dated December 5, 2005, between Edward Smith and the
Registrant.
(1)
10.7**
Employment Agreement, dated May 21, 2003, between Dawn P. Eringis and the Registrant.
(1)
10.8**
Employment Agreement, dated March 28, 2003, between Richard Scott, Ph.D. and the
Registrant.
(1)
10.9
Letter Agreement, dated February 25, 2004, between Dr. William DeGrado and the
Registrant.
(1)
10.10
Lab/Office Space License Agreement for 3701 Market Street, dated February 22, 2006, between the
Registrant and the University City Science Center.
(1)
II-4
Exhibit
No.
Description of Exhibit
10.11
Pennsylvania Full-Service Lease Agreement for 170 N. Radnor-Chester Road; Suite 300, Radnor, PA
19087, dated May 26, 2006, between the Registrant and the Radnor Properties— SDC,
L.P.
(11)
10.12
Financial Consulting Agreement, dated November 8, 2005, between the Registrant and Fordham
Financial Management, Inc.
(1)
10.13**
Amended and Restated 2005 Omnibus Equity Compensation Plan of the Registrant.
(12)
10.14**
2002 Equity Compensation Plan of the Registrant.
(13)
10.15**
Form of Incentive Stock Option Agreement.
(1)
10.16**
Form of Nonqualified Stock Option Agreement.
(1)
10.17
Sponsored Research Agreement, dated January 5, 2004, between the Registrant and the University of
Massachusetts.
(14)
10.18
Merrill Lynch Loan Management Account Agreement, dated April 13, 2006, between the Registrant and
Merrill Lynch Bank USA.
(11)
10.19**
Employment Agreement, dated October 19, 2006, between R. Eric McAllister and the
Registrant.
(14)
10.20**
Offer Letter to Bozena Korczak, Ph.D.
(15)
10.21
Form of Amended and Restated Co-Placement Agent Agreement by and among the Registrant, Carter
Securities, LLC and Fordham Financial Management, Inc.
(9)
10.22**
Offer Letter to J. Gregory Ford.
(16)
10.23
Investment Agreement, dated May 20, 2009, between the Registrant and Duchess Equity Fund,
LP.
(17)
10.24
Registration Rights Agreement, dated May 20, 2009, between the Registrant and Duchess Equity Fund,
LP.
(17)
21
List of Subsidiaries.
(18)
23.1*
Consent of Deloitte & Touche LLP
23.2
Consent of Pepper Hamilton, LLP.
(18)
24
Power of Attorney.
(19)
*
Filed herewith.
**
Management contract or compensatory arrangement.
(1)
Filed as an Exhibit to the Registration Statement on Form 10-SB (File No. 000-51895) filed on
April 5, 2006 and incorporated herein by reference.
(2)
Filed as an Exhibit to the Current Report on Form 8-K filed on June 5, 2007 and incorporated
herein by reference.
(3)
Filed as an Exhibit to the Current Report on Form 8-K filed on September 24, 2008 and
incorporated herein by reference.
(4)
Filed as an Exhibit to the Current Report on Form 8-K filed on December 12, 2008 and
incorporated herein by reference.
(5)
Filed as an Exhibit to the Current Report on From 8-K filed on May 14, 2009 and incorporated
herein by reference.
(6)
Filed as an Exhibit to Amendment No. 5 to the Registration Statement on Form SB-2 (File No.
333-146180) on November 30, 2007 and incorporated herein by reference.
(7)
Filed as an Exhibit to the Registration Statement on Form SB-2 (File No. 333-146180) on
September 19, 2007 and incorporated herein by reference.
(8)
Filed as an Exhibit to Amendment No. 1 to the Registration Statement on Form SB-2 (File
No. 333-146180) on October 4, 2007 and incorporated herein by reference.
(9)
Filed as an Exhibit to Amendment No. 2 to the Registration Statement on Form SB-2 (File
No. 333-146180) on October 16, 2007 and incorporated herein by reference.
(10)
Filed as an Exhibit to Amendment No. 1 to the Registration Statement on Form S-1 (File No.
333-151084) and incorporated herein by reference.
(11)
Filed as an Exhibit to Amendment No. 2 to the Registration Statement on Form 10-SB/A (File No.
000-51895) filed on June 19, 2006 and incorporated herein by reference.
(12)
Filed as Appendix A to the Registrant's Definitive Proxy Statement filed on April 10, 2008 and
incorporated herein by reference.
II-5
(13)
Filed as an Exhibit to the Registration Statement on Form S-8 (File No. 333-139686) and
incorporated herein by reference.
(14)
Filed as an Exhibit to the Annual Report on Form 10-KSB filed on March 19, 2007 and
incorporated herein by reference.
(15)
Filed as an Exhibit to the Current Report on Form 8-K filed on November 16, 2007 and
incorporated herein by reference.
(16)
Filed as an Exhibit to the Current Report on Form 8-K filed on December 4, 2008 and
incorporated herein by reference.
(17)
Filed as an Exhibit to the Current Report on Form 8-K filed on May 22, 2009 and incorporated
herein by reference.
(18)
Included with Exhibit 5.1.
(19)
Included on signature page to the Registration Statement filed with the SEC on Form S-1 on
December 31, 2008.
Item 17.
Undertakings.
(a)
The undersigned registrant hereby undertakes:
To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii)
To reflect in the prospectus any facts or events arising
after the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii)
To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2)
That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial
bona fide
offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the offering.
(4)
That, for the purpose of determining liability under the Securities Act of
1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration
II-6
statement relating to an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be
deemed to be part of and included in the registration statement as of the date it
is first used after effectiveness.
Provided, however
, that no statement made in a
registration statement or prospectus that is part of the registration statement or
made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such document
immediately prior to such date of first use.
(b)
Insofar as indemnification for liabilities arising under the Securities Act of 1933, may be
permitted to directors, officers and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been advised that, in the opinion of
the SEC, such indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by them is against public
policy as expressed in the Securities Act and will be governed by the final adjudication of
such issue.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this
registration statement to be signed on its behalf by the undersigned, in Radnor, Pennsylvania on
June 10, 2009.
POLYMEDIX, INC.
By:
Name:
/s/ Nicholas Landekic
Nicholas Landekic
Title:
President & Chief Executive Officer
(principal executive officer)
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been
signed by the following persons in the capacities and on the dates indicated.
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Nicholas Landekic and Edward F. Smith and each of them, his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities (including his capacity as a director and/or
officer of Polymedix, Inc.) to sign any or all amendments (including post-effective amendments) to
this registration statement and any and all additional registration statements pursuant to rule
462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto,
and all other documents in connection therewith, with the SEC, granting unto each said
attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this registration statement
has been signed below by the following persons in the capacities and on the dates indicated.
Name/Signature
Title
Date
/s/ Nicholas Landekic
Nicholas Landekic
President, Chief Executive Officer
and Director (principal executive
officer)
June 10, 2009
/s/ Edward F. Smith
Edward F. Smith
Chief Financial Officer (principal
financial officer and principal
accounting officer)
June 10, 2009
/s/ Frank Slattery, Jr.
Frank Slattery, Jr.
Chairman of the Board of Directors
June 10, 2009
/s/ Brian Anderson
Brian Anderson
Director
June 10, 2009
/s/ Richard W. Bank, M.D.
Richard W. Bank, M.D.
Director
June 10, 2009
/s/ William N. Kelley, M.D.
William N. Kelley, M.D.
Director
June 10, 2009
/s/ Michael E. Lewis, Ph.D.
Michael E. Lewis, Ph.D.
Director
June 10, 2009
/s/ Stefan Loren, Ph.D.
Stefan Loren, Ph.D.
Director
June 10, 2009
/s/ Shaun F. O'Malley
Shaun F. O'Malley
Director
June 10, 2009
II-8