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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt">As filed with the Securities and Exchange Commission on July 24, 2009
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 0pt"><B>Registration No.&nbsp;333-_________</B>
</DIV>
<DIV style="font-size: 6pt">&nbsp;</DIV>

<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&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: 12pt"><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: 12pt"><B>FORM S-1</B>
</DIV>


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

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><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: 24pt; margin-top: 12pt"><B>ADVENTRX
Pharmaceuticals, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><I>(Exact name of registrant as specified in its charter)</I></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="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="31%">&nbsp;</TD>
</TR>
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<!-- Begin Table Body -->
<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>84-1318182</B><BR>
<I>(I.R.S. Employer<BR>
Identification Number)</I></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><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: 10pt; margin-top: 12pt"><B>6725 Mesa Ridge Road,<BR>
Suite&nbsp;100,<BR>
San Diego, CA 92121<BR>
(858)&nbsp;552-0866</B><BR>
<I>(Address, including zip code, and telephone number, including<BR>
area code, of registrant&#146;s principal executive offices)</I></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><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: 10pt; margin-top: 12pt"><B>Brian M. Culley<BR>
Chief Business Officer and Senior Vice President<BR>
ADVENTRX Pharmaceuticals, Inc.<BR>
6725 Mesa Ridge Road, Suite&nbsp;100<BR>
San Diego, CA 92121<BR>
Telephone: (858)&nbsp;552-0866</B><BR>
<I>(Name, address, including zip code, and telephone number,<BR>
including area code, of agent for service)</I></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B><I>With a Copy to:</I></B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Michael S. Kagnoff<BR>
DLA Piper LLP (US)<BR>
4365 Executive Drive, Suite&nbsp;1100<BR>
San Diego, CA 92121<BR>
Telephone: (858)&nbsp;677-1400<BR>
Facsimile: (858)&nbsp;677-1401</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.&nbsp;<FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 statement for the same offering <FONT face="Wingdings">&#111;</FONT>
</DIV>

<DIV style="MARGIN-TOP: 6pt; FONT-SIZE: 10pt" align=left>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of &#147;large accelerated
filer,&#148; &#147;accelerated filer&#148; and &#147;smaller
reporting company&#148; in Rule 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%">

  <TR style="FONT-SIZE: 6pt">
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD></TR>
  <TR vAlign=top>
    <TD vAlign=top noWrap align="left">Large accelerated filer <FONT
face=Wingdings>&#111;</FONT>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD vAlign=top noWrap align="center">Accelerated filer <FONT
face=Wingdings>&#111;</FONT>&nbsp;</TD>
    <TD align="center">&nbsp;</TD>
    <TD noWrap align="center">Non-accelerated filer &nbsp; <FONT
face=Wingdings>&#111;</FONT><BR>(Do not check if a smaller reporting company)</TD>
    <TD align="center">&nbsp;</TD>
    <TD vAlign=top noWrap align="center">Smaller reporting company <FONT
face=Wingdings>&#254;</FONT>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">CALCULATION OF 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="1%">&nbsp;</TD>
    <TD width="76%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="9" 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 nowrap align="center"><B>Proposed Maximum</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&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 Each Class of Securities</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Aggregate</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><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 (1)</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Offering Price (2)</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Registration Fee (2)</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<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">Convertible Preferred Stock, par value $0.001 per share</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 align="center" valign="bottom" style="border-top: 2px solid #000000">&#151; (3)</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="center" valign="bottom" style="border-top: 2px solid #000000">&#151; (3)</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">Shares of Common Stock, par value $0.001 per share, underlying
Convertible Preferred Stock</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="center" valign="bottom" style="border-top: 2px solid #000000">$&#091;____&#093;</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="center" valign="bottom" style="border-top: 2px solid #000000">$&#091;____&#093;</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">Warrants</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 align="center" valign="bottom" style="border-top: 2px solid #000000">&#151; (3)</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="center" valign="bottom" style="border-top: 2px solid #000000">&#151; (3)</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">Shares of Common Stock, par value $0.001 per share,
underlying Warrants</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="center" valign="bottom" style="border-top: 2px solid #000000">$&#091;____&#093;</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="center" valign="bottom" style="border-top: 2px solid #000000">$&#091;____&#093;</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:30px; text-indent:-15px">Total</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 align="center" valign="bottom" style="border-top: 2px solid #000000">$10,000,000</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="center" valign="bottom" style="border-top: 2px solid #000000">$558</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="9" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 6pt; 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>Any securities registered hereunder may be sold separately or together with other securities
registered hereunder.</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 registration fee pursuant to Rule 457(o)
under the Securities Act. Pursuant to Rule&nbsp;416 under the Securities Act of 1933, as amended
(the &#147;Securities Act&#148;), 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, anti-dilution provisions,
or similar transactions. No additional registration fee is being paid for these shares.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Pursuant to Rule 457(g) under the Securities Act, no separate registration fee is required
for the convertible preferred stock or the warrants because the registrant is registering
these securities in the same registration statement as the underlying common stock to be
offered pursuant thereto.</TD>
</TR>

</TABLE>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><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&nbsp;8(a) of the Securities Act of 1933, as amended, or until the registration statement shall
become effective on such date as the Securities and Exchange Commission, acting pursuant to said
Section&nbsp;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>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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








<P style="padding: 5px; border: 3px double #000000; font-size: 11pt; color: #FF0000">The information in this prospectus is not complete and may be changed. We may not sell these
securities 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 align="center" style="font-size: 10pt; margin-top: 18pt"><B>SUBJECT TO COMPLETION, DATED JULY 24, 2009</B>
</DIV>


<DIV align="Center" style="font-size: 18pt; margin-top: 6pt"><B>ADVENTRX PHARMACEUTICALS, INC.</B>

</DIV>

<DIV align="Center" style="font-size: 12pt; margin-top: 6pt"><B>&#091;</B><B>&#149;</B><B>&#093; Shares of &#091;</B><B>&#149;</B><B>&#093;% Series&nbsp;C Convertible Preferred Stock<BR>
Warrants to Purchase up to &#091;</B><B>&#149;</B><B>&#093; Shares of Common Stock<BR>
&#091;</B><B>&#149;</B><B>&#093; Shares of Common Stock Underlying the Convertible Preferred Stock and the Warrants</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>

</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are offering &#091;<B>&#149;</B>&#093; shares of our &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock, par value $0.001
per share, and warrants to purchase up to &#091;<B>&#149;</B>&#093; shares of our common stock to purchasers in this
offering. We are also offering an aggregate of &#091;<B>&#149;</B>&#093; shares of our common stock, par value $0.001 per
share, issuable upon conversion of the convertible preferred stock and exercise of the warrants.
The convertible preferred stock and warrants will be sold in units, with each unit consisting of
one share of convertible preferred stock and a warrant to purchase up to approximately &#091;<B>&#149;</B>&#093; shares
of common stock. Subject to certain ownership limitations, the convertible preferred stock is
convertible at any time at the option of the holder into shares of our common stock at a conversion
price of $&#091;<B>&#149;</B>&#093; per share and will accrue a &#091;<B>&#149;</B>&#093;% dividend until &#091;<B>&#149;</B>&#093;. The warrants are exercisable at
any time after the six-month anniversary of their date of issuance and on or before the fifth
anniversary of their initial exercise date at an exercise price of $&#091;<B>&#149;</B>&#093; per share of common stock.
In the event that the convertible preferred stock is converted at any time prior to &#091;<B>&#149;</B>&#093;, we will
pay to the holder of such converted convertible preferred stock an amount equal to the total
dividend that would accrue on the preferred stock from the conversion date through &#091;<B>&#149;</B>&#093;, or $&#091;<B>&#149;</B>&#093; per
$1,000 in stated value of the shares of convertible preferred stock converted, less any dividend
payments previously made with respect to such shares. Each unit will be sold at a negotiated price
of $1,000. Units will not be issued or certificated. The shares of convertible preferred stock and
warrants are immediately separable and will be issued separately.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We will place &#091;<B>&#149;</B>&#093;%, or approximately $&#091;<B>&#149;</B>&#093;, of the gross proceeds in an escrow account, which
amounts will be released to make the dividend and &#147;make-whole&#148; payments due on the convertible
preferred stock.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is listed on the NYSE Amex (formerly, the American Stock Exchange) under the
symbol &#147;ANX.&#148; The last reported sale price of our common stock on the NYSE Amex on July 23, 2009
was $0.14 per share. We do not intend to list the convertible preferred stock or warrants on any
securities exchange.
</DIV>

<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Investing in our securities involves a high degree of risk and purchasers of our securities
may lose their entire investment. See &#147;Risk Factors&#148; beginning on page 7 of this prospectus for
factors you should consider before buying our securities. You should carefully read this prospectus
before you invest in our securities.</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 9pt" 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: 9pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Per Unit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Maximum Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Public offering price</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Placement agent&#146;s fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Proceeds, before expenses, to ADVENTRX Pharmaceuticals, Inc.</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 9pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have retained Rodman &#038; Renshaw, LLC as placement agent to use its reasonable best efforts
to solicit offers to purchase our securities in this offering. The placement agent is not
purchasing or selling any of the securities in this offering. There is no minimum amount of
securities that must be sold as a condition to closing this offering. The offering will end on &#091;<B>&#149;</B>&#093;,
2009. We expect that delivery of the securities being offered pursuant to this prospectus will be
made to purchasers on or about &#091;<B>&#149;</B>&#093;, 2009. We have agreed to indemnify the placement agent against
some liabilities, including liabilities under the Securities Act of 1933, as amended, or the
Securities Act, and to contribute to payments that the placement agent may be required to make in
respect thereof. In consideration for its services, in addition to the cash fees set forth in the
table above, we have agreed to issue to the placement agent five-year warrants to purchase up to an
aggregate of &#091;<B>&#149;</B>&#093; shares of our common stock at an exercise price of $&#091;<B>&#149;</B>&#093; per share. The placement
agent warrants are not covered by this prospectus.
</DIV>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Rodman &#038; Renshaw</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The date of this prospectus is&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2009.
</DIV>


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

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

<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>You should rely only on the information contained in this prospectus and any free writing
prospectus prepared by us or on our behalf. We have not authorized anyone to provide you with
different or additional information. If anyone provides you with different or additional
information, you should not rely on it. We are not making offers to sell, or seeking offers to buy,
these securities in any state or other jurisdiction where the offers and sales are not permitted.
The information contained in this prospectus is accurate only as of the date hereof, regardless of
the time of delivery of this prospectus or of any sale of the securities offered hereby. Our
business, financial condition, results of operations and prospects may have changed since the date
of this prospectus.</B>
</DIV>

<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" style="border-bottom: 1px solid #000000"><B>Page</B></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">Prospectus Summary</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#102">Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#103">Special Note Regarding Forward-Looking Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">29</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#104">Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#105">Dividend Policy</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#106">Capitalization</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#107">Dilution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#108">Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">36</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#109">Business</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#110">Management</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#111">Executive &#038; Director Compensation</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">64</TD>
    <TD>&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>&nbsp;</TD>
    <TD align="right">76</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#113">Description of Capital Stock</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">79</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#114">Description of Warrants</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">Plan of Distribution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">84</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#116">Legal Matters</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#117">Experts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#118">Where You Can Find More Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#119">Index to Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-1</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a53229exv21w1.htm">EX-21.1</A></FONT></TD></TR>
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="a53229exv23w1.htm">EX-23.1</A></FONT></TD></TR>
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our trademark CoFactor&#174; is registered in the United States Patent and Trademark Office (in the
Supplemental Register) under Registration No.&nbsp;2,946,934, for use in connection with chemotherapy
modulators derived from folic acid. We are developing commercial names for our other product
candidates. All other trademarks, service marks or trade names appearing in this prospectus,
including but not limited to Navelbine&#174; and Taxotere&#174;, are the property of their respective owners.
Use or display by us of other parties&#146; trademarks, service marks, trade names, trade dress or
products is not intended to and does not imply a relationship with, or endorsements or sponsorship
of, us by the trademark, service mark, trade name, trade dress or product owners. As indicated in
this prospectus, we have included market data and industry forecasts that were obtained from
industry publications.
</DIV>
<DIV align="left">
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</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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<DIV style="font-family: 'Times New Roman',Times,serif">
<P>
<DIV style="width: 100%; border: 1px solid black; padding: 11px;">


<DIV align="left">
<A name="101"></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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>This summary highlights selected information about us and this offering contained elsewhere in
this prospectus and is qualified in its entirety by the more detailed information and financial
statements contained elsewhere in this prospectus. It may not contain all of the information that
is important to you. You should carefully read this entire prospectus, including the risks and
uncertainties discussed under the heading &#147;Risk Factors&#148; below, our consolidated financial
statements and the notes related thereto, our condensed consolidated financial statements and the
notes related thereto, and the other documents included in or to which this prospectus refers,
before making an investment decision. When used in this prospectus, the terms &#147;ADVENTRX,&#148; &#147;we,&#148;
&#147;our,&#148; &#147;us&#148; and the &#147;Company&#148; refer to ADVENTRX Pharmaceuticals, Inc. and its subsidiaries, unless
otherwise indicated or the context otherwise requires.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>About ADVENTRX Pharmaceuticals, Inc.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a development-stage biopharmaceutical company whose fundamental business is focused on
in-licensing, developing and commercializing proprietary product candidates for the treatment of
cancer. We seek to improve the performance and commercial potential of existing treatments by
addressing limitations associated principally with their safety and use. We have devoted
substantially all of our resources to research and development or to acquisition of our product
candidates. We have not yet marketed or sold any products or generated any significant revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our lead product candidates, ANX-530 and ANX-514, are novel emulsion formulations of currently
marketed chemotherapy drugs. We believe ANX-530 and ANX-514 may improve the safety of and have
greater commercial potential than the currently marketed reference products, Navelbine and
Taxotere, respectively, 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reducing the incidence and severity of adverse effects; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increasing their pharmacoeconomics and convenience to healthcare practitioners and
patients</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have experienced significant operating losses in funding the development of our product
candidates, accumulating operating losses totaling approximately $133.9&nbsp;million as of March&nbsp;31,
2009, and we expect to incur substantial operating losses for the foreseeable future. Our
independent auditor&#146;s report for the year ended December&nbsp;31, 2008 includes an explanatory paragraph
stating that our recurring losses from operations and negative cash flows raise substantial doubt
about our ability to continue as a going concern. Our consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty. As of March&nbsp;31,
2009, we had approximately $5.3&nbsp;million in cash and cash equivalents and $2.8&nbsp;million in working
capital and we do not expect to generate positive net cash flows for the foreseeable future.
Historically, we have funded our operations primarily through sales of our equity securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2009, due to an immediate need to raise additional capital to continue our business,
we suspended substantially all of our development activities and fundamental business operations to
conserve cash while we evaluated strategic options, including the sale or exclusive license of one
or more of our product candidate programs, a strategic business merger and other similar
transactions, pursued financing alternatives and considered whether to liquidate our assets,
wind-up our operations and distribute any remaining cash to our stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;12, 2009, we completed an approximately $2.0&nbsp;million registered direct equity
financing involving the issuance of shares of our 0% Series&nbsp;A Convertible Preferred Stock,
convertible into 18,036,199 shares of our common stock, and warrants to purchase up to 8,116,290
shares of our common stock. We received approximately $1.7&nbsp;million in net proceeds from the
offering, after deducting the placement agent&#146;s fees and our estimated offering expenses. All of the shares
of the 0% Series A Convertible Preferred Stock subsequently have been converted. We may
receive up to approximately $1.2&nbsp;million of additional proceeds from the exercise of the warrants
issued in that offering; however, those warrants are not exercisable until December&nbsp;13, 2009 and
their exercise is subject to certain ownership limitations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the completion of the June&nbsp;2009 financing, we re-started the final manufacturing
activities related to submitting a New Drug Application, or NDA, for ANX-530 to seek approval of
the United States Food and Drug Administration, or FDA, to market ANX-530 in the United States. In
addition, we intend to continue to evaluate the data from our recently-completed bioequivalence
study of ANX-514 and we plan to seek a meeting with the FDA to discuss the results. However, even
following the offering described in this prospectus, we may need to raise substantial additional
capital to fund our operations, including pre-launch activities for ANX-530, during the regulatory
review period of an ANX-530 NDA, if an ANX-530 NDA is submitted, launch activities for ANX-530,
should an ANX-530 NDA be approved, and pre-NDA development activities for ANX-514.
</DIV>



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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 6, 2009,
we completed an approximately $1.4 million registered direct equity financing involving the issuance of
shares of our 5% Series B Convertible Preferred Stock, convertible into 9,504,189 shares of our common stock.
We received approximately $1.2 million in net proceeds from the offering, after deducting the placement agent&#146;s
fees and our estimated offering expenses. The convertible preferred shares were to accrue a 5% dividend
until July 6, 2014, unless converted prior to such date.  Upon any conversion of these preferred shares we
were obligated to pay the holder an amount equal to the total dividend that would have otherwise accrued on
the shares through July 6, 2014, less any dividend payment previously made with respect to such converted
shares. Twenty-five percent, or $340,250, of the gross proceeds of the financing were placed in an escrow
account for payment of the dividend and conversion amounts payable on the 5% Series B Convertible Preferred
Stock. All of the shares of the 5% Series B Convertible Preferred Stock subsequently have been converted and,
pursuant to the terms of the 5% Series B Convertible Preferred Stock, we paid an aggregate of $340,250 from
the escrow account to the holder of the converted preferred shares in connection with such conversions.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our goal is to be a leading biopharmaceutical company focused on in-licensing, developing and
commercializing proprietary product candidates primarily for the treatment of cancer. Our near-term
strategy is to obtain marketing approval of our lead product candidates and either partner or
establish an infrastructure to support marketing, distributing and selling these products in the
U.S. and abroad, should they be approved. Longer term, we intend to acquire additional product
candidates that fit our areas of expertise. Specifically, we intend 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Seek marketing-approval for ANX-530 and ANX-514 in the U.S</U>. We are applying
our operational experience to complete and seek approval of NDAs for ANX-530 and ANX-514
that we intend to submit to the FDA. In June&nbsp;2009, we announced that an update regarding
our NDA submission timeline will be provided as critical activities are completed;
however, our goal is to submit the NDA around the end of 2009. In addition, we are
continuing to evaluate the data from our recently-completed bioequivalence study of
ANX-514 and plan to seek a meeting with the FDA to discuss the results.</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Establish sales and marketing capabilities for ANX-530 and ANX-514 in the
U.S</U>. We intend to gain access to a substantial portion of the U.S. markets for
ANX-530 and ANX-514 through a small, specialized sales force targeting distributors,
provider networks and group purchasing organizations. For the near-term, we intend to
maintain our current cost-efficient and flexible infrastructure by limiting the number
of our full-time employees, engaging consultants on a project basis and outsourcing
substantially all of our development activities to specialized vendors and contract
development organizations. As we near regulatory approval of our product candidates, we
plan to establish the infrastructure and relationships necessary to access what we
believe will be concentrated markets for ANX-530 and ANX-514. However, we also remain
receptive to partnering these product candidates in the U.S. if presented with terms
that are sufficiently attractive.</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Partner with leading organizations to develop and market ANX-530 and ANX-514
outside the U.S. or globally</U>. We plan to draw on the development, regulatory and
commercial expertise of other companies in instances where we believe our product
candidates would benefit from such expertise. For example, for markets in which a large
sales force is required to gain access, and for markets outside the U.S. and possibly
within the U.S., we plan to commercialize products for which we obtain regulatory
approval through a variety of licensing, collaboration and distribution arrangements
with other pharmaceutical and biotechnology companies.</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Pursue additional indications and commercial opportunities for ANX-530 and
ANX-514 independently and through collaborations</U>. We may increase the value of our
product candidates by seeking approval for label changes and pursuing other commercial
opportunities. For example, we or a future partner may conduct clinical and non-clinical
studies that seek to differentiate ANX-530 and ANX-514 from Navelbine and Taxotere,
respectively.</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><U>Acquire new and improved formulations of currently marketed products</U>. We may
pursue other currently approved products that we believe can be improved, the U.S.
markets for which are concentrated and to which we can apply our operational experience.</TD>
</TR>

</TABLE>
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We face numerous risks and uncertainties that could materially and adversely affect our
business, results of operations and financial condition, including the risk that we may not be able
to raise sufficient capital to continue our business operations, which could result in our
inability to continue as a going concern, and the risk that we may be unable to regain compliance
with the continued listing requirements of the NYSE Amex, the securities exchange on which our
common stock is listed, and our common
</DIV>




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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">stock may be delisted from that exchange. For additional discussion of the risk and
uncertainties we face, see &#147;Risk Factors&#148; below.
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business was incorporated in Delaware in December&nbsp;1995. In October&nbsp;2000, we merged our
wholly-owned subsidiary, Biokeys Acquisition Corp., with and into Biokeys, Inc. and changed our
name to Biokeys Pharmaceuticals, Inc. In May&nbsp;2003, we merged Biokeys, Inc., our wholly-owned
subsidiary, with and into us and changed our name to ADVENTRX Pharmaceuticals, Inc. In July&nbsp;2004,
we formed a wholly-owned subsidiary, ADVENTRX (Europe) Ltd., in the United Kingdom primarily to
facilitate conducting clinical trials in the European Union and to obtain favorable pricing for
discussions with the European Medicines Agency. In April&nbsp;2006, we acquired SD Pharmaceuticals, Inc.
as a wholly-owned subsidiary.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our executive offices are located at 6725 Mesa Ridge Road, Suite&nbsp;100, San Diego, California
92121, and our telephone number is (858)&nbsp;552-0866. Our corporate website is located at
www.adventrx.com. Information on our website does not constitute part of this prospectus.
</DIV>



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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Offering</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="40%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="55%">&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 by us:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:21px; text-indent:-21px"><B>&#149;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Up to &#091;<B>&#149;</B>&#093; shares of
convertible preferred stock, par
value $0.001 per share;</DIV></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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:21px; text-indent:-21px"><B>&#149;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#091;<B>&#149;</B>&#093; shares of common
stock issuable upon conversion of
the convertible preferred stock;</DIV></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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:21px; text-indent:-21px"><B>&#149;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Warrants to purchase up to &#091;<B>&#149;</B>&#093; shares of common stock; and</DIV></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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="margin-left:21px; text-indent:-21px"><B>&#149;</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#091;<B>&#149;</B>&#093; shares of common
stock issuable upon exercise of
the warrants.</DIV></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">Common stock to be outstanding after this offering:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&#091;<B>&#149;</B>&#093; shares of common stock, or &#091;<B>&#149;</B>&#093; shares of common stock if the
convertible preferred stock and
warrants offered hereby are
converted and exercised in full.</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">Make-Whole Payment:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">In the event that the convertible
preferred stock is converted at
any time prior to &#091;<B>&#149;</B>&#093;, we will
pay to the holder an amount equal
to $&#091;<B>&#149;</B>&#093; per $1,000 in stated
value of the shares of
convertible preferred stock
converted, less any dividend
payments previously made with
respect to such shares.</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">Escrow:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">An amount of the proceeds of the
offering equal to the aggregate
potential make-whole payment will
be deposited with &#091;<B>&#149;</B>&#093;, as escrow
agent, to be held for a period of
&#091;<B>&#149;</B>&#093; months from the date of
closing. Amounts in the escrow
account will be released to pay
dividends and any make-whole
payments with respect to
convertible preferred stock
converted during the escrow
period. At the end of the escrow
period, the amount remaining in
the escrow account will be
released to us.</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 currently intend to use the
net proceeds from this offering
to fund activities relating to
seeking FDA approval to market
ANX-530 and ANX-514 in the United
States, pre-launch activities
related to commercialization of
ANX-530, and for general
corporate purposes, including
working capital. Please see &#147;Use
of Proceeds&#148; below.</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">NYSE Amex symbol:
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">ANX</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">Investing in our securities
involves a high degree of risk
and purchasers of our convertible
preferred stock and warrants and
the underlying common stock may
lose their entire investment. See
&#147;Risk Factors&#148; below and the
other information included
elsewhere in this prospectus for
a discussion of factors you
should carefully consider before
deciding to invest in our
securities.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 0%">The number of shares of our common stock to be outstanding immediately after this offering is
based on 117,792,960 shares of our common stock outstanding as of July&nbsp;22, 2009. This number
does not include, as of July&nbsp;22, 2009:
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>5,973,884 shares of common stock issuable upon the exercise of outstanding stock
options issued under our equity incentive plans prior to this offering, at a weighted
average exercise price of $0.82 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>650,000 shares of common stock issuable upon vesting and settlement of outstanding
restricted stock units issued under our 2008 Omnibus Incentive Plan prior to this
offering;</TD>
</TR>

</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->4<!-- /Folio -->
</DIV>
</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">



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



<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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>10,568,772 shares of common stock available for future issuance under our 2008
Omnibus Incentive Plan;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>20,304,118 shares of common stock issuable upon the exercise of outstanding warrants
issued prior to this offering, at a weighted average exercise price of $1.27 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#091;<B>&#149;</B>&#093; shares of common stock issuable upon exercise of warrants to be issued to the
purchasers in this offering, at an exercise price of $&#091;<B>&#149;</B>&#093; per share; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#091;<B>&#149;</B>&#093; shares of common stock issuable upon exercise of warrants to be issued to the
placement agent for this offering, which are not covered by this prospectus, at an
exercise price of $&#091;<B>&#149;</B>&#093; per share.</TD>
</TR>

</TABLE>
</DIV>



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


</TABLE>
</DIV>
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</DIV>
</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">



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



<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following tables set forth our summary statement of operations data for the fiscal years
ended December&nbsp;31, 2008 and 2007, for the three months ended March&nbsp;31, 2009 and 2008, and for
inception through March&nbsp;31, 2009, and our summary balance sheet as of March&nbsp;31, 2009. Our statement
of operations data for the fiscal years ended December&nbsp;31, 2008 and 2007 were derived from our
audited consolidated financial statements included elsewhere in this prospectus. Our statement of
operations data for the three months ended March&nbsp;31, 2009 and 2008 and for inception through March
31, 2009 and our balance sheet data as of March&nbsp;31, 2009 were derived from our unaudited condensed
consolidated financial statements included elsewhere in this prospectus. In the opinion of
management the unaudited condensed consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements and include all adjustments, consisting of
only normal recurring adjustments, necessary for a fair presentation of our operating results and
financial position for those periods and as of such dates. The results for any interim period are
not necessarily indicative of the results that may be expected for a full year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The results indicated below and elsewhere in this prospectus are not necessarily indicative of
our future performance. You should read this information together with &#147;Capitalization,&#148;
&#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations,&#148; our
consolidated financial statements and related notes and our unaudited condensed consolidated
financial statements and related notes included elsewhere in this prospectus.
</DIV>



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</DIV>
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="102"></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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Investing in our securities involves a high degree of risk. You should carefully consider the
risk factors discussed below, together with all the other information contained in this prospectus
before deciding whether to purchase any of our securities. Each of the risk factors could adversely
affect our business, operating results and financial condition, as well as adversely affect the
value of an investment in our securities, and the occurrence of any of these risks might cause you
to lose all or part of your investment.</I>
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to Our Financial Performance, Operations and Ability to Continue as a Going Concern</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We have incurred losses since our inception, we expect our operating expenses to continue to exceed
our revenues for the foreseeable future and we may never generate revenues sufficient to achieve
profitability.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a development stage company and have not generated sustainable revenues from operations
or been profitable since inception, and it is possible we will never achieve profitability. We have
devoted our resources to developing a new generation of therapeutic products, but such products
cannot be marketed until the regulatory process is completed and governmental approvals have been
obtained. Accordingly, there is no current source of revenues from operations, much less profits,
to sustain our present activities, and no revenues from operations will likely be available until,
and unless, our product candidates are approved by the U.S. Food and Drug Administration, or FDA,
or other regulatory agencies and successfully marketed, either by us or a partner, an outcome which
we are not able to guarantee.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our financial resources are limited, we will require substantial additional funding to continue our
operations and pursue our business strategy, and, if we are unable to raise sufficient additional
capital, we may cease operating as a going concern and seek protection under the U.S. Bankruptcy
Code or liquidate our assets.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have experienced significant operating losses in funding the development of our product
candidates, accumulating operating losses totaling approximately $141.7&nbsp;million as of March&nbsp;31,
2009, and we expect to continue to incur substantial operating losses for the foreseeable future,
even if we or a future partner of ours is successful in advancing our product candidates to market.
As of March&nbsp;31, 2009, we had approximately $5.3&nbsp;million in cash and cash equivalents and $2.8
million in working capital and we do not expect to generate positive net cash flows for the
foreseeable future. Following the equity financing we completed in June&nbsp;2009, in which we raised
net proceeds of approximately $1.7&nbsp;million, we re-started the final manufacturing activities
related to submitting a New Drug Application, or NDA, for ANX-530 to seek approval of the FDA to
market ANX-530 in the United States, or U.S., and intend to continue to evaluate the data from our
recently-completed bioequivalence study of ANX-514. We expect to incur substantial costs in
connection with activities relating to submitting an NDA for ANX-530 and advancing ANX-530 toward
commercialization in the U.S. We may also incur substantial costs in connection with evaluating,
negotiating and consummating capital-raising and/or strategic or partnering transactions or
liquidating our assets and winding-up our operations. We cannot currently predict the extent of
these costs. Even if we incur costs in pursuing, evaluating and negotiating particular
capital-raising and/or strategic or partnering transactions, our efforts may not prove successful.
Excluding the potentially significant costs associated with evaluating, negotiating and
consummating capital-raising and/or strategic or partnering transactions or seeking protection
under the provisions of the U.S. Bankruptcy Code or liquidating our assets and winding-up our
operations, we anticipate that our cash and cash equivalents as of March&nbsp;31, 2009, together with
the net proceeds from the equity financings we completed on June&nbsp;12, 2009 and July&nbsp;6, 2009, will be
sufficient to permit us to conduct our business through at least September&nbsp;30, 2009. We will need
to raise substantial additional capital to continue our business after this period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our independent auditor&#146;s report for the year ended December&nbsp;31, 2008 includes an explanatory
paragraph stating that our recurring losses from operations and negative cash flows raise
substantial doubt about our ability to continue as a going concern. If we are unable to obtain
additional financing or consummate a strategic transaction on commercially reasonable terms, our
business, financial condition and results of operations will be materially and adversely affected
and we may be unable to continue as a going concern. If we are unable to continue as a going
concern, we may have to seek protection under the provisions of the U.S. Bankruptcy Code or
liquidate our assets and dissolve our company. In either case, we may receive less than the value
at which those assets are carried on our financial statements. Based on our current working capital
and estimated costs of implementing an orderly liquidation of our assets, we do not expect that
there will be material cash available for distribution to our stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are seeking to raise additional capital as soon as possible in order to continue our
business and our recently re-started development activities, including activities related to
submitting an NDA to seek approval of the FDA for marketing ANX-530 in the U.S. Our future
expenditures on our programs are subject to many uncertainties, including whether our product
candidates will be
</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">developed with a partner or independently. Our future capital requirements will depend on, and
could increase significantly as a result of, 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs of seeking regulatory approval for our lead product candidates, ANX-530 and
ANX-514, including any bioequivalence or clinical studies, process development, scale-up
and other manufacturing activities, or other work required to achieve such approval, as
well as the timing of such activities and approval;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the timing and terms of any collaborative, licensing and other strategic 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost related to establishing or contracting for sales and marketing capabilities and
other commercial capabilities;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the scope, prioritization and number of development and/or commercialization programs we
pursue and the rate of progress and costs with respect to such 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the extent to which we will need to rebuild our workforce, which currently consists of
two full-time employees, and the cost involved in hiring, training and incentivizing new
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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the extent to which we invest in or acquire new technologies, products or businesses;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the effect of competing technological and market developments; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the cost involved in establishing, enforcing or defending patent claims and other
intellectual property rights.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are seeking additional funding through public or private sales of our equity securities,
debt financings, collaborations, licensing arrangements or other strategic transactions. However,
we may not be able to obtain sufficient additional funding on satisfactory terms, if at all. We
believe global economic conditions, including the recent credit crisis, have adversely impacted our
ability to raise additional capital and may continue to do so.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we have been evaluating and continue to evaluate strategic options, including the
sale or exclusive license of one or more of our product candidate programs, a strategic business
merger and similar transactions. However, to date, discussions with potential strategic transaction
partners have been unsuccessful, protracted or on terms that we determined were unacceptable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Our ability to raise capital may be limited by applicable laws and regulations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we have an effective &#147;shelf&#148; registration statement on Form S-3 that allows us to
raise up to $25&nbsp;million from the sale of common stock, preferred stock, debt securities, warrants
and units, we may not be able to use that registration statement to raise substantial additional
capital, if any. Under current SEC regulations, we will not be eligible to use a registration
statement on Form S-3 for primary offerings of our common stock or securities convertible into our
common stock unless our common stock is listed and registered on a national securities exchange or
unless the aggregate market value of our common stock held by non-affiliates reaches $75&nbsp;million or
more. The NYSE Amex will review the appropriateness of continued listing of any issuer that falls
below the exchange&#146;s continued listing standards and may, in its discretion, at any time, and
without notice, suspend dealings in, or may remove any security from, listing privileges. The NYSE
Amex will normally consider suspending dealings in, or removing from the list, securities of an
issuer which has stockholders&#146; equity of less than $6.0&nbsp;million if such issuer has sustained losses
from continuing operations and/or net losses in its five most recent fiscal years. On June&nbsp;1, 2009,
we received notice from the NYSE Amex staff that, based on their review of our Form 10-Q for the
period ended March&nbsp;31, 2009, we are not in compliance with certain stockholders&#146; equity continued
listing standards. Specifically, the NYSE Amex staff noted that we are not in compliance with
Section&nbsp;1003(a)(ii) of the NYSE Amex Company Guide because we reported stockholders&#146; equity of less
than $4,000,000 and losses from continuing operations and net losses in three of our four most
recent fiscal years, or with Section&nbsp;1003(a)(iii) of the Company Guide because we reported
stockholders&#146; equity of less than $6,000,000 and losses from continuing operations and net losses
in our five most recent fiscal years. In addition, the NYSE Amex staff notified us, in accordance
with Section&nbsp;1003(f)(v) of the Company Guide, that it deems it appropriate for us to effect a
reverse stock split of our common stock to address our low selling price per share, and that if a
reverse stock split is not completed within a reasonable amount of time after June&nbsp;1, 2009, the
NYSE Amex may consider suspending dealings in, or removing from the list, our common stock. See
the risk factor below headed, &#147;We are currently not in compliance with NYSE Amex continuing listing
standards and are at risk of being delisted from the NYSE Amex equities market,&#148; for additional
information regarding the risk of our common stock being delisted from the NYSE Amex. If our common
stock were delisted from the NYSE Amex, our ability to raise capital on terms and conditions we
deem acceptable, if at all, may be materially impaired. Currently, we do not anticipate being
eligible to register and list our common stock on any other national securities exchange.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, even if we maintain our listing with the NYSE Amex, under current SEC
regulations, at any time during which the aggregate market value of our common stock held by
non-affiliates, or public float, is less than $75.0&nbsp;million (calculated as set forth in Form S-3
and SEC rules and regulations), the amount we can raise through primary offerings of our securities
in any twelve-month period using a registration statement on Form S-3 will be limited to an
aggregate of one-third of our public float. As of July&nbsp;22, 2009, our public float was approximately
109&nbsp;million shares. Based on a market value of $0.22 per share, which was the closing price of our
common stock on June&nbsp;11, 2009, a date within 60&nbsp;days prior to the date hereof, the aggregate market
value of our public float was approximately $24&nbsp;million. The value of one-third of that public
float was approximately $8&nbsp;million; however, the market value of all securities sold by us under
our Form S-3 registration statement in the past 12&nbsp;months will be subtracted from that amount to
determine any future amount we can raise using our Form S-3 registration statement. Alternative
means of raising capital through sales of our securities, including through the use of a Form S-1
registration statement, may be more costly and time-consuming.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even if we maintain our listing with the NYSE Amex, our ability to timely raise sufficient
capital may be limited by the exchange&#146;s requirements relating to stockholder approval for
transactions involving the issuance of our common stock or securities convertible into our common
stock. For instance, the NYSE Amex requires that we obtain stockholder approval of any transaction
involving the sale, issuance or potential issuance by us of our common stock (or securities
convertible into our common stock) at a price less than the greater of book or market value, which
(together with sales by our officers, directors and principal stockholders) equals 20% or more of
our presently outstanding common stock, unless the transaction is deemed a &#147;public offering&#148; by the
NYSE Amex staff. Based on our outstanding common stock as of July 22, 2009 and a closing price of $0.13, which was the
closing price of our common stock on July&nbsp;22, 2009, we could not raise more than approximately $2.8 million without stockholder approval, unless the transaction is deemed a public offering or does
not involve the sale, issuance or potential issuance by us of our common stock (or securities
convertible into our common stock) at a price less than the greater of book or market value.
However, certain prior sales by us may be aggregated to any offering we may propose in the
near-term, further limiting the amount we could raise in any future offering that is not deemed a
public offering by the NYSE Amex and would involve the sale, issuance or potential issuance by us
of our common stock (or securities convertible into our common stock) at a price less than the
greater of book or market value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Obtaining stockholder approval is a costly and time-consuming process. If we are required to
obtain stockholder approval, we would expect to spend substantial additional money and resources.
In addition, seeking stockholder approval would delay our receipt of otherwise available capital,
which may materially and adversely affect our ability to continue as a going concern, and there is
no guarantee our stockholders would ultimately approve a proposed transaction. A public offering
under NYSE Amex rules typically involves broadly announcing the proposed transaction, which often
times has the effect of depressing the issuer&#146;s stock price. Accordingly, the price at which we
could sell our securities in a public offering may be less and the dilution existing stockholders
experience may in turn be greater than if we were able to raise capital through other means.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Raising additional capital may cause dilution to our existing stockholders, require us to
relinquish proprietary rights or restrict our operations.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may raise additional capital at any time and may do so through one or more financing
alternatives, including public or private sales of our equity securities, debt financings,
collaborations, licensing arrangements or other strategic transactions. Each of these financing
alternatives carries certain risks. Raising capital through the issuance of common stock may
depress the market price of our stock and may substantially dilute our existing stockholders. If we
instead seek to raise capital through strategic transactions, such as licensing arrangements or
sales of one or more of our technologies or product candidates, we may be required to relinquish
valuable rights. For example, any licensing arrangement would likely require us to share a
significant portion of any revenues generated by our licensed technologies with our licensees.
Additionally, the development of any product candidates licensed or sold to third parties will no
longer be in our control and thus we may not realize the full value of any such product candidates.
Debt financings could involve covenants that restrict our operations. These restrictive covenants
may include limitations on additional borrowing and specific restrictions on the use of our assets,
as well as prohibitions on our ability to create liens or make investments and may, among other
things, preclude us from making distributions to stockholders (either by paying dividends or
redeeming stock) and taking other actions beneficial to our stockholders. In addition, investors
could impose more one-sided investment terms and conditions on companies that have or are perceived
to have limited remaining funds or limited ability to raise additional funds. As we continue to use
our cash and cash equivalents to fund our operations, it will likely become increasingly difficult
to raise additional capital on commercially reasonable terms, or at all.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are unable to raise sufficient additional capital, we may be not be able to continue our
recently re-started development programs or we may be forced to partner product candidates at
inopportune times or pursue less-expensive but higher-risk development paths.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2009, we suspended substantially all of our development activities and fundamental
business operations. Additionally,
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">since October&nbsp;2008, we have significantly reduced our workforce in order to provide additional
time to consummate a strategic transaction or otherwise obtain financing. Following the equity
financing we completed in June&nbsp;2009, we re-started the final manufacturing activities related to
submitting an NDA for ANX-530 and intend to continue to evaluate the data from our
recently-completed bioequivalence study of ANX-514. However, even if we complete the offering
described in this prospectus, we may need to raise substantial additional capital to fund our
operations, including activities relating to the commercialization of ANX-530, if an NDA for
ANX-530 is submitted and ANX-530 is approved by the FDA for marketing in the U.S., and activities
relating to the development and regulatory review process and, ultimately, commercialization of
ANX-514. If we are not able to raise adequate funds to continue our recently re-started development
programs and operations at levels we believe would enable us to capitalize on our assets, we may
have to abandon some or all of them altogether or attempt to continue our development and
commercialization efforts by entering into arrangements with partners or others that, if available
at all, may not be on favorable terms and may require us to relinquish some or all of our rights to
our product candidates or the financial benefits thereof or we may determine to liquidate our
assets and may receive less than the value at which those assets are carried on our financial
statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To conserve funds, we may pursue less expensive but higher-risk development paths. For
instance, we may limit our process development activities to the minimum we feel is sufficient to
support our development and commercialization goals, in particular, with respect to ANX-530.
Process development helps define the various parameters and specifications for manufacturing
products at commercial-scale. Without comprehensive process development activities, we may lack the
information necessary to develop an accurate validation plan to support an NDA and may be unable to
successfully manufacture at commercial scale. If we are unable to validate the manufacturing
processes included in an NDA, we may be required to amend the NDA, which could result in
substantial delays in commercializing the subject drug, as well as call into question our ability
to ultimately obtain marketing approval for that drug. In addition, we would expect to spend
significant funds undertaking the activities necessary to support an amendment to an NDA.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may seek to merge with or be acquired by another company and that transaction may adversely
affect our business and the value of our securities.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because of our limited ability to raise funds, including for the reasons noted above, we may
seek to merge with another company with a stronger cash position, complementary work force or
product candidate portfolio or for other reasons. We believe the market price for our common stock
may not accurately reflect the value of our business. While we will continue to seek to maximize
the value of our business to our stockholders, the most attractive option for doing so may require
us to consummate a transaction involving an exchange of our common stock with that of another
company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are numerous risks associated with merging or being acquired. These risks include, among
others, incorrectly assessing the quality of a prospective acquirer or merger-partner, encountering
greater than anticipated costs in integrating businesses, facing resistance from employees and
being unable to profitably deploy the assets of the new entity. The operations, financial
condition, and prospects of the post-transaction entity depend in part on our and our
acquirer/merger-partner&#146;s ability to successfully integrate the operations related to our product
candidates, business and technologies. We may be unable to integrate operations successfully or to
achieve expected cost savings and any cost savings which are realized may be offset by losses in
revenues or other charges to operations. As a result, our stockholders may not realize the full
value of their investment.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we fail to maintain registration of the shares of common stock issued or issuable pursuant to
the exercise of warrants we issued in our July&nbsp;2005 private placement, we will be required to pay
the holders of those securities liquidated damages, which could be material in amount.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The terms of the securities purchase agreement that we entered into in connection with our
July&nbsp;2005 private placement require us to pay liquidated damages to the purchasers of those
securities in the event any shares issued or issuable pursuant to the exercise of warrants we
issued in the private placement cannot be resold pursuant to our registration statement on Form S-3
(No.&nbsp;333-127857) filed with and declared effective by the SEC on September&nbsp;2, 2005. We refer to
this as a maintenance failure. For each 30-day period or portion thereof during which a maintenance
failure remains uncured, we are obligated to pay each purchaser an amount in cash equal to 1% of
the purchaser&#146;s aggregate purchase price for any shares of common stock or shares of common stock
issuable upon exercise of warrants then held by the purchaser (pro rated for any period less than a
month), increasing by an additional 1% with regard to each additional 30-day period or portion
thereof until the maintenance failure is cured. There is no cap with respect to the total amount of
these liquidated damages. The aggregate gross proceeds from our July&nbsp;2005 private placement were
approximately $20&nbsp;million. We are required to maintain the registration statement until the earlier
of the date (i)&nbsp;all of the securities issued in our July&nbsp;2005 private placement have been resold
and (ii)&nbsp;each purchaser can resell the securities pursuant to Rule&nbsp;144 under the Securities Act of
1933, as amended, without regard to the adequate current public information, volume, manner of sale
or notice filing restrictions. The amount of these liquidated damages could be substantial and
could have a material adverse effect on our financial
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For additional information, see Note 11 of the Notes to Consolidated Financial Statements,
&#147;Registration Payment Arrangement,&#148; of our annual report on Form 10-K for the year ended December
31, 2008.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may be unable to retain the services of key personnel, and, even if we are successful in raising
additional funds to continue our business and recently re-started development activities, we may
not be successful in rebuilding our workforce to carry out the development and commercialization
activities necessary for our product candidates.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have only two full-time employees and we depend on the services of these employees to
continue our business. We do not have a chief executive officer or chief financial officer. Our
Chief Business Officer and Senior Vice President is currently acting as our interim principal
executive officer and our General Counsel, Secretary and Vice President, Legal is currently acting
as our interim principal financial and accounting officer. To the extent we are successful in
raising additional funds to continue our business and further advance our product candidates toward
commercialization, we may need to expand our managerial, financial, regulatory, research and
development, manufacturing, commercial, quality, compliance and other resources in order to manage
our operations, submit applications to and respond to inquiries from the FDA and, if approved,
commercialize our products. We do not expect that our current management and personnel, systems and
facilities will be adequate to support these activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The success of our business will depend, in part, on our ability to attract and retain highly
qualified management, scientific and other personnel, and on our ability to develop and maintain
important relationships with respected service providers and industry-leading consultants and
advisors. Competition for these types of personnel and relationships is intense from numerous
pharmaceutical and biotechnology companies, universities and other research institutions,
particularly in the San Diego, California area. In connection with the cost-cutting measures we
implemented in October&nbsp;2008, January&nbsp;2009 and March&nbsp;2009, we eliminated, among others, our
scientific staff and our manufacturing and regulatory personnel, who had a deep background in our
product candidates and our research and development programs. Recruiting and retaining employees,
including senior-level personnel, with relevant product development experience in cancer and
process development experience with emulsified cytotoxic drugs may be costly and time-consuming. We
have historically provided incentive compensation to our officers and employees in part through
grants of stock options and, more recently, restricted stock units under our equity compensation
plans. Decreases in the trading price of our common stock, however, have substantially reduced the
value of equity compensation awards made to our officers and employees in prior years and such
awards may not provide adequate compensation to retain such individuals. Our ability to provide
competitive compensation to our officers and employees may also be adversely affected by our
limited capital resources and anticipated need to raise substantial additional capital to continue
our business. We cannot ensure that we will be able to retain existing employees or attract and
retain additional skilled personnel on acceptable terms as a result of these factors and,
accordingly, we may not achieve our development and commercialization goals.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We have significant incentive and may, under certain circumstances, have significant severance and
other obligations under agreements with our current officers.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2009, we adopted a 2009 mid-year incentive plan and a retention and severance plan,
both of which apply to Mr.&nbsp;Culley and Mr.&nbsp;Keran, our two remaining employees. Under the incentive
plan, each of Mr.&nbsp;Culley and Mr.&nbsp;Keran are eligible for incentive awards based upon the achievement
of corporate performance objectives in effect at the end of 2009. Awards generally will be paid in
cash. The potential award of each of Mr.&nbsp;Culley and Mr.&nbsp;Keran will be based 100% on our
achievement of corporate objectives and the target award amount for each of them is $150,000. The
target amount of each award may be increased or decreased by multiplying the target amount by a
corporate performance multiplier, as will be determined by the compensation committee of our board
of directors in the first quarter of 2010. Award multipliers will range from zero to 1.5. Payment
of awards under the incentive plan will be made after December&nbsp;31, 2009 and on or before March&nbsp;14,
2010. Under the retention plan, if the employment of either of our two remaining employees
terminates at any time as a result of an involuntary termination, and such employee delivers and
does not revoke a general release of claims, which will also confirm any post-termination
obligations and/or restrictions applicable to such employee, such employee will be entitled to an
amount equal to twelve (12)&nbsp;months of such employee&#146;s then-current base salary, less applicable
withholdings, and an amount equal to the estimated cost of continuing such employee&#146;s health care
coverage and the coverage of such employee&#146;s dependents who are covered at the time of the
involuntary termination under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, for a period equal to twelve (12)&nbsp;months. These severance benefits will be paid in a
lump-sum on the date the general release of claims becomes effective. Our aggregate contractual
obligation under the retention plan, including applicable payroll and employer taxes, is approximately $650,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe these plans are necessary to incentivize and retain these key employees and
reinforce their dedication to us during a period when they would otherwise likely seek alternative
employment. Our contractual responsibility for our current and any future
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">incentive and/or severance obligations may cause us to cease or curtail our operations at an earlier date than would
otherwise be the case if we were not required to satisfy these obligations. In addition, part or
all of the proceeds from a future capital raising transaction may be used to satisfy these obligations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>The use of our net operating loss carryforwards may be limited.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net operating loss carryforwards may expire and not be used. As of December&nbsp;31, 2008, we had
generated federal net operating loss carryforwards of approximately $90.4&nbsp;million and state net
operating loss carryforwards of approximately $41.4&nbsp;million. Federal net operating loss
carryforwards have a 20-year carryforward period and begin to expire in 2020. State net operating
loss carryforwards have a ten year carry forward period and begin to expire in 2012.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to Section&nbsp;382 of the Internal Revenue Code, annual use of our net operating loss
carryforwards may be limited in the event a cumulative change in ownership of more than 50&nbsp;percent
occurs within a three-year period. We determined that, as of January&nbsp;1, 2009, no such ownership
change had occurred. However, recent and potential future financing events, including this
offering, may cause changes in ownership under Section&nbsp;382, which could cause our net operating
loss carryforwards to be subject to limitations and restrictions. If a change in ownership were to
occur, our net operating loss carryforwards could be eliminated or restricted. Inability to fully
utilize our net operating loss carryforwards could have an adverse impact on our financial position
and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we fail to maintain an effective system of internal control over financial reporting, we may not
be able to accurately report our financial results. As a result, current and potential investors
could lose confidence in our financial reporting, which could harm our business and have an adverse
effect on our stock price.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to Section&nbsp;404 of the Sarbanes-Oxley Act of 2002, we are required to annually furnish
a report by our management on our internal control over financial reporting. Such report must
contain, among other matters, an assessment by our principal executive officer and our principal
financial officer on the effectiveness of our internal control over financial reporting, including
a statement as to whether or not our internal control over financial reporting is effective as of
the end of our fiscal year. This assessment must include disclosure of any material weakness in our
internal control over financial reporting identified by management. In addition, under current SEC
rules, we will be required to obtain an attestation from our independent registered public
accounting firm as to our internal control over financial reporting for our annual report on Form
10-K for our fiscal year ending December&nbsp;31, 2009. Performing the system and process documentation
and evaluation needed to comply with Section&nbsp;404 is both costly and challenging. We have in the
past discovered, and may in the future discover, areas of internal controls that need improvement.
For example, during the fourth quarter of 2008, we discovered that we did not correctly apply
generally accepted accounting principles as they related to accounting for warrant liability
because our accounting staff did not have adequate training or expertise, and determined that we
had a material weakness in our internal control over financial reporting as of December&nbsp;31, 2007. A
material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of
our annual or interim financial statements will not be prevented or detected on a timely basis. For
a detailed description of this material weakness and our remediation of this material weakness, see
&#147;Part&nbsp;II &#151; Item&nbsp;9A(T) &#151; Controls and Procedures&#148; of our annual report on Form 10-K for the year
ended December&nbsp;31, 2008. If additional material weaknesses are identified in our internal control
over financial reporting, neither our management nor our independent registered public accounting
firm will be able to assert that our internal control over financial reporting and/or our
disclosure controls and procedures are effective, and we could be required to further implement
expensive and time-consuming remedial measures. We cannot be certain that any measures we take will
ensure that we implement and maintain adequate internal control over financial reporting and that
we will remediate the material weakness. As a result of recent reductions in our workforce and
other personnel departures, we have experienced substantial turnover in our personnel responsible
for performing activities related to our internal control over financial reporting. We have used
third-party contractors to maintain effective internal control over financial reporting during this
turn-over. However, if we fail to maintain effective internal control over financial reporting
and/or disclosure controls and procedures we could lose investor confidence in the accuracy and
completeness of our financial reports, which could have a material adverse effect on our stock
price.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our operations might be interrupted by the occurrence of a natural disaster or other catastrophic
event.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our corporate headquarters are located at a single business park in San Diego, California.
Important documents and records, including copies of our regulatory documents and other records for
our product candidates, are located at our facilities and we depend on our facilities for the
continued operation of our business. Natural disasters and other catastrophic events, such as
wildfires and other fires, earthquakes and extended power interruptions, which have impacted San
Diego businesses in the past, and terrorist attacks, drought or flood, could significantly disrupt
our operations and result in additional, unplanned expense. As a small company, we have
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">limited capability to establish and maintain a comprehensive disaster recovery program and, accordingly, we
do not have a formal business continuity or disaster recovery plan, and any natural disaster or
catastrophic event could delay our development and commercialization efforts. Even though we
believe we carry commercially reasonable insurance, we might suffer losses that exceed the coverage available under these insurance policies. In addition, we are not insured against
terrorist attacks or earthquakes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risks Related to Drug Development and Commercialization</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Further testing of and/or validation of manufacturing processes with respect to our product
candidates is required and regulatory approval may be delayed or denied, which would limit or
prevent us from marketing our product candidates and significantly impair our ability to generate
revenues.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Human pharmaceutical products generally are subject to rigorous preclinical testing and
clinical trials and other approval procedures mandated by the FDA and foreign regulatory
authorities. Various federal and foreign statutes and regulations also govern or influence the
manufacturing, safety, labeling, storage, record keeping and marketing of pharmaceutical products.
The process of obtaining these approvals and the subsequent compliance with appropriate U.S. and
foreign statutes and regulations is time-consuming and requires the expenditure of substantial
resources. In addition, these requirements and processes vary widely from country to country.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To varying degrees based on the regulatory plan for each product candidate, the effect of
government regulation and the need for FDA and other regulatory agency approval will delay
commercialization of our product candidates, impose costly procedures upon our activities, and put
us at a disadvantage relative to larger companies with which we compete. There can be no assurance
that FDA or other regulatory approval for any product candidates developed by us will be granted on
a timely basis, or at all. Even though the FDA has confirmed the appropriateness of a Section
505(b)(2) regulatory path for ANX-530 and ANX-514, the FDA&#146;s views may change. If the FDA requires
the longer-term regulatory approval pathway associated with traditional drug development for
ANX-530 and ANX-514, we may determine that the associated time and cost is not financially
justifiable and, as a result, discontinue those programs. If we discontinue the development of one
or both of these product candidates, our business and stock price may suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with any NDA that we file under Section&nbsp;505(b)(2) of the Federal Food, Drug and
Cosmetic Act, or FDCA, we may be required to notify third parties that we have certified to the FDA
that any patents listed for the approved drug in the FDA&#146;s Orange Book publication are invalid or
will not be infringed by the manufacture, use or sale of our drug. If the third-party files a
patent infringement lawsuit against us within 45&nbsp;days of its receipt of notice of our
certification, the FDA is automatically prevented from approving our NDA until, subject to certain
adjustments, the earliest of 30&nbsp;months, expiration of the patent, settlement of the lawsuit or a
decision in the infringement case that is favorable to us. Accordingly, we may invest significant
time and expense in the development of our product candidates, including ANX-530 and ANX-514, only
to be subject to significant delay and patent litigation before our products may be commercialized.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We may not achieve our projected development and commercialization goals in the time frames we
announce. Delays in the commencement or completion of pre/non-clinical testing, bioequivalence or
clinical trials or manufacturing, regulatory or launch activities could result in increased costs
to us and delay or limit our ability to generate revenues.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We set goals for and make public statements regarding our estimates of the timing of the
accomplishment of objectives material to successful development and commercialization of our
product candidates. The actual timing of these events can vary dramatically due to any number of
factors, including delays or failures in our pre/non-clinical testing, bioequivalence and clinical
trials and manufacturing, regulatory and launch activities and the uncertainties inherent in the
regulatory approval process. While our regulatory strategy for ANX-530 and ANX-514 has been to
demonstrate the pharmacokinetic equivalence of each to the currently approved reference product in
small, bioequivalence trials in humans, we may determine to conduct clinical studies to support
uses in new indications or other label changes or for other reasons.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We conduct pre/non-clinical activities in the course of our development programs, including in
connection with the manufacture of our product candidates, and in response to requests by
regulatory authorities, as well as for other reasons. Delays in our pre/non-clinical activities
could occur for a number of reasons, 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in reaching agreement on acceptable terms with prospective contract research
organizations, or CROs, and contract manufacturing organizations, or CMOs, the terms of
which can be subject to extensive negotiation and may vary significantly among different
CROs and CMOs;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>failures on the part of our CROs and CMOs in developing procedures and protocols or
otherwise conducting activities on</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->13<!-- /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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>timeframes requested by us;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in regulatory requirements or other standards or guidance relating to
preclinical testing, including testing of pharmaceutical products in animals;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a lack of availability of animals that are suitable for the types of studies we plan to
conduct;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a lack of availability of capacity at our CMOs, or of the component materials, including
the active pharmaceutical ingredient, or API, or related materials, including vials and
stoppers, necessary to manufacture our product candidates or products; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unforeseen results of preclinical or nonclinical testing that require us to amend study
or test designs or delay future testing or bioequivalence or clinical trials and related
regulatory filings.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we do not know whether planned bioequivalence or clinical trials will commence on
time or be completed on schedule, if at all. The commencement and completion of trials can be
delayed for a variety of reasons, including delays related 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtaining regulatory approval to commence a trial;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>identifying appropriate trial sites and reaching agreement on acceptable terms with
prospective CROs, trial sites and investigators, the terms of which can be subject to
extensive negotiation and may vary significantly among different CROs, trial sites and
investigators;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>manufacturing sufficient quantities of a product candidate;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtaining institutional review board, or IRB, approval to conduct a trial at a
prospective site;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>recruiting and enrolling patients to participate in trials for a variety of reasons,
including competition from other clinical trials for the same indication as our product
candidates and the perception that the design of a trial or the proposed treatment regimen
is less beneficial to patients than available alternatives; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>retaining patients who have initiated a trial but may be prone to withdraw due to side
effects from the therapy, lack of efficacy or personal issues, or who are lost to further
follow-up.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For example, in October&nbsp;2007, we announced results of our phase 2b clinical trial of ANX-510,
or CoFactor, for the first-line treatment of metastatic colorectal cancer, which demonstrated that
the CoFactor/5-FU arm did not demonstrate statistically significant improved safety in the trial&#146;s
primary endpoint. In November&nbsp;2007, we announced that we would discontinue enrolling patients in
our phase 3 clinical trial of CoFactor for the first-line treatment of metastatic colorectal cancer
and, in October&nbsp;2008, we announced that we had discontinued active work on all product candidates
other than ANX-530 and ANX-514, including CoFactor. In addition, in May&nbsp;2009, we announced that we
did not meet the primary endpoint in our bioequivalence study of ANX-514, resulting in additional
uncertainty around the cost and timeline to obtaining FDA approval for that product candidate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, a trial may be suspended or terminated by us, the FDA or other regulatory
authorities due to a number of 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>failure to conduct the trial in accordance with regulatory requirements or the trial&#146;s
protocol;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>inspection of trial operations or trial sites by the FDA or other regulatory authorities
resulting in the imposition of a clinical hold;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>unforeseen safety issues; 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>lack of adequate funding to continue the trial.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, changes in regulatory requirements and guidance relating to clinical trials may
occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may
require us to resubmit our clinical trial protocols to IRBs for reexamination or renegotiate terms
with CROs, trial sites and clinical investigators, all of which may impact the costs, timing or
successful completion of a clinical trial.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->14<!-- /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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurance that our preclinical and nonclinical testing and bioequivalence
and/or clinical trials will commence or be completed, that we will make regulatory submissions or
receive regulatory approvals as planned or that we will be able to adhere to our current schedule for the development or commercialization of any of our product
candidates. If we experience delays in completion of, or if we terminate, our bioequivalence or
clinical trials or preclinical and nonclinical testing, the commercial prospects for our product
candidates will be harmed, and our ability to generate product revenues will be delayed. In
addition, many of the factors that cause, or lead to, a delay in the commencement or completion of
bioequivalence or clinical trials or preclinical and nonclinical testing may also ultimately lead
to the denial of regulatory approval of a product candidate. Even if we are able to ultimately
commercialize our product candidates, other therapies for the same indications may have been
introduced to the market and established a competitive advantage.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Positive results in our preclinical testing and/or bioequivalence trials do not ensure that future
bioequivalence or clinical trials will be successful or that our product candidates will receive
the regulatory approvals necessary for their commercialization.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Before obtaining regulatory approvals for the commercial sale of any of our product
candidates, we must demonstrate through preclinical testing and bioequivalence or clinical trials
that each product is safe and effective for use in each target indication. Success in preclinical
testing and/or bioequivalence trials does not ensure that subsequent or large-scale trials will be
successful. Additionally, throughout development, we must provide adequate assurance to the FDA and
other regulatory authorities that we can consistently produce our product candidates in conformance
with current good manufacturing practices, or cGMP, and other regulatory standards. Bioequivalence
and clinical trial results are frequently susceptible to varying interpretations and regulatory
authorities may disagree on what are appropriate methods for analyzing data, which may delay, limit
or prevent regulatory approvals. For instance, with respect to our bioequivalence trial of ANX-530,
the FDA may perform its pharmacokinetic equivalence analysis based a patient population other than
the population on which we based our analysis, which may result in the FDA determining that ANX-530
and Navelbine are not bioequivalent, requiring that we evaluate additional patients, re-perform the
study or take other remedial action. In addition, the FDA may inquire regarding the manufacturing
source, in-process and product release specifications and overall uniformity of reference product
used in the bioequivalence trial of ANX-530, particularly since it was conducted at sites in
multiple countries, and we may be unable to provide documentation satisfactory to the FDA with
respect to such reference product, which may result in the FDA requiring that we evaluate
additional patients, re-perform the study or take other remedial measures. Further, the ANX-530
bioequivalence trial was open-label, meaning physician-investigators, as well as patients, may have
been aware of which drug was being administered. There is a risk of investigator bias in reporting
adverse events as a result of the study&#146;s open-label nature, including bias that increased the
reporting of adverse events associated with Navelbine and/or that decreased the reporting of
adverse events associated with ANX-530. With respect to ANX-514, despite positive preclinical
testing that indicated pharmacokinetic equivalence between ANX-514 and the reference product, our
bioequivalence trial of ANX-514 did not demonstrate pharmacokinetic equivalence between ANX-514 and
the reference product based on benchmark regulatory standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The length of time necessary to complete bioequivalence or clinical trials and manufacturing
development work and to submit an application for marketing approval for a final decision by a
regulatory authority varies significantly and may be difficult to predict. In addition, delays or
rejections may be encountered based upon changes in FDA policy for drug approval during the period
of product development and FDA regulatory review of each submitted NDA. There is a significant risk
that any of our product candidates could fail to show satisfactory results in human trials, as was
the case in our bioequivalence study of ANX-514, or manufacturing development, and, as a result, we
may not continue their development. A failure to obtain requisite regulatory approvals or to obtain
approvals of the scope requested will delay or preclude us from marketing our products or limit the
commercial use of the products, and would have a material adverse effect on our business, financial
condition and results of operations.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If any of our product candidates for which we receive regulatory approval do not achieve broad
market acceptance (including as a result of failing to differentiate our products from competitor
products or as a result of failing to obtain reimbursement rates for our products that are
competitive from the healthcare provider&#146;s perspective), the revenues we generate from their sales
will be limited and our business may not be profitable.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success will depend in substantial part on the extent to which our products for which we
obtain marketing approval from the FDA and comparable foreign regulatory authorities are accepted
by the medical community and reimbursed by third-party payors, including government payors. The
degree of market acceptance will depend upon a number of factors, including, among other things:
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our product&#146;s perceived advantages over existing treatment methods (including relative
convenience and ease of administration and prevalence and severity of any adverse 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>claims or other information (including limitations or warnings) in our product&#146;s
approved labeling;</TD>
</TR>

</TABLE>
</DIV>
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</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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reimbursement and coverage policies of government and other third-party payors;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pricing and cost-effectiveness;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the U.S., the ability of group purchasing organizations, or GPOs (including
distributors and other network providers), to sell our products to their constituencies;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the establishment and demonstration in the medical community of the safety and efficacy
of our products and our ability to provide acceptable evidence of safety and 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>availability of alternative treatments; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the prevalence of off-label substitution of chemically equivalent products.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot predict whether physicians, patients, healthcare insurers or maintenance
organizations, or the medical community in general, will accept or utilize any of our products. If
our products are approved but do not achieve an adequate level of acceptance by these parties, we
may not generate sufficient revenues from these products to become or remain profitable. In
addition, our efforts to educate the medical community and third-party payors regarding the
benefits of our products may require significant resources and may never be successful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our Section&nbsp;505(b)(2) regulatory strategy for ANX-530 and ANX-514, because we anticipate
submitting NDAs based on pharmacokinetic data, our ability to differentiate our products from
competitor products will be limited unless the FDA allows us to include certain data in our
products&#146; labels. Even if our products demonstrate clinical or pharmacoeconomic benefits, we may be
unable to market our products based on these benefits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we fail to obtain a unique Healthcare Common Procedure Coding System, or HCPCS, product
code for ANX-530, it is unlikely we will be able to sell that product at a price that exceeds its
manufacturing, marketing and distribution costs. Even if we obtain separate HCPCS codes for our
products, if our products are perceived to provide little or no advantage relative to competitive
products or for other reasons, we may be required to price our products at levels that do not cover
our costs to manufacture, market and distribute the products or provide any profit, or to price our
products at levels at which they are not competitive.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We do not have manufacturing capabilities and are dependent on single source manufacturers and
suppliers for certain of our product candidates and their component materials, and the loss of any
of these manufacturers or suppliers, or their failure to provide us with an adequate supply of
products or component materials on commercially acceptable terms, or at all, could harm our
business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not have any manufacturing capability. We rely on third-party manufacturers and
component materials suppliers for the manufacture of our product candidates for bioequivalence or
clinical trial purposes and we anticipate establishing relationships with third-party manufacturers
and component materials suppliers for the commercial production of our products. Currently we do
not have any commercial supply agreements or commitments with our third-party manufacturers or
component suppliers, and we cannot ensure that we will be able to establish relationships with
these parties on commercially acceptable terms, or at all. If we fail to establish and maintain
such relationships, we expect it would have a material and adverse effect on our operations. Even
if we successfully establish relationships with third-party manufacturers and component suppliers
on commercially acceptable terms, our manufacturers and suppliers may not perform as agreed or may
terminate their agreements with us. Because many of our single source suppliers provide
manufacturing services to a number of other pharmaceutical companies, our suppliers may experience
capacity constraints or choose to prioritize one or more of their other customers over us. Any
significant problem that our single source manufacturers or suppliers experience could delay or
interrupt the supply to us of bioequivalence or clinical trial materials or products until the
manufacturer or supplier cures the problem or until we locate an alternative source of supply, if
an alternative source is available, and any such delay or interruption could materially and
adversely affect our development and commercial activities and operations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For instance, ANX-530 is an emulsified cytotoxic product that must be aseptically-filled.
There are a limited number of CMOs capable and willing to manufacture this type of product at the
commercial scale at which we anticipate requiring in accordance with our marketing plans for
ANX-530, which will make identifying and establishing short- or long-term relationships with
willing manufacturers more difficult and provide them with substantial leverage over us in any
negotiations. Furthermore, certain of the component materials of ANX-530 are available only from a
particular supplier, and currently we do not have any short- or long-term agreements for the supply
of those materials.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even if we successfully establish a long-term relationship with our current CMO for ANX-530 on
commercially acceptable terms, our CMO may be unable to successfully and consistently manufacture
ANX-530 at commercial scale. We and this manufacturer have limited experience manufacturing ANX-530. Because data from a single bioequivalence trial of
ANX-530 may be sufficient to support an NDA for ANX-530, our and our current contract
manufacturer&#146;s ability to gain experience manufacturing ANX-530, in particular at various scales,
has been limited. If our current CMO is unable to manufacture ANX-530 successfully and consistently
at commercial scale and within established parameters, we may be unable to validate our
manufacturing process, even if the FDA otherwise would approve our NDA, and therefore unable to
sell ANX-530. Our current CMO has similarly limited experience with ANX-514.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All manufacturers of our products and product candidates must comply with cGMP requirements
enforced by the FDA through its facilities inspection program, as well as applicable requirements
of foreign regulatory authorities. These requirements include quality control, quality assurance
and the maintenance of records and documentation. Manufacturers of our products and product
candidates may be unable to comply with these cGMP requirements and with other FDA, state and
foreign regulatory requirements. While we or our representatives generally monitor and audit our
manufacturer&#146;s systems, we have little control over our manufacturers&#146; ongoing compliance with
these regulations and standards. A failure to comply with these requirements may result in fines
and civil penalties, suspension of production, suspension or delay in product approval, product
seizure or recall, or withdrawal of product approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, the manufacture of pharmaceutical products requires significant expertise and
capital investment, including the development of advanced manufacturing techniques and process
controls. Manufacturers of pharmaceutical products often encounter difficulties in production,
particularly in scaling up initial production. These problems include difficulties with production
costs and yields, quality control, including stability of the product candidate and quality
assurance testing and shortages of qualified personnel.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If our manufacturers were to encounter any of these difficulties or otherwise fail to comply
with their contractual obligations, our ability to provide product candidates to patients in our
future bioequivalence or clinical trials may be jeopardized. Any delay or interruption in the
supply of supplies could delay the completion of our future trials, increase the costs associated
with maintaining our development programs and, depending upon the period of delay, require us to
commence new trials at significant additional expense or terminate the trials completely. We cannot
ensure that manufacturing or quality control problems will not arise in connection with the
manufacture of our products or product candidates, or that third-party manufacturers will be able
to maintain the necessary governmental licenses and approvals to continue manufacturing such
products or product candidates. Any of the above factors could cause us to delay or suspend
anticipated or on-going trials, regulatory submissions, required approvals or commercialization of
our product candidates, entail higher costs or result in our being unable to effectively
commercialize our products. Our dependence upon third parties for the manufacture of our products
and product candidates may adversely affect our future costs and our ability to develop and
commercialize our products and product candidates on a timely and competitive basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If any of our product candidates should be approved, any problems or delays experienced in
their manufacturing processes may impair our ability to provide commercial quantities of the
products, which would limit our ability to sell the products and would adversely affect our
business. It could take significant time to redesign our manufacturing processes or identify
alternative suppliers in response to problems we may encounter as we manufacture our products, if
such alternative processes and suppliers are available at all. Even if we are able to identify
alternative suppliers, they may be unwilling to manufacture our products on commercially reasonable
terms. Neither ANX-530 nor ANX-514 have been manufactured at the scales we believe will be
necessary to maximize their commercial value to us and, accordingly, we may encounter difficulties
in production while scaling-up initial production and may not be successful at all in scaling-up
initial production.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any new supplier of products or component materials, including API, would be required to
qualify under applicable regulatory requirements and would need to have sufficient rights under
applicable intellectual property laws to the method of manufacturing such products or ingredients.
The FDA may require us to conduct additional bioequivalence or clinical trials, collect stability
data and provide additional information concerning any new supplier, or change in a validated
manufacturing process, before we could distribute products from that supplier or revised process.
Obtaining the necessary FDA approvals or other qualifications under applicable regulatory
requirements and ensuring non-infringement of third-party intellectual property rights could result
in a significant interruption of supply and could require the new supplier to bear significant
additional costs which may be passed on to us. For instance, with respect to ANX-530, the form of
API used in the manufacture of ANX-530 for purposes of our bioequivalence study of ANX-530 will not
be the same form of API used in the manufacture of ANX-530 for purposes of process validation
batches or commercial supply. To ensure the comparability of the ANX-530 used in the bioequivalence
study and the ANX-530 intended for commercial sale, FDA may require that we evaluate both forms of
ANX-530 in additional patients, re-perform the bioequivalence study or take other remedial actions.
We may have insufficient quantities of both forms of ANX-530 and could incur substantial cost and
delay in acquiring such quantities, in addition to the time and expense associated with conducting
the evaluation, re-performing the study or taking other remedial measures.
</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>We rely in part on third parties to conduct our preclinical and nonclinical testing and
bioequivalence and clinical studies and other aspects of our development programs and if those third parties do not satisfactorily perform their
contractual obligations or meet anticipated deadlines, the development of our product candidates
could be adversely affected.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not employ personnel or possess the facilities necessary to conduct the activities
associated with our programs, particularly since we implemented severe cost-cutting measures in
late 2008 and early 2009. We engage consultants, advisors, CROs, CMOs and others to design and
conduct preclinical and nonclinical tests and bioequivalence and clinical studies in connection
with the research and development of our product candidates. As a result, many important aspects of
our product candidates&#146; development are outside our direct control. There can be no assurance that
such third parties will perform all of their obligations under arrangements with us or will perform
those obligations satisfactorily.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The CROs with which we contract for execution of our bioequivalence and clinical studies play
a significant role in the conduct of the studies and subsequent collection and analysis of data,
and we will likely depend on these and other CROs and clinical investigators to conduct our future
bioequivalence or clinical or studies or assist with our analysis of completed bioequivalence
studies. Individuals working at the CROs with which we contract, as well as investigators at the
sites at which our studies are conducted, are not our employees, and we cannot control the amount
or timing of resources that they devote to our programs. If these CROs fail to devote sufficient
time and resources to our studies, or if their performance is substandard, it will delay the
approval of our applications to regulatory agencies and the introduction of our products. Failure
of these CROs to meet their obligations could adversely affect development of our product
candidates. Moreover, these CROs may have relationships with other commercial entities, some of
which may compete with us. If they assist our competitors at our expense, it could harm our
competitive position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For instance, we lack the internal capabilities to fully analyze the data from our
bioequivalence study of ANX-514 and will rely on multiple third-party consultants to help us
interpret and understand the data. Because of the impact different analyses of the data may have on
our business, we believe an employee likely would approach the data and analysis in a substantially
more rigorous, thoughtful and creative manner than a consultant or contractor.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We currently have no sales or marketing capability and our failure to develop these and related
capabilities internally or contract with third parties to perform these activities successfully
could delay and/or limit our ability to generate revenues in the event one or more of our product
candidates obtains regulatory approval.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently do not have sales, marketing or commercialization personnel. We have limited
business development personnel. To commercialize our products, including ANX-530, we will have to
acquire or develop sales, marketing and distribution capabilities, or rely on marketing partners or
other arrangements with third parties for the marketing, distribution and sale of our products.
There is no guarantee that we will be able to establish marketing, distribution or sales
capabilities or make arrangements with third parties to perform those activities on terms
satisfactory to us, or that any internal capabilities or third party arrangements will be
cost-effective. The acquisition or development of a sales and distribution and associated
regulatory compliance infrastructure will require substantial resources, which may divert the
attention of our management and key personnel and negatively impact our product development
efforts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, any third parties with which we establish marketing, distribution or sales
arrangements may have significant control over important aspects of the commercialization of our
products, including market identification, marketing methods, pricing, composition of sales force
and promotional activities. If we retain third-party service providers to perform functions related
to the sale and distribution of our products, key aspects of those functions that would be out of
our direct control could include warehousing and inventory management, distribution, contract
administration and chargeback processing, accounts receivable management and call center
management. In this event, we would place substantial reliance on third-party providers to perform
services for us, including entrusting our inventories of products to their care and handling. If
these third-party service providers fail to comply with applicable laws and regulations, fail to
meet expected deadlines, or otherwise do not carry out their contractual duties to us, or encounter
natural or other disasters at their facilitates, our ability to deliver product to meet commercial
demand could be significantly impaired. In addition, we may use third parties to perform various
other services for us relating to sample accountability and regulatory monitoring, including
adverse event reporting, safety database management and other product maintenance services. If the
quality or accuracy of the data maintained by these service providers is insufficient, our ability
to continue to market our products could be jeopardized or we could be subject to regulatory
sanctions. We do not currently have the internal capacity to perform these important commercial
functions, and we may not be able to maintain commercial arrangements for these services on
reasonable terms, or at all. Even if we are successful in establishing and maintaining these
arrangement, there can be no assurance that we will be able to control the amount and timing of
resources that any third party may devote to our products or prevent any third party from pursuing
alternative technologies or products that could result in the development of products that compete
with, or the withdrawal of support for, our products.
</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>If we receive regulatory approval for one or more of our product candidates, we may face
competition from generic products, which could exert downward pressure on the pricing and market
share of our products and limit our ability to generate revenues.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of the currently marketed and anticipated products against which our product candidates
may compete are, or we anticipate will be, available as generics. For instance, ANX-530 will
compete against Navelbine, for which generic equivalents are already available. ANX-514 will
compete against Taxotere. We anticipate that ANX-514 will also compete against other formulations
of docetaxel and that generic Taxotere will enter the market in November&nbsp;2013 or May&nbsp;2014
(depending on whether a period of pediatric exclusivity is granted in the future). Even if we
obtain unique HCPCS codes for our products, the existence of generic products could make it more
difficult for our branded products, including ANX-530 and ANX-514, to gain or maintain market share
and could cause prices for our products to drop, each of which could adversely affect our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may also face competition for our products from lower priced products from foreign
countries that have placed price controls on pharmaceutical products. Proposed federal legislative
changes may expand consumers&#146; ability to import lower priced versions of our and competing products
from Canada. Further, several states and local governments have implemented importation schemes for
their citizens, and, in the absence of federal action to curtail such activities, we expect other
states and local governments to launch importation efforts. The importation of foreign products
that compete with our own products could negatively impact our business and prospects.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Even if we receive regulatory approval in the U.S. for ANX-530 and/or ANX-514, we will likely
depend on a limited number of group purchasing organizations for retail distribution of these
products, and if we subsequently lose any significant GPO relationship, our business could be
harmed.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our current U.S. commercialization strategy for our lead emulsion formulations initially
involves marketing and selling these products through a limited number of GPOs. Even if we are
successful in securing relationships with these entities, the subsequent loss of any one or more of
these GPO accounts or a material reduction in their participation could harm our business,
financial condition or results of operations. In addition, we may face pricing pressure from these
GPOs.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Even if we receive regulatory approval for one or more of our product candidates, they may still
face future development and regulatory difficulties that could materially and adversely affect our
business, financial condition and results of operations and cause our stock price to decline.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even if initial regulatory approval is obtained, the FDA or a foreign regulatory agency may
still impose significant restrictions on a product&#146;s indicated uses or marketing or impose ongoing
requirements for potentially costly post-approval studies or marketing surveillance programs. Our
product candidates will also be subject to ongoing FDA requirements related to the labeling,
packaging, storage, advertising, promotion, record-keeping and submission of safety and other
post-market information on the product. For instance, in September&nbsp;2007, amendments to the FDCA
were signed into law. These amendments significantly strengthen the FDA&#146;s regulatory authority over
drugs, including new controls over the post-approval monitoring of drugs. The FDA may now require
changes to approved drug labels, require post-approval clinical trials and impose distribution and
use restrictions on certain drugs. In addition, approved products, manufacturers and manufacturers&#146;
facilities are subject to continuing regulatory review and periodic inspections. If previously
unknown problems with a product are discovered, such as adverse events of unanticipated severity or
frequency, or problems with the facility where the product is manufactured, the FDA may impose
restrictions on that product or us, including requiring withdrawal of the product from the market.
If we or a CMO of ours fail to comply with applicable regulatory requirements, a regulatory agency
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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>issue warning letters or untitled 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>impose civil or criminal penalties;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>suspend or withdraw regulatory approval;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>suspend or terminate any ongoing bioequivalence or 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>refuse to approve pending applications or supplements to approved 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>impose restrictions or affirmative obligations on our or our CMO&#146;s operations, including
costly new manufacturing requirements;</TD>
</TR>

</TABLE>
</DIV>
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</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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>close the facilities of a CMO; 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>seize or detain products or require a product recall.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Even if one or more of our product candidates receive regulatory approval in the U.S., we may never
receive approval or commercialize our products outside of the U.S., which would limit our ability
to realize the full market potential of our product candidates.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to market any products outside of the U.S., we must establish and comply with
numerous and varying regulatory requirements of other countries regarding safety and efficacy.
Approval procedures vary among countries and can involve additional product testing and validation
and additional administrative review periods. The time required to obtain approval in other
countries might differ from that required to obtain FDA approval. In particular, other countries
may not have a comparable regulatory as is available under Section&nbsp;505(b)(2) of FDCA. Even if a
country did have a comparable procedure, that country may require a more robust data package than
the pharmacokinetic data package that we intend to submit in support of NDAs for ANX-530 and
ANX-514. The regulatory approval process in other countries may include all of the risks detailed
above regarding FDA approval in the U.S., as well as other risks. Regulatory approval in one
country does not ensure regulatory approval in another, but a failure or delay in obtaining
regulatory approval in one country may have a negative effect on the regulatory process in others.
Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such
approval could have the same adverse effects detailed above regarding FDA approval in the U.S. As
described above, such effects include the risks that our product candidates may not be approved for
all indications requested, which could limit the uses of our product candidates and have an adverse
effect on product sales, and that such approval may be subject to limitations on the indicated uses
for which the product may be marketed or require costly, post-marketing follow-up studies.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Our product candidates may cause undesirable side effects or have other properties that could delay
or prevent their regulatory approval or commercialization.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Undesirable side effects caused by our product candidates could interrupt, delay or halt
bioequivalence or clinical trials and could result in the denial of regulatory approval by the FDA
or other regulatory authorities for any or all indications, and in turn prevent us from
commercializing our product candidates and generating revenues from their sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, if any of our product candidates receive marketing approval and we or others
later identify undesirable side effects caused by the product or the reference product:
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory authorities may require the addition of labeling statements, such as a &#147;black
box&#148; warning or a contraindication;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>regulatory authorities may withdraw their approval of the product;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may be required to change the way the product is administered, conduct additional
clinical trials or change the labeling of the product; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our reputation may suffer.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any of these events could prevent us from achieving or maintaining market acceptance of the
affected product or could substantially increase the costs and expenses of commercializing the
product, which in turn could delay or prevent us from generating significant revenues from its
sale.
</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>Our success will depend on patents and other protection we obtain on our product candidates and
proprietary technology.</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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Our success will depend in part on our ability to:</TD>
</TR>

<TR style="font-size: 6pt">
<TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain and maintain patent protection with respect to our products;</TD>
</TR>

<TR style="font-size: 6pt">
<TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prevent third parties from infringing upon our proprietary rights;</TD>
</TR>

<TR style="font-size: 6pt">
<TD>&nbsp;</TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>maintain trade secrets;</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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>operate without infringing upon the patents and proprietary rights of others; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>obtain appropriate licenses to patents or proprietary rights held by third parties if
infringement would otherwise occur, both in the U.S. and in foreign countries.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The patent and intellectual property positions of biopharmaceutical companies, including ours,
are uncertain and involve complex legal and factual questions. There is no guarantee that we have
or will develop or obtain the rights to products or processes that are patentable, that patents
will issue from any pending applications or that claims allowed will be sufficient to protect the
technology we develop or have developed or that is used by us, our CMOs or our other service
providers. In addition, we cannot be certain that patents issued to us will not be challenged,
invalidated, infringed or circumvented, including by our competitors, or that the rights granted
thereunder will provide competitive advantages to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, patent applications in the U.S. are confidential for a period of time until they
are published, and publication of discoveries in scientific or patent literature typically lags
actual discoveries by several months. As a result, we cannot be certain that the inventors listed
in any patent or patent application owned by us were the first to conceive of the inventions
covered by such patents and patent applications or that such inventors were the first to file
patent applications for such inventions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We may also rely on unpatented trade secrets and know-how and continuing technological
innovation to develop and maintain our competitive position, which we seek to protect, in part, by
confidentiality agreements with employees, consultants, collaborators and others. We also have
invention or patent assignment agreements with our employees and certain consultants. There can be
no assurance, however, that binding agreements will not be breached, that we will have adequate
remedies for any breach, or that trade secrets will not otherwise become known or be independently
discovered by competitors. In addition, there can be no assurance that inventions relevant to us
will not be developed by a person not bound by an invention assignment agreement with us.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Exclusivity for our emulsion-formulation product candidates may be limited because of the nature of
patent protection available for these candidates.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While the patent applications covering our emulsion-formulation product candidates, including
ANX-530 and ANX-514, include product claims, they cover only specific formulations of the
underlying chemical entity, or API, and not the API itself. Such product claims are not as strong
as claims covering new APIs, which are widely viewed as the strongest form of intellectual property
protection for pharmaceutical products, as they apply without regard to how the API is formulated
or the method in which the API is used. A competitor may modify our formulations and obtain
regulatory approval for products with the same API as our products. Such competitive products may
not infringe the patents we hold covering our specific formulations of the API.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If we are sued for infringing the proprietary rights of third parties, it will be costly and time
consuming, and an unfavorable outcome would have an adverse effect on our business.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our commercial success depends on our ability and the ability of our CMOs and component
suppliers to develop, manufacture, market and sell our products and product candidates and use our
proprietary technologies without infringing the proprietary rights of third parties. Numerous U.S.
and foreign issued patents and pending patent applications, which are owned by third parties, exist
in the fields in which we are or may be developing products. As the biotechnology and
pharmaceutical industry expands and more patents are issued, the risk increases that our products
and product candidates may give rise to claims that our products or product candidates infringe the
rights of others. Because patent applications can take many years to publish and issue, there may
be currently pending applications, unknown to us, that may later result in issued patents that our
products, product candidates or technologies infringe, or that the process of manufacturing our
products or any of their respective component materials, or the component materials themselves,
infringe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We or our CMOs or component material suppliers may be exposed to, or threatened with, future
litigation by third parties having patent or other intellectual property rights alleging that our
products, product candidates and/or technologies infringe their intellectual property rights or
that the process of manufacturing our products or any of their respective component materials, or
the component materials themselves, infringe their intellectual property rights. If one of these
patents was found to cover our products, product candidates, technologies or their uses, or any of
the underlying manufacturing processes or components, we could be required to pay damages and could
be unable to commercialize our products or use our technologies or methods unless we are able to
obtain a license to the patent or intellectual property right. A license may not be available to us
on acceptable terms, if at all. In addition, during litigation, a patent holder could obtain a
preliminary injunction or other equitable remedy that could prohibit us from making, using or
selling our products, technologies or methods.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with any NDA that we file under Section&nbsp;505(b)(2) of the FDCA, we may be
required to notify third parties that we have certified to the FDA that any patents listed for the
approved drug in the FDA&#146;s Orange Book publication are invalid or will not be infringed by the
manufacture, use or sale of our drug. If the third-party files a patent infringement lawsuit
against us within 45&nbsp;days of its receipt of notice of our certification, the FDA is automatically
prevented from approving our Section&nbsp;505(b)(2) NDA until, subject to certain adjustments, the
earliest of 30&nbsp;months, expiration of the patent, settlement of the lawsuit or a decision in the
infringement case that is favorable to us. Accordingly, we may invest significant time and expense
in the development of our product candidates, including ANX-514, only to be subject to significant
delay and patent litigation before our product candidates may be commercialized.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is a substantial amount of litigation involving patent and other intellectual property
rights in the biotechnology and pharmaceutical industries generally. If a third party claims that
we or our CMOs or component material suppliers infringe its intellectual property rights, we may
face a number of issues, including, but not limited 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>infringement and other intellectual property claims which, with or without merit, may be
expensive and time consuming to litigate and may divert our management&#146;s attention from our
core business;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>substantial damages for infringement, including treble damages and attorneys&#146; fees,
which we may have to pay if a court decides that the product at issue infringes on or
violates the third party&#146;s 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>a court prohibiting us from selling or licensing the product unless the third party
licenses its product rights to us, which it may not be required to do;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if a license is available from the third party, we may have to pay substantial
royalties, fees and/or grant cross-licenses to our products; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>redesigning our products or processes so they do not infringe, which may not be possible
or may require substantial funds and time.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No assurance can be given that patents do not exist, have not been filed, or could not be
filed or issued, which contain claims covering our products, technology or methods or those of our
CMOs or component material suppliers. Because of the number of patents issued and patent
applications filed in our field, we believe there is a risk that third parties may allege they have
patent rights encompassing our products, technology or methods or those of our CMOs or component
material suppliers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, it may be necessary for us to enforce patents under which we have rights, or to
determine the scope, validity and unenforceability of other parties&#146; proprietary rights, which may
affect our rights. There can be no assurance that our patents would be held valid by a court or
administrative body or that an alleged infringer would be found to be infringing. The uncertainty
resulting from the mere institution and continuation of any technology-related litigation or
interference proceeding could have a material and adverse effect on us.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>We expect intense competition in the marketplace for all of our product candidates.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The industry in which we operate is highly competitive and rapidly changing. If successfully
developed and approved, all of our products will likely compete with existing and new products and
therapies and our competitors may succeed in commercializing products more rapidly or effectively
than us, which would have a material and adverse effect on our results of operations and financial
condition. In addition, there are numerous companies with a focus in oncology and/or that are
pursuing the development of pharmaceuticals that target the same diseases as are targeted by the
products being developed by us or that focus on reformulating currently approved drugs. We
anticipate that we will face intense and increasing competition in the future as new products enter
the market and advanced technologies become available. There is no assurance that existing products
or new products developed by competitors will not be more effective, or more effectively marketed
and sold, than those we may market and sell. Competitive products may render our products and
product candidates obsolete or noncompetitive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For instance, numerous companies are focused on reformulating currently approved
chemotherapeutic agents. In particular, the taxanes, the class of drugs of which Taxotere is a
member, have experienced substantial commercial success, in part as a result of their effectiveness
in treating a wide variety of cancers, which has generated significant interest in reformulating
Taxotere and other taxanes. In addition to our approach of emulsifying docetaxel, other companies
are pursuing alternative delivery vehicles, including
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">the use of albumin nanoparticles, prodrugs, polyglutamates, analogs, co-solvents, liposomes
and microspheres. Many of these or similar approaches could be applied to vinorelbine. Relative to
our formulations, formulations based on one or more of these other methods may result in greater
efficacy or safety, provide better drug delivery to tumor sites or otherwise increase benefits to
patients and healthcare providers.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In particular, ANX-530 and ANX-514, if approved, may compete against Navelbine and Taxotere,
respectively, as well as their generic equivalents and other formulations of vinorelbine and
docetaxel. In addition to Navelbine, currently there are at least 6 generic versions of vinorelbine
on the market. In addition, there is an oral formulation of vinorelbine approved for use in the
European Union, or EU, against which we would compete if our emulsion formulation of vinorelbine
were approved for use in the EU. In the U.S., in May&nbsp;2010 (but subject to any period of pediatric
exclusivity that may be granted in the future), patent protection ends for docetaxel and, in
November&nbsp;2013 (but subject to any period of pediatric exclusivity that may be granted in the
future), patent protection ends for Taxotere. We are aware of two leading generics companies that
each have developed or acquired a formulation of docetaxel and have certified that, after May&nbsp;2010,
their respective formulations of docetaxel will not infringe any unexpired Taxotere patents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our current regulatory strategy, because we anticipate submitting Section&nbsp;505(b)(2) NDAs
with only bioequivalence data, the ability to differentiate our products from competitor products
will be limited. Even if we believe our products demonstrate clinical or pharmacoeconomic benefits,
we may be unable to market our products based on these benefits. If our products fail to obtain
unique HCPCS codes, we may be required to price our products at levels that do not cover our costs
to manufacture, market and distribute the products or provide any profit, or to price our products
at levels at which they are not competitive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Companies likely to have products that will compete with our product candidates have
significantly greater financial, technical and human resources and are better equipped to develop,
manufacture, market and distribute products. Many of these companies have extensive experience in
preclinical testing and clinical trials, obtaining FDA and other regulatory approvals and
manufacturing and marketing products and have products that have been approved or are in late-stage
development and operate large, well-funded research and development programs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Smaller companies may also prove to be significant competitors, particularly through
collaborative arrangements with large pharmaceutical and biotechnology companies. Furthermore,
academic institutions, government agencies and other public and private research organizations are
becoming increasingly aware of the commercial value of their inventions and are actively seeking to
commercialize the technology they have developed.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We are subject to uncertainty relating to healthcare reform measures and reimbursement policies
that, if not favorable to our products, could hinder or prevent our products&#146; commercial success.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ability to commercialize our products successfully will depend in part on the extent to
which reimbursement for the costs of such products and related treatments will be available from
government health administration authorities, private health insurers and other third-party payors.
Significant uncertainty exists as to the reimbursement status of newly approved medical products.
The continuing efforts of the government, insurance companies, managed care organizations and other
payors of healthcare services to contain or reduce costs of healthcare may adversely effect:
</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%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to set a price we believe is fair for our products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to generate revenues or achieve or maintain profitability;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the future revenues and profitability of our potential customers, suppliers and
collaborators; 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="3%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the availability to us of capital.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If we are successful in obtaining FDA approval for ANX-530, we will compete with Navelbine and
several generic versions of Navelbine. Our ability to commercialize ANX-530 will depend in part on
the extent to which governmental authorities, private health insurers and other organizations
establish appropriate coverage and reimbursement levels for the cost of our products and related
treatments. These payors are increasingly attempting to contain healthcare costs by limiting both
coverage and the level of reimbursement, particularly for new therapeutic products or if there is a
perception that the target indication of the new product is well-served by existing treatments.
Accordingly, even if coverage and reimbursement are provided, market acceptance of our products
would be adversely affected if the amount of coverage and/or reimbursement available for the use of
our products proved to be unprofitable for healthcare providers or less profitable than alternative
treatments.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There have been federal and state proposals to subject the pricing of healthcare goods and
services to government control and to make other changes to the U.S. healthcare system. While we
cannot predict the outcome of current or future legislation, we anticipate, particularly given
President Obama&#146;s focus on healthcare reform, that Congress and state legislatures will introduce
initiatives directed at lowering the total cost of healthcare. In addition, in certain foreign
markets, the pricing of drugs is subject to government control and reimbursement may in some cases
be unavailable or insufficient. It is uncertain if future legislative proposals, whether domestic
or abroad, will be adopted that might affect our product candidates or what actions federal, state,
or private payors for healthcare treatment and services may take in response to any such healthcare
reform proposals or legislation. Any such healthcare reforms could have a material and adverse
effect on the marketability of any products for which we ultimately receive FDA or other regulatory
agency approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We face potential product liability exposure and, if successful claims are brought against us, we
may incur substantial liability for a product or product candidate and may have to limit its
commercialization. In the future, we anticipate that we will need to obtain additional or increased
product liability insurance coverage and it is uncertain that such increased or additional
insurance coverage can be obtained on commercially reasonable terms.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business (in particular, the use of our product candidates in clinical trials and the sale
of our products for which we obtain marketing approval) will expose us to product liability risks.
Product liability claims might be brought against us by patients, health care providers,
pharmaceutical companies or others selling our products. If we cannot successfully defend ourselves
against these claims, we will incur substantial liabilities. Regardless of merit or eventual
outcome, liability claims may result in:
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>decreased demand for our products or 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>impairment of our business reputation;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>withdrawal of bioequivalence or clinical trial participants;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>costs of related litigation;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>substantial monetary awards to patients or other claimants;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>loss of revenues; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the inability to commercialize our products and product candidates.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We maintain limited product liability insurance for our bioequivalence and clinical trials,
but our insurance coverage may not reimburse us or may not be sufficient to reimburse us for any
expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive
and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in
sufficient amounts to protect us against losses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We intend to expand our insurance coverage to include the sale of commercial products if we
obtain marketing approval of any of our product candidates, but we may be unable to obtain product
liability insurance on commercially acceptable terms or may not be able to maintain such insurance
at a reasonable cost or in sufficient amounts to protect us against potential losses. Large
judgments have been awarded in class action lawsuits based on drugs that had unanticipated side
effects. A successful product liability claim or series of claims brought against us could cause
our stock price to fall and, if judgments exceed our insurance coverage, could decrease our cash
and adversely affect our business.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISKS RELATED TO OUR COMMON STOCK</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>We are currently not in compliance with NYSE Amex continuing listing standards and are at risk of
being delisted from the NYSE Amex equities market.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock currently trades on the NYSE Amex. NYSE Amex will normally consider
suspending dealings in, or removing from the list, securities of an issuer which has stockholders&#146;
equity of less than $6.0&nbsp;million if such issuer has sustained losses from continuing operations
and/or net losses in its five most recent fiscal years. As of March&nbsp;31, 2009, our stockholders&#146;
equity was approximately $3.0&nbsp;million and we have incurred annual net losses since inception. In
addition, NYSE Amex will normally consider suspending dealings in, or removing from the list,
securities selling for a substantial period of time at a low price per share if the issuer fails to
effect a reverse split of such stock within a reasonable time after being notified that the NYSE
Amex deems such
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">action to be appropriate under the circumstances. Since October&nbsp;1, 2007 through the date
hereof, the closing price of a share of our common stock has been less than $1.00.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;1, 2009, we received notice from the NYSE Amex staff that, based on their review of
our Form 10-Q for the period ended March&nbsp;31, 2009, we are not in compliance with certain
stockholders&#146; equity continued listing standards. Specifically, the NYSE Amex staff noted that we
are not in compliance with Section&nbsp;1003(a)(ii) of the NYSE Amex Company Guide because we reported
stockholders&#146; equity of less than $4,000,000 and losses from continuing operations and net losses
in three of our four most recent fiscal years, or with Section&nbsp;1003(a)(iii) of the Company Guide
because we reported stockholders&#146; equity of less than $6,000,000 and losses from continuing
operations and net losses in our five most recent fiscal years. In addition, the NYSE Amex staff
notified us, in accordance with Section&nbsp;1003(f)(v) of the Company Guide, that it deems it
appropriate for us to effect a reverse stock split of our common stock to address its low selling
price per share, and that if a reverse stock split is not completed within a reasonable amount of
time after June&nbsp;1, 2009, the NYSE Amex may consider suspending dealings in, or removing from the
list, our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To maintain listing of our common stock on the NYSE Amex, the
NYSE Amex required us to submit a plan by July&nbsp;1,
2009, advising the exchange of the actions we have taken, or will take, to regain compliance with
Sections&nbsp;1003(a)(ii) and (iii)&nbsp;of the Company Guide by December&nbsp;1, 2010. On July&nbsp;1, 2009, we
submitted a plan to attempt to resolve our listing deficiencies and regain compliance with the continued
listing requirements. If the NYSE Amex accepts our plan, then we may be able to continue our
listing during the plan period, up to December&nbsp;1, 2010, during which time we will be subject to
periodic reviews to determine whether we are making progress consistent with the plan. If the plan
we submitted is not accepted by the NYSE Amex or, if the plan is accepted but the NYSE Amex
determines that we are not making progress consistent with the plan or that we are not in
compliance with all continued listing standards of the Company Guide by November&nbsp;29, 2010, then we
expect the NYSE Amex will initiate delisting proceedings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of the NYSE Amex&#146;s warning that if we do not complete a reverse stock split of our
common stock to address its low selling price per share within a reasonable amount of time after
June&nbsp;1, 2009 it may consider suspending dealings in, or removing from the list, our common stock,
our board of directors has called a special meeting of our stockholders to be held on August&nbsp;25,
2009. We have recommended to our stockholders that at this special meeting they approve
authorizing our board of directors to effect a reverse stock split in any ratio in the board&#146;s
discretion that is not less than 2:1 nor greater than 50:1. If our stockholders do not provide
this authorization, the NYSE Amex may subsequently notify us that it has determined to suspend
dealings in, or remove from the list, our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The delisting of our common stock from the NYSE Amex would likely reduce the trading volume
and liquidity in our common stock and may lead to further decreases in the trading price of our
common stock. The delisting of our common stock may also materially impair our stockholders&#146;
ability to buy and sell shares of our common stock. In addition, the delisting of our common stock
could significantly impair our ability to raise capital, which is critical to the continuation of
our business.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>If our common stock were delisted and determined to be a &#147;penny stock,&#148; a broker-dealer may find it
more difficult to trade our common stock and an investor may find it more difficult to acquire or
dispose of our common stock in the secondary market.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, if our common stock were removed from listing with the NYSE Amex, it may be
subject to the so-called &#147;penny stock&#148; rules. The SEC has adopted regulations that define a &#147;penny
stock&#148; to be any equity security that has a market price per share of less than $5.00, subject to
certain exceptions, such as any securities listed on a national securities exchange. For any
transaction involving a &#147;penny stock,&#148; unless exempt, the rules impose additional sales practice
requirements on broker-dealers, subject to certain exceptions. If our common stock were delisted
and determined to be a &#147;penny stock,&#148; a broker-dealer may find it more difficult to trade our
common stock and an investor may find it more difficult to acquire or dispose of our common stock
on the secondary market. Investors in penny stocks should be prepared for the possibility that they
may lose their whole investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>The market price of our common stock has been and is likely to continue to be highly volatile.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On October&nbsp;1, 2007, the market price for our common stock dropped almost 80% following our
announcement of the results of our phase 2b clinical trial of CoFactor for the first-line treatment
of metastatic colorectal cancer. In addition, the market price for our common stock has
historically been highly volatile, and the market for our common stock has from time to time
experienced significant price and volume fluctuations that are unrelated to our operating
performance. The market price of our common stock may fluctuate significantly in response to a
number of 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the level of our financial resources and ability to continue as a going concern;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>announcements of entry into or consummation of a financing or strategic transaction;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->25<!-- /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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any decision by us to liquidate our assets and wind-up operations;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the regulatory status of our product candidates, including results of our
bioequivalence and clinical trials and other research and 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FDA or international regulatory actions and regulatory developments in the U.S. and
foreign countries;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>announcements of new products or technologies, commercial relationships or other events
(including bioequivalence and clinical trial results and regulatory events and actions) by
us or our competitors;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>market conditions in the pharmaceutical, biopharmaceutical and biotechnology sectors;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>developments concerning intellectual property rights generally or those of us or our
competitors;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>litigation or public concern about the safety of our products or 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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in securities analysts&#146; estimates of our financial performance or deviations in
our business and the trading price of our common stock from the estimates of securities
analysts;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>events affecting any future collaborations, commercial agreements and grants;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>fluctuations in stock market prices and trading volumes of similar companies;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>sales of large blocks of our common stock, including sales by our executive officers,
directors and significant stockholders or pursuant to shelf or resale registration
statements that register shares of our common stock that may be sold by certain of our
current or future stockholders;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discussion of us or our stock price by the financial and scientific press and in online
investor communities;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>additions or departures of key personnel; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in third party reimbursement policies.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As evidenced by the October&nbsp;1, 2007 decline, the realization of any of the foregoing could
have a dramatic and adverse impact on the market price of our common stock. In addition, class
action litigation has often been instituted against companies whose securities have experienced
periods of volatility in market price. Moreover, regulatory entities often undertake investigations
of investor transactions in securities that experience volatility following an announcement of a
significant event or condition. Any such litigation brought against us or investigation involving
our investors could result in substantial costs and a diversion of management&#146;s attention and
resources, which could hurt our business, operating results and financial condition.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Sales of substantial amounts of our common stock or the perception that such sales may occur could
cause the market price of our common stock to drop significantly, even if our business is
performing well.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market price of our common stock could decline as a result of sales by, or the perceived
possibility of sales by, us or our existing stockholders of shares of our common stock. These sales
might also make it more difficult for us to sell equity securities at a time and price that we deem
appropriate. In addition, this shelf registration statement and our resale registration statements
register a significant number of shares of our common stock, and securities convertible into our
common stock, that may be sold by us or certain of our stockholders, which may increase the
likelihood of sales by, or the perception of an increased likelihood of sales by, us or our
existing stockholders of shares of our common stock.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of
us, which may be beneficial to our stockholders, more difficult, which could depress our stock
price. Alternatively, prohibitions on anti-takeover provisions in our charter documents may
restrict us from acting in the best interests of our stockholders.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our
charter documents as currently in effect may make a change in control of our company more
difficult, even if a change in control would be beneficial to our stockholders. Our bylaws limit
who may call a special meeting of stockholders and establish advance notice requirements for
</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">nomination of individuals for election to our board of directors or for proposing matters that
can be acted upon at stockholders&#146; meetings. Delaware law also prohibits corporations from engaging
in a business combination with any holders of 15% or more of their capital stock until the holder
has held the stock for three years unless, among other possibilities, the board of directors
approves the transaction. Our board of directors may use these provisions to prevent changes in the
management and control of our company. Also, under applicable Delaware law, our board of directors
may adopt additional anti-takeover measures in the future. In addition, provisions of certain
compensatory contracts with our management, such as equity award agreements and retention and
incentive agreements with our executive officers, may have an anti-takeover effect by resulting in
accelerated vesting of outstanding equity securities held by these officers and cash payments upon
termination without cause or involuntary termination following a change in control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with a July&nbsp;2005 private placement, we agreed with the investors in that
transaction that we would not implement certain additional measures that would have an
anti-takeover effect. As a result, under our amended and restated certificate of incorporation, we
are prohibited from dividing our board of directors into classes and adopting or approving any
&#147;rights plan,&#148; &#147;poison pill&#148; or other similar plan or device. A classified board of directors could
serve to protect our stockholders against unfair treatment in takeover situations, by making it
more difficult and time-consuming for a potential acquirer to take control of our board of
directors. A company may also adopt a classified board of directors to ensure stability in the
board of directors and thereby improve long-term planning, which may benefit stockholders. A
&#147;poison pill&#148; or similar plan or device may encourage potential acquirers to discuss their
intentions with the board of directors of a company and avoid the time, expense and distraction of
a hostile take-over. Any benefit to us and our stockholders from instituting a classified board or
adopting or approving a &#147;poison pill&#148; or similar plan or device in these and other circumstances is
unavailable.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Because we do not expect to pay dividends with respect to our common stock in the foreseeable
future, you must rely on stock appreciation for any return on your investment.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have paid no cash dividends on any of our common stock to date, and we currently intend to
retain our future earnings, if any, to fund the development and growth of our business. As a
result, with respect to our common stock, we do not expect to pay any cash dividends in the
foreseeable future, and payment of cash dividends, if any, will also depend on our financial
condition, results of operations, capital requirements and other factors and will be at the
discretion of our board of directors. Furthermore, we are subject to various laws and regulations
that may restrict our ability to pay dividends and we may in the future become subject to
contractual restrictions on, or prohibitions against, the payment of dividends. Accordingly, the
success of your investment in our common stock will likely depend entirely upon any future
appreciation and there is no guarantee that our common stock will appreciate in value.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Since we have broad discretion in how we use the proceeds from this offering, we may use the
proceeds in ways with which you disagree.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we describe under the heading &#147;Use of Proceeds&#148; in this prospectus our currently
intended use of the net proceeds from this offering, we cannot estimate the allocation of the net
proceeds of this offering among those uses and we reserve the right to change the use of proceeds
as a result of certain contingencies, including any future partnering or strategic transaction
opportunity. Accordingly, our management will have significant flexibility in applying the net
proceeds of this offering. You will be relying on the judgment of our management and our board of
directors with regard to the use of these net proceeds, and you will not have the opportunity, as
part of your investment decision, to assess whether the proceeds are being used appropriately. It
is possible that the net proceeds will be used in a way that does not improve our operating results
or enhance the value of our common stock. In addition, if we are unable to obtain additional
capital or complete a strategic transaction on a timely basis, net proceeds from this offering may
be used for expenses related to seeking protection under the provisions of the U.S. Bankruptcy Code
or conducting an orderly liquidation of our assets and winding up of our corporate affairs. In
either case, you could lose part or all of your investment.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Investors in this offering will pay a much higher price than the book value of our stock.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The public offering price of the securities offered hereby is likely to be substantially
higher than the book value per share of our common stock. Investors purchasing securities in this
offering may, therefore, incur immediate dilution in net tangible book value per share of the
common stock issuable upon conversion or exercise of the securities purchased in this offering. See
&#147;Dilution&#148; below for a more detailed discussion of the dilution you will incur in this offering.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Provisions of the Delaware General Corporation Law may prohibit us from making dividend payments
with respect to our Series&nbsp;C convertible preferred stock or make-whole payments that may be due to
the holders of our Series&nbsp;C convertible preferred stock.</I></B>
</DIV>


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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are incorporated in the State of Delaware and are subject to the provisions of the Delaware
General Corporation Law (the &#147;DGCL&#148;). Section&nbsp;170 of the DGCL provides, among other things, that a
Delaware corporation may declare and pay dividends upon shares of its capital stock out of its
surplus, as defined in and computed in accordance with Sections&nbsp;154 and 244 of the DGCL. As of the
date hereof, we have sufficient surplus to make dividend payments with respect to the Series&nbsp;C
convertible preferred stock to be issued hereunder, as well as sufficient surplus to make the
make-whole payments that may be due to the holders of our Series&nbsp;C convertible preferred stock,
should such make-whole payments be deemed a dividend under the DGCL. However, our surplus will
decrease as we spend our capital on development and other operational activities, including the
development and commercialization activities related to ANX-530 and ANX-514, unless our spending is
offset by capital-raising transactions. If our surplus is less than then-due dividend payments,
including make-whole payments if they are deemed a dividend under the DGCL, we will be prohibited
by the DGCL from making the dividend or make-whole payment, which may constitute a violation of our
certificate of incorporation or a breach of our contractual obligations to the holders of our
Series&nbsp;C convertible preferred stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>There is no public market for the convertible preferred stock or the warrants being offered in this offering.</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no established trading market for the convertible preferred stock or the warrants
being offered in this offering, and we do not expect a market to develop. In addition, we do not
intend to apply to list the convertible preferred stock or warrants on any securities exchange or
automated quotation system. Without an active market, the liquidity of the convertible preferred
stock and warrants will be limited.
</DIV>

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</DIV>

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<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>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus and the registration statement of which it forms a part, and any final or free
writing prospectus, contain forward-looking statements within the meaning of Section&nbsp;27A of the
Securities Act of 1933, as amended, and Section&nbsp;21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical fact, are statements that could be
deemed forward-looking statements, including, but not limited to, statements regarding our business
strategy, expectations and plans, our objectives for future operations, including product
development, and our future financial position. We use words such as &#147;goal,&#148; &#147;anticipate,&#148;
&#147;believe,&#148; &#147;may,&#148; &#147;could,&#148; &#147;will,&#148; &#147;estimate,&#148; &#147;continue,&#148; &#147;anticipate,&#148; &#147;intend,&#148; &#147;expect,&#148;
&#147;indicate&#148; and similar expressions to identify forward-looking statements. We base these
forward-looking statements on our current expectations and projections about future events and
trends that we believe may affect our financial condition, results of operations, business
strategy, short-term and long-term business operations and objectives, and financial needs,
including our ability to satisfy our need for additional capital. These forward-looking statements
are subject to risks and uncertainties that could cause our actual results to differ materially
from those reflected in the forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed in under &#147;Risk Factors&#148; above and
&#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any forward-looking statement speaks only as of the date on which it is made and, except as
required by law, we do not intend to update any forward-looking statements publicly to reflect
events or circumstances after the date on which such statement is made or to update the reasons
actual results could differ materially from those anticipated in the forward-looking statements,
even if new information becomes available in the future. You should not place undue reliance on
any forward-looking statement. Before you invest in our common stock or securities convertible
into or exercisable for our common stock, you should be aware that the occurrence of any of the
events described under &#147;Risk Factors&#148; above or elsewhere in this prospectus could have a material
adverse effect on our business, financial condition and results of operation. In such case, the
trading price of our common stock could decline and you could lose all or part of your investment.
</DIV>

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</DIV>

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<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>USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that the net proceeds to us from the sale of the securities offered under this
prospectus, after deducting placement agent&#146;s fees and our estimated offering expenses, will be
approximately $&#091;<B>&#149;</B>&#093; if we sell the maximum amount of convertible preferred stock and warrants
offered hereby. Because there is no minimum offering amount required as a condition to closing
this offering, we may sell less than all of the securities offered hereby, which may significantly
reduce the amount of proceeds received by us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently intend to use the majority of the net proceeds to fund activities necessary to
advance ANX-530 toward commercialization in the U.S. should we submit an ANX-530 NDA and obtain FDA
approval. We also intend to use net proceeds to fund continued evaluation of the data from our
recently completed bioequivalence study of ANX-514 (docetaxel emulsion) and development activities
necessary to advance our ability to submit an NDA for ANX-514, and for general corporate purposes.
At this time we cannot estimate the allocation of the net proceeds of this offering among these
anticipated uses. The amounts and timing of the expenditures may vary significantly depending on
numerous factors, including our need for and ability to raise additional capital to advance ANX-530
toward commercialization. If we are unable to raise sufficient capital to fund continuation of the
activities necessary to seeking FDA approval to market ANX-530 and ANX-514 and advancing those
product candidates toward commercialization, we may cease operating as a going concern and seek
protection under the provisions of the U.S. Bankruptcy Code or, if sufficient funds are available,
conduct an orderly liquidation of our assets. We reserve the right to change the use of proceeds as
a result of certain contingencies, such as those discussed above and any future opportunities to
evaluate, negotiate and complete one or more strategic or partnering transactions. Accordingly, our
management will have broad discretion in the application of the net proceeds of this offering.
Pending use of the net proceeds, we intent to invest the net proceeds in money market accounts.
</DIV>

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</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>MARKET PRICE OF COMMON STOCK</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock trades under the symbol &#147;ANX&#148; on the NYSE Amex (formerly, the American Stock
Exchange). The following table sets forth the high and low closing prices for our common stock, as
reported by the NYSE Amex, for the periods 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="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 nowrap align="left" style="border-bottom: 1px solid #000000"><B>Period</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>High</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" colspan="2" style="border-bottom: 1px solid #000000"><B>Low</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>2009</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">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.09</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.22</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.11</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.64</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.36</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="left">$</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.33</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="left">$</TD>
    <TD align="right">0.38</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.18</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="left">$</TD>
    <TD align="right">0.21</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.07</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">First Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.84</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.98</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Second Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.31</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Third Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.80</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.07</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Fourth Quarter</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.88</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.43</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;22, 2009, the closing price of our common stock, as reported by the NYSE Amex, was
$0.13. As of July&nbsp;22, 2009, we had approximately 165 holders of record of our common stock. We
believe that the number of beneficial owners is substantially greater than the number of record
holders because a large portion of our common stock is held of record through brokerage firms in
&#147;street name.&#148;
</DIV>
<DIV align="left">
<A name="105"></A>
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have never declared or paid any cash dividends on our common stock and do not anticipate
declaring or paying any cash dividends on our common stock in the foreseeable future.
Our 5% Series B Convertible Preferred Stock would have accrued cumulative dividends at a rate of 5%
per annum until July 6, 2014, payable on a quarterly basis beginning on October 1, 2009. However, all of the
shares of the 5% Series B Convertible Preferred Stock were converted into common stock prior to the initial
dividend payment date.  Pursuant to the terms of the 5% Series B Convertible Preferred Stock, in connection
with conversion of the preferred shares, we paid an amount equal to $250 per $1,000 stated value of such
converted shares, or an aggregate of $340,250, in lieu of our dividend obligation.  Such payments may be
deemed dividends under the DGCL. Except for
dividends, or amounts that may be deemed dividends, payable on our &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock offered hereby, we expect to
retain all available funds and any future earnings to support operations and fund the development
and growth of our business. Our board of directors will determine whether we pay and the amount of
future dividends (including cash dividends), if any.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->31<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="106"></A>
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth our capitalization as of March&nbsp;31, 2009:
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on an actual basis;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on a pro forma basis to give effect to our issuance of 27,540,388 shares of common
stock issued upon full conversion of the 1,993 shares of our 0% Series&nbsp;A Convertible
Preferred Stock sold to investors in an approximately $2.0&nbsp;million convertible preferred
stock and warrant financing we completed on June&nbsp;12, 2009 and the 1,361 shares of our 5%
Series&nbsp;B Convertible Preferred Stock sold to investors in an approximately $1.4&nbsp;million
convertible preferred stock financing we completed on July&nbsp;6, 2009; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on a pro forma as adjusted basis to give effect to our sale of &#091;<B>&#149;</B>&#093; shares of our
convertible preferred stock in this offering, or &#091;<B>&#149;</B>&#093; shares of common stock issuable
upon conversion of the convertible preferred stock, at an assumed offering price of
$1,000 per share and conversion price of $&#091;<B>&#149;</B>&#093; per share, less the placement agent&#146;s fees
and our estimated offering expenses.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You should read this table in conjunction with the section of this prospectus entitled
&#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; and with
our consolidated financial statements and the notes thereto and our unaudited interim condensed
consolidated financial statements and the notes thereto, all of which is included elsewhere in this
prospectus.
</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 nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>As of 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>Pro Forma</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>Actual</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Pro Forma</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>As Adjusted</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">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">(unaudited)</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">Preferred stock, $0.001 par value; 1,000,000
shares authorized; 0 shares issued and
outstanding at March&nbsp;31, 2009, 1,993 0% Series
A shares issued and 0 shares outstanding and
1,361 5% Series&nbsp;B shares issued and 0 shares
outstanding pro forma, 1,993 0% Series&nbsp;A shares
issued and 0 shares outstanding, 1,361 5%
Series&nbsp;B shares issued and 0 shares
outstanding, and &#091;<B>&#149;</B>&#093; &#091;<B>&#149;</B>&#093;% Series&nbsp;C shares
issued and outstanding pro forma as adjusted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#091;<B>&#149;</B>&#093;</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">Common stock, $0.001 par value; 200,000,000
shares authorized; 90,252,572 shares issued and
outstanding at March&nbsp;31, 2009, 117,792,960
shares issued and outstanding pro forma, and
&#091;<B>&#149;</B>&#093; shares issued and outstanding pro forma as
adjusted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">90,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">117,793</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#091;<B>&#149;</B>&#093;</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">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,925,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,179,099</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</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">Deficit accumulated during the development stage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(129,003,468</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(129,715,898</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</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:30px; text-indent:-15px">Total stockholders&#146; equity (deficit)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,012,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,580,995</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The outstanding shares information in the table above 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>3,509,897 shares of common stock issuable upon the exercise of stock options issued
under our equity incentive plans and outstanding as of March&nbsp;31, 2009, at a weighted
average exercise price of $1.70 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>3,250,000 shares of common stock issuable upon vesting and settlement of restricted
stock units outstanding as of March&nbsp;31, 2009;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>13,032,759 shares of common stock available for future issuance under our 2008
Omnibus Incentive Plan as of March&nbsp;31, 2009;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>13,373,549 shares of common stock issuable upon the exercise of warrants outstanding
as of March&nbsp;31, 2009, at a</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->32<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></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: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>weighted average exercise price of $2.21 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>8,116,290 shares of common stock issuable upon the exercise of outstanding warrants
issued to the purchaser in the convertible preferred stock and warrant financing we
completed on June&nbsp;12, 2009, at an exercise price of $0.15 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>901,810 shares of common stock issuable upon the exercise of outstanding warrants
issued to the placement agent in connection with the convertible preferred stock and
warrant financing we completed on June&nbsp;12, 2009, at an exercise price of $0.15 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>475,209 shares of common stock issuable upon the exercise of outstanding warrants
issued to the placement agent in connection with the convertible preferred stock
financing we completed on July&nbsp;6, 2009, at an exercise price of $0.179 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#091;<B>&#149;</B>&#093; shares of our common stock issuable upon the exercise of warrants to be
issued to the purchasers in this offering, at an exercise price of $&#091;<B>&#149;</B>&#093; per share;
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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#091;<B>&#149;</B>&#093; shares of our common stock issuable upon the exercise of warrants to be
issued to the placement agent in connection with this offering, at an exercise price of
$&#091;<B>&#149;</B>&#093; per share.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<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>DILUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you invest in the securities being offered by this prospectus, you will suffer immediate
and substantial dilution in the net tangible book value per share of common stock. Our net tangible
book value as of March&nbsp;31, 2009 was approximately $2.8&nbsp;million, or approximately $0.03 per share of
common stock. Net tangible book value per share is determined by dividing our net tangible book
value, which consists of our total tangible assets less total liabilities, by the number of shares
of our common stock outstanding on that date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dilution in net tangible book value per share represents the difference between the amount per
share of common stock underlying the convertible preferred stock paid by purchasers in this
offering and the net tangible book value per share of our common stock immediately after this
offering. Without taking into account any other changes in the net tangible book value after March
31, 2009, other than to give effect 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our receipt of the estimated proceeds from the sale of 1,993 shares of convertible
preferred stock, or 18,036,199 shares of common stock issuable upon conversion of the
convertible preferred stock at a conversion price of $0.1105 per share, in our financing
that closed on June&nbsp;12, 2009, less the placement agent&#146;s fees and our estimated offering
expenses,</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our receipt of the estimated proceeds from the sale of 1,361 shares of convertible
preferred stock, or 9,504,189 shares of common stock issuable upon conversion of the
convertible preferred stock at a conversion price of $0.1432 per share, in our financing
that closed on July&nbsp;6, 2009, less the placement agent&#146;s fees and our estimated offering
expenses, 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our receipt of the estimated proceeds from the sale of &#091;<B>&#149;</B>&#093; shares of our convertible
preferred stock in this offering, or &#091;<B>&#149;</B>&#093; shares of common stock issuable upon conversion
of the convertible preferred stock, at an assumed offering price of $1,000 per share and
conversion price of $&#091;<B>&#149;</B>&#093; per share, less the placement agent&#146;s fees and our estimated
offering expenses,</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">our net tangible book value as of March&nbsp;31, 2009, after giving effect to the items above, would
have been approximately $&#091;<B>&#149;</B>&#093; million, or approximately $&#091;<B>&#149;</B>&#093; per share of common stock. This
represents an immediate increase of $&#091;<B>&#149;</B>&#093; in net tangible book value per share to our existing
stockholders and an immediate dilution of $&#091;<B>&#149;</B>&#093; per share to purchasers of securities in this
offering. The following table illustrates this per share dilution:
</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>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumed public offering price per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net tangible book value per share as of March&nbsp;31, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.03</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">Increase in net tangible book value per share attributable to offering closed June&nbsp;12, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.01</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Increase in net tangible book value per share attributable to offering closed July&nbsp;6, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.01</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">Increase in net tangible book value per share attributable to this offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net tangible book value per share as of March&nbsp;31, 2009, after giving effect to offering
closed on June&nbsp;12, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.04</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net tangible book value per share as of March&nbsp;31, 2009, after giving effect to offering
closed on July&nbsp;6, 2009</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.05</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Pro forma net tangible book value per share as of March&nbsp;31, 2009, after giving effect to this offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dilution in net tangible book value per share to new investors in this offering</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#091;<B>&#149;</B>&#093;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The above table is based on 90,252,572 shares of our common stock outstanding as of March&nbsp;31,
2009 (as adjusted for 18,036,199 shares of common stock issued upon conversion of the convertible
preferred stock issued in our financing that closed on June&nbsp;12, 2009, 9,504,189 shares of common
stock issued upon conversion of the convertible preferred stock issued in our financing that closed
on July&nbsp;6, 2009, &#091;<B>&#149;</B>&#093; shares of common stock issuable upon conversion of the convertible preferred
stock to be issued in this offering), 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>3,509,897 shares of common stock issuable upon the exercise of stock options issued
under our equity incentive plans and outstanding as of March&nbsp;31, 2009, at a weighted
average exercise price of $1.70 per share;</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->34<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></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: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>3,250,000 shares of common stock issuable upon vesting and settlement of restricted
stock units outstanding as of March&nbsp;31, 2009;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>13,032,759 shares of common stock available for future issuance under our 2008
Omnibus Incentive Plan as of March&nbsp;31, 2009;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>13,373,549 shares of common stock issuable upon the exercise of warrants outstanding
as of March&nbsp;31, 2009, at a weighted average exercise price of $2.21 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>8,116,290 shares of common stock issuable upon the exercise of outstanding warrants
issued to the purchaser in the convertible preferred stock and warrant financing we
completed on June&nbsp;12, 2009, at an exercise price of $0.15 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>901,810 shares of common stock issuable upon the exercise of outstanding warrants
issued to the placement agent in connection with the convertible preferred stock and
warrant financing we completed on June&nbsp;12, 2009, at an exercise price of $0.15 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>475,209 shares of common stock issuable upon the exercise of outstanding warrants
issued to the placement agent in connection with the convertible preferred stock and
warrant financing we completed on July&nbsp;6, 2009, at an exercise price of $0.179 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#091;<b>&#149;</b>&#093; shares of our common stock issuable upon the exercise of warrants to be
issued to the purchasers in this offering, at an exercise price of $&#091;<B>&#149;</B>&#093; per share;
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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>&#091;<B>&#149;</B>&#093; shares of our common stock issuable upon the exercise of warrants to be
issued to the placement agent in connection with this offering, at an exercise price of
$&#091;<B>&#149;</B>&#093; per share.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that any options or warrants are exercised, restricted stock units are settled,
new options or other equity awards are issued under our 2008 Omnibus Incentive Plan, or we
otherwise issue additional shares of common stock in the future, there will be further dilution to
new investors.
</DIV>

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

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<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>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF</B>
</DIV>

<DIV align="center" style="font-size: 10pt"><B>FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our financial statements and related notes appearing elsewhere
in this prospectus. In addition to historical information, this discussion and analysis contains
forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results
may differ materially from those anticipated in these forward-looking statements.</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a development-stage biopharmaceutical company whose fundamental business is focused on
in-licensing, developing and commercializing proprietary product candidates for the treatment of
cancer. We seek to improve the performance and commercial potential of existing treatments by
addressing limitations associated principally with their safety and use. We have devoted
substantially all of our resources to research and development, or R&#038;D, or to acquisition of our
product candidates. We have not yet marketed or sold any products or generated any significant
revenue. Our lead product candidates, ANX-530 and ANX-514, are novel emulsion formulations of
currently marketed chemotherapy drugs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have incurred annual net losses since inception. We had a net loss of $3.2&nbsp;million in the
first quarter of 2009, which included charges associated with our October&nbsp;2008 and January and
March&nbsp;2009 reductions in force, and cash and cash equivalents of approximately $5.3&nbsp;million and
working capital of $2.8&nbsp;million at March&nbsp;31, 2009. These factors raise substantial doubt about our
ability to continue as a going concern. Our unaudited condensed consolidated financial statements
for the period ended and at March&nbsp;31, 2009 have been prepared assuming we will continue as a going
concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of
liabilities in the normal course of business and does not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should we be unable to continue as a going
concern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2009, we announced that we and our wholly-owned subsidiary, SD Pharmaceuticals, Inc.,
entered into a license agreement with respect to ANX-514 with Shin Poong Pharmaceutical Co., Ltd.,
a company organized under the laws of the Republic of Korea, pursuant to which we granted to Shin
Poong an exclusive license, including the right to sublicense, to research, develop, make, have
made, use, offer for sale, sell and import licensed products, in each case solely for the treatment
of cancer by intravenous administration of formulations of docetaxel as emulsified products and
solely in South Korea. Under the terms of the license agreement, we received an upfront licensing
fee of $0.3&nbsp;million in April&nbsp;2009 (which we recognized as licensing revenue in the three-month
period ended March&nbsp;31, 2009 because we met the criteria under our revenue recognition policy in
that period), a regulatory milestone payment of either $0.2&nbsp;million or $0.4&nbsp;million (depending on
whether Shin Poong is required by the Korea Food and Drug Administration to conduct a
bioequivalence or clinical study in human subjects prior to receipt of regulatory approval) upon
receipt of regulatory approval for marketing a licensed product in South Korea, one-time commercial
milestone payments tied to annual net sales of licensed products in an aggregate amount of up to
$1.5&nbsp;million and royalty payments on net sales of licensed products. Shin Poong is responsible for
all development and commercial activities related to ANX-514 in South Korea. If Shin Poong is
required by the Korea Food and Drug Administration to conduct a bioequivalence or clinical trial in
human subjects prior to receipt of regulatory approval and we elect not to supply product to
conduct such trial, which supply obligation is subject to limitations, we will pay Shin Poong $0.1
million.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;12, 2009, we completed an approximately $2.0&nbsp;million registered direct equity
financing, involving of the issuance and sale of shares of our 0% Series&nbsp;A Convertible Preferred
Stock, convertible into 18,036,199 shares of our common stock, and warrants to purchase up to
8,116,290 shares of our common stock. We received approximately $1.7&nbsp;million in net proceeds from
the offering, after deducting the placement agent&#146;s fees and our estimated offering expenses. We
may receive up to approximately $1.2&nbsp;million of additional proceeds from the exercise of the
warrants issued in that offering; however, those warrants are not exercisable until December&nbsp;13,
2009 and their exercise is subject to certain ownership limitations. In connection with the
offering, we also issued warrants to purchase up to 910,810 shares of our common stock at an
exercise price of $0.15 per share to our placement agent in consideration for its services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 6, 2009, we
completed an approximately $1.4 million registered direct equity financing involving the issuance of shares of
our 5% Series B Convertible Preferred Stock, convertible into 9,504,189 shares of our common stock. We received
approximately $1.2 million in net proceeds from the offering, after deducting the placement agent&#146;s fees and
our estimated offering expenses. The convertible preferred shares were to accrue a 5% dividend until July 6,
2014, unless converted prior to such date.  Upon any conversion of these preferred shares we were obligated to
pay the holder an amount equal to the total dividend that would have otherwise accrued on the shares through
July 6, 2014, less any dividend payment previously made with respect to such converted shares. Twenty-five
percent, or $340,250, of the gross proceeds of the financing were placed in an escrow account for payment of
the dividend and conversion amounts payable on the 5% Series B Convertible Preferred Stock. All of the shares
of the 5% Series B Convertible Preferred Stock have been converted and, pursuant to the terms of the 5% Series
B Convertible Preferred Stock, we paid an aggregate of $340,250 from the escrow account to the holder of the
converted preferred shares in connection with such conversions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the shares of
our 0% Series A Convertible Preferred Stock and 5% Series B Convertible Preferred Stock issued in the June and
July 2009 financings have been converted and, as a result, an additional 27,540,388 shares of our common stock
have been issued since March 31, 2009.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->36<!-- /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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the completion of the June&nbsp;2009 financing, we re-started the final manufacturing
activities related to submitting an NDA for ANX-530 to seek approval of the FDA to market ANX-530
in the U.S. In addition, we intend to continue to evaluate the data from our recently-completed
bioequivalence study of ANX-514 and we plan to seek a meeting with the FDA to discuss the results.
However, even following the offering described in this prospectus, we may need to raise substantial
additional capital to fund our operations, including activities relating to the commercialization
of ANX-530 in the U.S., if an NDA for ANX-530 is submitted and ANX-530 is approved by the FDA, and
activities relating to the development and regulatory review process and, ultimately,
commercialization of ANX-514.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There can be no assurances that we will be able to obtain additional financing on a timely
basis, or at all. If we are unable to raise sufficient additional capital on a timely basis to
continue our fundamental business operations, we may seek protection under the provisions of the
U.S. Bankruptcy Code or liquidate our assets and wind-up our operations. If we pursue an orderly
liquidation of our assets, based on our current working capital and the estimated costs associated
with seeking approval for and implementing a liquidation plan, we expect the remaining cash
available for distribution to our stockholders, if any, to be insignificant.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors has called a special meeting of our stockholders to be held on August
25, 2009. We have recommended to our stockholders that, at this special meeting, they approve
authorizing our board of directors to effect a reverse stock split of our outstanding common stock
at a ratio in the discretion of the board of directors that is not less than 2:1 nor greater than
50:1.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our discussion and analysis of our financial condition and results of operations is based upon
consolidated financial statements that we have prepared in accordance with accounting principles
generally accepted in the United States of America, or U.S. The preparation of these consolidated
financial statements requires management to make a number of assumptions and estimates that affect
the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial
statements and accompanying notes. On an on-going basis, we evaluate these estimates and
assumptions, including those related to recognition of expenses in service contracts, license
agreements, share-based compensation and registration payment arrangements. Management bases its
estimates on historical information and assumptions believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Revenue Recognition</I></B>. We recognize revenue in accordance with the SEC&#146;s Staff Accounting
Bulletin Topic 13, &#147;Revenue Recognition,&#148; or Topic 13, and Emerging Issues Task Force Issue, or
EITF, No.&nbsp;00-21, &#147;Revenue Arrangements with Multiple Deliverables,&#148; or EITF 00-21. Revenue is
recognized when all of the following criteria are met: (1)&nbsp;persuasive evidence of an arrangement
exists; (2)&nbsp;delivery has occurred or services have been rendered; (3)&nbsp;the seller&#146;s price to the
buyer is fixed and determinable; and (4)&nbsp;collectability is reasonably assured.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Revenue from licensing agreements is recognized based on the performance requirements of the
agreement. Revenue is deferred for fees received before earned. Nonrefundable upfront fees that are
not contingent on any future performance by us are recognized as revenue when the license term
commences and the revenue recognition criteria under Topic 13 and EITF 00-21 are met. Nonrefundable
upfront fees, where we have ongoing involvement or performance obligations, are recorded as
deferred revenue and recognized as revenue over the life of the contract, the period of the
performance obligation or the development period, whichever is appropriate in light of the
circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments related to substantive, performance-based milestones in an agreement are recognized
as revenue upon the achievement of the milestones as specified in the underlying agreement when
they represent the culmination of the earnings process. Royalty
</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">revenue from licensed products will be recognized when earned in accordance with the terms of
the applicable license agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>R&#038;D Expenses</I></B>. R&#038;D expenses consist of expenses incurred in performing R&#038;D activities,
including salaries and benefits, facilities and other overhead expenses, bioequivalence and
clinical trials, research-related manufacturing services, contract services and other outside
expenses. R&#038;D expenses are charged to operations as the underlying work is performed. Advance
payments, including nonrefundable amounts, for goods or services that will be used or rendered for
future R&#038;D activities are deferred and capitalized. Such amounts will be recognized as an expense
as the related goods are delivered or the related services are performed. If the goods will not be
delivered, or services will not be rendered, then the capitalized advance payment is charged to
expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Milestone payments that we make in connection with in-licensed technology or product
candidates are expensed as incurred when there is uncertainty in receiving future economic benefits
from the licensed technology or product candidates. We consider the future economic benefits from
the licensed technology or product candidates to be uncertain until such licensed technology or
product candidates are approved for marketing by the FDA or when other significant risk factors are
abated. For accounting purposes, management has viewed future economic benefits for all of our
licensed technology or product candidates to be uncertain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Payments in connection with our bioequivalence and clinical trials are often made under
contracts with multiple contract research organizations that conduct and manage these trials on our
behalf. The financial terms of these agreements are subject to negotiation and vary from contract
to contract and may result in uneven payment flows. Generally, these agreements set forth the scope
of work to be performed at a fixed fee or unit price or on a time-and-material basis. Payments
under these contracts depend on factors such as the successful enrollment or treatment of patients
or the completion of other milestones. Expenses related to bioequivalence and clinical trials are
accrued based on our estimates and/or representations from service providers regarding work
performed, including actual level of patient enrollment, completion of patient studies, and trials
progress. Other incidental costs related to patient enrollment or treatment are accrued when
reasonably certain. If the contracted amounts are modified (for instance, as a result of changes in
the bioequivalence or clinical trial protocol or scope of work to be performed), we modify our
accruals accordingly on a prospective basis. Revisions in scope of contract are charged to expense
in the period in which the facts that give rise to the revision become reasonably certain. Because
of the uncertainty of possible future changes to the scope of work in bioequivalence and clinical
trials contracts, we are unable to quantify an estimate of the reasonably likely effect of any such
changes on our consolidated results of operations or financial position. Historically, we have had
no material changes in our bioequivalence and clinical trial expense accruals that would have had a
material impact on our consolidated results of operations or financial position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Purchased In-Process Research and Development</I></B>. In accordance with SFAS No.&nbsp;141, &#147;Business
Combinations,&#148; through December&nbsp;31, 2008, we accounted for the costs associated with any purchased
in-process research and development, or IPR&#038;D, to the statement of operations upon acquisition.
These amounts represent an estimate of the fair value of purchased IPR&#038;D for projects that, as of
the acquisition date, had not yet reached technological feasibility, had no alternative future use,
and had uncertainty in generating future economic benefits. We determine the future economic
benefits from the purchased IPR&#038;D to be uncertain until such technology is incorporated into
products approved for marketing by the FDA or when other significant risk factors are abated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We adopted SFAS No.&nbsp;141(R)-1, &#147;Business Combinations&#148;, effective for fiscal years beginning on
or after December&nbsp;15, 2008. The adoption of SFAS 141(R) did not have a material effect on our
consolidated results of operations and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Share-based Compensation Expenses</I></B>. Effective January&nbsp;1, 2006, we accounted for share-based
compensation awards granted to employees, including members of our board of directors, in
accordance with the revised SFAS No.&nbsp;123, &#147;Share-Based Payment,&#148; or SFAS 123R, including the
provisions of Staff Accounting Bulletins No.&nbsp;107 and No.&nbsp;110. Share-based compensation cost is
measured at the grant date, based on the estimated fair value of the award, and is recognized as
expense over the employee&#146;s requisite service period. As of March&nbsp;31, 2009, we had no awards with
market or performance conditions other than the restricted stock units that we granted in January
2009, which would have vested, if at all, immediately prior to a strategic transaction (as defined
in the documentation evidencing the grant of the units), but which were terminated in July&nbsp;2009. As
share-based compensation expense is based on awards ultimately expected to vest, it has been
reduced for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those
estimates. Forfeitures were estimated based on historical experience. Although estimates of
share-based compensation expenses are significant to our consolidated financial statements, they
are not related to the payment of any cash by us. Prior to January&nbsp;1, 2006, we accounted for
stock-based compensation under the recognition and measurement principles of SFAS 123, &#147;Accounting
for Stock-Based Compensation.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate the fair value of stock option awards on the date of grant using the Black-Scholes
option-pricing model, or Black-Scholes model. The determination of the fair value of share-based
payment awards on the date of grant using an option-pricing model is affected by our share price as
well as assumptions regarding a number of complex and subjective variables. These variables
include,
</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">but are not limited to, our expected share price volatility over the term of the awards,
actual and projected employee stock option exercise behaviors, a risk-free interest rate and
expected dividends. We may elect to use different assumptions under the Black-Scholes model in the
future, which could materially affect our net income or loss and net income or loss per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We account for share-based compensation awards granted to non-employees in accordance with
EITF No.&nbsp;96-18, &#147;Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services,&#148; or EITF 96-18. Under EITF 96-18, we
determine the fair value of the share-based compensation awards granted as either the fair value of
the consideration received or the fair value of the equity instruments issued, whichever is more
reliably measurable. If the fair value of the equity instruments issued is used, it is measured
using the share price and other measurement assumptions as of the earlier of (1)&nbsp;the date at which
a commitment for performance by the counterparty to earn the equity instruments is reached or (2)
the date at which the counterparty&#146;s performance is complete.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Income Taxes</I></B>. In June&nbsp;2006, FASB issued Financial Interpretation No., or FIN, 48, &#147;Accounting
for Uncertainty in Income Taxes-an Interpretation of FASB Statement 109,&#148; which clarifies the
accounting for uncertainty in tax positions. FIN 48 provides that the tax effects from an uncertain
tax position can be recognized in our consolidated financial statements only if the position is
more likely than not of being sustained upon an examination by tax authorities. An uncertain income
tax position will not be recognized if it has less than a 50% likelihood of being sustained.
Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The provisions of FIN 48 were effective
for us as of January&nbsp;1, 2007, with the cumulative effect of the change in accounting principle
recorded as an adjustment to opening retained earnings in the year of adoption. We adopted FIN 48
on January&nbsp;1, 2007, which did not have a material impact on our consolidated results of operations
or financial position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Costs Associated with Exit or Disposal Activities</I></B>. As part of our efforts to reduce operating
costs, we completed the following three work force reductions since the end of the third quarter of
2008, each of which was accounted for in accordance with SFAS No.&nbsp;146, &#147;Accounting for Costs
Associated with Exit or Disposal Activities:&#148;
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In October&nbsp;2008, we completed a work force reduction of nine employees. As a result,
we recorded severance-related charges of $403,000, of which approximately $384,000 was
recorded in R&#038;D and the remainder in selling, general and administrative, or SG&#038;A. In
connection with the October&nbsp;2008 reduction in workforce, severance-related charges of
$244,000 were recorded in the fourth quarter of 2008, $120,000 were recorded in the
first quarter of 2009, and the remainder was recorded in the second quarter of 2009.</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In January&nbsp;2009, we completed a work force reduction of six employees. As a result,
we recorded severance-related charges of $174,000, of which $86,000 was recorded in R&#038;D
and the remainder in SG&#038;A. In connection with the January&nbsp;2009 reduction in workforce,
severance-related charges of $144,000 were recorded in the first quarter of 2009 and the
remainder was recorded in the second quarter of 2009.</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In April&nbsp;2009, we completed a work force reduction of nine employees. As a result, we
recorded severance-related charges of $160,000, of which $101,000 was recorded in R&#038;D
and the remainder in SG&#038;A. In connection with the April&nbsp;2009 reduction in workforce,
severance-related charges of $114,000 were recorded in the first quarter of 2009 and the
remainder was recorded in the second quarter of 2009.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The foregoing is not intended to be a comprehensive list of all of our accounting policies. In
most cases, the accounting treatment of a particular transaction is specifically dictated by
accounting principles generally accepted in the U.S.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A general understanding of the drug development process is critical to understanding our
results of operations. Drug development in the U.S. and most countries throughout the world is a
process that includes several steps defined by the FDA and similar regulatory authorities in
foreign countries. The FDA approval processes relating to new drugs differ, depending on the nature
of the particular drug for which approval is sought. With respect to any drug product with active
ingredients not previously approved by the FDA, a prospective drug manufacturer is required to
submit a new drug application, or NDA, which includes complete reports of pre-clinical, clinical
and laboratory studies and extensive manufacturing information to prove such product&#146;s safety and
effectiveness. The NDA process generally requires, before the submission of the NDA, filing of an
investigational new drug application, or IND, pursuant to which permission is sought to begin
clinical testing of the new drug product. An NDA based on published safety and effectiveness
studies conducted by others, or previous findings of safety and effectiveness by the FDA, may be
submitted under Section&nbsp;505(b)(2) of the Federal Food, Drug and Cosmetic Act, or FDCA. Development
of new formulations of pharmaceutical products under Section
</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">505(b)(2) of the FDCA may have shorter timelines than those associated with developing new
chemical entities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, with respect to any drug product with active ingredients not previously approved by
the FDA, an NDA must be supported by data from at least phase 1, phase 2 and phase 3 clinical
trials. Phase 1 clinical trials can be expected to last from 6 to 18&nbsp;months, phase 2 clinical
trials can be expected to last from 12 to 24&nbsp;months and phase 3 clinical trials can be expected to
last from 18 to 36&nbsp;months. However, clinical development timelines vary widely, as do the total
costs of clinical trials and the likelihood of success. We anticipate that we will make
determinations as to which of our programs to pursue and how much funding to direct to each program
on an ongoing basis in response to the scientific and clinical success of the underlying product
candidate, our ongoing assessment of its market potential and our available resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Future expenditures on R&#038;D programs are subject to many uncertainties, including whether our
product candidates will be further developed with a partner or independently. At this time, due to
such uncertainties and the risks inherent in drug development and the associated regulatory
process, we cannot estimate with reasonable certainty the duration of or costs to complete our R&#038;D
programs or whether or when or to what extent revenues will be generated from the commercialization
and sale of any of our product candidates. The duration and costs of our R&#038;D programs, in
particular those associated with bioequivalence trials and research-related manufacturing, can vary
significantly among programs as a result of a variety of 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the number and location of sites included in trials and the rate of site approval for
the trial;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the rates of patient recruitment and enrollment;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ratio of randomized to evaluable patients;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the availability and cost of reference product in the jurisdiction of each site;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the time and cost of process development activities related to 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs of manufacturing our product candidates; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the costs, requirements, timing of and the ability to secure regulatory approvals.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The difficult process of seeking regulatory approvals for our product candidates and
compliance with applicable regulations requires the expenditure of substantial resources. Any
failure by us to obtain, or any delay in obtaining, regulatory approvals could cause our R&#038;D
expenditures to increase and, in turn, have a material and unfavorable effect on our results of
operations. We cannot be certain when, if ever, we will generate revenues from sales of any of our
products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While many of our R&#038;D expenses are transacted in U.S. dollars, certain significant expenses
are required to be paid in foreign currencies and expose us to transaction gains and losses that
could result from changes in foreign currency exchange rates. In particular, our current contract
manufacturer for both ANX-530 and ANX-514 is located outside the U.S. and generally we pay for its
services, including the final manufacturing activities related to submitting an NDA for ANX-530, in
Euros. As a result, our exposure to currency risk likely will increase as we move our products
towards commercialization and increase the services we request from our current contract
manufacturer. We include realized gains and losses from foreign currency transactions in operations
as incurred.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate our business and evaluate our company on the basis of a single reportable segment,
which, fundamentally, is the business of in-licensing, developing and commercializing proprietary
product candidates for the treatment of cancer. We recognized revenues of $0.5&nbsp;million in each of
2008 and 2007, which revenues were derived solely from license fees under a license agreement with
Theragenex, LLC, which we terminated in August&nbsp;2007.
</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"><B>Operating Expenses</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</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"><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" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></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 nowrap align="right">&nbsp;</TD>
    <TD align="right">64</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">64</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">35</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">35</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1</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>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</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: 12pt"><B><I>Comparison of Three Months Ended March&nbsp;31, 2009 and 2008</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Revenue</I></B><I>. </I>Revenue recognized for the three months ended March&nbsp;31, 2009 represents a $0.3
million nonrefundable license fee under our license agreement with Shin Poong Pharmaceutical Co.,
Ltd. Consistent with our revenue recognition policy, we recognized the license fee as revenue in
the three-month period ended March&nbsp;31, 2009 because, in that period, persuasive evidence of an
arrangement existed, services had been rendered, the amount of the payment was fixed and
determinable and collectability was reasonably assured. No revenue was recognized for the three
months ended March&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have not generated any revenue from product sales to date, and we do not expect to generate
revenue from product sales until such time that we have obtained approval from a regulatory agency
to sell one of our product candidates, the timing of which, if it occurs at all, we cannot
currently predict.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>R&#038;D Expenses</I></B><I>. </I>We maintain and evaluate our R&#038;D expenses by the type of cost incurred rather
than by project. We maintain and evaluate R&#038;D expenses by type primarily because of the
uncertainties described above, as well as because we out-source a substantial portion of our work
and our R&#038;D personnel work across multiple programs rather than dedicating their time to one
particular program. We began maintaining such expenses by type on January&nbsp;1, 2005. The following
table summarizes our consolidated R&#038;D expenses by type for the three months ended March&nbsp;31, 2009
compared to the same period in 2008, and for the period from January&nbsp;1, 2005 through March&nbsp;31,
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="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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>January 1, 2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" 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>through</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>$ Variance</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>% Variance</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">External clinical study fees
and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">578,992</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,021,920</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">(442,928</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(43</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23,778,472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">External non-clinical study
fees and expenses (1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">470,248</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,418,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(948,737</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(67</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,415,722</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Personnel costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">623,436</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,073,706</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(450,270</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(42</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,134,624</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,376</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305,696</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">(331,072</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(108</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,858,784</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>
    <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:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,647,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,820,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">(2,173,007</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(57</TD>
    <TD nowrap>%)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">56,187,602</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>
</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>External non-clinical study fees and expenses include preclinical,
research-related manufacturing, quality assurance and regulatory expenses.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R&#038;D expenses decreased by $2.2&nbsp;million, or 57%, to $1.6&nbsp;million for the three months ended
March&nbsp;31, 2009, compared to $3.8&nbsp;million for the comparable period in 2008. The decrease in R&#038;D
expenses was primarily due to a $0.6&nbsp;million decrease in external clinical trial expenses related
to CoFactor, a $1.0&nbsp;million decrease in non-clinical expenses related to ANX-514 and ANX-530, a
$0.5&nbsp;million decrease in personnel costs related to the reductions in staff and a $0.3&nbsp;million
decrease in share-based compensation expense, offset by a $0.2&nbsp;million increase in clinical trial
expenses related to ANX-514. We expect that our recent reductions in full-time employees will
result in R&#038;D cost savings. However, we also expect such cost-savings will be offset in part or
entirely by costs related to our recently re-started activities related to ANX-530 and ANX-514.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Selling, General and Administrative Expenses</I></B><I>. </I>SG&#038;A expenses decreased by $0.6&nbsp;million, or 25%,
to $1.8&nbsp;million for the three months ended March&nbsp;31, 2009, compared to $2.4&nbsp;million for the
comparable period in 2008. The decrease was primarily due to a $0.3&nbsp;million decrease in personnel
costs related to reductions in staff, a $0.2&nbsp;million decrease in legal and professional services
and a $0.1&nbsp;million decrease in business insurance. We expect SG&#038;A expenses to continue to decline
given our recent reductions in full-time employees. However, we also expect such cost-savings will
be offset in part or entirely by costs related to capital-raising activities, which costs will be
expensed unless and until the closing of the applicable capital-raising transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Interest Income and Other Income</I></B><I>. </I>Interest income and other income decreased by $0.3&nbsp;million,
or 99%, to $1,776 for the three months ended March&nbsp;31, 2009, compared to $0.3&nbsp;million for the
comparable period in 2008. The decrease was primarily attributable to lower interest income based
on lower cash balances. We expect that interest income will continue to decline as forecasted
interest rates decline along with lower cash balances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Net Loss. </I></B>Net loss was $3.2&nbsp;million, or $0.03 per share, for the three months ended March&nbsp;31,
2009, compared to a net loss of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->41<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">$5.9&nbsp;million, or $0.07 per share, for the comparable period in 2008. Included in the net loss
for the three months ended March&nbsp;31, 2009 were charges associated with our October&nbsp;2008 and January
and March&nbsp;2009 reductions in force.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Comparison of Years Ended December&nbsp;31, 2008 and 2007</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Revenue</I></B>. We recognized revenue of $0.5&nbsp;million for each of the years ended December&nbsp;31, 2008
and 2007. Revenue in 2007 represents nonrefundable licensing fees paid under our license agreement
with Theragenex LLC, which we terminated in August&nbsp;2007 as a result of Theragenex&#146;s breach of the
agreement. Revenue in 2008 represents a portion of a settlement payment from Theragenex. In May
2008, we settled our dispute with Theragenex arising out of its breach of the license agreement
and, in accordance with such settlement, Theragenex paid us $0.6&nbsp;million. We recognized $0.5
million as revenue in 2008, which represents a portion of the $0.6&nbsp;million settlement payment,
because under the license agreement Theragenex was required to pay a total nonrefundable, up front
licensing fee of $1.0&nbsp;million ($0.5&nbsp;million of which we received in January&nbsp;2007 and $0.5&nbsp;million
of which was due in June&nbsp;2007) and because we met the criteria for revenue recognition. The
remainder of the settlement payment, $0.1&nbsp;million, was recorded as other income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>R&#038;D Expenses</I></B>. The following table summarizes our consolidated R&#038;D expenses by type for the
year ended December&nbsp;31, 2008, compared to the same period in 2007, and for the period from January
1, 2005 through December&nbsp;31, 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="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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>January 1, 2005</B></TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="14" style="border-bottom: 1px solid #000000"><B>Year ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>through</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>$ Variance</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>% Variance</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>December 31, 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">External clinical
study fees and
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3,373,865</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,535,923</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,162,058</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(55</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">23,199,479</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">External
non-clinical study
fees and expenses
(1)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,585,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,346,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,239,298</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">144</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,945,474</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Personnel costs</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,237,158</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,997,852</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">239,306</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">8</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,511,188</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share-based
compensation
expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">725,465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,054,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(328,772</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(31</TD>
    <TD nowrap>)%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,884,161</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>
    <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:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">17,922,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">15,934,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,987,774</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">12</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">54,540,302</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>
</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>External non-clinical study fees and expenses include preclinical,
research-related manufacturing, quality assurance and regulatory expenses.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;R&#038;D expenses increased by $2.0&nbsp;million, or 12%, to $17.9&nbsp;million for the year ended December
31, 2008, compared to $15.9&nbsp;million in 2007. The increase in R&#038;D expenses was primarily due to a
$6.2&nbsp;million increase in expenses related to external research-related manufacturing and regulatory
and quality assurance activities related to ANX-530 and ANX-514, a $1.3&nbsp;million increase in
external clinical trial expenses related to ANX-514 and a $0.2&nbsp;million increase in personnel costs,
offset by a $5.4&nbsp;million decrease in external clinical trial expenses related to CoFactor and
ANX-530 and a $0.3&nbsp;million decrease in non-cash, share-based compensation expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Selling, General and Administrative Expenses</I></B>. SG&#038;A expenses increased by $1.0&nbsp;million, or 12%,
to $9.7&nbsp;million for 2008, compared to $8.7&nbsp;million in 2007. The increase was substantially due to a
$0.7&nbsp;million increase for severance expenses, a $0.4&nbsp;million increase for consulting expenses
related to market research, a $0.3&nbsp;million increase in personnel expenses and a $0.1&nbsp;million
increase in professional services, offset by a decrease of $0.5&nbsp;million in non-cash, share-based
compensation expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Interest Income and Other Income</I></B>. Interest income and other income for 2008 decreased by $1.5
million, or 69%, to $0.7&nbsp;million in 2008, compared to $2.2&nbsp;million in 2007. The decrease was
primarily attributable to lower interest income based on lower invested balances. The decrease was
partially offset by $0.1&nbsp;million received as part of the Theragenex settlement, which was recorded
as other income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Net Loss</I></B>. Net loss was $26.6&nbsp;million or $0.30 per share in 2008, compared to a net loss of
$22.1&nbsp;million or $0.25 per share in 2007.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a history of recurring losses from operations and we have funded our operations
primarily through sales of our equity securities. We had a net loss of $3.2&nbsp;million in the first
quarter of 2009, which included charges associated with our October&nbsp;2008 and January and March&nbsp;2009
reductions in force, and cash and cash equivalents of approximately $5.3&nbsp;million and working
capital of $2.8

</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">million at March&nbsp;31, 2009. </DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;12, 2009, we completed an approximately $2.0&nbsp;million registered direct equity
financing involving the issuance of shares of our 0% Series&nbsp;A Convertible Preferred Stock,
convertible into 18,036,199 shares of our common stock, and warrants to purchase up to 8,116,290
shares of our common stock. We received approximately $1.7&nbsp;million in net proceeds from the
offering, after deducting the placement agent&#146;s fees and our estimated offering expenses.
All of the shares of the 0% Series A Convertible Preferred Stock subsequently have been converted. We may
receive up to approximately $1.2&nbsp;million of additional proceeds from the exercise of the warrants
issued in that offering; however, those warrants are not exercisable until December&nbsp;13, 2009 and
their exercise is subject to certain ownership limitations. In connection with the offering, we
also issued warrants to purchase up to 910,810 shares of our common stock at an exercise price of
$0.15 per share to the placement agent in the offering as additional consideration for its
services. The placement agent&#146;s warrant is not exercisable until December&nbsp;13, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 6, 2009, we
completed an approximately $1.4 million registered direct equity financing involving the issuance of shares of
our 5% Series B Convertible Preferred Stock, convertible into 9,504,189 shares of our common stock. We
received approximately $1.2 million in net proceeds from the offering, after deducting the placement agent&#146;s
fees and our estimated offering expenses. The convertible preferred shares were to accrue a 5% dividend until
July 6, 2014, unless converted prior to such date.  Upon any conversion of these preferred shares we were
obligated to pay the holder an amount equal to the total dividend that would have otherwise accrued on the
shares through July 6, 2014, less any dividend payment previously made with respect to such converted shares.
Twenty-five percent, or $340,250, of the gross proceeds of the financing were placed in an escrow account for
payment of the dividend and conversion amounts payable on the 5% Series B Convertible Preferred Stock. All of
the shares of the 5% Series B Convertible Preferred Stock subsequently have been converted and, pursuant to
the terms of the 5% Series B Convertible Preferred Stock, we paid an aggregate of $340,250 from the escrow
account to the holder of the converted preferred shares in connection with such conversions.
In connection with the offering, we also issued warrants to purchase up to 475,209
shares of our common stock at an exercise price of $0.179 per share to the placement agent in the
offering as additional consideration for its services. The placement agent&#146;s warrant is not
exercisable until January&nbsp;7, 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have an on-going need to raise additional capital to support our operations, which we have
historically done primarily through the issuance of our equity securities. In the current
financial and economic environment it is uncertain that we can obtain funding through our
traditional sources of capital. These factors raise substantial doubt about our ability to
continue as a going concern. We expect to incur substantial costs in connection with activities
relating to submitting an NDA for ANX-530, advancing ANX-530 toward commercialization in the U.S.
and continuing development and regulatory related activities for ANX-514. We may also incur
substantial costs in connection with evaluating, negotiating and consummating future
capital-raising and/or strategic or partnering transactions or liquidating our assets and
winding-up our operations. We cannot currently predict the extent of these costs. Even if we incur
costs in pursuing, evaluating and negotiating particular capital-raising and/or strategic or
partnering transactions, our efforts may not prove successful. Excluding the potentially
significant costs associated with evaluating, negotiating and consummating capital-raising and/or
strategic or partnering transactions or seeking protection under the provisions of the U.S.
Bankruptcy Code or liquidating our assets and winding-up our operations, we anticipate that our
cash and cash equivalents as of March&nbsp;31, 2009, together with the net proceeds from the equity
financings we completed on June&nbsp;12, 2009 and July&nbsp;6, 2009, will be sufficient to permit us to
conduct our business through at least September&nbsp;30, 2009. We will need to raise substantial
additional capital to continue our business after this period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Three months ended March&nbsp;31, 2009 and 2008</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Operating Activities</I></B><B>. </B>Net cash used in operating activities was $4.5&nbsp;million for the three months
ended March&nbsp;31, 2009, compared to $4.8&nbsp;million for the comparable period in 2008. The decrease in
cash used in operating activities was primarily due to reductions in development activities and
fundamental business operations, as well as a $0.3&nbsp;million increase in licensing revenue. Included
in cash used in operating activities for the three months ended March&nbsp;31, 2009 were charges
associated with our October&nbsp;2008 and January and March&nbsp;2009 reductions in force. Accordingly, the
decreased expenses we otherwise would have realized in the first quarter of 2009 were offset by
charges associated with our October&nbsp;2008 and January and March&nbsp;2009 reductions in force.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Investing Activities. </I></B>Net cash provided by investing activities was $0 for the three months ended
March&nbsp;31, 2009, compared to cash used in investing activities of $10.3&nbsp;million for the comparable
period in 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Financing Activities. </I></B>There were no financing activities in the three months ended March&nbsp;31,
2009 and 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Accrued Compensation and Payroll Taxes</I></B><B>. </B>Accrued compensation and payroll taxes were $0.8
million at March&nbsp;31, 2009, compared to $0.9&nbsp;million at December&nbsp;31, 2008, a decrease of $0.1
million, or 15%. The decrease was primarily due to the paying-down of severance-related expenses
associated with our October&nbsp;2008 reduction in staff, offset by severance-related expenses
associated with our January and March&nbsp;2009 reductions in staff.
</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" style="font-size: 10pt; margin-top: 12pt"><B><I>Years Ended December&nbsp;31, 2008 and 2007</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Explanations of cash flow from operating, investing and financing activities are provided
below.
</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>December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Decrease</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><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" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>During 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents and investments in securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(23,613,252</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">33,463,156</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net working capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,735,519</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(24,922,542</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">30,658,061</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="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 nowrap align="center" colspan="2"><B>Year Ended</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Change</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Year Ended</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 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Between</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>Periods</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><DIV style="margin-left:15px; text-indent:-15px">Cash used in operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(23,787,604</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,144,414</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(19,643,190</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash provided by investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,856,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,848,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,008,272</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash provided by financing activities</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">(441,616</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">441,616</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (decrease)&nbsp;increase in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(4,930,835</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,262,467</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(11,193,302</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: 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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Operating activities. </I></B>Net cash used in operating activities was $23.8&nbsp;million in 2008, compared to
$19.6&nbsp;million in 2007. The increase in cash used in operating activities in 2008 was mainly due to
the increase in our R&#038;D and SG&#038;A expenses.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Investing activities</I></B>. Net cash provided by investing activities was $18.9&nbsp;million in 2008,
compared to cash used in investing activities of $8.0&nbsp;million in 2007. Cash provided by investing
activities in 2008 and 2007 was mainly net proceeds from sales of short-term investments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Financing activities. </I></B>There was no cash provided by financing activities in 2008. In 2007,
net cash provided by financing activities was $0.4&nbsp;million, consisting of proceeds from option
exercises.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have an on-going need to raise additional capital to support our operations. Despite the
equity financings we completed on June&nbsp;12, 2009 and July&nbsp;6, 2009, we believe our ability to raise
capital has been materially and adversely affected by the current financial and economic
environment. In addition, our ability to timely raise capital on commercially reasonable terms may
be limited by requirements, rules and regulations of the Securities and Exchange Commission and the
NYSE Amex (formerly, the American Stock Exchange).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the funds raised in our June and July&nbsp;2009 equity financings have enabled us to
re-start activities necessary to submit an NDA seeking FDA approval to market ANX-530 in the U.S.
and engage consultants to assist us in analyzing the results of our recently completed
bioequivalence study of ANX-514, we will require substantial additional capital to continue to seek
FDA approval of and ultimately commercialize ANX-530 and ANX-514. Currently, in addition to
pursuing activities necessary to submit an ANX-530 NDA and continuing to evaluate the data from the
ANX-514 bioequivalence study, we are focused primarily on raising additional capital as soon as
possible to continue to advance ANX-530 and ANX-514 toward commercialization in the U.S. We also
intend to continue to evaluate any strategic or partnering options, including the sale or exclusive
license of one or more of our product candidate programs, a strategic business merger, co-marketing
partnerships and other similar transactions. However, there can be no assurances that we will
continue to pursue capital-raising transactions or strategic or partnering alternatives or, if we
do, that we will be successful in consummating a transaction on a timely basis, or at all. We
likely will not be able to continue as a going concern unless we raise adequate additional capital.
Given our recent restructuring and cost-cutting measures, our ability to further curtail expenses
to provide additional time to obtain financing or to consummate a strategic or partnering
transaction is limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are unable to predict when, if ever, we will be able to raise additional capital or the
form, structure or terms of any potential strategic or partnering transaction, including whether we
will continue as a going concern, or whether we will seek protection under the provisions of the
U.S. Bankruptcy Code or liquidate our assets and entirely wind-up our operations. As a result, the
duration that our existing cash and cash equivalents will sustain our current operations is
uncertain. However, excluding the potentially significant costs associated with evaluating,
negotiating and consummating capital-raising and/or strategic or partnering transactions or seeking
protection under the provisions of the U.S. Bankruptcy Code or liquidating our assets and
winding-up our operations, we anticipate that our cash and cash equivalents as of March&nbsp;31, 2009,
together with the net proceeds from the equity financings we completed on
</DIV>

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

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">June&nbsp;12, 2009 and July&nbsp;6, 2009, will be sufficient to permit us to conduct our business
through at least September&nbsp;30, 2009. We will need to raise substantial additional capital to
continue our business after this period.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See Note 8, &#147;Recent Accounting Pronouncements,&#148; of the Notes to the Condensed Consolidated
Financial Statements (unaudited)&nbsp;in this prospectus for a discussion of recent accounting
announcements and their effect, if any, on us.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We had no off-balance sheet arrangements as of December&nbsp;31, 2008 or 2007 or as of March&nbsp;31,
2009 or 2008, as defined in Item&nbsp;303(a)(4) of Regulation&nbsp;S-K promulgated by the SEC. Accordingly,
no such arrangements are likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
</DIV>


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<DIV align="left">
<A name="109"></A>
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<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>BUSINESS</B>
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a development-stage biopharmaceutical company whose fundamental business is focused on
in-licensing, developing and commercializing proprietary product candidates for the treatment of
cancer. We seek to improve the performance and commercial potential of existing treatments by
addressing limitations associated principally with their safety and use. We have not yet marketed
or sold any products or generated any significant revenue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our lead product candidates, ANX-530 and ANX-514, are novel emulsion formulations of currently
marketed chemotherapy drugs. We believe ANX-530 (vinorelbine emulsion) and ANX-514 (docetaxel
emulsion) may improve the safety of and have greater commercial potential than the currently
marketed reference products, Navelbine and Taxotere, respectively, 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Reducing the incidence and severity of adverse effects; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Increasing their pharmacoeconomics and convenience to healthcare practitioners and
patients.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have recently re-started certain of our fundamental business operations, which we had
previously suspended to conserve working capital. Specifically, following completion of our equity
financing in June&nbsp;2009, we have been conducting activities necessary to submit an NDA seeking FDA
approval to market ANX-530 in the U.S. and evaluating the data from our recently completed
bioequivalence study of ANX-514. In addition, we have remained focused on raising additional
capital as soon as possible to continue to advance ANX-530 and ANX-514 toward commercialization in
the U.S. We also plan to continue to evaluate any strategic or partnering options, including the
sale or exclusive license of one or more of our product candidate programs, a strategic business
merger, co-marketing partnerships and other similar transactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beginning in October&nbsp;2008 and through June&nbsp;2009, we implemented numerous restructuring,
cost-cutting and re-prioritization initiatives to reduce operating costs and focus on those of our
options that we believed maximized the value of our assets. For instance, during that period, we
effected three reductions in our full-time employee workforce and, currently, we have two full-time
employees. We engage consultants on a project or as-needed basis and outsource substantially all
of our development activities to specialized vendors and contract development organizations. In
addition, in October&nbsp;2008, we discontinued our ANX-510, or CoFactor, program, in December&nbsp;2008, we
began exploring a range of strategic options, including the sale or disposition or one or more of
our product candidate programs, a strategic business merger and other similar transactions, and, in
March&nbsp;2009, we suspended substantially all of our development activities and fundamental business
operations to provide additional time to consummate a strategic transaction or otherwise obtain
financing.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Throughout 2008 and the first half of 2009, we experienced substantial turn-over in our
executive and management ranks. In January and April&nbsp;2008, our employment relationship with our
former president and chief medical officer and former chief financial officer and senior vice
president, respectively, ended. In April&nbsp;2008, Mark N.K. Bagnall, the former chair of the audit
committee of our board of directors, who was also a member of the compensation and nominating and
governance committees of our board of directors, joined our management team as executive vice
president and chief financial officer and, in December&nbsp;2008, Mr.&nbsp;Bagnall stepped down as executive
vice president and chief financial officer and resumed his role as solely a member of our board of
directors but also serves as a consultant to us. In October&nbsp;2008, as part of a reduction in our
workforce, we ended our employment relationship with our former chief scientific officer and senior
vice president, our former vice president of medical affairs and our former vice president of
research and development and promoted our former vice president of commercialization to senior vice
president of operations. At the same time, our former chief executive officer and president
resigned his management positions, though remained on our board of directors until December&nbsp;2008,
at which time he resigned his position on our board of directors. In January&nbsp;2009, as part of an
additional reduction in our work force, we ended our employment relationship with our vice
president of manufacturing. In May&nbsp;2009, our senior vice president of operations, resigned and, in
July&nbsp;2009, our vice president of regulatory affairs and quality assurance resigned. Beginning in
October&nbsp;2008, our company was led by a committee of executive officers. In February&nbsp;2009, our board
of directors appointed Brian M. Culley, our chief business officer and senior vice president, to
additionally serve as our principal executive officer and, in July&nbsp;2009, appointed Patrick L.
Keran, our general counsel, secretary and vice president, legal, to additionally serve as our
principal financial officer and principal accounting officer. However, as of the date of this
prospectus, we have not hired or appointed a chief executive officer or chief financial officer. In
addition, as of the date of this prospectus, we have only two employees, both full-time, Mr.&nbsp;Culley
and Mr.&nbsp;Keran. It is unclear whether or to what extent the departure of our former executives and
management personnel, our reduced workforce or our reliance on consultants, vendors and contract
organizations for assistance with our research and development and our selling, general and
administrative activities or our leadership by officers who do not have substantial previous
experience in executive leadership roles will negatively impact our ability to execute our business
plan or to
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">maintain effective disclosure controls and procedures or internal control over financial
reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;12, 2009, we completed an approximately $2.0&nbsp;million registered direct equity
financing involving the issuance of shares of our 0% Series&nbsp;A Convertible Preferred Stock,
convertible into 18,036,199 shares of our common stock, and warrants to purchase up to 8,116,290
shares of our common stock. We received approximately $1.7&nbsp;million in net proceeds from the
offering, after deducting the placement agent&#146;s fees and our estimated offering expenses. All of the shares of
the 0% Series A Convertible Preferred Stock subsequently have been converted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the June&nbsp;2009 financing, we re-started the final manufacturing activities related to
submitting an NDA for ANX-530 to seek approval of the FDA to market ANX-530 in the U.S. and engaged
consultants with expertise in taxane pharmacokinetics to assist us in analyzing the results of our
bioequivalence study of ANX-514.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July 6, 2009, we
completed an approximately $1.4 million registered direct equity financing involving the issuance of shares of
our 5% Series B Convertible Preferred Stock, convertible into 9,504,189 shares of our common stock. We received
approximately $1.2 million in net proceeds from the offering, after deducting the placement agent&#146;s fees and
our estimated offering expenses. The convertible preferred shares were to accrue a 5% dividend until July 6,
2014, unless converted prior to such date.  Upon any conversion of these preferred shares we were obligated to
pay the holder an amount equal to the total dividend that would have otherwise accrued on the shares through
July 6, 2014, less any dividend payment previously made with respect to such converted shares. Twenty-five
percent, or $340,250, of the gross proceeds of the financing were placed in an escrow account for payment of
the dividend and conversion amounts payable on the 5% Series B Convertible Preferred Stock. All of the shares
of the 5% Series B Convertible Preferred Stock subsequently have been converted and, pursuant to the terms of
the 5% Series B Convertible Preferred Stock, we paid an aggregate of $340,250 from the escrow account to the
holder of the converted preferred shares in connection with such conversions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We expect that, even if we complete the offering described in this prospectus, we may need to
raise substantial additional capital to fund our operations, including activities relating to the
commercialization of ANX-530, if an NDA for ANX-530 is submitted and if ANX-530 is approved by the
FDA, and activities relating to the development and regulatory review process and, ultimately,
commercialization of ANX-514. If we are unable to raise sufficient additional capital through this
offering or through future transactions following this offering, we may seek protection under the
provisions of the U.S. Bankruptcy Code or liquidate our assets and wind-up our operations. We are
unable to predict when, if ever, we will be able to raise additional capital to support our
operations or the form, structure or terms of any future equity or debt financing or strategic or
partnering transaction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our business was incorporated in Delaware in December&nbsp;1995. In October&nbsp;2000, we merged our
wholly-owned subsidiary, Biokeys Acquisition Corp., with and into Biokeys, Inc. and changed our
name to Biokeys Pharmaceuticals, Inc. In May&nbsp;2003, we merged Biokeys, Inc., our wholly-owned
subsidiary, with and into us and changed our name to ADVENTRX Pharmaceuticals, Inc. In July&nbsp;2004,
we formed a wholly-owned subsidiary, ADVENTRX (Europe) Ltd., in the United Kingdom primarily to
facilitate conducting clinical trials in the European Union and to obtain favorable pricing for
discussions with the European Medicines Agency. In April&nbsp;2006, we acquired SD Pharmaceuticals, Inc.
as a wholly-owned subsidiary. Our executive offices are located at 6725 Mesa Ridge Road, Suite&nbsp;100,
San Diego, California 92121, and our telephone number is (858)&nbsp;552-0866. Our corporate website is
located at www.adventrx.com.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our lead product candidates are designed to improve treatments for cancer patients. Each year,
almost 11&nbsp;million people worldwide are diagnosed with and nearly 7&nbsp;million people die from cancer.
According to the American Cancer Society, cancer is the second most common cause of death in the
U.S., accounting for 1 of every 4 deaths. It is estimated that over 1.4&nbsp;million new cancer cases
were diagnosed and over 550,000 people died from cancer in the U.S. in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Treatment choices for cancer patients depend on the type, stage and progression of the cancer,
along with the number and types of prior therapies, if any. Treatment options include surgery,
radiation, chemotherapy, hormone therapy and immunotherapy, both alone and in combination with each
other. Treatment of cancer with chemicals is referred to as chemotherapy. Adjuvant therapy refers
to additional treatment, typically chemotherapy or radiation, following removal of detectable
cancerous growths, typically by surgery. In 2006, chemotherapies generated over $40&nbsp;billion in
revenues.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Our Lead Product Candidates (ANX-530 and ANX-514)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Opportunities for New Formulations</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reformulating existing pharmaceutical products is an increasingly common product
lifecycle-management technique. Between 2002 and 2005, nearly 40% of the products launched by the
top 50 pharmaceutical manufacturers were reformulations. Finding new
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">markets for and ways to modify and improve existing products is often an essential element of
pharmaceutical companies&#146; efforts to maintain or grow revenues in the face of patent expirations
and competitive pressures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Navelbine and Taxotere are intravenously-injected chemotherapy drugs commonly used to treat
solid tumors. We believe the current formulations of these drugs have limitations that present
opportunities for improvement. We are developing novel ways to formulate the active ingredient
underlying each of these drugs that we believe may improve their safety profiles without adversely
affecting efficacy. In addition, we believe our formulations may provide benefits to patients and
practioners that do not manifest themselves in traditional measures of safety or efficacy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Regulatory Strategy</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The regulatory strategy for our lead product candidates is to demonstrate the bioequivalence
of each of ANX-530 and ANX-514 to the currently marketed reference product. The bioequivalence of
two drugs can be demonstrated in a single trial of as few as 28 patients, typically in an
open-label, single-dose, cross-over comparison of the drugs. For each of ANX-530 and ANX-514, the
FDA has indicated that data from a single study of approximately 28 patients that demonstrates the
bioequivalence of our product candidates to the reference product may be sufficient to support an
NDA. Accordingly, we view these bioequivalence trials as registrational studies in that they have
the potential to support a marketing application. If approved, the drug prescribing information, or
&#147;label,&#148; for our products may reflect data generated during the bioequivalence trials, including
comparative adverse event information.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The relatively low number of required patients and the single-dose treatment cycles associated
with these bioequivalence trials can decrease study timelines and costs relative to typical pivotal
studies. Accordingly, with relatively modest financial investment, we are able to assess the
pharmacokinetic equivalence of each of our product candidates to the reference product in as little
as 12 to 18&nbsp;months from initiation of the trial, which information should provide the data
necessary to support an NDA. By securing in advance clarity from the FDA regarding our planned
regulatory pathway, as we have done for ANX-530 and ANX-514, we mitigate aspects of the regulatory
risk associated with drug development. Furthermore, after we obtain marketing approval, we can
conduct clinical studies while marketing our products to expand product labels in ways that might
increase their commercial value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Furthermore, if any clinical studies we conduct, in addition to our bioequivalence studies,
are essential to the FDA&#146;s approval of an application to use our products or product candidates to
treat a new indication, or to support a label change in product use, the product may be eligible
for three years of marketing exclusivity for that indication or use. Marketing exclusivity means
that the FDA will not approve an abbreviated NDA, or ANDA (an ANDA is for a generic drug product)
or Section&nbsp;505(b)(2) NDA during the exclusivity period based on the conditions of approval of our
product.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Commercialization Strategy</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;HCPCS Product Codes and Reimbursement
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the U.S. and elsewhere, healthcare providers, including hospitals, nursing homes and
physician offices, typically purchase and administer to patients the drugs that patients are
restricted from self-administering and then seek reimbursement, primarily from third party payors
such as Medicare, Medicaid and private insurance companies. As a result, sales of
physician-administered prescription pharmaceuticals are dependent in large part on the availability
and rate of reimbursement to healthcare providers from third party payors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Healthcare Common Procedure Coding System, or HCPCS, was established to identify and
provide unique codes for healthcare goods and procedures, including codes for injectable oncology
drugs such as ANX-530 and ANX-514, should they be approved. Ultimately, the Centers for Medicare
and Medicaid Services, or CMS, is responsible for reviewing and approving applications for new
HCPCS codes for healthcare goods. Generic equivalents of drugs are assigned the same HCPCS code as
the original drug. Virtually all U.S. payors, including Medicare and private insurance plans, use
the Healthcare Common Procedure Coding System, including the product codes assigned by CMS.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In determining a specific reimbursement rate for a drug, CMS publishes an average sales price
for the drug based on manufacturer-reported sales data for all drugs within the same HCPCS product
code, including applicable discounts and rebates, as well as a reimbursement rate, expressed as a
percentage of the average sales price. Because generic equivalents of drugs are assigned the same
HCPCS code as the original drug, generic competition can be expected to decrease the level of
reimbursement for all drugs with the same HCPCS product code (both the original drug and its
generic equivalents) until price equilibrium is reached. Most private payors use similar methods
for determining reimbursement rates, sometimes based on average wholesale prices or CMS&#146;
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">published average sales price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our commercial strategy in the U.S. for ANX-530 and ANX-514 is to seek HCPCS product codes
that are distinct from those for Navelbine and Taxotere, respectively. If our products are provided
unique HCPCS codes, they will be reimbursed based on their own sales prices, without including
sales prices of the applicable reference product or its generic competition. We believe this will
provide greater freedom to price our products at a premium to competitive products, thereby
enhancing their value, and our plans include pricing ANX-530 at a premium to competitive products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Group Purchasing Organizations
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Group purchasing organizations, or GPOs, including provider networks, are entities that help
health care providers, such as hospitals, nursing homes and physician offices, realize savings and
efficiencies by aggregating purchasing volume and using that scale to negotiate discounts with
manufacturers and other vendors. The U.S. healthcare industry spends more than $200&nbsp;billion
annually in medical and non-medical products, with more than 70% allocated through GPOs.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe up to 80% of the U.S. markets for ANX-530 and ANX-514 are concentrated within eight
to ten GPOs and that a small, specialized sales force may be able to effectively market and sell
our products, if approved, through these organizations. As consolidation within the industry and
attempts to further enhance economies of scale and marketing advantages continue, we believe these
markets will concentrate further. If our products demonstrate equivalent efficacy and superior
tolerability or pharmacoeconomic benefits relative to the reference product, we believe the
well-established utility of the reference product should enable GPOs to enact broad and rapid
shifts among their constituents from the reference product to our novel emulsion formulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2008, we announced that, until we secured additional funding, we may delay or
significantly reduce spending on activities related to product launches. Since then, we have
deferred conducting most activities related to acquiring or developing sales, marketing and
distribution capabilities, establishing commercial relationships with contract manufacturers and
suppliers and building the associated regulatory compliance infrastructure. We will spend
considerable resources, both financial and otherwise, to prepare for the commercial launch of, and
to launch commercially, our product candidates, should any of them be approved and we determine to
launch them independently.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ANX-530 (vinorelbine emulsion)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Background; Limitations of Current Formulations</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ANX-530 is a novel emulsion formulation of the chemotherapy drug vinorelbine. Navelbine, a
branded formulation of vinorelbine, is approved in the U.S. to treat advanced non-small cell lung
cancer as a single agent or in combination with cisplatin, and approved in the European Union, or
EU, to treat non-small cell lung cancer and advanced or metastatic breast cancer. Since February
2003, generic equivalents of Navelbine have been available in the U.S.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Navelbine and its generic equivalents are often associated with injection site reactions,
including phlebitis, erythema and pain at the site of injection. Studies have shown these reactions
occur in approximately one-third of patients, with 5% of the reactions categorized as severe.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ANX-530 is designed to reduce the incidence and severity of these injection site reactions.
Our formulation emulsifies vinorelbine into a homogeneous suspension of nanoparticles that is
designed protect the venous endothelium during administration into a peripheral vein, thereby
reducing irritation associated with administration of the drug.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Clinical and Regulatory Developments</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In November&nbsp;2007, we announced positive results from a bioequivalence study of ANX-530.
Pharmacokinetic equivalence, the primary endpoint of the study, was observed between ANX-530 and
Navelbine. Based on federal regulations and FDA guidance regarding bioequivalence studies,
pharmacokinetic equivalence was demonstrated by a statistical comparison of both the areas under
the curve (AUC)&nbsp;and maximum plasma concentrations (Cmax).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In January&nbsp;2008, we announced safety results from the study. In post hoc analyses, relative to
Navelbine, ANX-530 demonstrated a statistically significant reduction in injection site reactions.
Notably, the incidence of injection site reactions attributed to Navelbine was consistent with its
product label. Furthermore, ANX-530 was determined to be safe and well-tolerated with no
significant differences observed in any other safety parameters.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Throughout 2008, we conducted various activities related to our ANX-530 NDA submission. In
particular, we engaged a new contract manufacturer and met with the FDA regarding our NDA
submission. At this meeting, the FDA requested additional information regarding our new contract
manufacturer and material manufactured by our new contract manufacturer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2009, due to an immediate need to raise additional capital to continue our business,
we suspended substantially all of our development activities and fundamental business operations to
conserve cash while we pursued financing alternatives, evaluated strategic options and considered
whether to liquidate our assets, wind-up our operations and distribute any remaining cash to our
stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Following the equity financing that we completed in June&nbsp;2009, in which we raised net proceeds
of approximately $1.7&nbsp;million, we re-started the final manufacturing activities related to
submitting an NDA for ANX-530. An update on the ANX-530 NDA submission timeline will be provided as
critical activities are completed. However, assuming the continued availability of capital to us,
our goal is to submit the NDA around the end of 2009.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Worldwide sales of Navelbine and generic formulations of vinorelbine in 2006 were in excess of
$200&nbsp;million, with approximately 13% of these revenues generated in the U.S. Between 2004 and 2007,
U.S. unit sales of Navelbine and its generic equivalents grew at a compounded annual rate of
approximately 9%. If ANX-530 is granted a separate HCPCS code and is sold at a price-premium to
Navelbine and its generic equivalents, the potential dollar value of this market could increase
substantially.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, based in part on recent clinical studies, we believe the market for
vinorelbine-based treatments, both in the U.S. and abroad, will grow in the coming years. In 2005,
the New England Journal of Medicine published a study reporting a statistically significant
improvement in overall survival among patients with early-stage lung cancer who received adjuvant
therapy consisting of vinorelbine plus cisplatin following tumor resection relative to patients
receiving no adjuvant therapy. In addition, a second study presented at the 2005 annual meeting of
the American Society of Clinical Oncology reported similarly positive results. Research involving
vinorelbine to treat other cancer types, including breast and ovarian cancer, is ongoing. We
believe that if ongoing research yields additional positive results, demand may increase for
vinorelbine-based treatments, including ANX-530.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe ANX-530 is well-positioned as an alternative to Navelbine and its generic
equivalents. In post hoc analyses, relative to Navelbine, ANX-530 demonstrated a statistically
significant reduction in injection site reactions in our registrational bioequivalence study while
maintaining comparable pharmacokinetics. We believe an improved safety profile of ANX-530 will be
compelling to healthcare practitioners and patients.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our market research, conducted among practicing oncologists and oncology nurses, suggests that
healthcare practitioners prefer and would use a formulation of vinorelbine that reduced or
eliminated injection site reactions while providing comparable efficacy, provided the financial
impact to the practitioner of using such a formulation, relative to alternative formulations, is
neutral or positive. Furthermore, for a variety of reasons, including anticipated frequent
intravenous drug delivery and to avoid injection site reactions and loss of venous access,
Navelbine often is administered through a central line, a more invasive procedure in which a
catheter is inserted into and left for a period of time in a large vein in the neck, chest or
groin. We believe ANX-530 may provide an alternative to placing a central line for those patients
for whom central lines are used primarily to avoid injection site reactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ANX-514 (docetaxel emulsion)</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Background; Limitations of Taxotere</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ANX-514 is a novel emulsion formulation of the chemotherapy drug docetaxel. Taxotere, a
branded formulation of docetaxel, is approved to treat breast, non-small cell lung, prostate,
gastric and head and neck cancers. In the U.S., aspects of Taxotere are covered by patents through
November&nbsp;2013.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;According to Taxotere&#146;s label, patients should be observed closely for hypersensitivity, or
allergic, reactions, which may occur within a few minutes following initiation of Taxotere
administration. These reactions generally are believed to be associated with polysorbate 80, which
is present in Taxotere, and range from mild, including flushing, rash, breathing difficulty and
drop in blood pressure, to severe, including generalized rash/erythema, hypotension and, in rare
cases, fatal anaphylaxis. Taxotere&#146;s label recommends that all patients should be premedicated with
oral corticosteroids for three days starting one day prior to Taxotere administration to reduce the
severity of hypersensitivity reactions, among other reasons. Even following premedication,
hypersensitivity reactions have been observed, including, very rarely, fatal anaphylaxis.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ANX-514 is formulated without polysorbate 80 or other detergents and is designed to reduce the
incidence and severity of hypersensitivity reactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Preclinical Efficacy and Safety; Data from Bioequivalence Study</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In preclinical testing, we demonstrated that ANX-514 reduced hypersensitivity reactions
without impacting pharmacokinetics or antitumor activity when compared to Taxotere. In an animal
model, we observed anaphylactic reactions following Taxotere administration, including decreased
respiration, swelling and tremors. Furthermore, decreases in blood pressure and increases in
histamine levels were observed within 10-20 minutes of Taxotere administration. In contrast, we did
not observe hypersensitivity reactions following administration of ANX-514. Specifically, we did
not observe treatment-related changes in blood pressure or increases in histamine levels. On
rechallenge at three weeks, hypersensitivity reactions were observed only in the Taxotere-treated
animals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, in two separate studies in different animal species, ANX-514 showed equivalent
pharmacokinetics to Taxotere. In animal models, ANX-514 demonstrated dose-dependent inhibition of
tumor growth with equivalent antitumor activity when compared to Taxotere at equal dose levels.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2008, we initiated enrollment in a registrational bioequivalence study of ANX-514
and, in February&nbsp;2009, we announced that enrollment in the study was complete. In May&nbsp;2009, we
announced that ANX-514 was determined to have comparable overall safety as Taxotere, with no
differences between treatment groups in severe toxicities. However, pharmacokinetic equivalence,
the primary endpoint of the study, was not demonstrated based on benchmark regulatory standards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The study data revealed higher blood-levels of docetaxel during and immediately following
infusion of the study drug (i.e., during the first hour of treatment) in patients receiving ANX-514
relative to those receiving Taxotere, but, at 10 minutes after the completion of infusion,
docetaxel blood-levels were comparable and remained so through the end of the observation period.
We are analyzing these short-term increased levels, which were the reason ANX-514 was outside the
bounds established by the FDA for determining bioequivalence. Following preliminary discussions
with clinicians and experts in taxane pharmacokinetics, we believe that the increased blood-levels
of docetaxel do not affect the safety or efficacy of the drug and are not clinically relevant. We
intend to continue to evaluate the data from this study and plan to seek a meeting with the FDA in
the fourth quarter of 2009 to discuss the results.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Worldwide annual sales of Taxotere in 2007 were approximately $2.9&nbsp;billion, making it one of
the top-selling anti-cancer agents in the world. Based on its early success, substantial investment
into researching the use of Taxotere in new indications has led to numerous label expansions in the
U.S. and abroad.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Assuming we are able to demonstrate that the increased blood-levels of docetaxel do not affect
the safety or efficacy of docetaxel, we believe ANX-514 is well-positioned as an alternative to
Taxotere and any of its future generic equivalents. In established animal models, we demonstrated
ANX-514 reduces hypersensitivity reactions relative to Taxotere. Our market research, conducted
among practicing oncologists and oncology nurses, suggests a preference for a formulation of
docetaxel that reduces hypersensitivity reactions, which are perceived as a significant issue. In
addition, patients with a history of allergic reactions to Taxotere, but for whom docetaxel is the
best or only therapeutic option, may benefit from ANX-514, particularly as Taxotere&#146;s label
recommends against rechallenging patients with a history of severe hypersensitivity reactions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If clinical studies validate our preclinical work, the need to premedicate patients, which is
intended to reduce the severity of hypersensitivity reactions, may be reduced or eliminated. Many
patients prefer to avoid premedication and the side effects often associated with steroids, which
include agitation, altered mental state, sleeplessness and altered blood/sugar levels. In addition,
ANX-514 may be well-suited for patients for whom steroid premedication causes other complications,
such as diabetics.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the improved safety and comparable efficacy observed in preclinical testing,
ANX-514 may provide nonclinical benefits to patients and healthcare practitioners. ANX-514 is
formulated without polysorbate 80, which can present practical problems during administration.
Taxotere&#146;s label indicates foaming may occur when mixing Taxotere and the accompanying diluent due
to the presence of polysorbate 80. Our market research suggests foaming is frequent, which can
cause delays in administering the drug or disruption during administration if too much foam is
present during administration. Practitioners have also expressed concern that foaming, as well as
the physical process of extracting the initially diluted Taxotere mixture from the mixing vial, may
result in patient underdosing.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Polysorbate 80 also is incompatible with plasticized polyvinyl chloride, or PVC, which is used
in making the IV bags and tubing commonly used to infuse chemotherapy drugs. Polysorbate 80 can
leach diethylhexyl phthalate, a potentially hepatotoxic and carcinogenic acid, from plasticized PVC
bags and tubing, resulting in the addition of diethylhexyl phthalate into the infusion solution.
Taxotere&#146;s label warns against contact between Taxotere and plasticized PVC equipment and
recommends storing the fully-prepared Taxotere mixture in glass or polypropylene bottles or
polypropylene or polyolefin plastic bags and administering through polyethylene-lined
administration sets. As a result, healthcare providers must have available and remember to use more
costly non-PVC supplies to prepare and administer Taxotere, the costs of which generally are not
separately reimbursed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Finally, infusion of the fully-prepared Taxotere mixture should begin within three hours of
preparation. Our stability testing suggests fully-prepared ANX-514 is stable for up to 48 hours. In
hospital settings, where a central pharmacy may prepare products for administration, the limited
stability of the fully-prepared Taxotere mixture may result in expired doses. In addition to wasted
product, patients must wait while additional Taxotere is prepared for administration and additional
stress is placed on hospital resources, including room availability.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While in the U.S. aspects of Taxotere retain patent protection through November&nbsp;2013, the
active ingredient, docetaxel, loses its patent protection in May&nbsp;2010; however, if an outstanding
request for pediatric exclusivity is granted, this date would be extended by six months. This
creates a significant opportunity to develop a formulation of docetaxel that does not infringe any
of the remaining Taxotere patents. Without challenging the remaining Taxotere patents, a generic
equivalent of Taxotere cannot be approved in the U.S. until November&nbsp;2013, which could provide
other formulations of docetaxel, including ANX-514, over three years (less any period of pediatric
exclusivity that may be granted in the future) of marketing in the U.S. before the introduction of
Taxotere generic equivalents. We believe this potential lead time over generic competition provides
an additional opportunity to establish ANX-514 as an alternative to Taxotere and to establish
pricing for ANX-514 prior to the introduction of Taxotere generic equivalents.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the past, we spent significant resources on the development of ANX-510, or CoFactor,
including a phase 2b clinical trial and a discontinued phase 3 clinical trial in the first line
treatment of metastatic colorectal cancer, and a phase 2 clinical trial in the treatment of
advanced breast cancer. Following our announcement in October&nbsp;2007 that the CoFactor/5-FU arm of
our phase 2b clinical trial of CoFactor did not demonstrate statistically significant improved
safety in the trial&#146;s primary endpoint, we discontinued enrolling patients in our phase 3 clinical
trial of CoFactor and, in October&nbsp;2008, we discontinued all active work on Co-Factor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2008, we also discontinued active work on all other compounds (other than ANX-530 and
ANX-514) to which we have or had rights and on which we may have previously spent resources
developing. We do not plan to resume development activities with respect to CoFactor or any of such
other compounds in the next 12&nbsp;months.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If regulatory authorities approve the marketing and selling of any of our product candidates,
they will face significant and long-term competition from pharmaceutical companies, pharmaceutical
divisions of companies and biotechnology, biopharmaceutical and specialty pharmaceuticals
companies, among others. This competition likely will become more intense if any of our products or
competitor products achieve commercial success. Most of our competitors, particularly large
pharmaceutical companies, have greater clinical, regulatory, manufacturing, marketing,
distribution, compliance and financial resources and experience than we have. Many of these
companies have commercial arrangements with other companies to supplement their internal
capabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ANX-530 and ANX-514, if approved, may compete against Navelbine and Taxotere, respectively, as
well as their generic equivalents and other formulations of vinorelbine and docetaxel. In addition
to Navelbine, currently there are at least 6 generic versions of vinorelbine on the market. In the
U.S., in May&nbsp;2010 (but subject to any period of pediatric exclusivity that may be granted in the
future), patent protection ends for docetaxel and, in November&nbsp;2013, patent protection ends for
Taxotere. We are aware of two leading generics companies that each have developed or acquired a
formulation of docetaxel and have certified that, after May&nbsp;2010, their respective formulations of
docetaxel will not infringe any unexpired Taxotere patents.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under our current regulatory strategy, because we anticipate submitting NDAs with only
bioequivalence data, the ability to differentiate our products from competitor products will be
limited. Even if we believe our products demonstrate clinical or pharmacoeconomic benefits, we may
be unable to market our products based on these benefits. If our products fail to obtain separate
HCPCS codes, we may be required to price our products at levels that do not cover our costs to
manufacture, market and distribute the products or provide any profit, or to price our products at
levels at which they are not competitive.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, numerous companies are focused on reformulating currently marketed drugs. In
particular, the taxanes, the class of drugs of which Taxotere is a member, have experienced
substantial commercial success, in part as a result of their effectiveness in treating a wide
variety of cancers. This commercial success has generated significant interest in reformulating
Taxotere and other taxanes. In addition to our approach of emulsifying docetaxel, other companies
are pursuing alternative delivery vehicles, including the use of albumin nanoparticles, prodrugs,
polyglutamates, analogs, co-solvents, liposomes and microspheres. Many of these or similar
approaches could be applied to vinorelbine. Relative to our formulations, formulations based on one
or more of these other methods may result in greater efficacy or safety, provide better drug
delivery to tumor sites or otherwise improve benefits to patients and healthcare providers. For
instance, there is an oral formulation of vinorelbine approved for use in the EU against which we
would compete if our emulsion formulation of vinorelbine were approved for use in the EU.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Over the longer term, our ability, independently or with a strategic or other partner, to
successfully manufacture, market, distribute and sell any of our or their approved products, expand
their usage and bring new products to the marketplace will depend on many factors, including, but
not limited to, the effectiveness and safety of those products, FDA and foreign regulatory
agencies&#146; approvals of new products and indications, the degree of patent protection afforded to
particular products and the rates at which those products are reimbursed.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not have our own manufacturing facilities. We meet our preclinical and clinical trial
manufacturing requirements (including manufacturing active pharmaceutical ingredient, or API,
formulating and assembling final drug product, labeling, testing and release, packaging, storing
API and finished drug product and similar activities) by establishing relationships with
third-party manufacturers and other service providers to perform these services for us. In the
past, we relied on individual proposals and purchase orders to meet our needs and typically relied
on terms and conditions proposed by the third party or us to govern our rights and obligations
under each order (including provisions with respect to intellectual property, if any). In 2008, we
entered into a master services agreement with a new contract manufacturer, as well as individual
work orders that are governed by the master services agreement, under which the manufacturer will
provide process development and scale-up activities for ANX-530 and ANX-514. We do not have any
long-term agreements or commitments for these services. Likewise, we do not have any long-term
agreements or commitments with vendors to supply the underlying component materials of our product
candidates, some of which are available from only a single supplier. In January&nbsp;2009, as part of
on-going cost-containment measures, we substantially reduced or delayed spending on third-party
consulting and vendor services, including contract manufacturing. In March&nbsp;2009, we suspended
substantially all of our development activities and fundamental business operations to provide
additional time to consummate a strategic transaction or otherwise obtain financing. In June&nbsp;2009,
following the completion of an equity financing in which we raised net proceeds of approximately
$1.7&nbsp;million, we resumed the final manufacturing activities related to submitting an NDA for
ANX-530.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Should any of our product candidates obtain marketing approval, relationships with third-party
manufacturers and other service providers in connection with the commercial production of our
products would need to be established. There is some flexibility in securing other manufacturers to
produce our product candidates; however, our alternatives may be limited due to proprietary
technologies or methods used in the manufacture of some of our product candidates. In addition, if
we seek to make certain changes to an approved product, such as changing vendors who supply the
underlying component materials of our product candidates, we may need FDA review and approval
before the change can be implemented.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>ANX-530 </I>(vinorelbine emulsion)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We own world-wide rights (excluding China, Hong Kong, Macau and Taiwan) to patent applications
covering the composition and use of our vinorelbine emulsion product candidate, subject to the
exclusive license we granted to Latitude Pharmaceuticals (described below under &#147;Licensing
Agreements&#148;). Patent applications, entitled &#147;Compositions for Delivering Highly Water Soluble
Drugs,&#148; currently are pending in the U.S., Canada and 13 additional countries, and regional patent
applications are also pending in the European Patent Office and the Eurasian Patent Office. These
applications have a priority date of July&nbsp;12, 2004, and any patents granted thereon have an
expected expiration date of July&nbsp;2025 in the U.S. and July&nbsp;2025 in the other countries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>ANX-514 </I>(docetaxel emulsion)
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We own world-wide rights (excluding China, Hong Kong, Macau and Taiwan) to patent applications
covering the composition and use of our docetaxel emulsion product candidate for the treatment of
cancer, subject to the exclusive license we granted to Latitude Pharmaceuticals (described below
under &#147;Licensing Agreements&#148;). Patent applications, entitled &#147;Low Oil Emulsion
</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">Compositions for Delivering Taxoids and Other Insoluble Drugs,&#148; currently are pending in the
U.S., Canada and 9 additional countries, and a regional patent application is also pending in the
European Patent Office. These applications have a priority date of September&nbsp;28, 2004, and any
patents granted thereon will expire in September&nbsp;2025. Patent applications, entitled &#147;Vitamin E
Succinate Stabilized Pharmaceutical Compositions, Methods for the Preparation and Use Thereof,&#148; are
also currently pending in the U.S., Canada and 8 additional countries, and regional patent
applications are also pending in the European Patent Office and the Eurasian Patent Office. These
applications have a priority date of February&nbsp;1, 2006, and any patents granted on these
applications have an expected expiration date in February&nbsp;2027.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are aware of a substantial number of patents issued and patent applications filed in our
technical areas or fields. There is a risk that third parties may allege that they have patent
rights encompassing our product candidates or methods and no assurance can be given that patents do
not exist, have not been filed, or could not be filed or issued, which contain claims covering our
product candidates or methods.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We cannot provide assurance that our pending patent applications will issue as patents, that
any issued patents will provide us with significant competitive advantages, or that the validity or
enforceability of any of our patents will not be challenged or, if instituted, that these
challenges will not be successful. The cost of litigation to uphold the validity and prevent
infringement of our patents could be substantial. Furthermore, we cannot provide assurance that
others will not independently develop similar technologies or duplicate our technologies or design
around the patented aspects of our technologies. We can provide no assurance that our proposed
technologies will not infringe patents or rights owned by others, licenses to which might not be
available to us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the approval process for patent applications in different countries may differ
significantly. The patent authorities in each country administer that country&#146;s laws and
regulations relating to patents independently of the laws and regulations of any other country and
the patents must be sought and obtained separately, which can add substantial cost and expense. In
addition, a favorable outcome or approval in one country does not necessarily indicate that a
favorable outcome or approval can be obtained in other countries.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our research and development expenses were $17.9&nbsp;million in 2008 and $15.9&nbsp;million in 2007.
Our research and development expenses consist primarily of salaries and related employee benefits,
costs associated with bioequivalence and clinical trials managed by contract research
organizations, or CROs, and costs associated with non-clinical activities, such as research-related
manufacturing, preclinical research studies, quality assurance and regulatory activities. In 2007,
our most significant costs were for bioequivalence and clinical trials and, in 2008 our most
significant costs were for research-related manufacturing, including the cost of API and other raw
materials and components. Our bioequivalence and clinical trial expenses include payments to
vendors such as CROs, investigators, clinical suppliers and related consulting. Our
research-related manufacturing expenses include purchasing API, manufacturing materials for
bioequivalence and clinical trials and stability testing to support regulatory filings and related
labeling, testing and release, packaging and storing.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>SD Pharmaceuticals</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2006, we acquired SD Pharmaceuticals, Inc. in exchange for shares of our common
stock. Under a prior license agreement between SD Pharmaceuticals, Latitude Pharmaceuticals, Inc.
and Andrew X. Chen, the sole owner of Latitude Pharmaceuticals, Dr.&nbsp;Chen had assigned to SD
Pharmaceuticals all rights and interests of Dr.&nbsp;Chen and Latitude Pharmaceuticals to certain
patents throughout the world other than in China, Hong Kong, Macau and Taiwan. Under this
agreement, SD Pharmaceuticals granted back to Latitude Pharmaceuticals a worldwide, exclusive,
royalty-free and irrevocable license to use the assigned patents in all fields of use other than
certain excluded fields as specified in the agreement. Our rights in ANX-530 (vinorelbine emulsion)
and ANX-514 (docetaxel emulsion) arise through our interest in SD Pharmaceuticals. Accordingly, we
have no rights in these product candidates in China, Hong Kong, Macau and Taiwan, and our rights
under the assigned patents in the rest of the world are limited to the following fields:
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For ANX-530, vinca alkaloid intravenous emulsion formulation for cancer treatment and
any other disease indication.</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For ANX-514, docetaxel intravenous emulsion formulation for cancer treatment and any
other disease indication.</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">



</TABLE>
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Governmental authorities in the U.S. and other countries extensively regulate the testing,
manufacturing, labeling, storage, recordkeeping, advertising, promotion, export, marketing and
distribution, among other things, of pharmaceutical products. In the U.S., the FDA, under the
Federal Food, Drug and Cosmetic Act, or FDCA, and other federal statutes and regulations, subjects
pharmaceutical products to rigorous review. If we do not comply with applicable requirements, we
may be fined, the government may refuse to approve our marketing applications or allow us to
manufacture or market our products, and we may be criminally prosecuted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We and our third-party manufacturers, distributors and CROs may also be subject to regulations
under other federal, state, and local laws, including the Occupational Safety and Health Act, the
Environmental Protection Act, the Clean Air Act, the Health Insurance Portability and
Accountability Act, privacy laws and import, export and customs regulations as well as the laws and
regulations of other countries.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>FDA Approval Process</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To obtain approval of a new product from the FDA, we must, among other requirements, submit
data supporting safety and efficacy as well as detailed information on the manufacture and
composition of the product and proposed labeling. The testing and collection of data and the
preparation of necessary applications are expensive and time-consuming. The FDA may not act quickly
or favorably in reviewing these applications, and we may encounter significant difficulties or
costs in our efforts to obtain FDA approvals that could delay or preclude us from marketing our
products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The process required by the FDA before a new drug may be marketed in the U.S. generally
involves the following: completion of preclinical laboratory and animal testing in compliance with
FDA regulations; submission of an investigational new drug application, which must become effective
before human clinical trials may begin; performance of adequate and well-controlled human clinical
trials to establish the safety and efficacy of the proposed drug for its intended use; and
submission and approval of an NDA by the FDA. The sponsor typically conducts human clinical trials
in three sequential phases, but the phases may overlap. In phase 1 clinical trials, the product is
tested in a small number of patients or healthy volunteers, primarily for safety at one or more
doses. In phase 2, in addition to safety, the sponsor evaluates the efficacy of the product on
targeted indications, and identifies possible adverse effects and safety risks, in a patient
population somewhat larger than phase 1 clinical trials. Phase 3 clinical trials typically involve
additional testing for safety and clinical efficacy in an expanded population at
geographically-dispersed test sites.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a product candidate moves through the clinical phases, manufacturing processes are further
defined, refined, controlled and validated. The level of control and validation required by the FDA
increases as clinical studies progress.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Clinical trials must be conducted in accordance with the FDA&#146;s good clinical practices
requirements. The FDA may order the temporary or permanent discontinuation of a clinical trial at
any time or impose other sanctions if it believes that the clinical trial is not being conducted in
accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients.
An institutional review board, or IRB, generally must approve the clinical trial design and patient
informed consent at each clinical site and may also require the clinical trial at that site to be
halted, either temporarily or permanently, for failure to comply with the IRB&#146;s requirements, or
may impose other conditions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The applicant must submit to the FDA the results of the preclinical and clinical trials,
together with, among other things, detailed information on the manufacture and composition of the
product and proposed labeling, in the form of an NDA, including payment of a user fee. The FDA
reviews all NDAs submitted before it accepts them for filing and may request additional information
rather than accepting an NDA for filing. Once the submission is accepted for filing, the FDA begins
an in-depth review of the NDA. Under the Prescription Drug User Fee Act, or PDUFA, the FDA
ordinarily has 10&nbsp;months in which to complete its initial review of the NDA and respond to the
applicant. However, the PDUFA goal dates are not legal mandates and the FDA response often occurs
several months beyond the original goal date. The review process and the target response date under
PDUFA may be extended if the FDA requests or the NDA sponsor otherwise provides additional
information or clarification regarding information already provided in the submission. Following
completion of the FDA&#146;s initial review of the NDA and the clinical and manufacturing procedures and
facilities, the FDA will issue an complete response or action letter, which will either include an
approval authorizing commercial marketing of the drug for certain indications or contain the
conditions that must be met in order to secure final approval of the NDA. If the FDA&#146;s evaluation
of the NDA submission and the clinical and manufacturing procedures and facilities is not
favorable, the FDA may refuse to approve the NDA.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Section&nbsp;</I><I>505(b)(2)</I><I> New Drug Applications</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As an alternate path to FDA approval for new formulations of previously approved products, a
company may file an NDA under Section&nbsp;505(b)(2) of the FDCA. Section&nbsp;505(b)(2) was enacted as part
of the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the
Hatch-Waxman Act. Section&nbsp;505(b)(2) permits the submission of an NDA where at least some of the
information required for approval comes from studies not conducted by or for the applicant and for
which the applicant has not obtained a right of reference. The Hatch-Waxman Act permits the
applicant to rely upon certain published preclinical or clinical studies conducted for an approved
product or the FDA&#146;s conclusions from prior review of such studies. The FDA may also require
companies to perform additional studies or measurements to support the change from the approved
product. The FDA may then approve the new product for all or some of the label indications for
which the referenced product has been approved, as well as for any new indication sought by the
Section&nbsp;505(b)(2) applicant. While references to preclinical and clinical data not generated by the
applicant or for which the applicant does not have a right of reference are allowed, all
development, process, stability, qualification and validation data related to the manufacturing and
quality of the new product must be included in an NDA submitted under Section&nbsp;505(b)(2) of the
FDCA. Our regulatory strategy for both ANX-530 and ANX-514 involves submitting NDAs under Section
505(b)(2).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent that the Section&nbsp;505(b)(2) applicant is relying on the FDA&#146;s conclusions
regarding studies conducted for an already approved product, the applicant is required to certify
to the FDA concerning any patents listed for the approved product in the FDA&#146;s Orange Book
publication. Specifically, the applicant must certify that: (i)&nbsp;the required patent information has
not been filed; (ii)&nbsp;the listed patent has expired; (iii)&nbsp;the listed patent has not expired, but
will expire on a particular date and approval is sought after patent expiration; or (iv)&nbsp;the listed
patent is invalid or will not be infringed by the new product. A certification that the new product
will not infringe the already approved product&#146;s listed patents or that such patents are invalid is
called a paragraph IV certification. If the applicant does not challenge the listed patents, the
Section&nbsp;505(b)(2) application will not be approved until all the listed patents claiming the
referenced product have expired. The Section&nbsp;505(b)(2) application also will not be approved until
any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity,
listed in the Orange Book for the referenced product has expired.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If the applicant has provided a paragraph IV certification to the FDA, the applicant must also
send notice of the paragraph IV certification to the NDA and patent holders for the referenced
product once the applicant&#146;s NDA has been accepted for filing by the FDA. The NDA and patent
holders may then initiate a legal challenge to the paragraph IV certification. The filing of a
patent infringement lawsuit within 45&nbsp;days of their receipt of a paragraph IV certification
automatically prevents the FDA from approving the Section&nbsp;505(b)(2) NDA until the earlier of 30
months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case
that is favorable to the Section&nbsp;505(b)(2) applicant. Thus, the Section&nbsp;505(b)(2) applicant may
invest a significant amount of time and expense in the development of its products only to be
subject to significant delay and patent litigation before its products may be commercialized.
Alternatively, if the listed patent holder does not file a patent infringement lawsuit within the
required 45-day period, the applicant&#146;s NDA will not be subject to the 30-month stay. A paragraph
IV certification would be required in connection with a Section&nbsp;505(b)(2) NDA for ANX-514 that is
filed before November&nbsp;2013.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Other Regulatory Requirements</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Even if the FDA approves one or more of our product candidates, we will continue to be subject
to a number of post-approval regulatory requirements. If we seek to make certain changes to an
approved product, such as the addition of a new labeled indication or making certain manufacturing
changes or product enhancements, we will need FDA review and approval before the change can be
implemented. While physicians may use products for indications that have not been approved by the
FDA, we may not label or promote the product for an indication that has not been approved. Securing
FDA approval for new indications or product enhancements and, in some cases, for labeling claims or
changes in manufacturing, is generally a time-consuming and expensive process that may require us
to conduct clinical studies under the FDA&#146;s investigational new drug regulations. Even if such
studies are conducted, the FDA may not approve any change in a timely fashion, or at all. In
addition, adverse experiences associated with use of the products must be reported to the FDA, and
FDA rules govern how we can label, advertise or otherwise commercialize our products. The FDA also
may, in its discretion, require post-marketing testing and surveillance to monitor the effects of
approved products or place conditions on any approvals that could restrict the commercial
applications of these products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to FDA restrictions on marketing of pharmaceutical products, several other types
of state and federal laws have been applied to restrict certain marketing practices in the
pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims
statutes. The federal healthcare program anti-kickback statute prohibits, among other things,
knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in
return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any
healthcare item or service reimbursable under Medicare, Medicaid or other federally financed
healthcare programs. This statute has been interpreted to apply to arrangements between
pharmaceutical manufacturers on the one
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">hand and prescribers, purchasers and formulary managers on the other. Violations of the
anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary penalties and
exclusion from participation in federal healthcare programs. Although there are a number of
statutory exemptions and regulatory safe harbors protecting certain common activities from
prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and
practices that involve remuneration intended to induce prescribing, purchases or recommendations
may be subject to scrutiny if they do not qualify for an exemption or safe harbor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Federal false claims laws prohibit any person from knowingly presenting, or causing to be
presented, a false claim for payment to the federal government, or knowingly making, or causing to
be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other
healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they
report to pricing services, which in turn are used by the government to set Medicare and Medicaid
reimbursement rates, and for allegedly providing free product to customers with the expectation
that the customers would bill federal programs for the product. In addition, certain marketing
practices, including off-label promotion, may also violate false claims laws. The majority of
states also have statutes or regulations similar to the federal anti-kickback law and false claims
laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in
several states, apply regardless of the payor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we and the third-party manufacturers on which we rely for the manufacture of our
products or their respective underlying components (including API) are subject to requirements that
drugs be manufactured, packaged and labeled in conformity with current Good Manufacturing Practices
promulgated by the FDA, or cGMP. To comply with cGMP requirements, manufacturers must continue to
spend time, money and effort to meet requirements relating to personnel, facilities, equipment,
production and process, labeling and packaging, quality control, recordkeeping and other
requirements. The FDA periodically inspects drug manufacturing facilities to evaluate compliance
with cGMP requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Also, as part of the sales and marketing process, pharmaceutical companies frequently provide
samples of approved drugs to physicians. This practice is regulated by the FDA and other
governmental authorities, including, in particular, requirements concerning recordkeeping and
control procedures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Outside of the U.S., the ability to market our products will also depend on receiving
marketing authorizations from the appropriate regulatory authorities. The foreign regulatory
approval process includes all of the risks associated with the FDA approval described above. In
addition, the requirements governing the conduct of clinical trials and marketing authorization
vary widely from country to country, and the time may be longer or shorter than that required for
FDA approval. In addition, 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 any collaborator of ours.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have two employees, our chief business officer and senior vice president and our general
counsel, secretary and vice president, legal, both of whom are full-time. Our employees are not
unionized and we believe that our relationship with our employees is good. We engage a number of
consultants, vendors and contract organizations to assist us with our research and development
activities, including research-related manufacturing and regulatory affairs, and our selling,
general and administrative activities, such as finance, accounting, human resources, marketing,
legal and investor relations.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In the normal course of business, we may become subject to lawsuits and other claims and
proceedings. Such matters are subject to uncertainty and outcomes are often not predictable with
assurance. We are not currently involved in any material legal proceedings.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our offices are located at 6725 Mesa Ridge Road, San Diego, California 92121. Our offices
consist of 12,038 square feet of primarily office space, which we use pursuant to a lease that will
expire on August&nbsp;31, 2009. The base rent for this space currently is $262,000 annually, excluding
incremental operating cost adjustments.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are negotiating a 9-month extension under our existing lease agreement, beginning September
1, 2009, for a portion of our existing office space, which would consist of approximately 3,173
square feet. The aggregate rent for this portion of our existing offices for the extended term of
the lease agreement would be approximately $33,000.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 are available free of charge on our corporate website
(www.adventrx.com) as soon as reasonably practicable after they are filed with, or furnished to,
the Securities and Exchange Commission.
</DIV>

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<DIV align="left">
<A name="110"></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: 12pt"><B>Management and Board of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our executive officers and directors, their ages and positions as of July&nbsp;22, 2009 are as
follows:
</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="10%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="38%">&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" 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/Affiliation</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Brian M. Culley</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">38</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Interim Principal Executive Officer, Chief Business Officer and Senior Vice President</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:15px; text-indent:-15px">Patrick L. Keran</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">38</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Interim Principal Financial and Accounting Officer, General Counsel, Secretary and Vice President, Legal</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jack Lief</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">63</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chairman of the Board</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark N.K. Bagnall</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">52</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Alexander J. Denner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">40</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael M. Goldberg</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">50</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark J. Pykett</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">45</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Eric K. Rowinsky</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">52</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Brian M. Culley, M.S., M.B.A. </I>Mr.&nbsp;Culley currently is the Company&#146;s interim principal
executive officer, a position he has held since February&nbsp;2009, and chief business officer and a
senior vice president, positions he has held since January&nbsp;2007. Mr.&nbsp;Culley served as vice
president, business development since joining the Company in December&nbsp;2004, and was appointed
senior vice president, business development in February&nbsp;2006. From 2002 until 2004, Mr.&nbsp;Culley
managed all strategic collaborations and licensing agreements for Immusol, Inc. in San Diego, where
his most recent title was director of business development and marketing. From 1999 until 2000, he
was a licensing and marketing associate at the University of California, San Diego, department of
technology transfer &#038; intellectual property services and from 1996 to 1999, he was a research
associate for Neurocrine Biosciences, Inc., where he performed drug discovery research. Mr.&nbsp;Culley
has over 15&nbsp;years of experience in the biotechnology industry, including deal structure and
negotiation, licensing, due diligence, market and competitive research, and venture funding. He
received a B.S. in biology from Boston College, an M.S. in biochemistry from the University of
California, Santa Barbara and an M.B.A. from The Johnson School of Business at Cornell University
with an emphasis on private equity and entrepreneurship.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Patrick L. Keran, J.D. </I>Mr.&nbsp;Keran currently is the Company&#146;s interim principal financial and
accounting officer, a position he has held since July&nbsp;2009, general counsel, a position he has held
since August&nbsp;2006, secretary, a position he has held since September&nbsp;2006, and vice president,
legal, a position he has held since January&nbsp;2007. From April&nbsp;2004 to August&nbsp;2006, Mr.&nbsp;Keran was
associate general counsel at Isis Pharmaceuticals, a publicly held drug discovery and development
company. From February&nbsp;2003 to April&nbsp;2004, Mr.&nbsp;Keran practiced corporate law at the law firm of
Heller Ehrman LLP, specializing in public and private financings, licensing arrangements, mergers
and acquisitions and corporate governance matters. From September&nbsp;1999 to February&nbsp;2003, Mr.&nbsp;Keran
practiced law at the law firm of Brobeck Phleger &#038; Harrison LLP where he had a similar corporate
practice. Mr.&nbsp;Keran is licensed to practice law in the State of California. Mr.&nbsp;Keran received a
B.A. from the University of California at San Diego and a J.D. from the University of California at
Berkeley, Boalt Hall School of Law.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mark N.K. Bagnall, C.P.A. </I>Mr.&nbsp;Bagnall has served as a director since February&nbsp;2004. Mr.
Bagnall currently serves as president of ProGenTech Limited, a life science and
molecular diagnostics company committed to developing next generation instrumentation for nucleic
acid and protein purification and molecular diagnostic testing, a position he has held since July
2009. From March 2009 to July 2009, Mr. Bagnall served as chief financial officer of ProGenTech Limited. Mr.&nbsp;Bagnall has held senior management positions in the biotechnology industry for over 20
years. During his time in the industry, he has held positions in both finance and business
development and has managed equity and debt financings, corporate partnering and licensing deals
and mergers and acquisitions transactions. From April&nbsp;2008 to December&nbsp;2008, Mr.&nbsp;Bagnall served as
the Company&#146;s chief financial officer, executive vice president and treasurer, and from November
2008 to December&nbsp;2008, he served as interim principal executive officer. Since December&nbsp;2008, he
has served as a consultant to the Company, and from February&nbsp;2009 to July 2009, he served as the Company&#146;s
interim principal financial and accounting officer. From June&nbsp;2000 to June&nbsp;2007, Mr.&nbsp;Bagnall served
as senior vice president and chief finance and operations officer of Metabolex, Inc., a
biotechnology company dedicated to the discovery and development of novel therapeutics for diabetes
and related metabolic disorders. Prior to joining Metabolex, Mr.&nbsp;Bagnall held the top financial
position at four life science companies: Metrika, Inc., a privately held diagnostics company, and
three publicly held
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">biotechnology companies, Progenitor, Inc., Somatix Therapy Corporation, and Hana Biologics,
Inc. Mr.&nbsp;Bagnall is a director of VIA Pharmaceuticals, Inc., a publicly held biotechnology company
focused on the development of compounds for the treatment of cardiovascular disease. In addition,
he is a co-founder and director of the Association of Bioscience Financial Officers, an
international organization of life science finance professionals. Mr.&nbsp;Bagnall received his B.S. in
Business Administration from the University of California at Berkeley, Haas School of Business and
is a Certified Public Accountant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Alexander J. Denner, Ph.D. </I>Dr.&nbsp;Denner has served as a director since October&nbsp;2006. Dr.&nbsp;Denner
currently serves as managing director of entities affiliated with Carl C. Icahn, including Icahn
Partners, Icahn Master, Icahn Master II and Icahn Master III. Icahn Partners, Icahn Master, Icahn
Master II and Icahn Master III are private investment funds. Dr.&nbsp;Denner has served in this position
since August&nbsp;2006. From April&nbsp;2005 to May&nbsp;2006, Dr.&nbsp;Denner served as a portfolio manager
specializing in healthcare investments for Viking Global Investors. Previously, he served in a
variety of roles at Morgan Stanley, beginning in 1996, including as portfolio manager of healthcare
and biotechnology mutual funds. Dr.&nbsp;Denner is a director of Biogen Idec Inc., a publicly held
global biotechnology company that creates new standards of care in therapeutic areas with high
unmet medical needs, and Amylin Pharmaceuticals, Inc., a publicly held biopharmaceutical company
committed to improving the lives of people with diabetes, obesity and other diseases through the
discovery, development and commercialization of innovative medicines. Dr.&nbsp;Denner was the chairman
of the executive committee of ImClone Systems Incorporated, a publicly held biopharmaceutical
company, and a director from April&nbsp;2006 until the company was purchased in November&nbsp;2008. Dr.
Denner received his S.B. degree from the Massachusetts Institute of Technology and his M.S.,
M.Phil. and Ph.D. degrees from Yale University. Dr.&nbsp;Denner was nominated by, among others, entities
affiliated with Carl C. Icahn. Information regarding the arrangement by which Dr.&nbsp;Denner was
selected as a director is located below under &#147;<I>Director Arrangements</I>.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Michael M. Goldberg, M.D. </I>Dr.&nbsp;Goldberg has served as a director since January&nbsp;2004. Dr.
Goldberg currently is a managing partner of Montaur Capital Partners, an investment firm, a
position he has held since January&nbsp;2007. From August&nbsp;1990 to January&nbsp;2007, Dr.&nbsp;Goldberg was
chairman and chief executive officer of Emisphere Technologies, Inc., a biopharmaceutical company.
Prior to this, Dr.&nbsp;Goldberg was a vice president for The First Boston Corporation, where he was a
founding member of the Healthcare Banking Group. He received a B.S. from Rensselaer Polytechnic
Institute, an M.D. from Albany Medical College of Union University and an M.B.A. from Columbia
University Graduate School of Business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Jack Lief. </I>Mr.&nbsp;Lief has served as a director since September&nbsp;2006 and as chair of the Board
since May&nbsp;2007. Mr.&nbsp;Lief is a co-founder and since April&nbsp;1997 has served as president, chief
executive officer and a director of Arena Pharmaceuticals, Inc., a publicly held clinical-stage
biopharmaceutical company focused on the discovery, development and commercialization of small
molecule drugs targeting G protein-coupled receptors. From 1995 to April&nbsp;1997, Mr.&nbsp;Lief served as
an advisor and consultant to numerous biopharmaceutical organizations. From 1989 to 1994, Mr.&nbsp;Lief
served as senior vice president, corporate development and secretary of Cephalon, Inc., a
biopharmaceutical company. From 1983 to 1989, Mr.&nbsp;Lief served as director of business development
and strategic planning for Alpha Therapeutic Corporation, a manufacturer of biological products.
Mr.&nbsp;Lief joined Abbott Laboratories, a pharmaceutical company, in 1972, where he served until 1983,
most recently as the head of international marketing research. Mr.&nbsp;Lief is a director of
Accumetrics, Inc., a developer and marketer of diagnostic tests, ReqMed Company, Ltd., a provider
of partnering opportunities, R&#038;D strategies and bio-venture funding, and TaiGen Biotechnology Co.,
Ltd., a biotechnology company. Mr.&nbsp;Lief is also an executive board member of BIOCOM, a life science
industry association representing more than 450 member companies in San Diego and Southern
California, and he was the chairman of BIOCOM from March&nbsp;2005 to March&nbsp;2006. Mr.&nbsp;Lief holds a B.A.
from Rutgers University and an M.S. in Psychology (Experimental and Neurobiology) from Lehigh
University.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Mark J. Pykett, Ph.D., M.B.A., V.M.D. </I>Dr.&nbsp;Pykett has served as a director since February&nbsp;2004.
Dr.&nbsp;Pykett currently is president and chief operating officer of Alseres Pharmaceuticals, Inc.
(formerly Boston Life Sciences, Inc.), positions he has held since November&nbsp;2004. From May&nbsp;1996
until April&nbsp;2003, Dr.&nbsp;Pykett served as president and chief executive officer and a director of
Cytomatrix, LLC, a privately held biotechnology company focused on the research, development and
commercialization of novel cell-based therapies that Dr.&nbsp;Pykett co-founded. Cytomatrix was acquired
by Cordlife, Pte. Ltd., a subsidiary of CyGenics Ltd., a publicly held biotechnology company listed
on the Australian Stock Exchange. From April&nbsp;2003 to February&nbsp;2004, Dr.&nbsp;Pykett served as president
of Cordlife and then as president and director of CyGenics from February&nbsp;2004 until November&nbsp;2004.
In addition, Dr.&nbsp;Pykett served as a director of Cordlife from April&nbsp;2003 through November&nbsp;2005 and
a director of Oramax, LLC, a development stage dental implant company developing biomaterials for
dental prostheses, from 2000 through 2006. Dr.&nbsp;Pykett graduated Phi Beta Kappa, Summa Cum Laude
from Amherst College, holds a veterinary degree, Phi Zeta, Summa Cum Laude, a doctorate in
molecular biology from the University of Pennsylvania, and received an M.B.A., Beta Gamma Sigma,
from Northeastern University. He completed post-doctoral fellowships at the University of
Pennsylvania and Harvard University. Dr.&nbsp;Pykett held an adjunct faculty position at the Harvard
School of Public Health from 1997 to 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Eric K. Rowinsky, M.D. </I>Dr.&nbsp;Rowinsky has served as a director since February&nbsp;2008. Dr.&nbsp;Rowinsky
currently is chief medical
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">officer, a position he has held since February&nbsp;2005, and executive vice president, a position
he has held since December&nbsp;2007, of ImClone Systems Incorporated, a wholly-owned subsidiary of Eli
Lilly and Company. Dr.&nbsp;Rowinsky held the position of director of the Institute of Drug Development
(&#147;IDD&#148;) at the Cancer Therapy and Research Center from 2002 to 2004 and was the director of
clinical research at the IDD from 1996 to 2002. In addition, he held the SBC Endowed Chair for
Early Drug Development at the IDD. From 1996 to 2006, Dr Rowinsky was also a clinical professor of
medicine (division of medical oncology) at the University of Texas Health Science Center, San
Antonio, Texas. Dr.&nbsp;Rowinsky also served as an associate professor of oncology at Johns Hopkins
University from 1988 until 1996. He served on the Board of Scientific Counselors of the National
Cancer Institute from 2004 to 2007. Dr.&nbsp;Rowinsky received a B.A. degree from New York University
and an M.D. degree from the Vanderbilt University School of Medicine. Following his residency in
internal medicine, he completed fellowship training in medical oncology at the Johns Hopkins
University School of Medicine.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There are no family relationships among any of the Company&#146;s directors or executive officers.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to that certain Rights Agreement, dated July&nbsp;27, 2005, as amended, or the Rights
Agreement, we are required to cause our board of directors to nominate to our board of directors an
individual, who we refer to as the Purchaser Designee, selected by the &#147;Purchasers&#148; who at the time
own a majority of the &#147;Purchased Shares.&#148; Dr.&nbsp;Denner is the current Purchaser Designee.
&#147;Purchasers,&#148; as defined in the Rights Agreement, refers to those entities that purchased our
common stock and warrants in a private transaction in July&nbsp;2005. &#147;Purchased Shares,&#148; as defined in
the Rights Agreement, refers to those shares of common stock outstanding and issuable upon exercise
of warrants issued to the Purchasers in connection with July&nbsp;2005 transaction. The Purchasers&#146;
right to select a Purchaser Designee for nomination to our board of directors shall terminate upon
the earlier of (i)&nbsp;July&nbsp;27, 2012, (ii)&nbsp;the date that the Purchasers&#146; aggregate holdings of
Purchased Shares (either of record or beneficially) is, as a result of sales or other dispositions
thereof, equal to less than 50% of the aggregate number of shares purchased by the Purchasers in
connection with the July&nbsp;2005 transaction, and (iii)&nbsp;at the time of a change of control of our
company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to that certain Second Amendment to Rights Agreement, dated February&nbsp;25, 2008, or the
Second Amendment, the Rights Agreement was amended to allow our board of directors to increase the
authorized number of directors from six to seven if the vacancy created by such action was filled
by a majority of the directors then in office, which majority must include the Purchaser Designee
(as defined in the Rights Agreement), if any; provided that, if at any time there are seven members
of our board of directors and one of such members is removed, resigns, retires or dies and the
Purchaser Designee, if any, does not approve a successor, we will do those things reasonably
necessary and within our control to, as soon as reasonably practicable after the effective date of
such removal, resignation, retirement or death, set the authorized number of our board of directors
at six. The Second Amendment confirmed that Dr.&nbsp;Denner, and not Dr.&nbsp;Rowinsky, is the Purchaser
Designee. Following the resignation of Evan M. Levine as a member of our board of directors in
December&nbsp;2008, our board of directors set the authorized number of directors constituting our board
of directors at six.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bylaws allow the authorized number of directors to be not less than three or more than
nine; currently, the size of our board of directors is set at six. Each of our directors serves a
one-year term and are elected at each year&#146;s annual meeting of stockholders. Our board of directors
has determined that Dr.&nbsp;Denner, Dr.&nbsp;Goldberg, Mr.&nbsp;Lief, Dr.&nbsp;Pykett and Dr.&nbsp;Rowinsky are
&#147;independent&#148; under the rules of the NYSE Amex (formerly, the American Stock Exchange). Before his
employment by us in April&nbsp;2008, Mr.&nbsp;Bagnall was also &#147;independent&#148; under the rules of the NYSE
Amex. Under applicable rules of the NYSE Amex and the Securities and Exchange Commission, or the
SEC, the existence of certain transactions above certain thresholds between a director and our
company are required to be disclosed and preclude a finding by our board of directors that the
director is independent. In addition to transactions required to be disclosed under these NYSE Amex
and SEC rules, in making its independence determination with respect to Dr.&nbsp;Denner, our board of
directors considered Dr.&nbsp;Denner&#146;s position with entities affiliated with Mr.&nbsp;Icahn and such
entities&#146; (a)&nbsp;ownership position in our company and (b)&nbsp;rights under the Rights Agreement, pursuant
to which such entities, along with others, are, among other things, entitled to participate in
future sales by us of additional securities and cause our board of directors to nominate to our
board of directors an individual selected by them. After considering these relationships and
transactions, our board of directors concluded that they did not interfere with Dr.&nbsp;Denner&#146;s
ability to exercise independent judgment in carrying out his responsibilities as a member of our
board of directors.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2008, our board of directors met seventeen times, the audit committee of our board of
directors met seven times and
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">action was taken by unanimous written consent once, the compensation committee of our board of
directors met seven times, the nominating and governance committee of our board of directors met
three times and action was taken by unanimous written consent once and the research and development
committee of our board of directors met three times. During 2008, each member of our board of
directors nominated for re-election attended 75% or more of the aggregate of (i)&nbsp;the total number
of meetings of our board of directors held during the period of such member&#146;s service and (ii)&nbsp;the
total number of meetings of committees on which such member served, during the period of such
member&#146;s service, except that Dr.&nbsp;Goldberg attended five, or approximately 71%, of the total number
of audit committee meetings held during 2008. We encourage all directors to attend our annual
stockholder meetings. Messrs.&nbsp;Bagnall, Levine and Lief attended our 2008 annual meeting of
stockholders and Mr.&nbsp;Lief attended our 2009 annual meeting of stockholders.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our board of directors currently has standing audit, compensation and nominating and
governance committees. In February&nbsp;2008, the Board created a research and development committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Committee. </I>The audit committee currently consists of Mr.&nbsp;Lief (chair), Dr.&nbsp;Goldberg and
Dr.&nbsp;Pykett. During 2008 until his employment by us in April&nbsp;2008, Mr.&nbsp;Bagnall served as a member
and chair of the audit committee. Our board of directors has determined that all members of the
audit committee are independent directors and meet the eligibility standards for audit committee
service under the rules of the NYSE Amex. Our board of directors has determined that Mr.&nbsp;Lief
qualifies as an &#147;audit committee financial expert&#148; as defined by the rules of the SEC. The purpose
of the audit committee is to oversee our accounting and financial reporting processes and audits of
our financial statements. The responsibilities of the audit committee include appointing and
providing for the compensation of the independent accountants to conduct the annual audit of our
accounts, reviewing the scope and results of the independent audits, reviewing and evaluating
internal accounting policies, and approving all professional services to be provided to us by our
independent accountants. The audit committee is governed by a written charter approved by our board
of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Compensation Committee. </I>The compensation committee currently consists of Dr.&nbsp;Goldberg (chair),
Dr.&nbsp;Denner and Mr.&nbsp;Lief. During 2008 until May&nbsp;2008, Dr.&nbsp;Pykett served as a member of the
compensation committee. Our board of directors has determined that all members of the compensation
committee are independent directors under the rules of the NYSE Amex. The compensation committee
administers our benefit plans, reviews, approves and administers all compensation arrangements for
executives, and establishes and reviews general policies relating to the compensation and benefits
of our executives and other personnel. The compensation committee meets several times a year and
consults with independent compensation consultants, as it deems appropriate, to review, analyze and
set compensation packages for our executives. The compensation committee is governed by a written
charter approved by our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under its charter, the compensation committee has authority to determine the amount and form
of compensation paid to our chief executive officer, and to take such action, and to direct us to
take such action, as is necessary and advisable to compensate our chief executive officer in a
manner consistent with its determinations, and shall deliberate and vote on all such actions
outside the presence of our chief executive officer. In accordance with its charter, the
compensation committee will review at least annually the performance of our chief executive
officer, including in light of any goals and objectives established for such performance, and in
light of such review determine his or her compensation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The compensation committee has authority to determine the amount and form of compensation paid
to our other executives, employees, consultants and advisors and to review the performance of such
persons in order to determine appropriate compensation. The compensation committee has authority to
take such action, and to direct us to take such action, as is necessary and advisable to compensate
such persons and to implement such policies and practices in a manner consistent with its
determinations. The compensation committee may delegate its authority on these matters with regard
to our non-executive employees to our officers and other appropriate supervisory personnel, subject
to applicable law and regulations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except with respect to its responsibilities regarding setting compensation for our chief
executive officer and our other executives, the compensation committee may delegate its authority
to individual members of the compensation committee or other members of our board of directors. In
addition, to the extent permitted by applicable law and regulations, the compensation committee may
delegate to one or more of our officers (or other appropriate supervisory personnel) the authority
to grant stock options, stock appreciation rights, restricted stock units and performance units to
employees (who are not officers or members of our board of directors) of ours or of any subsidiary
of ours; <U>provided</U>, however that (a)&nbsp;the number of shares of our common stock underlying
such options, stock appreciation rights, restricted stock units and performance units are
consistent with guidelines previously approved by the compensation committee; (b)&nbsp;the per-share
exercise or purchase price of such awards equals the fair market value of our common stock on the
date of grant; and (c)&nbsp;the vesting and other terms that apply to such awards are the same terms as
apply under our standard
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">form of agreement under the applicable equity compensation plan, provided that such officer(s)
may, in such officer(s)&#146; discretion, grant awards that are fully vested on the date of grant of the
award or grant awards with more restrictive vesting requirements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, including in 2008, our chief executive officer reviewed and assessed the
performance of our other executive officers for the preceding year in the first quarter of each
year and subsequently made recommendations to the compensation committee regarding the amount and
form of those officers&#146; compensation packages for the current year. The compensation committee
generally gives substantial deference to our chief executive officer&#146;s recommendations because the
members of that committee generally believe the chief executive officer is in the best position to
evaluate the other executive officers&#146; past performance and anticipated contributions. From
September&nbsp;2004 until the end of his employment relationship with us in October&nbsp;2008, our chief
executive was Mr.&nbsp;Levine. During the first quarter of 2008, Mr.&nbsp;Levine evaluated the 2007
performance of our other executive officers and, based on those officers&#146; individual performance
and anticipated contributions and our 2007 performance and 2008 goals and projections, made
recommendations as to 2008 compensation for those executive officers to the compensation committee.
The compensation committee took Mr.&nbsp;Levine&#146;s recommendations into consideration, according them
substantial deference, in setting the executive officers&#146; 2008 compensation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2007, the compensation committee retained Frederic W. Cook &#038; Co., Inc., a
nationally-recognized compensation consulting firm, to provide an independent evaluation of our
compensation practices. The compensation committee retained responsibility and authority over the
scope of services provided by F.W. Cook and F.W. Cook reported and was responsible to the
compensation committee. In connection with retaining F.W. Cook, the compensation committee charged
F.W. Cook with, among other things, conducting a competitive assessment of our executive
compensation practices, in particular those applicable to our chief executive officer, which
included assisting the compensation committee in identifying a peer group of companies against
which to evaluate the competitiveness of our executive compensation packages. In February&nbsp;2007,
F.W. Cook completed its analysis of our chief executive officer&#146;s compensation and, in May&nbsp;2007,
completed its analysis of our other executive officers&#146; compensation. Other than reviewing with the
compensation committee the results of its analysis and providing corresponding written reports, the
compensation committee generally did not involve F.W. Cook in its 2007 compensation determinations.
In connection with determining 2008 executive compensation, the compensation committee reviewed and
evaluated the information previously provided by F.W. Cook and contacted F.W. Cook with certain
specific questions, but otherwise did not involve F.W. Cook in its 2008 compensation
determinations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Nominating and Governance Committee. </I>The nominating and governance committee currently
consists of Dr.&nbsp;Pykett (chair)&nbsp;and Dr.&nbsp;Rowinsky, each of whom our board of directors has determined
is an independent director under the rules of the NYSE Amex. During 2008 and until May&nbsp;2008, Dr.
Goldberg and Mr.&nbsp;Lief served on the nominating and governance committee. The nominating and
governance committee&#146;s responsibilities include recommending to our board of directors nominees for
possible election to our board of directors and providing oversight with respect to corporate
governance and succession planning matters. The nominating and governance committee is governed by
a written charter approved by our board of directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Research and Development Committee. </I>Currently, the sole member and chair of the research and
development committee is Dr.&nbsp;Rowinsky. The research and development committee assists our board of
directors in evaluating our basic scientific and manufacturing research, clinical development and
regulatory affairs and the allocation of our resources.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Charters for the audit, compensation and nominating and governance committees of our board of
directors, as well as our corporate governance guidelines, are posted on our corporate website at:
www.adventrx.com.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>The information contained in this prospectus with respect to the charters of each of the audit
committee, the compensation committee, and the nominating and governance committee and the
independence of the non-management members of our board of directors shall not be deemed to be
&#147;soliciting material&#148; or to be &#147;filed&#148; with the SEC, nor shall the information be incorporated by
reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that we specifically incorporate it by reference in a filing.</I>
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have adopted a code of ethics that applies to our principal executive officer, principal
financial officer, principal accounting officer or persons performing similar functions, as well as
all of our other officers, directors and employees. This code of ethics is a part of our code of
business conduct and ethics and available on our corporate website at www.adventrx.com. We intend
to disclose future amendments to, or waivers of, certain provisions of our code of ethics that
apply to our principal executive officer, principal financial officer, principal accounting officer
or persons performing similar functions on the above website within four business days following
such amendment or waiver.
</DIV>

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<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXECUTIVE &#038; DIRECTOR COMPENSATION</B>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information concerning compensation earned for services
rendered to us during the years ended December&nbsp;31, 2008 and December&nbsp;31, 2007 by (i)&nbsp;each
individual serving as principal executive officer during 2008, (ii)&nbsp;the two most highly compensated
executive officers, other than the individuals serving as the principal executive officer, who were
serving as executive officers as of December&nbsp;31, 2008, and (iii)&nbsp;the individuals who would have
qualified under the foregoing clause (ii)&nbsp;but for the fact that such individuals were not serving
as executive officers as of December&nbsp;31, 2008. Collectively, these individuals are referred to as
the &#147;Named Executive Officers.&#148;
</DIV>
<DIV align="center">
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    <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>Nonqualified</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>Non-Equity</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deferred</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 nowrap align="left"><B>Name and Principal</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Incentive Plan</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>All Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Position(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Year</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Salary</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Bonus</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Awards</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Awards(2)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Compensation(3)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brian M. Culley</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">262,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">183,493</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 align="right">$</TD>
    <TD align="right">13,989</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">459,982</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Chief Business Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">250,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">235,852</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 align="right">$</TD>
    <TD align="right">9,162</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">495,014</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Patrick Keran<BR>
General Counsel </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">231,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">121,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">13,758</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">366,466</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Evan M. Levine</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">381,635</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">493,685      </TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">875,320</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Former Chief Executive Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">450,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,180</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">659,180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Mark N.K. Bagnall(5)<BR>
Former Chief Financial Officer </DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">258,462</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap valign="top" align="right">$</TD>
    <TD align="right" valign="top">37,599      </TD>
    <TD nowrap valign="top">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap valign="top" align="right">$</TD>
    <TD align="right" valign="top">97,791      </TD>
    <TD nowrap valign="top">(7)</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">$</TD>
    <TD align="right" valign="top">393,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:0px; text-indent:-0px">
Gregory P. Hanson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">67,308</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 align="right">$</TD>
    <TD align="right">38,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">341,498      </TD>
    <TD nowrap>(8)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">447,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Former Chief Financial Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">250,000</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 align="right">$</TD>
    <TD align="right">149,498</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">10,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">409,686</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joan M. Robbins</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2008</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">224,740</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 align="right">$</TD>
    <TD align="right">181,994</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">86,110      </TD>
    <TD nowrap>(9)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">492,844</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Former Chief Scientific Officer</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2007</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">265,000</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 align="right">$</TD>
    <TD align="right">192,095</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">9,270</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">466,365</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>Mr.&nbsp;Culley and Mr.&nbsp;Keran held the positions listed in the table through December&nbsp;31, 2008. On April
2, 2008, Mr.&nbsp;Hanson&#146;s employment with us ended. On October&nbsp;14, 2008, Dr.&nbsp;Robbins&#146; employment with us
ended. On October&nbsp;17, 2008, Mr.&nbsp;Levine&#146;s employment with us ended and, on December&nbsp;22, 2008, Mr.
Levine resigned from our board of directors. On December&nbsp;26, 2008, Mr.&nbsp;Bagnall&#146;s employment with us
ended, though he remains on our board of directors. Compensation information for Mr.&nbsp;Keran and Mr.
Bagnall for 2007 is not included because they were not 2007 named executive officers.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The value of the option awards has been computed in accordance with the provisions of FAS 123R, which
requires that we recognize as compensation expense the value (excluding the effect of assumed
forfeiture rates) of all share-based awards, including stock options, granted to employees in
exchange for services over the requisite service period, which is typically the vesting period. For
more information, including the assumptions made in calculating the FAS 123R value of the option
awards, see Note 8 of the Notes to Consolidated Financial Statements contained in our Annual Report
on Form 10-K filed with the SEC on March&nbsp;27, 2009 and Note 9 of the Consolidated Financial Statemetns
contained in our Annual Report on Form 10-K filed with the SEC on March&nbsp;17, 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>Except as otherwise indicated, consists of (a)&nbsp;matching contributions made pursuant to our
tax-qualified 401(k) plan and (b)&nbsp;premiums paid for term life insurance policies for the benefit of
our executives.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of (a)&nbsp;matching contributions pursuant to our 401(k) plan of $12,519, (b)&nbsp;life insurance
premiums of $145, (c)&nbsp;severance payments of $365,000, (d)&nbsp;a severance-related health benefit
allowance of $19,870, and (e)&nbsp;accrued vacation benefits paid in connection with termination of
employment of $90,865. See &#147;Narrative Disclosure to Summary Compensation Table&#148; below for additional
information regarding termination-related payments.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Mr.&nbsp;Bagnall served as our chief financial officer, executive vice president and treasurer from April
3, 2008 to December&nbsp;26, 2008. From November&nbsp;3, 2008 to December&nbsp;26, 2008, Mr.&nbsp;Bagnall additionally
served as our principal executive officer. Both prior to and after his service as an employee, he
served as a member of our board of directors and, after his service as an employee, he served as a
consultant to us.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of the value of an option award to Mr.&nbsp;Bagnall in 2007 as a member of our board of directors.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of (a)&nbsp;matching contributions pursuant to our 401(k) plan of $13,800, (b)&nbsp;life insurance
premiums of $345, (c)&nbsp;accrued vacation benefits paid in connection with termination of employment of
$19,683, (d)&nbsp;the value of the partial acceleration of an option award triggered by termination of
employment of $49,863, and (e)&nbsp;non-employee director fees for service on our board of directors
during the periods in 2008 in which Mr.&nbsp;Bagnall was not employed by us of $14,100. Mr.&nbsp;Bagnall
received severance</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->64<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>and a health benefit allowance in connection with the termination of his
employment, but these payments were not paid or accrued to Mr.&nbsp;Bagnall in 2008 because we did not
enter into a separation agreement with Mr.&nbsp;Bagnall until January&nbsp;2009. See &#147;Narrative Disclosure to
Summary Compensation Table&#148; below for additional information regarding termination-related payments.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of (a)&nbsp;matching contributions pursuant to our 401(k) plan of $4,038, (b)&nbsp;life insurance
premiums of $320, (c)&nbsp;severance payments of $125,000, (d)&nbsp;a severance-related health benefit
allowance of $20,997, (e)&nbsp;the value of the partial acceleration of an option award triggered by
termination of employment of $174,272, (f)&nbsp;accrued vacation benefits paid in connection with
termination of employment of $16,496, and (g)&nbsp;consulting fees of $375. See &#147;Narrative Disclosure to
Summary Compensation Table&#148; below for additional information regarding termination-related payments.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of (a)&nbsp;matching contributions pursuant to our 401(k) plan of $12,519, (b)&nbsp;life insurance
premiums of $218, (c)&nbsp;severance payments of $22,475, (d)&nbsp;a severance-related health benefit allowance
of $1,511, and (e)&nbsp;accrued vacation benefits paid in connection with termination of employment of
$49,387. See &#147;Narrative Disclosure to Summary Compensation Table&#148; below for additional information
regarding termination-related payments.</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"><B><I>Current Base Salary; Employment and Severance Arrangements with Currently Employed Named Executive
Officers</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In July&nbsp;2009, the compensation committee of our board of directors adjusted the annual base salaries
of Mr.&nbsp;Culley and Mr.&nbsp;Keran to, respectively, $315,000 and $289,000, which adjustments were
retroactive to January&nbsp;1, 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each of Mr.&nbsp;Culley&#146;s and Mr.&nbsp;Keran&#146;s employment with us is at-will and, as of December&nbsp;31,
2008, we had no obligation to pay such officer any severance or other benefits, other than as may
be required by law, in connection with a termination of employment. In July&nbsp;2009, we adopted a 2009
mid-year incentive plan and a retention and severance plan. We believe these plans are necessary
to incentivize and retain our remaining officers, who are also our remaining employees, and
reinforce their dedication to us during a period when they would otherwise likely seek alternative
employment. As a part of adopting these plans, we terminated the retention and incentive agreements
we entered into with each of Mr.&nbsp;Culley and Mr.&nbsp;Keran in January&nbsp;2009 and the awards of restricted
stock units, representing the right to receive 1,200,000 and 850,000 shares, respectively, of our
common stock, that we granted to Mr.&nbsp;Culley and Mr.&nbsp;Keran in January&nbsp;2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the incentive plan, each of Mr.&nbsp;Culley and Mr.&nbsp;Keran are eligible for incentive awards
based upon the achievement of corporate performance objectives in effect at the end of 2009.
Awards generally will be paid in cash. The potential award of each of Mr.&nbsp;Culley and Mr.&nbsp;Keran
will be based 100% on our achievement of corporate objectives and the target award amount for each
of them is $150,000. The target amount of each award may be increased or decreased by multiplying
the target amount by a corporate performance multiplier, as will be determined by the compensation
committee of our board of directors in the first quarter of 2010. Award multipliers will range
from zero to 1.5. Payment of awards under the incentive plan will be made after December&nbsp;31, 2009
and on or before March&nbsp;14, 2010.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the retention plan, if the employment of Mr.&nbsp;Culley or Mr.&nbsp;Keran, as applicable,
terminates at any time as a result of an involuntary termination, and such employee delivers and
does not revoke a general release of claims, which will also confirm any post-termination
obligations and/or restrictions applicable to such employee, such employee will be entitled to an
amount equal to twelve (12)&nbsp;months of such employee&#146;s then-current base salary, less applicable
withholdings and an amount equal to the estimated cost of continuing such employee&#146;s health care
coverage and the coverage of such employee&#146;s dependents who are covered at the time of the
involuntary termination under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, for a period equal to twelve (12)&nbsp;months. These severance benefits will be paid in a
lump-sum on the date the general release of claims becomes effective. Our aggregate contractual
obligation under the retention plan, including applicable payroll and employer taxes, is approximately $650,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of the retention plan, an involuntary termination means (i)&nbsp;without the
employee&#146;s express written consent, an action by our board of directors or external events causing
or immediately portending a material reduction or alteration of the employee&#146;s duties, position or
responsibilities relative to the employee&#146;s duties, position or responsibilities in effect
immediately prior to such reduction or alteration, or the removal of the employee from such
position, duties or responsibilities; provided, however, that an &#147;involuntary termination&#148; shall
not be deemed to occur (a)&nbsp;with respect to Mr.&nbsp;Culley, if Mr.&nbsp;Culley remains the head of and most
senior individual within the Company&#146;s (or its successor&#146;s) business development function and (B)
with respect to Mr.&nbsp;Keran, if Mr.&nbsp;Keran remains the head of and most senior individual within the
Company&#146;s (or its successor&#146;s) legal function; (ii)&nbsp;without the
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">employee&#146;s express written consent, a material reduction by us of the employee&#146;s base salary
as in effect immediately prior to such reduction; (iii)&nbsp;without the employee&#146;s express written
consent, the relocation of the employee&#146;s principal place of employment with us by more than fifty
(50)&nbsp;miles; (iv)&nbsp;any termination of the employee by us without cause (as defined below); or (vi)&nbsp;a
material breach of the retention plan, including, but not limited to our failure to obtain the
assumption of the retention plan by any successors as contemplated in the retention plan. For
purposes of the retention plan, &#147;Cause&#148; means (i)&nbsp;any act of personal dishonesty taken by the
employee in connection with his or her responsibilities as an employee which is intended to result
in substantial personal enrichment of the employee; (ii)&nbsp;the employee&#146;s conviction of a felony that
our board of directors reasonably believes has had or will have a material detrimental effect on
our reputation or business; (iii)&nbsp;a willful act by the employee that constitutes misconduct and is
materially injurious to us, or (iv)&nbsp;continued willful violations by the employee of the employee&#146;s
obligations to us after there has been delivered to the employee a written demand for performance
from us that describes the basis for our belief that the employee has not substantially performed
his or her duties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, as of December&nbsp;31, 2008, we had accrued vacation benefits liability for Mr.
Culley in the amount of $48,461 and for Mr.&nbsp;Keran in the amount of $30,166. If their employment
with us had ended on December&nbsp;31, 2008, they would have been entitled to payment of those amounts.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;It is our policy that, at the beginning of employment, all employees sign our standard
confidential information, non-solicitation and invention assignment agreement for employees. Under
the current version of this agreement, employees agree that, during the period of the employee&#146;s
service to us and for one year thereafter, the employee will not (a)&nbsp;solicit any employee or
consultant of ours to leave the employ of or terminate any relationship with us or (b)&nbsp;solicit the
business of any client or customer of ours using our confidential information. Each of Mr.&nbsp;Culley
and Mr.&nbsp;Keran executed such an agreement in connection with the commencement of his employment with
us.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>2008 and 2009 Stock Option Grants</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On March&nbsp;31, 2008, the compensation committee granted stock option awards to certain or our
non-CEO executives, including a stock option to purchase 200,000 shares to each of Messrs.&nbsp;Culley
and Keran and Dr.&nbsp;Robbins. The compensation committee did not grant any stock option awards to Mr.
Levine (the reasons for which are described under &#147;Compensation Programs and Process &#151; Elements of
Compensation&#148; in the proxy statement we filed with the SEC on April&nbsp;16, 2008) or Mr.&nbsp;Bagnall, who
was then one of our non-employee directors (see -&#148;Employment and Separation Arrangements with Mr.
Bagnall&#148; below regarding an option granted to him in April&nbsp;2008 in connection with commencement of
his employment). The March&nbsp;2008 stock options were granted under our 2005 Equity Incentive Plan,
have a term of 10&nbsp;years, and vest and become exercisable as to one-fifth of the shares subject to
the option on each of January&nbsp;1, 2009, January&nbsp;1, 2010, January&nbsp;1, 2011, January&nbsp;1, 2012 and
January&nbsp;1, 2013. The vesting schedule was recommended by Mr.&nbsp;Levine, then our chief executive
officer, and, after substantial discussion, approved by the compensation committee. The per share
exercise price of these options is $0.54, which was the closing price of our common stock on March
31, 2008. None of these options currently are in-the-money.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;21, 2009, the compensation committee granted to each of Mr.&nbsp;Culley and Mr.&nbsp;Keran a
stock option to purchase up to 1,700,000 shares of our common stock. The per share exercise price
of these options is $0.13, which was the closing price of our common stock on July&nbsp;21, 2009. The
July&nbsp;2009 stock options were granted under our 2008 Omnibus Incentive Plan, have a term of 10
years, and vest and become exercisable, subject to the respective employee&#146;s continuous service, as
to one-fourth of the shares subject to the option on each of January&nbsp;1, 2010, January&nbsp;1, 2011,
January&nbsp;1, 2012 and January&nbsp;1, 2013. However, in the event Mr.&nbsp;Culley or Mr.&nbsp;Keran, as applicable,
ceases to provide services to us as an employee by reason of an involuntary termination,
exercisability of the then-vested stock options shall be extended such that the stock options shall
be exercisable for a period of 12&nbsp;months from the date of such involuntary termination. In
addition, the vesting and exercisability of each option will accelerate or be extended under
certain circumstances, including, (i)&nbsp;in the event of a change in control (as defined in our 2008
Omnibus Incentive Plan), acceleration with respect to fifty percent of the then unvested shares on
the day prior to the date of the change in control and, subject to the respective employee&#146;s
continuous service, with respect to the remaining fifty percent of the then unvested shares on the
one year anniversary of the date of the change in control, (ii)&nbsp;subject to the preceding clause
(i), in the event of a change of control, to the extent the successor company (or a subsidiary or
parent thereof) does not assume or substitute for the option, acceleration in full on the day prior
to the date of the change in control if the employee is then providing services or was the subject
an involuntary termination in connection with, related to or in contemplation of the change in
control and exercisability for a period of 36&nbsp;months from the date of such involuntary termination,
and (iii)&nbsp;subject to the preceding clause (i), in the event of a change of control, to the extent
the successor company (or a subsidiary or parent thereof) assumes or substitutes for the option,
and in the event of an involuntary termination of the employee within 12&nbsp;months following the date
of the change in control, acceleration in full and exercisability for a period of 36&nbsp;months from
the date of such involuntary termination. For purposes of the July&nbsp;2009 stock options, the
definition of &#147;involuntary termination&#148; is the same as under the retention plan described above.
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We structured the number of shares underlying and the vesting schedule of the March&nbsp;2008 stock
options and the July&nbsp;2009 stock options primarily to retain and incentivize our executives, and not
primarily as a form of compensation or to recognize individual or corporate performance in 2007 or
2008. In particular, we did not view these awards as typical annual option grants. The compensation
committee&#146;s goal in determining the size of these stock option awards was to emphasize unity and
cohesion within our executive ranks. The compensation committee intended for, with respect to the
March&nbsp;2008 stock options, our non-CEO executives and, with respect to the July&nbsp;2009 stock options,
our two remaining employees, to share equally in our future success and, accordingly, granted
similarly situated executives comparably sized stock option awards.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The compensation committee granted these awards to retain and properly incentive the
individuals capable of maximizing the potential of our assets. Without a substantial opportunity to
participate in our future success, we were concerned that we would be unable to retain key
executives. In addition, the annual, cliff-based vesting schedule of the March&nbsp;2008 stock options
and the July&nbsp;2009 stock options was structured to provide substantial retentive value.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a condition to the grant of the July&nbsp;2009 stock options, both Mr.&nbsp;Culley and Mr.&nbsp;Keran
agreed to terminate the awards of restricted stock units, representing the right to receive
1,200,000 and 850,000 shares, respectively, of our common stock, that we granted to Mr.&nbsp;Culley and
Mr.&nbsp;Keran in January&nbsp;2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>2007 Bonus to Mr.&nbsp;Levine</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March&nbsp;2008, we evaluated our executives&#146; 2007 compensation and performance and, consistent
with past practice, no cash bonuses for any of our non-CEO executives were approved by the
compensation committee. However, the compensation committee awarded Mr.&nbsp;Levine a discretionary cash
bonus of $200,000.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Levine&#146;s 2007 bonus was not based on achievement of the corporate objectives previously
established by the compensation committee. Following our announcement in October&nbsp;2007 regarding the
results of our phase 2b clinical trial of ANX-510, several of the corporate objectives previously
established by the compensation committee became irrelevant or undesirable and the compensation
committee did not subsequently revise those objectives. Mr.&nbsp;Levine&#146;s 2007 bonus was awarded in part
in recognition of his 2007 performance, but also to compensate him in lieu of our not granting him
any stock option awards (the reasons for which are more fully described under &#147;Compensation
Programs and Process &#151; Elements of Compensation&#148; in the proxy statement we filed with the SEC on
April&nbsp;16, 2008). Despite our October&nbsp;2007 announcement regarding the results of our phase 2b
clinical trial of ANX-510 and the resulting decline in our stock price, 2007 was marked with
several positive achievements. Furthermore, the compensation committee determined that Mr.&nbsp;Levine&#146;s
performance in 2007 was exceptional in light of prevailing conditions and that he displayed the
leadership and perseverance in the face of adversity that we seek in our executives and wish to
reward.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In approving Mr.&nbsp;Levine&#146;s 2007 bonus, the compensation committee was sensitive to the
perception that it was rewarding Mr.&nbsp;Levine when our stockholders and stock price have suffered. To
rebuild value, however, the compensation committee believed it was critical that we retain and
properly incentivize Mr.&nbsp;Levine because of the unique qualities that he possesses, as well as to
provide continuity to our operations. Based on our successes in 2007 and Mr.&nbsp;Levine&#146;s leadership
following our October&nbsp;2007 clinical trial results announcement, as well as our not granting Mr.
Levine any equity awards since 2003, the compensation committee determined that a cash bonus
reflecting 80% of Mr.&nbsp;Levine&#146;s target award was appropriate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Separation Arrangements with Mr.&nbsp;Levine</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In October&nbsp;2008, Mr.&nbsp;Levine&#146;s employment relationship with us ended and, in December&nbsp;2008, Mr.
Levine resigned from our board of directors. Mr.&nbsp;Levine formerly served as our chief executive
officer and president. In December&nbsp;2008, we entered into a confidential separation agreement and
general release of all claims regarding terms of separation with Mr.&nbsp;Levine, or the Levine
Separation Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As set forth in the Levine Separation Agreement, in exchange for a mutual release of claims
and Mr.&nbsp;Levine&#146;s agreement and representations (as more fully described below), we agreed to
provide a severance payment of $225,000 to Mr.&nbsp;Levine. In addition, we agreed to provide a health
benefit allowance of $19,870, which Mr.&nbsp;Levine may use, at his discretion, to pay the premiums
required to continue his group health care coverage under COBRA or any other health care related
expenses. The severance payment and the health benefit allowance were paid in one lump sum, less
applicable payroll deductions and required withholdings, in January&nbsp;2009. In addition, pursuant to
the Levine Separation Agreement, we agreed to issue 1,000,000 fully-vested shares of our common
stock to Mr.&nbsp;Levine, subject to the satisfaction of certain conditions by January&nbsp;30, 2009, or, if
those conditions were not so satisfied, pay Mr.&nbsp;Levine an additional $100,000 in one lump sum, less
applicable payroll deductions and required withholdings. In February&nbsp;2009, because the conditions
to our obligation to issue the shares had not been timely satisfied, we paid Mr.&nbsp;Levine an
additional $100,000
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">in one lump sum, less applicable payroll deductions and required withholdings. In November
2008, prior to entering into the Levine Separation Agreement, we paid Mr.&nbsp;Levine a total of $40,000
in four weekly installments ending in December&nbsp;2008 in exchange for Mr.&nbsp;Levine&#146;s agreement not to
sign a confidential separation agreement and general release of all claims that was presented to
Mr.&nbsp;Levine on October&nbsp;19, 2008 to allow time for discussions related to the terms of Mr.&nbsp;Levine&#146;s
separation from us and release of claims to continue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Levine Separation Agreement, Mr.&nbsp;Levine represented that he had returned to us all
property, data and information belonging to us and agreed not to use or disclose to others any
confidential or proprietary information of ours and agreed to comply with his continuing
obligations under various agreements and other documents as previously executed by him. In
addition, we and Mr.&nbsp;Levine each agreed that neither would make any voluntary statements, written
or oral, or cause or encourage others to make any such statements, that defame, disparage or in any
way criticize the personal and/or business reputation, practices or conduct of, respectively, Mr.
Levine, on the one hand, or us or our employees, officers and directors, among others, on the other
hand. Each of we and Mr.&nbsp;Levine also represented that neither had filed any lawsuits, complaints or
other accusatory pleadings against the other. Mr.&nbsp;Levine also certified that all transactions in
our securities prior to his separation date and reportable under Section&nbsp;16 of the Securities
Exchange Act of 1934 had been reported on Form&nbsp;4 and agreed to execute and deliver promptly after
December&nbsp;31, 2008 a document certifying that he is not required to file a Form&nbsp;5 for the fiscal
year ended December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Employment and Separation Arrangements with Mr.&nbsp;Bagnall</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with Mr.&nbsp;Bagnall&#146;s employment as our chief financial officer, executive vice
president and treasurer, effective as of April&nbsp;3, 2008, we entered into an offer letter agreement
with Mr.&nbsp;Bagnall. Pursuant to the terms of the offer letter, Mr.&nbsp;Bagnall&#146;s base salary was $350,000
per year and he was entitled to participate in our health and welfare benefits, 401(k) plan and
other benefits on the same terms as our other executive officers. In addition, Mr.&nbsp;Bagnall was
eligible to participate in our 2008 Incentive Plan, which is discussed under &#147;Executive Officer and
Director Compensation &#151; Compensation Discussion and Analysis&#148; in the proxy statement we filed with
the SEC on April&nbsp;16, 2008, on the same basis as our other executive officers. In the event of Mr.
Bagnall&#146;s involuntary termination, we agreed to (a)&nbsp;continue to pay Mr.&nbsp;Bagnall&#146;s base salary in
effect immediately prior to the effective date of such involuntary termination for the number of
months equal to the number of full 30-day periods he was a full-time employee of our, provided that
in no event would such number of months exceed 12 (this period is referred to as the Severance
Period), (b)&nbsp;pay Mr.&nbsp;Bagnall all costs that we would otherwise have incurred to maintain his health
and similar benefits during the Severance Period, and (c)&nbsp;pay Mr.&nbsp;Bagnall the amount of the
matching 401(k) contribution that would have been contributed by us based on the amount contributed
by Mr.&nbsp;Bagnall in the pay-period immediately prior to the effective date of the involuntary
termination. Our obligation to make such payments was conditioned upon Mr.&nbsp;Bagnall&#146;s execution and
delivery of a general release of claims and submission of his resignation as a member of our board
of directors. If Mr.&nbsp;Bagnall failed to execute and deliver the release of claims or subsequently
revoked the release, he would not have been entitled to any of the severance payment. If Mr.
Bagnall failed to submit his resignation from our board of directors, he would not have received
any severance payment until after our next annual meeting of stockholders for which he was not
nominated for election to our board of directors in the proxy materials related to such meeting. On
December&nbsp;11, 2008, the compensation committee of the Board approved amendments to the offer letter
intended to make severance benefits payable to Mr.&nbsp;Bagnall exempt from potential deferred
compensation tax penalties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, on March&nbsp;31, 2008, the compensation committee approved a stock option to Mr.
Bagnall under our 2005 Equity Incentive Plan to purchase up to 500,000 shares of our common stock,
contingent upon the commencement of Mr.&nbsp;Bagnall&#146;s employment with us. Accordingly, this option was
granted on April&nbsp;3, 2008 with an exercise price of $0.52 per share, which was the closing price of
our common stock on April&nbsp;3, 2008. The terms of the option provide that it would vest and become
exercisable with respect to 100,000 of the underlying shares on each of January&nbsp;1, 2009, January&nbsp;1,
2010, January&nbsp;1, 2011, January&nbsp;1, 2012 and January&nbsp;1, 2013, subject to Mr.&nbsp;Bagnall&#146;s continuous
service (as defined in our 2005 Equity Incentive Plan). However, in the event of Mr.&nbsp;Bagnall&#146;s
involuntary termination, the option&#146;s vesting schedule would accelerate such that (a)&nbsp;an additional
50,000 shares will vest and become exercisable if the effective date of such involuntary
termination occurs between January 1 and June&nbsp;30 of a given calendar year and (b)&nbsp;an additional
100,000 shares will vest and become exercisable if the effective date of such involuntary
termination occurs between July 1 and December&nbsp;31 of a given calendar year, subject to Mr.
Bagnall&#146;s execution and delivery to us of a release of claims and his not revoking such release. In
the event of Mr.&nbsp;Bagnall&#146;s death, disability or other termination, the option would be exercisable
for 90&nbsp;days following such event, except that in the event of an involuntary termination, the
option would be exercisable for 180&nbsp;days following such termination, subject to Mr.&nbsp;Bagnall&#146;s
execution and delivery to us of a release of claims and his not revoking such release. In addition,
in the event of a change of control (as defined in our 2005 Equity Incentive Plan) where Mr.
Bagnall was employed by us or one of our affiliates as of the closing date of the change of control
and the option was not assumed or replaced, the option would accelerate in full. In the event of
Mr.&nbsp;Bagnall&#146;s involuntary termination before and in connection with a change of control, the option
would accelerate in full upon the change of control. Finally, in the event of a change of control
where the
</DIV>

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<DIV align="left" style="font-size: 10pt; margin-top: 6pt">option is
assumed or replaced, (i)&nbsp;50% of any unvested portion of the option would vest immediately
prior to the closing date of the change of control, (ii)&nbsp;the remaining unvested portion of the
option would vest ratably by month over the 12-month period beginning on the closing date of the
change of control, subject to Mr.&nbsp;Bagnall&#146;s continuous service, and (iii)&nbsp;100% of any remaining
unvested portion of the option would vest upon an involuntary termination of Mr.&nbsp;Bagnall that
occurs within 12&nbsp;months of the change of control. Unless terminated earlier pursuant to its terms,
the option would expire on April&nbsp;2, 2018.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For purposes of the offer letter and the stock option granted to Mr.&nbsp;Bagnall, an &#147;involuntary
termination&#148; is one that occurs by reason of involuntary dismissal by us for any reason other than
misconduct (as defined below) or Mr.&nbsp;Bagnall&#146;s voluntary resignation for &#147;good reason,&#148; which means
the occurrence of one of the following events or circumstances without his written consent: (i)&nbsp;a
change in position that materially reduces the level of his responsibility, (ii)&nbsp;a material
reduction in his base salary, or (iii)&nbsp;relocation by more than 50 miles from his then-primary work
location; provided that his resignation shall not be for &#147;good reason&#148; unless (x)&nbsp;he provides us
with written notice within 30&nbsp;days after he first has knowledge of the occurrence or existence of
such event or circumstance, (y)&nbsp;we fail to correct the circumstance or event so identified within
30&nbsp;days after receipt of such written notice, and (z)&nbsp;he resigns within 90&nbsp;days after the date of
delivery of the notice. &#147;Misconduct&#148; means the commission of any act of fraud, embezzlement or
dishonesty by Mr.&nbsp;Bagnall, any unauthorized use or disclosure by him of confidential information or
trade secrets of ours (or any parent or subsidiary), or any other intentional misconduct by him
adversely affecting our business affairs (or those of any parent or subsidiary) in a material
manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2008, Mr.&nbsp;Bagnall&#146;s employment relationship with us ended. In January&nbsp;2009, we
entered into a confidential separation agreement and general release of all claims regarding terms
of separation with Mr.&nbsp;Bagnall, or the Bagnall Separation Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As set forth in the Bagnall Separation Agreement, in exchange for a release of claims and Mr.
Bagnall&#146;s agreement and representations (as more fully described below), we agreed to provide a
severance payment of $165,500 to Mr.&nbsp;Bagnall and each of we and Mr.&nbsp;Bagnall agreed to enter into a
consulting relationship. In addition, we agreed to provide a health benefit allowance of $18,352,
which Mr.&nbsp;Bagnall may use, at his discretion, to pay the premiums required to continue his group
health care coverage under COBRA or any other health care related expenses. The severance payment
and the health benefit allowance were paid in one lump sum, less applicable payroll deductions and
required withholdings, in January&nbsp;2009. The severance provisions set forth in the Bagnall
Separation Agreement supersede and replace the severance provisions set forth in Mr.&nbsp;Bagnall&#146;s
offer letter, which was effective as of April&nbsp;3, 2008 and amended as of December&nbsp;11, 2008. Pursuant
to the terms of the stock option granted to Mr.&nbsp;Bagnall in April&nbsp;2008 in connection with the
commencement of his employment (as more fully described above), 100,000 shares underlying this
option vested and became exercisable immediately prior to Mr.&nbsp;Bagnall&#146;s involuntary termination in
December&nbsp;2008. As a result of Mr.&nbsp;Bagnall&#146;s remaining on our board of directors, Mr.&nbsp;Bagnall
remained in continuous service and this option will continue to vest until such time as Mr.&nbsp;Bagnall
is no longer in continuous service. Stock options held by Mr.&nbsp;Bagnall granted to him as a member of
our board of directors were unaffected by Mr.&nbsp;Bagnall&#146;s involuntary termination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Bagnall Separation Agreement, Mr.&nbsp;Bagnall represented that he returned to us all
property, data and information belonging to us other than is reasonably required by Mr.&nbsp;Bagnall to
perform services as a member of our board of directors or is reasonably related to such services or
is needed by Mr.&nbsp;Bagnall to provide services as a consultant to us. Mr.&nbsp;Bagnall agreed not to use
or disclose to others any confidential or proprietary information of ours, except, as applicable,
in connection with Mr.&nbsp;Bagnall&#146;s position as a member of our board of directors or as a consultant
to us, in which case such use and disclosure will be governed by such documents, agreements and
duties as apply to such positions. Mr.&nbsp;Bagnall further agreed to comply with his continuing
obligations under various agreements and other documents as previously executed by him. In
addition, Mr.&nbsp;Bagnall agreed that he will not make any voluntary statements, written or oral, or
cause or encourage others to make any such statements, that defame, disparage or in any way
criticize the personal and/or business reputation, practices or conduct of us or our employees,
officers and directors, among others. Mr.&nbsp;Bagnall also represented that he had not filed any
lawsuits, complaints or other accusatory pleadings against us and certified that all transactions
in our securities prior to his separation date and reportable under Section&nbsp;16 of the Securities
Exchange Act of 1934 had been reported on Form&nbsp;4 and agreed to execute and deliver promptly after
December&nbsp;31, 2008 a document certifying that he is not required to file a Form&nbsp;5 for the fiscal
year ended December&nbsp;31, 2008. Finally, Mr.&nbsp;Bagnall agreed, at the end of the consulting period, to
extend and reaffirm the promises made by Mr.&nbsp;Bagnall in the Bagnall Separation Agreement, including
the release of claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In December&nbsp;2008, the Company and Mr.&nbsp;Bagnall entered into a consulting agreement. Under the
consulting agreement, Mr.&nbsp;Bagnall agreed to provide consulting services on an as-needed basis to
assist us in identifying and evaluating strategic options and to respond to inquiries regarding
finance and other matters, and we agreed to pay Mr.&nbsp;Bagnall $100 per hour. In February&nbsp;2009, we and
Mr.&nbsp;Bagnall amended the consulting agreement to include services related to Mr.&nbsp;Bagnall acting as
our interim principal financial and accounting officer, and agreed to pay Mr.&nbsp;Bagnall $250 per hour
for services provided after such amendment. Either party may
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">terminate the consulting agreement upon written notice. In 2008, we did not pay or accrue any
amount with respect to Mr.&nbsp;Bagnall&#146;s consulting services. We do not expect to pay Mr.&nbsp;Bagnall more
than $120,000 under the consulting agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Employment and Separation Arrangements with Mr.&nbsp;Hanson</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the commencement of Mr.&nbsp;Hanson&#146;s employment in December&nbsp;2006 as our chief
financial officer and a senior vice president, we entered into an offer letter agreement with Mr.
Hanson which provided that in the event of Mr.&nbsp;Hanson&#146;s involuntary termination, subject to Mr.
Hanson&#146;s execution of a mutual release (which included a nondisparagement provision and a covenant
not to sue our company), Mr.&nbsp;Hanson would receive an amount equal to his base salary for the
six-month period immediately prior to the effective date of such involuntary termination, payable
in six substantially equal installments over the six-month period following such effective date,
and we would pay in cash all costs we would otherwise have incurred to maintain Mr.&nbsp;Hanson&#146;s
health, welfare and retirement benefits if Mr.&nbsp;Hanson had continued to render services to us for
six months after such effective date. In addition, we granted to Mr.&nbsp;Hanson a stock option to
purchase up to 250,000 shares of our common stock, which option would vest and become exercisable
monthly over 48&nbsp;months from the vesting start date except that no shares would vest or become
exercisable for the first 12&nbsp;months and, on the 12-month anniversary of the vesting start date,
which was December&nbsp;20, 2007, 25% of the shares would vest and become exercisable. Pursuant to the
terms of Mr.&nbsp;Hanson&#146;s December&nbsp;2006 stock option, in the event of Mr.&nbsp;Hanson&#146;s involuntary
termination, and subject to Mr.&nbsp;Hanson&#146;s execution of a general release of claims (which included a
nondisparagement provision and a covenant not to sue our company), that number of shares underlying
the stock option would vest and become exercisable, effective immediately prior to the effective
date of such involuntary termination, as would have vested and become exercisable had Mr.&nbsp;Hanson
remained in continuous service (i.e., the absence of any interruption or termination of services as
an employee, director or consultant of ours, or any subsidiary) for six months following such
effective date, and Mr.&nbsp;Hanson would have 180&nbsp;days following the effective date of such involuntary
termination to exercise this stock option. For purposes of this agreement, an &#147;involuntary
termination&#148; meant one that occurred by reason of dismissal for any reason other than misconduct or
of voluntary resignation following: (i)&nbsp;a change in position that materially reduced the level of
Mr.&nbsp;Hanson&#146;s responsibility, (ii)&nbsp;a material reduction in Mr.&nbsp;Hanson&#146;s base salary, or (iii)
relocation by more than 50 miles; provided that (ii)&nbsp;and (iii)&nbsp;will apply only if Mr.&nbsp;Hanson did
not consented to the change or relocation. &#147;Misconduct&#148; meant the commission of any act of fraud,
embezzlement or dishonesty by Mr.&nbsp;Hanson, any unauthorized use or disclosure by Mr.&nbsp;Hanson of
confidential information or trade secrets of ours (or any parent or subsidiary), or any other
intentional misconduct by Mr.&nbsp;Hanson adversely affecting our business affairs (or those of any
parent or subsidiary) in a material manner.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In April&nbsp;2008, Mr.&nbsp;Hanson&#146;s employment relationship with us ended. In April&nbsp;2008, we entered
into a letter agreement regarding terms of separation with Mr.&nbsp;Hanson. The terms of Mr.&nbsp;Hanson
employment separation, as provided in the letter agreement, were substantially identical to those
set forth in his offer letter, dated December&nbsp;13, 2006, and in the stock option agreement relating
to the stock option granted to him in December&nbsp;2006 in connection with the commencement of his
employment, both of which are described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As set forth in the letter agreement regarding terms of separation, in exchange for a mutual
release, beginning in April&nbsp;2008, we paid Mr.&nbsp;Hanson an aggregate of $125,000, which was equal to
six months of Mr.&nbsp;Hanson base salary in effect at the time of termination, less applicable payroll
deductions and required withholdings, in substantially equal installments in accordance with our
standard payroll practices over 13 pay periods. In addition, we paid Mr.&nbsp;Hanson $20,997, less
applicable payroll deductions and required withholdings, which we and Mr.&nbsp;Hanson agreed satisfied
in full our obligation to pay all costs that we would otherwise have incurred to maintain Mr.
Hanson&#146;s health, welfare and retirement benefits if Mr.&nbsp;Hanson had continued for six continuous
months after Mr.&nbsp;Hanson&#146;s termination date. We paid the $20,997 amount in substantially equal
installments commencing on and continuing in accordance with the same schedule described above with
respect to payment of Mr.&nbsp;Hanson&#146;s base salary. Furthermore, we accelerated the vesting and
extended the time to exercise vested shares under the stock option granted to Mr.&nbsp;Hanson in
December&nbsp;2006 in connection with the commencement of his employment. Under this option, Mr.&nbsp;Hanson
was granted the right to purchase up to 250,000 shares of our common stock at a price of $2.57 per
share, which right was subject to a vesting schedule. As of Mr.&nbsp;Hanson&#146;s termination date, this
option was vested as to 78,125 shares and unvested as to 171,875 shares. Pursuant to the letter
agreement regarding terms of separation, we accelerated vesting as to 31,250 of the unvested
shares, which resulted in this option being vested as to a total of 109,375 shares, and extended
the time for Mr.&nbsp;Hanson to exercise the vested shares under this option through September&nbsp;29, 2008.
Mr.&nbsp;Hanson did not exercise the option by September&nbsp;29, 2008 and, accordingly, it terminated on
that date. The closing market price of our common stock on September&nbsp;29, 2008 was $0.18 per share,
while the exercise price of the option was $2.57 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the letter agreement regarding terms of separation, Mr.&nbsp;Hanson represented that he had
returned to us all of our property and data that had been in his possession or control and
acknowledged that he will continue to be bound an agreement with us regarding the use and
confidentiality of our confidential information and, in particular, that he will hold all of our
confidential
</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">information in confidence and not directly or indirectly use any aspect of such confidential
information. Mr.&nbsp;Hanson also agreed not to make any voluntary statements, written or oral, or cause
or encourage others to make any such statements that defame or disparage us and, among others, our
officers and directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, in April&nbsp;2008, we and Mr.&nbsp;Hanson entered into a consulting agreement and related
confidential information and invention assignment agreement. Under the consulting agreement, Mr.
Hanson agreed to provide consulting services on an as-needed basis and we agreed to pay Mr.&nbsp;Hanson
(a)&nbsp;for the first ten hours in a particular calendar month, $250 per hour and (b)&nbsp;for any time
beyond ten hours in a particular calendar month, $150 per hour. Either party may terminate the
consulting agreement upon written notice, except that Mr.&nbsp;Hanson could not terminate the consulting
agreement, other than for our failure to pay Mr.&nbsp;Hanson as set forth in the consulting agreement,
prior to December&nbsp;31, 2008. The Company does not expect to require Mr.&nbsp;Hanson&#146;s consulting services
during 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Employment and Separation Arrangements with Dr.&nbsp;Robbins</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the terms of an offer letter, dated March&nbsp;5, 2003, we agreed to pay Dr.&nbsp;Robbins a bonus,
payable in stock options, equal to 5% of all government grants received by us. In addition, we
agreed to pay Dr.&nbsp;Robbins a bonus, payable in stock options, equal to 5% of capital received by us
that was a direct result of Dr.&nbsp;Robbins&#146; introduction. We never issued any stock options to Dr.
Robbins as a result of these provisions. In October&nbsp;2008, Dr.&nbsp;Robbins employment relationship with
us ended. Dr.&nbsp;Robbins formerly served as our chief scientific officer and a senior vice president.
In December&nbsp;2008, we entered into a confidential separation agreement and general release of all
claims regarding terms of separation with Dr.&nbsp;Robbins, or the Robbins Separation Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As set forth in the Robbins Separation Agreement, in exchange for a release of claims and Dr.
Robbins&#146; agreement to provide certain transition assistance and Dr.&nbsp;Robbins&#146; other agreements and
representations (as more fully described below), we agreed to provide a severance payment of
$123,615 to Dr.&nbsp;Robbins. In addition, we agreed to provide a health benefit allowance of $8,309,
which Dr.&nbsp;Robbins may use, at her discretion, to pay the premiums required to continue her group
health care coverage under COBRA or any other health care related expenses. We agreed to pay the
severance payment and the health benefit allowance in eleven substantially equal installments over
a period of five and one-half months, less applicable payroll deductions and required withholdings,
beginning in December&nbsp;2008, conditioned upon Dr.&nbsp;Robbins&#146; making herself available as needed during
that period to answer business-related questions by telephone or in person as deemed reasonably
necessary by us. At the time of her separation, Dr.&nbsp;Robbins held vested options to purchase up to
495,312 shares. Pursuant to their terms, these options expired, unexercised, on December&nbsp;30, 2008
and January&nbsp;12, 2009. The closing market price of our common stock on December&nbsp;30, 2008 was $0.07
per share, while the exercise price of the option that expired on December&nbsp;30, 2008 was $0.50 per
share. The closing market price of our common stock on January&nbsp;12, 2009 was $0.12 per share, while
the exercise prices of the options that expired on January&nbsp;12, 2009 were $2.30 per share, $2.75 per
share and $4.75 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Robbins Separation Agreement, Dr.&nbsp;Robbins represented that she had returned to us
all property, data and information belonging to us and agreed not to use or disclose to others any
confidential or proprietary information of ours and agreed to comply with her continuing
obligations under various agreements and other documents as previously executed by her. In
addition, she agreed to make herself available, as needed, without any additional compensation, to
answer business-related questions by telephone or in person as deemed reasonably necessary by us
and that she will not make any voluntary statements, written or oral, or cause or encourage others
to make any such statements, that defame, disparage or in any way criticize the personal and/or
business reputation, practices or conduct of us or our employees, officers and directors, among
others. Dr.&nbsp;Robbins also represented that she had not filed any lawsuits, complaints or other
accusatory pleadings against us and certified that all transactions in our securities prior to her
separation date and reportable under Section&nbsp;16 of the Securities Exchange Act of 1934 had been
reported on Form&nbsp;4 and agreed to execute and deliver promptly after December&nbsp;31, 2008 a document
certifying that she is not required to file a Form&nbsp;5 for the fiscal year ended December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Acceleration of Vesting of Outstanding Stock Options</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stock options granted under our 2005 Equity Incentive Plan typically are evidenced by our
standard stock option agreement. We may elect to incorporate into our standard stock option
agreement one or more alternatives regarding the effect of a change in control on the underlying
option, including its vesting and exercisability. We have not granted any stock options to any of
the Named Executive Officers currently employed by us under our 2008 Omnibus Incentive Plan, other
than the July&nbsp;2009 stock options described above under &#147;Narrative Disclosure to Summary
Compensation Table.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We generally provide in stock option agreements (actually entered into with recipients of
stock option awards) that the option will accelerate in full in the event of an &#147;acquisition&#148;
constituting a &#147;change of control&#148; (as such terms are defined in our standard
</DIV>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">form of stock option agreement) if the recipient remains employed by us as of the closing date
of such acquisition and the option is not assumed or replaced by the successor or acquiring entity
or the entity in control of such successor or acquiring entity. Otherwise, the option will not
accelerate in the event of such an acquisition. All of the stock option agreements governing the
outstanding, unvested options held by the Named Executive Officers currently employed by us contain
this acceleration provision.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, we have incorporated into certain stock option agreements for options granted in
and after August&nbsp;2006 a provision providing that, if following a change of control in which an
option is assumed as described above, in the event of the recipient&#146;s &#147;involuntary termination&#148;
within a period of time, not to exceed 24&nbsp;months, after the closing date of such change of control,
the vesting of the assumed option will be accelerated such that the option will vest as of the
effective date of such involuntary termination with respect to all shares that would have vested
during such period. For purposes of the stock option agreements, an &#147;involuntary termination&#148; is a
termination of employment that occurs by reason of dismissal for any reason other than &#147;misconduct&#148;
or of voluntary resignation following: (i)&nbsp;a change in position that materially reduces the level
of the employee&#146;s responsibility, (ii)&nbsp;a material reduction in the employee&#146;s base salary, or (iii)
relocation by more than 50 miles; provided that (ii)&nbsp;and (iii)&nbsp;will apply only if the employee has
not consented to the change or relocation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;Misconduct&#148; means the commission of any act of fraud, embezzlement or dishonesty by the
employee, any unauthorized use or disclosure by the employee of confidential information or trade
secrets of our company (or any parent or subsidiary), or any other intentional misconduct by the
employee adversely affecting our business affairs (or those of any parent or subsidiary) in a
material manner. All of the stock option agreements governing the options granted to the Named
Executive Officers in January&nbsp;2007 contain this double trigger acceleration provision. We
anticipate continuing to include this or a similar double trigger acceleration provision in most
stock option awards made in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of December&nbsp;31, 2008, none of the Named Executive Officers had any in-the-money unvested
stock options. The value at December&nbsp;31, 2008 of the acceleration provisions described above is
based on the &#147;spread&#148; between the exercise price of option shares that would accelerate under the
acceleration scenarios described above and the market value of these shares as of December&nbsp;31,
2008. The market value of these shares is based on the closing market price of our common stock on
December&nbsp;31, 2008, which was $0.08 per share. None of the outstanding, unvested options held by the
Named Executive Officers has an exercise price of less than $0.08 per share. Accordingly, none of
the Named Executive Officers would have realized any value as a result of the acceleration
provisions described above had any of the acceleration scenarios occurred on December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Outstanding Equity Awards at Fiscal Year-End 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding outstanding equity awards held by the
Named Executive Officers at the end of fiscal 2008:
</DIV>
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    <TD nowrap align="center" colspan="3"><B>Plan Awards:</B></TD>
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    <TD nowrap align="center" colspan="3"><B>Equity Incentive</B></TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>Equity Incentive</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>or Payout</B></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 nowrap align="center" colspan="3"><B>Plan Awards:</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>Market Value</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Plan Awards:</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Value of</B></TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>Number of</B></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</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unearned</B></TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>of Securities</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>Shares or</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares or</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unearned Shares,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares, Units</B></TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>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"><B>Underlying</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>Units of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Units of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Units or Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>or Other</B></TD>
</TR>
<TR style="font-size: 7pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unexercised</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>Stock That</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Stock That</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rights That</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Rights That</B></TD>
</TR>
<TR style="font-size: 7pt" 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>Options</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Unearned</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"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Have Not</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Have Not</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Have Not</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Have Not</B></TD>
</TR>
<TR style="font-size: 7pt" 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>Options</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>Expiration</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Vested</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Vested</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Vested</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Vested</B></TD>
</TR>
<TR style="font-size: 7pt" 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>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>($)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>(#)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>($)</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>($)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brian M. Culley</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</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 align="right">$</TD>
    <TD align="right">2.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7/13/2015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">58,333      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">21,667      </TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1/30/2016</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">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">71,875      </TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">78,125      </TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1/11/2017</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">200,000      </TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/30/2018</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="padding-top: 0em">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Patrick L. Keran</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">58,333      </TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">41,667      </TD>
    <TD nowrap>(4)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.99</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8/17/2016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">23,958      </TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">26,042      </TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1/11/2017</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">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">200,000      </TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3/30/2018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 0em; background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Evan M. Levine</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Mark N.K. Bagnall</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.42</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7/13/2015</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">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</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 align="right">$</TD>
    <TD align="right">4.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6/01/2016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.57</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5/22/2017</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">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">100,000      </TD>
    <TD nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">400,000      </TD>
    <TD nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4/02/2018</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 nowrap><DIV style="margin-left:15px; text-indent:-15px">Gregory P. Hanson</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap><DIV style="margin-left:15px; text-indent:-15px">Joan M. Robbins</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">93,750      </TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">6,250      </TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1/12/2009</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">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">68,750      </TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">31,250      </TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">4.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1/12/2009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">32,812      </TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">42,188      </TD>
    <TD nowrap>(6)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2.75</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1/12/2009</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">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">200,000      </TD>
    <TD nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">0.54</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1/12/2009</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>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->72<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<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">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Subject to accelerated vesting in the event of a change in control, as
described above under &#147;Narrative Disclosure to Summary Compensation
Table &#151; Acceleration of Vesting of Outstanding Stock Options,&#148; this
option vested and became exercisable with respect to 1/4 of the total
underlying shares on January&nbsp;1, 2007 and vests and becomes exercisable
with respect to 1/48 of the total underlying shares at the end of each
successive calendar month thereafter.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 24&nbsp;months of a change in control, as
described above under &#147;Narrative Disclosure to Summary Compensation
Table &#151; Acceleration of Vesting of Outstanding Stock Options,&#148; this
option vested and became exercisable with respect to 1/4 of the total
underlying shares subject to the option on January&nbsp;1, 2008 and vests
and becomes exercisable with respect to 1/48 of the total underlying
shares at the end of each successive month thereafter.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 24&nbsp;months of a change in control, as
described above under &#147;Narrative Disclosure to Summary Compensation
Table &#151; Acceleration of Vesting of Outstanding Stock Options,&#148; this
option will vest and became exercisable with respect to 1/5 of the
total underlying shares on each of January&nbsp;1, 2009, January&nbsp;1, 2010,
January&nbsp;1, 2011, January&nbsp;1, 2012 and January&nbsp;1, 2013.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 24&nbsp;months of a change in control, as
described above under &#147;Narrative Disclosure to Summary Compensation
Table &#151; Acceleration of Vesting of Outstanding Stock Options,&#148; this
option vested and became exercisable with respect to 1/4 of the total
underlying shares subject to the option on August&nbsp;7, 2007 and vests
and becomes exercisable with respect to 1/48 of the total underlying
shares at the end of each successive month thereafter.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 12&nbsp;months of a change in control, as
described above under &#147;Narrative Disclosure to Summary Compensation
Table &#151; Employment and Separation Arrangements with Mr.&nbsp;Bagnall,&#148;
this option vested and became exercisable with respect to 100,000
shares immediately prior to Mr.&nbsp;Bagnall&#146;s involuntary termination in
December&nbsp;2008 and will vest and became exercisable with respect to 1/5
of the total underlying shares on each of January&nbsp;1, 2009, January&nbsp;1,
2010, January&nbsp;1, 2011 and January&nbsp;1, 2012.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>Dr.&nbsp;Robbins&#146; employment with us ended on October&nbsp;14, 2008 and, as a
result, this option stopped vesting as of such date. Pursuant to the
terms of the option grant, this option expired and was no longer
exercisable as of January&nbsp;12, 2009.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>Dr.&nbsp;Robbins&#146; employment with us ended on October&nbsp;14, 2008 and, as a
result, this option stopped vesting as of such date. On October&nbsp;14,
2008, none of the shares underlying this option were vested or
exercisable.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Tax-Qualified Defined Contribution Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have a defined contribution savings plan pursuant to Section 401(k) of the IRC. The plan is
for the benefit of all full-time employees and permits voluntary contributions by qualifying
employees of up to 100% of eligible compensation, subject to Internal Revenue Service-imposed
maximum limits. Until January&nbsp;1, 2008, we were required to make matching contributions in the
amount of 100% of employee contributions up to 3% of eligible compensation and 50% of employee
contributions between 3% and 5% of eligible compensation. Effective January&nbsp;1, 2008, the plan was
amended to require us to make matching contributions equal to 100% of employee contributions up to
6% of eligible compensation, limited by the IRS-imposed maximum. We incurred total expenses of
approximately $218,150 and $118,000 in employer matching contributions in 2008 and 2007,
respectively. In May&nbsp;2009, a further amendment to the plan to eliminate matching contributions
became effective.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Directors who are also our employees do not receive any additional compensation for their
services as directors. As of the date of this prospectus, none of our directors is also an
employee. Our non-employee directors are compensated as described below.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Retainer and Meeting Fees</I></B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2008, we paid our non-employee directors quarterly cash retainers and board of director
and committee meeting fees. The amounts of the quarterly retainers vary depending on the
non-employee director&#146;s role on our board of directors and its committees, as set forth in the
table below:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->73<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></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="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 nowrap align="left" style="border-bottom: 1px solid #000000"><B>Quarterly Retainers</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Chairperson</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Member</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Board of Directors</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">6,250</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit Committee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Compensation Committee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Nominating and Governance Committee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,250</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and Development Committee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">1,250</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the quarterly retainers, we pay the following per meeting fees with respect to
each meeting of our board of directors or any committee of our board of directors with a duration
of more than 15 minutes, other than (i)&nbsp;the first four meetings of our board of directors held
during each calendar year, (ii)&nbsp;the first four meetings of the audit committee held during each
calendar year, (iii)&nbsp;the first two meetings of the compensation committee held during each calendar
year and (iv)&nbsp;the first meeting of the nominating and governance committee and the research and
development committee held during each calendar year:
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$1,000 to each director for each such meeting attended in person; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>$500 to each director for each such meeting attended via telephone conference call.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to the quarterly retainer and meeting fees, we reimburse our directors for travel
and other reasonable out-of-pocket expenses related to attendance at our board of directors and
committee meetings.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the terms of our 2005 Equity Incentive Plan, each of our non-employee directors
was automatically granted a nonstatutory option to purchase 50,000 shares of our common stock at
the first meeting of our board of directors following each annual meeting of stockholders, provided
that such non-employee director had served on our board of directors for at least the preceding six
months. The exercise price per share of each automatically granted option was equal to 105% of the
per-share fair market value of our common stock on the grant date. Each such option became
exercisable as to 1/12th of the shares underlying the option at the end of each calendar month
after its date of grant, provided that the director remains in continuous service. The options
expire no later than ten years after the date of grant. In May&nbsp;2008, our stockholders approved our
2008 Omnibus Incentive Plan. Following adoption of our 2008 Omnibus Incentive Plan, no additional
awards (including the automatic options to our non-employee directors described above) have been or
will be made under our 2005 Equity Incentive Plan; however, the 2005 Equity Incentive Plan will
continue to govern any outstanding awards (including the automatic options to our non-employee
directors described above) previously granted under the 2005 Equity Incentive Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Awards under our 2008 Omnibus Incentive Plan are at the discretion of our board of directors
or the compensation committee of our board of directors. Unlike the 2005 Equity Incentive Plan, the
2008 Omnibus Incentive Plan does not provide for automatic awards to our directors. However, we
currently intend to grant annual nonstatutory options to our non-employee directors on terms
substantially similar to the terms of the automatic annual options granted to the non-employee
directors under the 2005 Equity Incentive Plan, except that the exercise price per share of these
options would be equal to 100% of the per-share fair market value of our common stock on the date
of grant.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2008, our board of directors approved an option to purchase up to of 50,000 shares
of our common stock to each of Drs.&nbsp;Rowinsky and Denner. Our board of directors granted an option
to Dr.&nbsp;Rowinsky in connection with his appointment to our board of directors in February&nbsp;2008 and
granted an option to Dr.&nbsp;Denner in acknowledgment that it had not granted Dr.&nbsp;Denner an option in
connection with his appointment to our board of directors in October&nbsp;2006. Each option will vest
and become exercisable in 12 equal monthly installments beginning on, for Dr.&nbsp;Rowinsky, February
25, 2008, and, for Dr.&nbsp;Denner, February&nbsp;28, 2008, and will expire on March&nbsp;23, 2018. The grants of
these options were contingent upon our receipt of a waiver under the Rights Agreement of
restrictions relating to equity awards to our directors and employees. We received the waiver on
March&nbsp;24, 2008 and, accordingly, the options were granted with an exercise price of $0.48 per
share, which was the closing price of our common stock on March&nbsp;24, 2008. If Dr.&nbsp;Rowinsky&#146;s or Dr.
Denner&#146;s service to us terminates for any reason, the options will be exercisable, to the extent
then vested, during the three-year period after the date of such termination, but in no event after
March&nbsp;23, 2018.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In May&nbsp;2008, our board of directors approved an option to purchase up to 50,000 shares of our
common stock to each non-employee member of our board of directors. Each option will vest and
become exercisable in 12 equal monthly installments beginning on May&nbsp;28, 2008 and will expire on
June&nbsp;29, 2018. To comply with the requirements of the NYSE Amex regarding the listing of
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->74<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">additional securities and applicable securities laws, our board of directors authorized these
options to be granted as of a date that would give us a reasonable period of time to apply for and
receive approval to list the additional shares with the NYSE Amex and to prepare and file a
registration statement on Form S-8 covering awards under our 2008 Omnibus Incentive Plan.
Accordingly, our board of directors approved a grant date of June&nbsp;30, 2008 for these options and
the options were granted with an exercise price of $0.37 per share, which was the closing price of
our common stock on June&nbsp;30, 2008. If any of our non-employee director&#146;s service to us terminates
for any reason, the options will be exercisable, to the extent then vested, during the three-year
period after the date of such termination, but in no event after June&nbsp;29, 2018.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Director Compensation in 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows compensation information for the individuals who served as our
non-employee directors during the year ended December&nbsp;31, 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="23%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Nonqualified</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>Fees Earned or</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>Non-Equity</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Deferred</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>Stock</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Option</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Incentive Plan</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>All Other</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name</B>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Cash</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Awards</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Awards(2)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Earnings</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Alexander J. Denner</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">44,772      </TD>
    <TD nowrap>(3)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">65,890      </TD>
    <TD nowrap>(4)</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 align="right">$</TD>
    <TD align="right">110,662</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael M. Goldberg</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">42,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">47,002      </TD>
    <TD nowrap>(5)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">89,058</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Jack Lief</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">59,944</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">47,002      </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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">106,947</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark J. Pykett</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">41,556</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">47,002      </TD>
    <TD nowrap>(7)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">88,558</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Eric K. Rowinsky</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">29,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">28,291      </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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">58,014</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>Mark N.K. Bagnall served as a non-employee director for part of 2008, but from April&nbsp;3, 2008 to December&nbsp;26, 2008,
he served as our executive vice president, chief financial officer and treasurer. Accordingly, all of Mr.&nbsp;Bagnall&#146;s
2008 compensation is set forth above in the Summary Compensation Table and under &#147;Narrative Disclosure to the
Summary Compensation Table.&#148;</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Values for option awards have been computed in accordance with FAS 123R, which requires that we recognize as
compensation expense the value (excluding the effect of assumed forfeiture rates) of the options granted to the
directors over the requisite service period, which is typically the vesting period. For the assumptions made in
calculating the FAS 123R value of the option awards, see Note 8 of the Notes to Consolidated Financial Statements
contained in our Annual Report on Form 10-K filed with the SEC on March&nbsp;27, 2009. The amounts in this column include
the ratable compensation expense recognized in 2008 for options granted in 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>Since October&nbsp;2006, when Dr.&nbsp;Denner joined our board of directors, through February&nbsp;2008, based on its past practice
regarding cash compensation with respect to Mr.&nbsp;Meister, the Purchaser Designee under the Rights Agreement prior to
Dr.&nbsp;Denner, we did not pay Dr.&nbsp;Denner any fees associated with his participation on our board of directors or its
committees. For information regarding the Rights Agreement, see &#147;Director Nominations &#151; Board Nominees for the 2009
Annual Meeting,&#148; above. In March&nbsp;2008, after discussions with Dr.&nbsp;Denner, we paid Dr.&nbsp;Denner $18,500 and $2,772,
which represented fees earned by Dr.&nbsp;Denner in 2007 and 2006, respectively, for participation on our board of
directors and its compensation committee.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>The aggregate number of shares underlying Dr.&nbsp;Denner&#146;s outstanding options at December&nbsp;31, 2008 was 150,000 shares.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>The aggregate number of shares underlying Dr.&nbsp;Goldberg&#146;s outstanding options at December&nbsp;31, 2008 was 250,000 shares.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(6)</TD>
    <TD>&nbsp;</TD>
    <TD>The aggregate number of shares underlying Mr.&nbsp;Lief&#146;s outstanding options at December&nbsp;31, 2008 was 150,000 shares.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(7)</TD>
    <TD>&nbsp;</TD>
    <TD>The aggregate number of shares underlying Dr.&nbsp;Pykett&#146;s outstanding options at December&nbsp;31, 2008 was 250,000 shares.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>The aggregate number of shares underlying Dr.&nbsp;Rowinsky&#146;s outstanding options at December&nbsp;31, 2008 was 100,000 shares.</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->75<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth information regarding beneficial ownership of our common stock
as of July&nbsp;22, 2009, or the Evaluation Date, or an earlier date for information based on filings
with the SEC, by (a)&nbsp;each person known to us to beneficially own more than 5% of the outstanding
shares of our common stock, (b)&nbsp;each director and nominee for director, (c)&nbsp;each of the Named
Executive Officers and (d)&nbsp;all of our directors and executive officers as a group. The information
in this table is based solely on statements in filings with the SEC or other reliable information.
As of the Evaluation Date, there were 117,792,960 shares of the Company&#146;s common stock outstanding.
</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</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>Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beneficial</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 nowrap align="left" style="border-bottom: 1px solid #000000"><B>Beneficial Owner(1)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Ownership(2)</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Class</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><B>Principal Stockholders</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">Funds
affiliated with Carl C. Icahn(3)<br>
c/o Icahn Associates Corp.<br>
767 Fifth Avenue <br>
New York, NY 10153</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,648,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.1      </TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><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:15px; text-indent:-15px">Mark N.K. Bagnall(4)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">350,000</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:15px; text-indent:-15px">Alexander J. Denner(5)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,798,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">7.2      </TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Michael M. Goldberg(6)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">226,000</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:15px; text-indent:-15px">Jack Lief(7)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Mark J. Pykett(8)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">208,000</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:15px; text-indent:-15px">Eric K. Rowinsky(9)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Brian M. Culley(10)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">313,333</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:15px; text-indent:-15px">Patrick L. Keran(11)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Evan M. Levine(12)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,395,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3.7      </TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Greg Hanson</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Joan M. Robbins(13)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156,500</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:15px; text-indent:-15px">All directors and executive officers as a group (8 persons)(14)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,296,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">8.4      </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>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 each of the listed persons
is c/o ADVENTRX Pharmaceuticals, Inc., 6725 Mesa Ridge Road, Suite
100, San Diego, CA 92121.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Beneficial ownership of shares is determined in accordance with the
rules of the SEC and generally includes any shares over which a
person exercises sole or shared voting or investment power, or of
which a person has the right to acquire ownership within 60&nbsp;days
after the Evaluation Date. Except as otherwise noted, each person or
entity has sole voting and investment power with respect to the
shares shown. Unless otherwise noted, none of the shares shown as
beneficially owned on this table are subject to pledge.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(3)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of (a)&nbsp;864,865 shares of common stock held by High River
Limited Partnership (&#147;High River&#148;); (b)&nbsp;1,660,540 shares of common
stock held by Icahn Partners LP (&#147;Icahn Partners&#148;); (c)&nbsp;1,798,919
shares of common stock held by Icahn Partners Master Fund LP (&#147;Icahn
Master&#148;); (d)&nbsp;864,865 shares of common stock issuable upon exercise
of warrants held by High River; (e)&nbsp;1,660,540 shares of common stock
issuable upon exercise of warrants held by Icahn Partners and (f)
1,798,919 shares of common stock issuable upon exercise of warrants
held by Icahn Master. Based on our review of a Schedule&nbsp;13D filed
with the SEC on August&nbsp;5, 2005 (the &#147;Icahn 13D&#148;) by High River,
Hopper Investments, LLC (&#147;Hopper&#148;), Barberry Corp. (&#147;Barberry&#148;),
Icahn Master, Icahn Offshore LP (&#147;Icahn Offshore&#148;), CCI Offshore
Corp. (&#147;CCI Offshore&#148;), Icahn Partners, Icahn Onshore LP (&#147;Icahn
Onshore&#148;), CCI Onshore Corp. (&#147;CCI Onshore&#148;) and Mr.&nbsp;Carl C. Icahn,
we believe that (i)&nbsp;Barberry, Hopper and Mr.&nbsp;Icahn may be deemed to
beneficially own (as that term is defined in Rule&nbsp;13d-3 under the
Securities Exchange Act of 1934, as amended) the shares (including
warrant shares) held by High River; (ii)&nbsp;CCI Onshore, Icahn Onshore
and Mr.&nbsp;Icahn may be deemed to beneficially own (as that term is
defined in Rule&nbsp;13d-3 under the Securities Exchange Act of 1934, as
amended) the shares (including warrant shares) directly held by Icahn
Partners; and (iii)&nbsp;CCI Offshore, Icahn Offshore and Mr.&nbsp;Icahn may be
deemed to beneficially own (as that term is defined in Rule&nbsp;13d-3
under the Securities Exchange Act of 1934, as amended) the</TD>
</TR>

</TABLE>


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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">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>shares (including warrant shares) directly held by Icahn Master because, in
each of the foregoing cases, such referenced persons are in a
position to directly or indirectly determine the investment and
voting decisions of the holder referenced. Barberry, Hopper, CCI
Onshore, Icahn Onshore, CCI Offshore, Icahn Offshore and Mr.&nbsp;Icahn
each disclaim beneficial ownership of such shares they may be deemed
the beneficial owner of for all other purposes.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(4)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of 350,000 shares of common stock subject to options
currently exercisable or exercisable within 60&nbsp;days of the Evaluation
Date.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(5)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of (a)&nbsp;150,000 shares of common stock subject to options
currently exercisable or exercisable within 60&nbsp;days of the Evaluation
Date, (b)&nbsp;864,865 shares of common stock held by High River, (c)
1,660,540 shares of common stock held by Icahn Partners, (d)
1,798,919 shares of common stock held by Icahn Master, (e)&nbsp;864,865
shares of common stock issuable upon exercise of warrants held by
High River, (f)&nbsp;1,660,540 shares of common stock issuable upon
exercise of warrants held by Icahn Partners and (g)&nbsp;1,798,919 shares
of common stock issuable upon exercise of warrants held by Icahn
Master. Dr.&nbsp;Denner is a Managing Director of entities affiliated with
Mr.&nbsp;Icahn, including Icahn Partners and Icahn Master. Dr.&nbsp;Denner
disclaims beneficial ownership of the shares owned by High River,
Icahn Partners and Icahn Master except to the extent of his pecuniary
interest therein.</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 200,000 shares of common stock subject to options currently
exercisable or exercisable within 60&nbsp;days of the Evaluation 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>Consists of 150,000 shares of common stock subject to an option
currently exercisable or exercisable within 60&nbsp;days of the Evaluation
Date.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(8)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of (a)&nbsp;200,000 shares of common stock subject to options
currently exercisable or exercisable within 60&nbsp;days of the Evaluation
Date and (b)&nbsp;8,000 shares of common stock held by Dr.&nbsp;Pykett and his
spouse, as joint tenants.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(9)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of 100,000 shares of common stock subject to an option
currently exercisable or exercisable within 60&nbsp;days of the Evaluation
Date.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(10)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of 313,333 shares of common stock subject to an option
currently exercisable or exercisable within 60&nbsp;days of the Evaluation
Date.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(11)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of 150,416 shares of common stock subject to an option
currently exercisable or exercisable within 60&nbsp;days of the Evaluation
Date.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(12)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of (a)&nbsp;4,320,000 shares of common stock held by Mark Capital
LLC, (b)&nbsp;60,000 shares of common stock held by Mr.&nbsp;Levine in an
individual retirement account and (c)&nbsp;15,000 shares of common stock
held by Mr.&nbsp;Levine and his father, as joint tenants with right of
survivorship. Mr.&nbsp;Levine is the managing member of Mark Capital LLC.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(13)</TD>
    <TD>&nbsp;</TD>
    <TD>Consists of 146,500 shares of common stock held by Dr.&nbsp;Robbins&#146;
husband and 10,000 shares of common stock held by Dr.&nbsp;Robbins and her
spouse, as joint tenants.</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(14)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 5,938,073 shares of common stock subject to options and
warrants currently exercisable or exercisable within 60&nbsp;days of the
Evaluation Date. Includes shares deemed beneficially owned by Dr.
Denner but as to which he disclaims beneficial ownership.</TD>
</TR>

</TABLE>


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






<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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have incorporated into our written review and approval policies certain procedures designed
to ensure that any proposed transaction in which we would be a participant and in which any of our
directors, executive officers, holders of more than 5% of our common stock, or any member of the
immediate family of any of the foregoing would have a direct or indirect material interest is
reviewed by individuals within our company (including our general counsel) familiar with the
requirements of Item&nbsp;404 of Regulation&nbsp;S-K promulgated by the SEC. If any such proposed transaction
would require disclosure pursuant to Item&nbsp;404(a), it will be presented to the audit committee for
review and, if appropriate, approval.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since January&nbsp;1, 2007, there has not been, nor currently are there proposed, any transactions
or series of similar transactions in which we were or are to be a participant and the amount
involved exceeds or will exceed the lesser of $120,000 or 1% of the average of our total assets at
December&nbsp;31, 2007 and 2008, and in which any director, executive officer, holder of more than 5% of
our common stock or any member of the immediate family of any of the foregoing persons had or will
have a direct or indirect material interest, other than the transactions described below and the
employment arrangements described above under &#147;Executive &#038; Director Compensation.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Separation Arrangements with Former President and Chief Medical Officer</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dr.&nbsp;James Merritt was employed by us from September&nbsp;2006 to January&nbsp;2008 as our president and
chief medical officer. Dr.&nbsp;Merritt was a named executive officer of ours for fiscal year 2007. In
February&nbsp;2008, we entered into a letter agreement regarding terms of separation with Dr.&nbsp;Merritt.
The terms of Dr.&nbsp;Merritt&#146;s employment separation, as provided in the letter agreement, are
substantially identical to those set forth in his offer letter, dated September&nbsp;7, 2006, and in the
stock option agreement relating to the stock option to purchase up to 300,000 shares of our common
stock granted to him in September&nbsp;2006 in connection with the commencement of his employment,
except that we agreed to extend the exercise period of that option from June&nbsp;29, 2008 to December
31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As set forth in the letter agreement regarding terms of separation, in exchange for a mutual
release, beginning in February&nbsp;2008, we paid Dr.&nbsp;Merritt an aggregate of $181,250, which was equal
to six months of Dr.&nbsp;Merritt&#146;s base salary in effect at the time of termination, less applicable
state and federal payroll deductions, in substantially equal installments in accordance with our
standard payroll practices over 13 pay periods. In addition, we paid Dr.&nbsp;Merritt $16,038, less
applicable state and federal payroll deductions, which we and Dr.&nbsp;Merritt agreed satisfied in full
our obligation to pay all costs that we would otherwise have incurred to maintain Dr.&nbsp;Merritt&#146;s
health, welfare and retirement benefits if Dr.&nbsp;Merritt had continued for six continuous months
after Dr.&nbsp;Merritt&#146;s termination date. We paid the $16,038 amount in substantially equal
installments commencing on and continuing in accordance with the same schedule described above with
respect to payment of Dr.&nbsp;Merritt&#146;s base salary. Furthermore, we accelerated the vesting and
extended the time to exercise vested shares under the stock option granted to Dr.&nbsp;Merritt in
September&nbsp;2006 in connection with the commencement of his employment. Under this option, Dr.
Merritt was granted the right to purchase up to 300,000 shares of our common stock at a price of
$2.86 per share, which right was subject to a vesting schedule. As of Dr.&nbsp;Merritt&#146;s termination
date, this option was vested as to 100,000 shares and unvested as to 200,000 shares. Pursuant to
the letter agreement regarding terms of separation, we accelerated vesting as to 31,249 of the
unvested shares, which resulted in this option being vested as to a total of 131,249 shares, and
extended the time for Dr.&nbsp;Merritt to exercise the vested shares under this option to Noon (Pacific
time) on December&nbsp;31, 2008. Dr.&nbsp;Merritt did not exercise the option by December&nbsp;31, 2008 and,
accordingly, it terminated. The closing market price of our common stock on December&nbsp;31, 2008 was
$0.08 per share, while the exercise price of the option was $2.86 per share. In addition, at the
time of his separation, Dr.&nbsp;Merritt held another option that was vested as to 8,334 shares.
Pursuant to its terms, this option expired, unexercised, on April&nbsp;28, 2008. The closing market
price of our common stock on April&nbsp;28, 2008 was $0.52 per share, while the exercise price of this
option was $2.75 per share.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the letter agreement regarding terms of separation, Dr.&nbsp;Merritt represented that he had
returned to us all of our property and data that had been in his possession or control and
acknowledged that he is bound by an agreement with us regarding the use and confidentiality of our
confidential information.
</DIV>

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</DIV>

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<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>DESCRIPTION OF CAPITAL STOCK</B>
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are authorized to issue 200,000,000 shares of common stock, par value $0.001 per share.
Additional shares of authorized common stock may be issued, as authorized by our board of directors
from time to time, without stockholder approval, except as may be required by applicable securities
exchange requirements. The holders of common stock possess exclusive voting rights in us, except to
the extent specified in the certificate of designation relating to our &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible
Preferred Stock and to the extent our board of directors specifies voting power with respect to any
other class of securities issued in the future. Each holder of our common stock is entitled to one
vote for each share held of record on each matter submitted to a vote of stockholders, including
the election of directors. Stockholders do not have any right to cumulate votes in the election of
directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subject to preferences that may be granted to the holders of preferred stock, each holder of
our common stock is entitled to share ratably in distributions to stockholders and to receive
ratably such dividends as may be declared by our board of directors out of funds legally available
therefor. In the event of our liquidation, dissolution or winding up, the holders of our common
stock will be entitled to receive, after payment of all of our debts and liabilities and of all
sums to which holders of any preferred stock may be entitled, the distribution of any of our
remaining assets. Holders of our common stock have no conversion, exchange, sinking fund,
redemption or appraisal rights (other than such as may be determined by our board of directors in
its sole discretion) and have no preemptive rights to subscribe for any of our securities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All of the outstanding shares of our common stock are, and the shares of common stock issued
upon the conversion of any securities convertible into our common stock will be, fully paid and
non-assessable. The shares of common stock offered by this prospectus or upon the conversion of any
preferred stock or exercise of any warrants offered pursuant to this prospectus, when issued and
paid for, will also be, fully paid and non-assessable.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Securities Exchange Listing</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is listed on the NYSE Amex under the symbol &#147;ANX.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Transfer Agent and Registrar</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent and registrar for our common stock is American Stock Transfer &#038; Trust
Company.
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are authorized to issue 1,000,000 shares of preferred stock, par value $0.001 per share.
Our board of directors is authorized to classify or reclassify any unissued portion of our
authorized shares of preferred stock to provide for the issuance of shares of other classes or
series, including preferred stock in one or more series. We may issue preferred stock from time to
time in one or more class or series, with the exact terms of each class or series established by
our board of directors. Our board of directors may issue preferred stock with voting and other
rights that could adversely affect the voting power of the holders of our common stock without
seeking stockholder approval. Additionally, the issuance of preferred stock may have the effect of
decreasing the market price of the common stock and may adversely affect the voting power of
holders of common stock and reduce the likelihood that common stockholders will receive dividend
payments and payments upon liquidation. The issuance of preferred stock may delay, deter or prevent
a change in control.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The DGCL provides that the holders of preferred stock will have the right to vote separately
as a class on any proposal involving fundamental changes in the rights of holders of that preferred
stock. This right is in addition to any voting rights that may be provided for in any applicable
certificate of designation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>0% Series&nbsp;A Convertible Preferred Stock</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A special pricing committee of our board of directors, pursuant to authority delegated to it
by our board of directors, previously designated 1,993 shares of our preferred stock &#147;0% Series&nbsp;A
Convertible Preferred Stock,&#148; and authorized the issuance and sale of these shares in connection
with our June&nbsp;2009 equity financing. The rights, preferences, privileges and restrictions of the 0%
Series&nbsp;A Convertible Preferred Stock are set forth in the certificate of designation related to
that series of preferred stock, which was filed as an exhibit to the registration statement of
which this prospectus is a part. As of the date of this prospectus, all of the shares of this
preferred stock have been converted into shares of our common stock pursuant to the certificate of
designation and, in accordance with Section 11(i) of the certificate of designation, such shares
have resumed the status of authorized but unissued shares of preferred stock
</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">and are no longer designated as 0% Series&nbsp;A Convertible Preferred Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>5% Series&nbsp;B Convertible Preferred Stock</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A special pricing committee of our board of directors, pursuant to authority delegated to it
by our board of directors, previously designated 1,361 shares of our preferred stock &#147;5% Series&nbsp;B
Convertible Preferred Stock,&#148; and authorized the issuance and sale of these shares in connection
with our July&nbsp;2009 equity financing. The rights, preferences, privileges and restrictions of the 5%
Series&nbsp;B Convertible Preferred Stock are set forth in the certificate of designation related to
that series of preferred stock, which was filed as an exhibit to the registration statement of
which this prospectus is a part. As of the date of this prospectus, all of the shares of this
preferred stock have been converted into shares of our common stock pursuant to the certificate of
designation and, in accordance with Section 11(i) of the certificate of designation, such shares
have resumed the status of authorized but unissued shares of preferred stock and are no longer
designated as 5% Series&nbsp;B Convertible Preferred Stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>&#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The convertible preferred stock we are offering will be issued pursuant to a securities
purchase agreement between each of the investors and us. We urge you to review the securities
purchase agreement and the certificate of designation authorizing the convertible preferred stock,
which is filed as an exhibit to the registration statement of which this prospectus forms a part,
for a complete description of the terms and conditions applicable to the convertible preferred
stock. The following brief summary of the material terms and provisions of the convertible
preferred stock is subject to, and qualified in its entirety by, the certificate of designation
authorizing the convertible preferred stock. This prospectus also relates to the offering of the
shares of our common stock upon the conversion of the convertible preferred stock issued to the
investors in this offering.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are authorized to issue &#091;<B>&#149;</B>&#093; shares of &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock, par value
$0.001 per share, pursuant to the Certificate of Designation of Preferences, Rights and Limitations
of &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock we have filed with the Secretary of State of the State
of Delaware. This certificate of designation was authorized by our board of directors without
approval by our stockholders pursuant to the authority vested in the board of directors under our
certificate of incorporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock will be convertible at the option of the holder
at any time into shares of our common stock at a conversion price of $&#091;<B>&#149;</B>&#093; per share. The conversion
price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares
and similar recapitalization transactions. The conversion price may also subject to adjustment if
we issue rights, options or warrants to all holders of our common stock entitling them to subscribe
for or purchase shares of our common stock at a price per share less than the daily weighted volume
weighted average price of our common stock, if we distribute evidences of our indebtedness or
assets or rights or warrants to subscribe for or purchase any security to all holders of our common
stock, or if we consummate a fundamental corporate transaction such as a merger or consolidation,
sale or other disposition of all or substantially all of our assets, or an exchange or tender offer
accepted by the holders of 50% or more of our outstanding common stock. Subject to limited
exceptions, a holder of shares of &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock will not have the right
to convert any portion of its &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock if the holder, together
with its affiliates, would beneficially own in excess of 4.99% of the number of shares of our
common stock outstanding immediately after giving effect to its conversion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock will be subject to automatic conversion into
shares of our common stock upon the occurrence of a change in control of our company and we may
become obligated to redeem the &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock upon the occurrence of
certain triggering events, including the material breach by us of certain contractual obligations
to the holders of the &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock, our inability to effect a
registered issuance of shares of our common stock upon conversion of the &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible
Preferred Stock pursuant to the registration statement of which this prospectus is a part, our
failure to have available a sufficient number of authorized and unreserved shares of common stock
to issue upon conversion of the &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock, a redemption by us of
more than a de minimis number of shares of common stock or other junior securities, the occurrence
of a change in control of our company, the occurrence of certain insolvency events relating to our
company, the failure of our common stock to continue to be listed or quoted for trading one of a
few specified U.S. securities exchanges, and any judgment against us for more than $150,000 that
remains unvacated, unbonded or unstayed for 60&nbsp;days.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock is entitled to receive cumulative dividends at
the rate per share (as a percentage of the stated value of $1,000 per share) of &#091;<B>&#149;</B>&#093;% per annum
until &#091;<B>&#149;</B>&#093;, payable quarterly. If the &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock is converted any
time prior to &#091;<B>&#149;</B>&#093;, we will pay the holder of the converted shares an amount equal to $250 per
$1,000 in stated value (subject to adjustment) of the shares of &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred
Stock converted, less dividends paid with respect to such converted preferred shares before the
relevant conversion date.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->80<!-- /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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except as required by law, holders of the convertible preferred stock are not entitled to
voting rights, except that the affirmative vote of the holders of a majority of the outstanding
shares of convertible preferred stock is required to take certain actions that may adversely affect
the rights or preferences of the holders of convertible preferred stock, including authorizing any
class of stock ranking as to dividends, redemption or distribution of assets upon a liquidation,
dissolution or winding up of our company senior to, or otherwise pari passu with, the &#091;<B>&#149;</B>&#093;% Series&nbsp;C
Convertible Preferred Stock and increasing the number of authorized shares of &#091;<B>&#149;</B>&#093;% Series&nbsp;C
Convertible Preferred Stock. In addition, without the prior written consent of the holders of at
least 80% in stated value (initially $1,000 per share, subject to adjustment) of the &#091;<B>&#149;</B>&#093;% Series&nbsp;C
Convertible Preferred Stock, we may not amend our certificate of incorporation or bylaws in any
manner that materially and adversely affects any rights of the holders of the &#091;<B>&#149;</B>&#093;% Series&nbsp;C
Convertible Preferred Stock, repay or reacquire more than a de minimis number of shares of our
common stock or securities convertible into or exercisable for our common stock, pay cash dividends
or make distributions on our common stock or other securities, or enter into certain transactions
with any affiliate of ours.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The securities purchase agreement pursuant to which the &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred
Stock will be issued prohibits us from issuing any shares of our common stock or any equity or debt
securities convertible into our common stock for a period of 60-days after the closing of this
offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not intend to list the &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock on any securities
exchange or automated quotation system.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following is a summary of certain provisions of Delaware law, our certificate of
incorporation and our bylaws. This summary does not purport to be complete and is qualified in its
entirety by reference to the corporate law of Delaware and our certificate of incorporation and
bylaws.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Certificate of Incorporation and Bylaws</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Preferred Stock. </I>Under our amended and restated certificate of incorporation, our board of
directors has the power to authorize the issuance of up to 1,000,000 shares of preferred stock and
to determine the price, rights, preferences, privileges and restrictions, including voting rights,
of those shares without further vote or action by our stockholders. The issuance of preferred stock
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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delay, defer or prevent a change in control;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discourage bids for our common stock at a premium over the market price of our common
stock;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>adversely affect the voting and other rights of the holders of our common stock; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>discourage acquisition proposals or tender offers for our shares and, as a
consequence, inhibit fluctuations in the market price of our shares that could result
from actual or rumored takeover attempts.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Advance Notice Requirement. </I>Stockholder nominations of individuals for election to our board
of directors and stockholder proposals of other matters to be brought before an annual meeting of
our stockholders must comply with the advance notice procedures set forth in our bylaws. Generally,
to be timely, such notice must be received at our principal executive offices no later than the
date specified in our proxy statement released to stockholders in connection with the preceding
year&#146;s annual meeting of stockholders, which date shall be not earlier than the 120th day, nor
later than the close of business on the 90th day, prior to the first anniversary of the date of the
preceding year&#146;s annual meeting of stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Special Meeting Requirements. </I>Our bylaws provide that special meetings of our stockholders may
only be called at the request of our board of directors, president (unless there is a chief
executive officer who is not the president, in which case a special meeting may be called at any
time by the chief executive officer and not the president) or chair of the board of directors. Only
such business shall be considered at a special meeting as shall have been stated in the notice for
such meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>No Cumulative Voting. </I>Our certificate of incorporation does not include a provision for
cumulative voting for directors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Indemnification. </I>Our certificate of incorporation and our bylaws provide that we will
indemnify our officers and directors against losses as they are incurred in investigations and
legal proceedings resulting from their services to us, which may include service in connection with
takeover defense measures.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Delaware Anti-Takeover Statute</I></B>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->81<!-- /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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to Section&nbsp;203 of the DGCL, an anti-takeover law. In general, Section&nbsp;203
prohibits, with some exceptions, a publicly held Delaware corporation from engaging in a &#147;business
combination&#148; with any &#147;interested stockholder&#148; for a period of three years following the date on
which that stockholder became an interested stockholder, unless:
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>prior to that date, the board of directors of the corporation approved either the
business combination or the transaction that resulted in the stockholder becoming an
interested stockholder;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>upon consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares of voting stock outstanding (but not
the voting stock owned by the interested stockholder) those shares owned by persons who
are directors and officers and by excluding employee stock plans in which employee
participants do not have the right to determine whether shares held subject to the plan
will be tendered in a tender or exchange offer; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on or subsequent to that date, the business combination is approved by the board of
directors of the corporation and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least 66-2/3% of
the outstanding voting stock that is not owned by the interested stockholder.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;203 defines &#147;business combination&#148; to include any 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="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any merger or consolidation involving the corporation and the interested stockholder;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>subject to certain exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation beneficially
owned by the interested stockholder; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the corporation.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In general, Section&nbsp;203 defines an &#147;interested stockholder&#148; as any person who, together with
the person&#146;s affiliates and associates, beneficially owns, or within three years prior to the
determination of interested stockholder status did beneficially own, 15% or more of the outstanding
voting stock of the corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The above provisions may deter a hostile takeover or delay a change in control of our management or
us.
</DIV>

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</DIV>

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<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>DESCRIPTION OF WARRANTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>The warrants we are offering will be issued pursuant to a securities purchase agreement
between each of the investors and us. We urge you to review the securities purchase agreement and
the form of warrant, which are filed as exhibits to the registration statement of which this
prospectus forms a part, for a complete description of the terms and conditions applicable to the
warrants. The following brief summary of the material terms and provisions of the warrants is
subject to, and qualified in its entirety by, the form of warrant we have filed. This prospectus
also relates to the offering of the shares of our common stock upon the exercise, if any, of the
warrants issued to the investors in this offering. The warrants we are issuing to the placement
agent in this offering to purchase up to an aggregate of &#091;<B>&#149;</B>&#093; shares of our common stock are not
covered by this prospectus.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The warrants will have an exercise price of $&#091;<B>&#149;</B>&#093; per share of our common stock and will be
exercisable at the option of the holder at any time after the date that is six months from the date
of issuance, which will be the closing date of this offering, through and including the date that
is the fifth anniversary of the initial exercise date. Subject to limited exceptions, a warrant
holder will not have the right to exercise any portion of the warrant if the holder, together with
its affiliates, would beneficially own in excess of 4.99% of the number of shares of our common
stock outstanding immediately after the exercise.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The exercise price of the warrants, and in some cases the number of shares issuable upon
exercise of the warrants, will be subject to adjustment in the event of stock splits, stock
dividends, combinations and similar events affecting our common stock. The conversion price may
also be subject to adjustment if we issue rights, options or warrants to all holders of our common
stock entitling them to subscribe for or purchase shares of our common stock at a price per share
less than the daily weighted volume weighted average price of our common stock or if we distribute
evidences of our indebtedness or assets or rights or warrants to subscribe for or purchase any
security to all holders of our common stock. In addition, in the event we consummate a fundamental
corporate transaction such as a merger or consolidation with or into another person or other
reorganization event in which our common stock is converted or exchanged for securities, cash or
other property, or we sell, lease, license or otherwise dispose of all or substantially all of our
assets or we or another person acquires 50% or more of our outstanding common stock, then following
such event, the holders of the warrants will be entitled to receive upon exercise of the warrants
the same kind and amount of securities, cash or property which the holders would have received had
they exercised the warrants immediately prior to such fundamental transaction. Any successor to us
or surviving entity shall assume our obligations under the warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The warrant holders must surrender payment in cash of the aggregate exercise price of the
shares being acquired upon exercise of the warrants. If, however, we are unable to offer and sell
the shares underlying these warrants pursuant to this prospectus due to the ineffectiveness of the
registration statement of which this prospectus is a part, then the warrants may only be exercised
on a &#147;net&#148; or &#147;cashless&#148; basis. No fractional shares of common stock will be issued in connection
with the exercise of a warrant. In lieu of fractional shares, we will pay the holder an amount in
cash equal to the fractional amount multiplied by the exercise price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The warrants do not entitle the holders thereof to any voting rights, dividends or other
rights as a stockholder of ours prior to the exercise of the warrants.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not intend to list the warrants on any securities exchange or automated quotation
system.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->83<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="115"></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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into an engagement letter agreement, dated &#091;<B>&#149;</B>&#093;, 2009, with Rodman &#038; Renshaw,
LLC. Subject to the terms and conditions set forth in the agreement, Rodman &#038; Renshaw has agreed to
act as our placement agent in connection with this offering. The placement agent is not purchasing
or selling any securities being offered by this prospectus, nor is it required to arrange for the
purchase or sale of any specific number or dollar amount of the securities, but has agreed to use
its reasonable best efforts to arrange for the sale of all of the securities in this offering. We
will enter into a securities purchase agreement directly with investors in this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There is no requirement that any minimum number of units or dollar amount of units be sold in
this offering and there can be no assurance that we will sell all or any of the convertible
preferred stock being offered.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our agreement with the placement agent and the securities purchase agreement among us and the
investors in this offering provide that the obligations of the placement agent and the investors
are subject to certain conditions precedent, including, among other things, the absence of any
material change in our business and our receipt of a customary written legal opinion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We currently anticipate that the closing of this offering will take place on or about &#091;<B>&#149;</B>&#093;,
2009. On the scheduled closing date, the following will 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we will receive funds in the amount of the aggregate purchase price of the securities
being sold by us, less the amount of the fees we are paying to the placement agent and
less the amount to be placed in escrow for the dividend and other payments due upon the
convertible preferred stock;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the placement agent will receive the placement agent fees and compensation warrants
to purchase shares of our common stock in accordance with the terms of the engagement
letter agreement;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the escrow agent will receive the aggregate escrow amount to be released to make the
dividend and other payments due upon the convertible preferred stock; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we will deliver, or cause to be delivered, the shares of convertible preferred stock
and the warrants being sold.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed to pay the placement agent a cash fee equal to 7.0% of the gross proceeds of
the sale of the units in this offering. We have also agreed to grant compensation warrants to the
placement agent to purchase that number of our shares of common stock equal to &#091;<B>&#149;</B>&#093; % of the number
of shares of common stock underlying the convertible preferred stock sold by us in this offering,
or up to an aggregate of &#091;<B>&#149;</B>&#093; shares, at an exercise price of $&#091;<B>&#149;</B>&#093; per share. In compliance with the
guidelines of the Financial Industry Regulatory Authority, or FINRA, under no circumstances will
the fee, commission or discount received by the placement agent or any other FINRA member or
independent broker-dealer exceed 8.0% of the gross proceeds to us in this offering or any other
offering in the U.S. pursuant this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The compensation warrants will be substantially on the same terms as the warrants offered
hereby, except that they will have an exercise price of $&#091;<B>&#149;</B>&#093; per share and will be exercisable at
the option of the holder at any time after the date that is six months from the date of issuance,
which will be the closing date of this offering, through and including the date that is the fifth
anniversary of the date of issuance, and they will comply with FINRA Rule 5110(g) in that for a
period of six months after their date of issuance (which shall not be earlier than the closing date
of this offering), neither the compensation warrants nor any shares issued upon exercise of the
compensation warrants shall be sold, transferred, assigned, pledged, or hypothecated, or be the
subject of any hedging, short sale, derivative, put, or call transaction that would result in the
effective economic disposition of the securities by any person, except the transfer of any
security:
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>by operation of law or by reason of reorganization of us;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to any FINRA member firm participating in this offering and the officers or partners
thereof, if all securities so transferred remain subject to the lock-up restriction
described above for the remainder of the time period;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>if the aggregate amount of our securities held by Rodman &#038; Renshaw, LLC or related
persons do not exceed 1% of the securities being offered;</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>that is beneficially owned on a pro-rata basis by all equity owners of an investment
fund, provided that no participating</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->84<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></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: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>member manages or otherwise directs investments by the fund, and participating members in
the aggregate do not own more than 10% of the equity in the fund; 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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the exercise or conversion of any security, if all securities received remain
subject to the lock-up restriction set forth above for the remainder of the time
period.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table shows the per unit and total fees we will pay to the placement agent in
connection with the sale of the units offered pursuant to this prospectus, assuming the purchase of
all of the units being offered hereby. Because there is no minimum offering amount required as a
condition to closing in this offering, the actual total offering fees, if any, are not presently
determinable and may be substantially less than the maximum amount set forth below.
</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="95%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">Per unit placement agent fees
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$&#091;<B>&#149;</B>&#093;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Maximum offering total
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$&#091;<B>&#149;</B>&#093;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We estimate that the total expenses of the offering by us, excluding the placement agent&#146;s
fees, will be approximately $&#091;<B>&#149;</B>&#093;.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purchase price per unit and the exercise price of the warrants were determined based on
negotiations with the purchasers and discussions with the placement agent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed to indemnify the placement agent and its affiliates against certain
liabilities, including liabilities relating to and arising out of its activities under the
engagement letter agreement. We have also agreed to contribute to payments the placement agent may
be required to make in respect of such liabilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have agreed that we will not issue, enter into any agreement to issue or announce the
issuance or proposed issuance of any shares of our common stock, or securities that would entitle
the holder thereof to acquire shares of our common stock, for a period of 60&nbsp;days from the closing
date of the offering without the prior written consent of purchasers holding at least two-thirds in
interest of the convertible preferred stock and warrants (on an as converted basis) then
outstanding.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A copy of the engagement letter agreement with the placement agent and the form of securities
purchase agreement to be entered into with the investors in this offering have been filed as
exhibits to the registration statement of which this prospectus is a part.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The placement agent has informed us that it will not engage in over-allotment, stabilizing
transactions or syndicate covering transactions in connection with this offering. Notwithstanding
anything to the contrary contained herein, we shall not be responsible for paying any fees or
compensation to any persons pursuant to such arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The transfer agent for our common stock is American Stock Transfer &#038; Trust Company. We will
act as transfer agent for the convertible preferred stock and the warrants being offered hereby.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our common stock is traded on the NYSE Amex under the symbol &#147;ANX.&#148; The convertible preferred
stock and the warrants being offered hereby are not expected to be eligible for trading on any
market.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->85<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<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>LEGAL MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The validity of the issuance of securities offered by this prospectus will be passed upon for
us by DLA Piper LLP (US), San Diego, California.
</DIV>
<DIV align="left">
<A name="117"></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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our consolidated financial statements as of December&nbsp;31, 2008 and 2007, and the related
consolidated statements of operations, stockholders&#146; equity (deficit)&nbsp;and comprehensive loss and
cash flows for the years then ended and for the period from January&nbsp;1, 2002 through December&nbsp;31,
2008 have been incorporated by reference herein and in the registration statement of which this
prospectus forms a part in reliance upon the report of J.H. Cohn LLP, independent registered public
accounting firm, incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
</DIV>
<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>WHERE YOU CAN FIND MORE INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We file reports, proxy statements and other information with the SEC. Copies of our reports,
proxy statements and other information may be inspected and copied at the SEC&#146;s Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of these materials can also be obtained
by mail at prescribed rates from the Public Reference Room of the SEC, 100 F. Street, N.E.,
Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements and other information regarding us and other issuers that file
electronically with the SEC. The address of the SEC Internet site is www.sec.gov. In addition, we
make available on or through our Internet site copies of these reports, proxy statements and other
information as soon as reasonably practicable after we electronically file or furnish them to the
SEC. Our Internet site can be found at http://www.adventrx.com.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed with the SEC a registration statement on Form S-1 under the Securities Act with
respect to the securities offered by this prospectus. This prospectus, which forms a part of that
registration statement, does not contain all of the information set forth in the registration
statement because certain parts of the registration statement are omitted in accordance with the
rules and regulations of the SEC. The registration statement is available for inspection and
copying as set forth above. Statements contained in this prospectus as to the contents of any
contract or other document that we have filed as an exhibit to the registration statement of which
this prospectus forms a part are qualified in their entirety by reference to such exhibits for a
complete statement of their terms and conditions.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->86<!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX PHARMACEUTICALS, INC. AND SUBSIDIARIES</B>
</DIV>

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>INDEX TO FINANCIAL STATEMENTS</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>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#300">Condensed Consolidated Balance Sheet as of March&nbsp;31, 2009 and December&nbsp;31, 2008 (Unaudited)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-2</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 for the three months ended March&nbsp;31, 2009
and 2008 and for the period from inception (June&nbsp;12, 1996) through March&nbsp;31, 2009
(Unaudited)</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-3</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 for the three months ended March&nbsp;31, 2009
and 2008 and for the period from inception (June&nbsp;12, 1996) through March&nbsp;31, 2009 (Unaudited)
</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-4</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>
<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="#304">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">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#305">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">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#306">Consolidated Statements of Operations for the years ended December&nbsp;31, 2008 and 2007 and
for the period from inception (June&nbsp;12, 1996) through 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">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#307">Consolidated Statements of Stockholders&#146; Equity (Deficit) and Comprehensive Loss for the
period from inception (June&nbsp;12, 1996) through 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">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#308">Consolidated Statements of Cash Flows for the years ended December&nbsp;31, 2008 and 2007 and
for the period from inception (June&nbsp;12, 1996) through December&nbsp;31, 2008</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-18</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#309">Notes to Consolidated Financial Statements</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">F-20</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-1<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Part I. Financial Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;1. </B><B><I>Financial Statements.</I></B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)
</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">
<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>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" colspan="2">(Unaudited)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD align="center"><DIV style="margin-left:90px; 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">Current 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" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,306,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest and other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">304,594</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,736</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">353,340</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">477,902</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">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,964,580</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,449,542</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">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">166,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,052</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,247</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,664</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" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,191,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,709,258</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">
    <TD align="center"><DIV style="margin-left:60px; 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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Current liabilities:</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">Accounts payable</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,054,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,721,376</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,342,945</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,077,188</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued compensation and payroll taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">781,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">915,459</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" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,179,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,714,023</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:15px; text-indent:-15px">Stockholders&#146; equity:</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, $0.001 par value; 200,000,000 shares
authorized; 90,252,572 shares issued and outstanding at
March&nbsp;31, 2009 and December&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,254</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Additional paid-in capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,925,397</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,751,439</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Deficit accumulated during the development stage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">( 129,003,468</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(125,846,458</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,012,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,995,235</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:75px; text-indent:-15px">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">6,191,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,709,258</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">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 3pt">Note: The balance sheet at December&nbsp;31, 2008 has been derived from audited financial statements at
that date. It does not include, however, all of the information and notes required by accounting
principles generally accepted in the United States of America for complete financial statements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">See accompanying notes to unaudited 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"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)
</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">(Unaudited)</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>Inception</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>(June 12, 1996)</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" style="border-bottom: 0px solid #000000"><B>through</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">Revenues:</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
sales</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">174,830</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Grant revenue</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">129,733</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Licensing revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</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">1,300,000</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">Total net revenues</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</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">1,604,563</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:30px; text-indent:-15px">Cost of goods sold</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">51,094</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">Gross margin</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">300,000</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">1,553,469</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Operating expenses:</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">1,647,300</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,820,307</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">63,661,856</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,779,240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,365,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">44,748,442</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,830,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">In-process research and development</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">10,422,130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Impairment loss &#151; write off of goodwill</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">5,702,130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity in loss of investee</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">178,936</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">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,458,786</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,232,280</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">135,543,811</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,158,786</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,232,280</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(133,990,342</TD>
    <TD nowrap>)</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on fair value of warrants</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">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</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">4,582,028</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">299,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">114,154</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</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">(179,090</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss before cumulative effect of change in accounting principle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,157,010</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,933,072</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(141,712,938</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cumulative effect of change in accounting principle</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">(25,821</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" 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">(3,157,010</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(5,933,072</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(141,738,759</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock dividends</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">(621,240</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss applicable to common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,157,010</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,933,072</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(142,359,999</TD>
    <TD nowrap>)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss per common share &#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.03</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</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">Weighted average shares &#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,252,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,252,572</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">See accompanying notes to unaudited 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"><A HREF="#tocpage">Table of Contents</A></H5><P>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)
</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">(Unaudited)</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>Inception</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>(June 12, 1996)</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>through</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>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">Cash flows from 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:30px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,157,010</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(5,933,072</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(141,738,759</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 and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,246</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">46,779</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,380,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Loss (gain)&nbsp;on disposal of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">279</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,319</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Fair value of warrant liability</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">12,239,688</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Expenses related to employee stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638,416</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,026,520</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Expense related to stock options issued to non-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">5,680</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Expenses paid by issuance of common 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">1,341,372</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Expenses paid by warrants</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">573,357</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Expenses paid by 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">142,501</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Expenses related to stock warrants issued</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">612,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accretion of discount</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">(131,929</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,249,853</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Amortization of debt discount</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">450,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Gain /loss on disposals of property and equipment</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Accretion of discount on investments in 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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(354,640</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Forgiveness of employee 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">30,036</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Impairment loss &#151; write-off of goodwill</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">5,702,130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Equity in loss of investee</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">178,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">In-process research and development</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">10,422,130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Write-off of license agreement</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">152,866</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Write-off of assets available-for-sale</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">108,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cumulative effect of change in accounting principle</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">25,821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in assets and liabilities, net of effect of acquisitions:</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase (decrease)&nbsp;in prepaid expenses and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(57,879</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,648</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(965,550</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase (decrease)&nbsp;in accounts payable and accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,534,852</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">588,129</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,355,878</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Decrease in other long-term liabilities</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">(5,352</TD>
    <TD nowrap>)</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">
    <TD><DIV style="margin-left:60px; text-indent:-15px">Net cash used in operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,543,258</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,773,513</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(90,365,905</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash flows from investing 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:30px; text-indent:-15px">Purchases of short-term investments</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">(6,437,340</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(111,183,884</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sales and maturities of short-term investments</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">16,750,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,788,378</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchases of 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">(20,522</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,030,354</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of property and equipment</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">33,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Purchase of certificate of deposit</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">(1,016,330</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Maturity of certificate of deposit</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">1,016,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment on obligation under license agreement</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">(106,250</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash acquired from acquisitions, net of cash paid</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">32,395</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of note receivable &#151; related party</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">(35,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments on note 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">405,993</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advance to investee</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">(90,475</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash transferred in rescission of acquisition</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">(19,475</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash received in rescission of acquisition</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">230,000</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">Net cash provided by (used in) investing activities</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">10,292,138</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,025,234</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:15px; text-indent:-15px">Cash flows from financing 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" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of 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">4,200,993</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of common 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">84,151,342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from exercise of stock options</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">712,367</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale or exercise of warrants</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">11,382,894</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repurchase of warrants</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">(55,279</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payment of financing and offering 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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,483,809</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments of notes payable and long-term debt</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">(605,909</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of notes payable and detachable warrants</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">1,344,718</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">Net cash provided by financing activities</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">94,647,317</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:15px; text-indent:-15px">Net increase (decrease)&nbsp;in cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,543,258</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,518,625</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,306,646</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,780,739</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,306,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">20,299,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,306,646</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">See accompanying notes to unaudited condensed consolidated financial statements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-4<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)
</DIV>

<DIV align="left">
<A name="303"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Notes to Condensed Consolidated Financial Statements (Unaudited)</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"><B>1.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Basis of Presentation</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>ADVENTRX Pharmaceuticals, Inc., a Delaware corporation (&#147;ADVENTRX,&#148; &#147;we&#148; or the &#147;Company&#148;),
prepared the unaudited interim condensed consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America (&#147;U.S. GAAP&#148;) for
interim financial information and with the instructions of the Securities and Exchange Commission
(&#147;SEC&#148;). Accordingly, they do not include all of the information and disclosures required by U.S.
GAAP for annual audited financial statements and should be read in conjunction with our audited
consolidated financial statements and related notes for the year ended December&nbsp;31, 2008 included
in our Annual Report on Form 10-K filed with the SEC on March&nbsp;27, 2009 (&#147;2008 Annual Report&#148;).
The condensed consolidated balance sheet as of December&nbsp;31, 2008 has been derived from the
audited consolidated financial statements included in the 2008 Annual Report. In the opinion of
management, these interim condensed consolidated financial statements include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation of the financial
position, results of operations, and cash flows for the periods presented. The results of
operations for the interim periods shown in this report are not necessarily indicative of results
expected for the full year.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Since our inception, we have an accumulated net loss of approximately $141.7&nbsp;million and
recurring negative cash flows from operations. Currently, we are focused primarily on evaluating
strategic options, including the sale or exclusive license of one or more of our product
candidate programs, a strategic business merger and other similar transactions. We implemented
restructuring and cost-cutting measures in October&nbsp;2008, January&nbsp;2009 and March&nbsp;2009 and
eliminated all but a select, small number of full-time employees and discontinued substantially
all of our development activities and fundamental business operations to provide additional time
to consummate a strategic transaction or otherwise obtain financing.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The condensed consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, SD Pharmaceuticals, Inc. and ADVENTRX (Europe) Ltd. All intercompany
accounts and transactions have been eliminated in consolidation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>2.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Going Concern</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The accompanying unaudited interim condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. Going concern contemplates the
realization of assets and the satisfaction of liabilities in the normal course of business over a
reasonable length of time. However, as a result of the Company&#146;s continued losses and current
cash and financing position, such realization of assets or satisfaction of liabilities, without
substantial adjustments, is uncertain. The future of the Company is dependent upon its ability to
obtain additional funding.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In December&nbsp;2008, the Company announced that it was evaluating various strategic options,
including the sale or exclusive license of one or more of the Company&#146;s product candidate
programs, a strategic business merger and other similar transactions, certain of which would
result in a change of control of the Company. However, progress with potential strategic
transaction partners has not been as rapid or on terms as attractive as the Company would have
desired. The Company previously has taken steps designed to provide additional time to consummate
a strategic transaction or otherwise obtain financing, including eliminating all but a select,
small number of full-time employees and discontinuing substantially all of its development
activities and fundamental business operations. As a result, its ability to further curtail
expenses to provide further time is limited, and the restructuring and cost-cutting measures it
has taken may not provide it with sufficient additional time to consummate a strategic
transaction or otherwise obtain financing. Further, in May&nbsp;2009, the Company announced that the
primary endpoint in its bioequivalence study of ANX-514 was not met, that the resulting
uncertainty around the cost and timeline to approval by the U.S. Food and Drug Administration, or
FDA, of ANX-514 may adversely impact the Company&#146;s on-going strategic transaction discussions,
and that, in light of its working capital, the Company is evaluating both its strategic and
non-strategic options. Accordingly, in May&nbsp;2009, the Company began to evaluate the process of
winding-down its operations, including engaging a third-party firm to assist it with its
evaluation. There can be no assurances that we will continue to pursue our strategic transaction
alternatives or, if we do, that we will be able to consummate a strategic transaction on a timely
basis, or at all. The Company likely will not be able to continue as a going concern, unless, as
part of a strategic transaction or otherwise, it raises adequate capital. Given this uncertainty,
there is significant doubt as to the Company&#146;s ability to continue as a going concern.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The accompanying financial statements for the quarter ended March&nbsp;31, 2009 do not include any
adjustments related to the recovery and classification of recorded assets, or the amounts and
classification of liabilities, that might be necessary in the event the Company cannot continue
as a going concern.</TD>
</TR>

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

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></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 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>3.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Use of Estimates</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those estimates.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>4.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Fair Value Measurements</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective January&nbsp;1, 2008, we adopted Statement of Financial Accounting Standards (&#147;FAS&#148;) No.
157, &#147;Fair Value Measurements&#148; (&#147;FAS 157&#148;). In February&nbsp;2008, the Financial Accounting Standards
Board (&#147;FASB&#148;) issued FASB Staff Position (&#147;FSP&#148;) No.&nbsp;FAS 157-2, &#147;Effective Date of FASB
Statement No.&nbsp;157,&#148; which provides a one year deferral of the effective date of FAS 157 for
non-financial assets and non-financial liabilities, except those that are recognized or disclosed
in the financial statements at fair value at least annually. As a result, we only partially
adopted FAS 157 as it relates to our financial assets and liabilities until we are required to
apply this pronouncement to our non-financial assets and liabilities beginning with fiscal year
2009. The adoption of FAS 157 did not have a material impact on our consolidated results of
operations or financial condition.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In October&nbsp;2008, the FASB issued FSP No.&nbsp;FAS 157-3 &#147;Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active&#148; (&#147;FSP FAS 157-3&#148;). FSP FAS 157-3 clarifies
the application of FAS No.&nbsp;157, in a market that is not active and provides an example to
illustrate key considerations in determining the fair value of a financial asset when the market
for that financial asset is not active. FSP FAS 157-3 is effective upon issuance, including prior
periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 had
no impact on our consolidated results of operations, financial position or cash flows.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>FAS 157 defines fair value, establishes a framework for measuring fair value under U.S. GAAP and
enhances disclosures about fair value measurements. Fair value is defined under FAS 157 as the
exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. Valuation techniques used to
measure fair value under FAS 157 must maximize the use of observable inputs and minimize the use
of unobservable inputs. FAS 157 describes a fair value hierarchy based on three levels of inputs,
of which the first two are considered observable and the last unobservable, that may be used to
measure fair value which are the following:</TD>
</TR>

</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="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="85%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<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"><B>&#149;</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>Level 1 &#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Quoted prices in active markets for identical assets or liabilities.</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>
    <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"><B>&#149;</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Level 2 &#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or
liabilities.</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>
    <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"><B>&#149;</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Level 3 &#151;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities.</TD>
</TR>
<!-- End Table Body -->
</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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The following table represents our fair value hierarchy for our financial assets (which consisted
solely of cash equivalents) measured at fair value on a recurring basis as of March&nbsp;31, 2009:</TD>
</TR>

</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="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 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>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Money Market funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,306,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,306,646</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:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,306,646</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,306,646</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: 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: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Effective January&nbsp;1, 2008, we adopted FAS No.&nbsp;159, &#147;The Fair Value Option for Financial Assets
and Financial Liabilities&#148; (&#147;FAS 159&#148;). FAS 159 allows an entity the irrevocable option to elect
to measure specified financial assets and liabilities in their entirety at fair value on a
contract-by-contract basis. If an entity elects the fair value option for an eligible item,
changes in the item&#146;s fair value must be reported as unrealized gains and losses in earnings at
each subsequent reporting date. In adopting FAS 159, we did not elect the fair value option for
any of our financial assets or financial liabilities.</TD>
</TR>

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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></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 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>5.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Share-Based Payments</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Estimated share-based compensation expense related to equity awards granted to employees for the
three months ended March&nbsp;31, 2009 and 2008 was as follows:</TD>
</TR>

</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="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="6" style="border-bottom: 0px solid #000000"><B>Three Months Ended 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>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">199,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">332,720</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(25,376</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">305,696</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" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Share-based compensation expense before taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">173,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">638,416</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Related income tax benefits</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Share-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">173,958</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">638,416</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net share-based compensation expense per common share &#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.002</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.001</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 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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In January&nbsp;2009, we granted under our 2008 Omnibus Incentive Plan restricted stock units to seven
employees that represented the right to receive in the aggregate 3,700,000 shares of our common
stock. These units will vest immediately prior to a strategic transaction (as defined in the
documentation evidencing the grant of the units). We will record share-based compensation
expense in connection with these restricted stock units, if at all, only if a strategic
transaction is consummated.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Since we have a net operating loss carryforward as of March&nbsp;31, 2009, no excess tax benefits for
the tax deductions related to share-based awards were recognized in the condensed consolidated
statement of operations. There were no employee stock options exercised in the three months ended
March&nbsp;31, 2009 and 2008.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At March&nbsp;31, 2009, total employee stock compensation expense included forfeitures for terminated
employees resulting in a credit to research and development stock compensation expense for the
three month period ended March&nbsp;31, 2009.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>At March&nbsp;31, 2009, total unrecognized estimated compensation cost related to non-vested employee
and non-employee director share-based awards granted prior to that date was $1.7&nbsp;million, which
is expected to be recognized over a weighted-average period of 3.0&nbsp;years. During the three months
ended March&nbsp;31, 2009 and 2008, we granted 0 and 1,802,500 stock options, respectively, to our
employees and non-employee directors with an estimated weighted-average grant-date fair value of
$0 and $0.51.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Estimated share-based compensation expense related to equity awards granted to non-employee
consultants was $0 and $6,000 for the three months ended March&nbsp;31, 2009 and 2008, respectively.</TD>
</TR>

</TABLE>
</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"><A HREF="#tocpage">Table of Contents</A></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 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>6.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Net Loss Per Common Share</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We calculate basic and diluted net loss per common share in accordance with the FAS No.&nbsp;128,
&#147;Earnings Per Share&#148;. Basic net loss per common share was calculated by dividing the net loss for
the period by the weighted-average number of common shares outstanding during the period, without
consideration for common stock equivalents. Options, warrants and restricted stock units are
considered to be common stock equivalents and are only included in the calculation of diluted
earnings per common share when their effect is dilutive. Because of the net loss, all of the
options, warrants and restricted stock units were excluded from the calculation.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We have excluded the following options, warrants and restricted stock units from the calculation
of diluted net loss per common share for the three months ended March&nbsp;31, 2009 and 2008 because
they are anti-dilutive, due to the net loss:</TD>
</TR>

</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="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>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><DIV style="margin-left:15px; text-indent:-15px">Warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,373,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,373,549</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,509,897</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,589,483</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Restricted Stock Units</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,700,000</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">20,583,446</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,963,032</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 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>7.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Comprehensive Loss</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Comprehensive loss is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner sources, including
foreign currency translation adjustments and unrealized gains and losses on short-term
investments. Our components of comprehensive loss consist of net loss and unrealized gains or
losses on short-term investments in securities. For the three months ended March&nbsp;31, 2009 and
2008, comprehensive loss was $3.2&nbsp;million and $5.9&nbsp;million, respectively. For the three months
ended March&nbsp;31, 2008 and 2007 and the period from inception (June&nbsp;12, 1996) through March&nbsp;31,
2009, comprehensive loss was $5.9&nbsp;million, $5.1&nbsp;million and $141.7&nbsp;million, respectively.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>8.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Recent Accounting Pronouncements</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In April&nbsp;2009, the FASB issued three new FASB Staff Positions (&#147;FSP&#148;) relating to fair value
accounting; FSP FAS 157-4, &#147;Determining Fair Value When the Volume and Level of Activity of the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly,&#148; FSP FAS 115-2 and FSP FAS 124-2, &#147;Recognition and Presentation of Other-Than-Temporary
Impairments&#148; and FSP FAS 107-1/APB 28-1, &#147;Interim Disclosures about Fair Value of Financial
Instruments.&#148; These FSPs impact certain aspects of fair value measurements, impairments of
securities and related disclosures. The provisions of these FSPs are effective for interim and
annual periods ending after June&nbsp;15, 2009. The Company does not expect the impact of adopting
these FSPs to have a material effect on its consolidated results of operations or financial
position.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In April&nbsp;2009, the FASB issued FSP FAS 141(R) -1, &#147;Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arises from Contingencies&#148;. The FSP amends and clarifies
FASB Statement No.&nbsp;141 (revised 2007), &#147;Business Combinations&#148; to address application issues on
initial recognition and measurement, subsequent measurement and accounting, and disclosure of
assets and liabilities arising from contingencies in a business combination. This FSP is
effective for assets or liabilities arising from contingencies in business combinations for which
the acquisition date is on or after the beginning of the first annual reporting beginning on or
after December&nbsp;15, 2008.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>9.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Licensing Revenue</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In March&nbsp;2009, we announced that we and our wholly-owned subsidiary, SD Pharmaceuticals, Inc.,
had entered into a license agreement with respect to our product candidate ANX-514 (docetaxel
emulsion) (the &#147;License Agreement&#148;) with Shin Poong Pharmaceutical Co., Ltd., a company organized
under the laws of the Republic of Korea (&#147;Shin Poong&#148;), pursuant to which we granted to Shin
Poong an exclusive license, including the right to sublicense, to research, develop, make, have
made, use, offer for sale, sell and import licensed products, in each case solely for the
treatment of cancer by intravenous administration of formulations of docetaxel as emulsified
products and solely in South Korea. Under the terms of the License Agreement, we will receive an
upfront licensing fee of $0.3&nbsp;million, a regulatory milestone payment of either $0.2&nbsp;million or
$0.4&nbsp;million (depending on whether Shin Poong is required by the Korea Food and Drug
Administration to conduct a bioequivalence or clinical study in human subjects prior to receipt
of regulatory approval) upon receipt of regulatory approval for marketing a licensed product in
South Korea, one-time commercial milestone payments tied to annual net sales of licensed products
in an aggregate amount of up</TD>
</TR>

</TABLE>
</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"><A HREF="#tocpage">Table of Contents</A></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="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>to $1.5&nbsp;million and royalty payments on net sales of licensed products. Shin Poong is responsible
for all development and commercial activities related to ANX-514 in South Korea. If Shin Poong is
required by the Korea Food and Drug Administration to conduct a bioequivalence or clinical trial
in human subjects prior to receipt of regulatory approval and we elect not to supply product to
conduct such trial, which supply obligation is subject to limitations, we will pay Shin Poong
$0.1&nbsp;million.</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">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>We received the $0.3&nbsp;million upfront licensing fee in April&nbsp;2009. We recognized $0.3&nbsp;million in
licensing revenue in the three-month period ended March&nbsp;31, 2009 because we met the criteria
under our revenue recognition policy in that period.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><B>10.</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD><B>Supplementary Cash Flow Information</B></TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Noncash investing and financing transactions not presented on the condensed consolidated
statements of cash flows for the three months ended March&nbsp;31, 2009 and 2008 and for the period
from inception (June&nbsp;12, 1996) through March&nbsp;31, 2009 are as follows:</TD>
</TR>

</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="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>Inception</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>(June 12, 1996)</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" style="border-bottom: 0px solid #000000"><B>through</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">Supplemental disclosures of cash flow information:</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">Interest paid</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">$</TD>
    <TD align="right">179,090</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes paid</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><TD>&nbsp;</TD></TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of warrants, common stock and preferred stock for:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion of notes payable and accrued interest</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</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>&nbsp;</TD>
    <TD align="right">1,213,988</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid services to consultants</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">1,482,781</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Conversion of 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">2,705</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisitions</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">24,781,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Payment of dividends</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">213,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Financial advisor services in connection with private placement</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">1,137,456</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of treasury stock in settlement of a claim</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">34,747</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cancellation of treasury 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="right">&nbsp;</TD>
    <TD align="right">(34,737</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Assumptions of liabilities in acquisitions</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">1,235,907</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Acquisition of license agreement for long-term debt</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">161,180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cashless exercise of warrants</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">4,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends accrued</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">621,040</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade asset converted to available-for-sale asset</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">108,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Dividends extinguished</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">408,240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Trade payable converted to note payable</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">83,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of warrants for return of common 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">50,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Detachable warrants issued with notes payable</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">450,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Purchases of equipment, which are included in accounts payable</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">12,382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,825</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Unrealized (gain)&nbsp;loss on short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,101</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>11. Severance Related Expenses</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left:4%">In January&nbsp;2009, as part of a restructuring to reduce operating costs, we completed a work force
reduction of six employees. As a result of the work force reduction, in accordance with SFAS No.
146, &#147;Accounting for Costs Associated with Exit or Disposal Activities,&#148; we recorded
severance-related charges of $174,000, of which $86,000 was recorded in research and development
and the remainder in selling, general, and administrative expenses. Severance-related charges
of $144,000 were recorded in the first quarter of 2009 and the remainder will be recorded in the
second quarter of 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left:4%">On April&nbsp;3, 2009, we effected the reduction in our full-time workforce to small, select number of
full-time employees that we announced on March&nbsp;20, 2009. In addition, we have discontinued
substantially all of our development activities and fundamental business operations. Our
remaining employees will focus their efforts primarily on continuing to evaluate and execute
strategic options. As a result of this reduction in force, we recorded severance-related charges
of $163,000, of which $114,000 was recorded in the first quarter of 2009 and $49,000 is expected
to be recorded in the second quarter of 2009. The severance-related charges that we expect to
incur in the second quarter of 2009 are subject to a number of assumptions, and actual results
may differ. We may also incur other charges not currently contemplated due to events that may
occur as a result of, or associated with, this and
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-9<!-- /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">other reductions in our workforce.</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2009, we announced that we did not meet the primary endpoint in our bioequivalence study
of ANX-514, that the resulting uncertainty around the cost and timeline to FDA approval of
ANX-514 may adversely impact our on-going strategic transaction discussions, and that, in light
of our working capital, we are evaluating both our strategic and non-strategic options.
Accordingly, in May&nbsp;2009, the Company began to evaluate the process of winding-down its
operations, including engaging a third-party firm to assist it with its evaluation.
</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"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="304"></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<BR>
ADVENTRX Pharmaceuticals, Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have audited the accompanying consolidated balance sheets of ADVENTRX Pharmaceuticals, Inc. and
Subsidiaries (a development stage enterprise) as of December&nbsp;31, 2008 and 2007, and the related
consolidated statements of operations, stockholders&#146; equity (deficit)&nbsp;and comprehensive loss and
cash flows for the years then ended and for the period from January&nbsp;1, 2002 through December&nbsp;31,
2008. These consolidated financial statements are the responsibility of the Company&#146;s management.
Our responsibility is to express an opinion on these consolidated financial statements based on our
audits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">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. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes 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">In our opinion, such consolidated financial statements present fairly, in all material respects,
the financial position of ADVENTRX Pharmaceuticals, Inc. and Subsidiaries (a development stage
enterprise) as of December&nbsp;31, 2008 and 2007, and the results of operations and their cash flows
for years then ended and for the period from January&nbsp;1, 2002 through 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: 6pt">As discussed in Note 3 to the consolidated financial statements, effective January&nbsp;1, 2007,
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries adopted the Financial Accounting Standards Board
Staff Position on No.&nbsp;EITF 00-19-2, Accounting for Registration Payment Arrangements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As discussed in Note 3 to the consolidated financial statements, certain prior year amounts have
been restated.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the consolidated financial statements,
the Company has suffered recurring losses from operations and negative cash flows from operations
that raise substantial doubt about its ability to continue as a going concern. Management&#146;s plans
in regards to these matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">/s/ J.H. COHN LLP
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">San Diego, California<BR>
March&nbsp;25, 2009
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-11<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)
</DIV>

<DIV align="left">
<A name="305"></A>
</DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated Balance Sheets</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="6" style="border-bottom: 1px 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>
</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><I>Assets</I></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">Current 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" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,780,739</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,682,417</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest and other receivables</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">121,736</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">72,029</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Prepaid expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">477,902</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">615,691</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">Total current assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,449,542</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">34,150,876</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">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">199,052</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">332,444</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,664</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">58,305</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:60px; text-indent:-15px">Total assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,709,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,541,625</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: 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><I>Liabilities and Stockholders&#146; Equity</I></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">Current liabilities:</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">$</TD>
    <TD align="right">1,721,376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">552,143</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,077,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,317,910</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accrued compensation and payroll taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">915,459</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">622,762</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">Total current liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,714,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,492,815</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Long-term liabilities</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">14,270</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">Total liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,714,023</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,507,085</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:15px; text-indent:-15px">Commitments and contingencies</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"><!-- 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">Stockholders&#146; equity:</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"><!-- 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; 200,000,000 shares
authorized; 90,252,572 shares issued and
outstanding at December&nbsp;31, 2008 and 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,254</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">131,751,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,140,549</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">(125,846,458</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99,198,965</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accumulated other comprehensive income</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">2,702</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">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,995,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">31,034,540</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"><!-- 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">Total liabilities and stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">10,709,258</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">34,541,625</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: 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">See accompanying notes to 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"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)
</DIV>

<DIV align="left">
<A name="306"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Consolidated Statements of Operations</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>Inception</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>(June 12, 1996)</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>Through</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>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>2008</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>(as restated)</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">Licensing revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,000,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net sales</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">174,830</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Grant revenue</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">129,733</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:30px; text-indent:-15px">Total net revenue</DIV></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">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,304,563</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">Cost of sales</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">51,094</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">Gross margin</DIV></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">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,253,469</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">Operating expenses:</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">Research and development</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,922,183</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,934,409</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">62,014,556</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Selling, general and administrative</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,719,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,678,853</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,969,202</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,798,071</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">In-process research and development</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">10,422,130</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:30px; text-indent:-15px">Impairment loss &#151; write-off of goodwill</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">5,702,130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity in loss of investee</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">178,936</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">Total operating expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,809,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">24,811,045</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">132,085,025</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">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,309,835</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(24,311,045</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(130,831,556</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on fair value of warrants</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">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">549,964</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,169,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,582,028</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Interest expense</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">(179,090</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Other income</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,378</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">112,378</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:15px; text-indent:-15px">Loss before income taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,647,493</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,142,040</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138,555,928</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Provision for income taxes</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>
</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:15px; text-indent:-15px">Loss before cumulative effect of change in
accounting principle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(26,647,493</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,142,040</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138,555,928</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cumulative effect of change in
accounting principle</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">(25,821</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">
    <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">(26,647,493</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(22,142,040</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(138,581,749</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Preferred stock dividends</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">(621,240</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:15px; text-indent:-15px">Net loss applicable to common stock </DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(26,647,493</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(22,142,040</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(139,202,989</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: 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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss per common share &#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.30</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(0.25</TD>
    <TD nowrap>)</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: 0px 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">Weighted average shares outstanding &#151;basic
and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,252,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,912,732</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: 0px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to 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"><A HREF="#tocpage">Table of Contents</A></H5><P>

<!-- LANDSCAPE -->

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)
</DIV>

<DIV align="left">
<A name="307"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Consolidated Statements of Stockholders&#146; Equity (Deficit) and Comprehensive Loss</B></DIV>


<DIV align="center" style="font-size: 10pt">Inception (June&nbsp;12, 1996) Through December&nbsp;31, 2008</DIV>


<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
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    <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>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>accumulated</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>Total</B></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 nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>other</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>Treasury</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stockholders&#146;</B></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 nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series A</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series B</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series C</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>comprehensive</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>stock,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Comprehensive</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>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>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>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>income (loss)</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>at cost</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(deficit)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>loss</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">Balances at June
12, 1996 (date of
incorporation)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</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">Sale of common
stock without par
value</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">503</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in par
value of common
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">&#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</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Issuance of common
stock and net
liabilities
assumed in
acquisition</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">1,716,132</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,716</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,224</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">(18,094</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">(13,154</TD>
    <TD nowrap>)</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">Issuance of common
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">&#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">2,010,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">456</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">(2,466</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>&nbsp;</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>&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">(259,476</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">(259,476</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(259,476</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>
    <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>
    <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>
    <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">Balances at
December&nbsp;31, 1996</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">3,726,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,727</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,689</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">(280,036</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">(272,620</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(259,476</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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">Sale of common
stock, net of
offering costs of $9,976</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">1,004,554</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,004</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,789,975</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">1,790,979</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">Issuance of common
stock in
acquisition</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">375,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">376</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">887,874</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">888,250</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">Minority interest
deficiency at
acquisition
charged to the
Company</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">&#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">(45,003</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">(45,003</TD>
    <TD nowrap>)</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">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>&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">(1,979,400</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">(1,979,400</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,979,400</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>
    <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>
    <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>
    <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">Balances at
December&nbsp;31, 1997</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">5,107,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,107</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,681,538</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">(2,304,439</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">382,206</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,979,400</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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">Rescission of
acquisition</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">(375,891</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(376</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(887,874</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">561,166</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">(327,084</TD>
    <TD nowrap>)</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">Issuance of common
stock at
conversion of
notes payable</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">450,264</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">451</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">363,549</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">364,000</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">Expense related to
stock warrants
issued</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">260,000</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">260,000</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">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>&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">(1,204,380</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">(1,204,380</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,204,380</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>
    <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>
    <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>
    <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">Balances at
December&nbsp;31, 1998</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">5,181,564</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,182</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,417,213</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">(2,947,653</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">(525,258</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,204,380</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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">Sale of common
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">&#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">678,412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">134,322</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">135,000</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">Expense related to
stock warrants
issued</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212,000</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">212,000</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">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>&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">(1,055,485</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">(1,055,485</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,055,485</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>
    <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>
    <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>
    <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">Balances at
December&nbsp;31, 1999</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">5,859,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,763,535</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">(4,003,138</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">(1,233,743</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(1,055,485</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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">Sale of preferred
stock, net of
offering costs of $76,500</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</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">3,123,468</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">3,123,500</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">Issuance of common
stock at
conversion of
notes and interest
payable</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">412,487</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">412</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">492,085</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">492,497</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">Issuance of common
stock at
conversion of
notes payable</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">70,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">83,930</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">84,000</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">Issuance of common
stock to settle
obligations</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">495,111</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,201,664</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">1,202,160</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">Issuance of common
stock for
acquisition</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">6,999,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,325,769</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">9,332,769</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">Issuance of
warrants for
acquisition</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,767,664</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">4,767,664</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">Stock issued for
acquisition 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">&#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">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">487,350</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">487,500</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">Expense related to
stock warrants
issued</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">140,000</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">140,000</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">Dividends payable
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>&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">(85,000</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">(85,000</TD>
    <TD nowrap>)</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">Cashless exercise
of warrants</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">599,066</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">599</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(599</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>&nbsp;</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>&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">(3,701,084</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">(3,701,084</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,701,084</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>
    <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>
    <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>
    <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">Balances at
December&nbsp;31, 2000</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32</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">14,586,984</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,587</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,299,866</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">(7,704,222</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">14,610,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(3,701,084</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to 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"><A HREF="#tocpage">Table of Contents</A></H5><P>

<!-- LANDSCAPE -->

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Consolidated Statements of Stockholders&#146; Equity (Deficit) and Comprehensive Loss</B><BR>
Inception (June&nbsp;12, 1996) Through December&nbsp;31, 2008
</DIV>


<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</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>
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    <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>accumulated</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>Total</B></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 nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>other</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>Treasury</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stockholders&#146;</B></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 nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series A</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series B</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series C</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>comprehensive</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>stock,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Comprehensive</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>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>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>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>income (loss)</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>at cost</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(deficit)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>loss</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">Dividends payable
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>&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">(256,000</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">(256,000</TD>
    <TD nowrap>)</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">Repurchase of
warrants</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(55,279</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">(55,279</TD>
    <TD nowrap>)</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">Sale of warrants</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,741</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">47,741</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">Cashless exercise
of warrants</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">218,493</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">219</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(219</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>&nbsp;</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 pay
preferred
dividends</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">93,421</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">212,907</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">213,000</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">Detachable
warrants issued
with notes payable</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">450,000</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">450,000</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">Issuance of
warrants to pay
operating expenses</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">167,138</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">167,138</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">Issuance of common
stock to pay
operating expenses</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">106,293</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">387,165</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">387,271</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">Issuance of
preferred stock to
pay operating
expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">137</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">&#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">136,499</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">136,500</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">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>&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">(16,339,120</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">(16,339,120</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(16,339,120</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>
    <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>
    <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>
    <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">Balances at
December&nbsp;31, 2001</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,337</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33</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">15,005,191</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,005</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">23,389,818</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">(24,043,342</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">(638,486</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(16,339,120</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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">Dividends payable
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>&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">(242,400</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">(242,400</TD>
    <TD nowrap>)</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">Repurchase of
warrants</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">&#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>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sale of warrants</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">240,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">240</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">117,613</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">117,853</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">Cashless exercise
of warrants</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">100,201</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(100</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of
warrants</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">344,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">345</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,477</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">168,822</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">Sale of preferred
stock at $1.50 per
share</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">200,000</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">&#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">298,000</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">300,000</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">Sale of preferred
stock at $10.00
per share</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">70,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">701</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">700,392</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">701,093</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">Conversion of
preferred stock
into common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30</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">1,800,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,800</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,770</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Preferred stock
dividends forgiven</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">335,440</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">335,440</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">Issuance of
warrants to pay
operating expenses</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">163,109</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">163,109</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">Issuance of common
stock to pay
operating expenses</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">6,292</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">12,263</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">12,269</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">Issuance of
preferred stock to
pay operating
expenses</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">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">&#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">6,000</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">6,001</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">Issuance of stock
options 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">&#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">329,296</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">329,296</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">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>&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">(2,105,727</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">(2,105,727</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,105,727</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>
    <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>
    <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>
    <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">Balances at
December&nbsp;31, 2002</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</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">70,109</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">701</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,496,257</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,496</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,276,138</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">(26,149,069</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">(852,730</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,105,727</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to 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"><A HREF="#tocpage">Table of Contents</A></H5><P>

<!-- LANDSCAPE -->

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Consolidated Statements of Stockholders&#146; Equity (Deficit) and Comprehensive Loss</B><BR>
Inception (June&nbsp;12, 1996) Through December&nbsp;31, 2008
</DIV>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
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    <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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>accumulated</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>Total</B></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 nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>other</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>Treasury</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stockholders&#146;</B></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 nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series A</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series B</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series C</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>comprehensive</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>stock,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Comprehensive</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>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>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>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>income (loss)</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>at cost</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(deficit)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>loss</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">Dividends payable
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>&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">(37,840</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">(37,840</TD>
    <TD nowrap>)</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">Conversion of
Series&nbsp;C preferred
stock into common
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">&#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">(70,109</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(701</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,021,860</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,022</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(13,321</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>&nbsp;</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 pay
interest on Bridge
Notes</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">165,830</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">165</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,326</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">53,491</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">Sale of common
stock at $0.40 per
share, 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">&#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">6,640,737</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6,676</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,590,656</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">2,597,332</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">Sale of common
stock at $1.00 per
share, 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">&#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">3,701,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,668</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,989,181</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">3,992,849</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">Exchange of
warrants</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">235,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,486</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">49,721</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">Issuance of common
stock to pay
operating expenses</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">230,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">230</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">206,569</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">206,799</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">Issuance of
warrants to pay
operating expenses</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">156,735</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">156,735</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">Issuance of stock
options 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">&#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">286,033</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">286,033</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">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>&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">(2,332,077</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">(2,332,077</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,332,077</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>
    <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>
    <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>
    <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">Balances at
December&nbsp;31, 2003</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">473</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200,000</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">&#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">42,491,708</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">42,492</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">32,556,963</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">(28,481,146</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">4,120,313</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(2,332,077</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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">Extinguishment of
dividends payable
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>&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">72,800</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">72,800</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">Conversion of
Series&nbsp;A
cumulative
preferred stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(473</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4</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">236,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">236</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(232</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Conversion 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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(200,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,000</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">200,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">200</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,800</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cashless exercise
of warrants</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">464,573</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">465</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(465</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of
warrants</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">23,832</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">27,330</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">27,353</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">Issuance of
warrants in
settlement of a
claim</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">86,375</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">86,375</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">Sale of common
stock at $1.50 per
share</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">10,417,624</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,419</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,616,031</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">15,626,450</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">Payment of
financing and
offering 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">&#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">(1,366,774</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">(1,366,774</TD>
    <TD nowrap>)</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">Issuance of stock
options 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">&#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">524,922</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">524,922</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">Acquisition of
treasury 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">&#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">34,747</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">(34,747</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>
</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>&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">(6,701,048</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">(6,701,048</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,701,048</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>
    <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>
    <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>
    <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">Balances at
December&nbsp;31, 2004</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">53,834,237</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">53,835</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">47,553,497</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">(35,182,194</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34,747</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,390,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(6,701,048</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt">See accompanying notes to consolidated financial statements.
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<!-- LANDSCAPE -->

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Consolidated Statements of Stockholders&#146; Equity (Deficit) and Comprehensive Loss</B><BR>
Inception (June&nbsp;12, 1996) Through December&nbsp;31, 2008
</DIV>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="16%">&nbsp;</TD>

    <TD width="2%">&nbsp;</TD>
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    <TD width="2%">&nbsp;</TD>
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    <TD width="2%">&nbsp;</TD>
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    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>

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    <TD width="2%">&nbsp;</TD>
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    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>


    <TD width="2%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>

    <TD width="2%">&nbsp;</TD>
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    <TD width="2%">&nbsp;</TD>
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    <TD width="1%">&nbsp;</TD>

    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</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>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
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    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>accumulated</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>Total</B></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 nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6"><B>Cumulative convertible</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>Additional</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>other</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>Treasury</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>stockholders&#146;</B></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 nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series A</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series B</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>preferred stock, series C</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="6" style="border-bottom: 1px solid #000000"><B>Common stock</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>paid-in</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>comprehensive</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>stock,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>equity</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Comprehensive</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>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>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>capital</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>income (loss)</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>at cost</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>(deficit)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>loss</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">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>&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">(24,782,646</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">(24,782,646</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(24,782,646</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of change in
fair value of
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">&#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">(1,722</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">(1,722</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,722</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Par value of shares
issued in
conjunction with
mezzanine financing</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">10,810,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,811</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,811</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>&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">Cashless exercise
of warrants</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">149,613</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">149</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(149</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of warrants</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">2,258,703</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,259</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,071,179</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">3,073,438</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">Exercise of stock
options</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">185,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">185</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">144,815</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">145,000</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">Issuance of stock
options 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">&#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">994,874</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">994,874</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">Issuance of stock
options to
non-employee</DIV></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>
    <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">93,549</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">93,549</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">Issuance of common
stock to vendor</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">125,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">258,375</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">258,500</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 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>
    <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>
    <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>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balances at
December&nbsp;31, 2005,
as restated</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">67,363,362</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">67,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,105,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,722</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(59,964,840</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34,747</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,828,616</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(24,784,368</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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">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>&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">(29,331,773</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">(29,331,773</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(29,331,773</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of change in
fair value of
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">&#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">(368</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">(368</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(368</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cashless exercise
of warrants</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">420,161</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(420</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of
warrants, net of
financing 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">&#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">5,103,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,104</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,686,486</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">7,691,590</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">Acquisition of SD
Pharmaceuticals.
Inc.</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">2,099,990</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,100</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,161,852</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">10,163,952</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">Sale of common
stock at $2.75 per
share, net of
offering 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">&#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">14,545,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,545</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">37,055,666</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">37,070,211</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">Issuance of stock
for severance
agreement</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">60,145</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">196,614</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">196,674</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">Exercise of stock
options</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">92,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">93</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">125,658</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">125,751</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">Issuance of
restricted stock to
non-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">&#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">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">68,635</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">68,650</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">Issuance of stock
options 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">&#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">1,697,452</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">1,697,452</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">Issuance of stock
options to
non-employee</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">104,225</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">104,225</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">Cancellation of
treasury stock
shares</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">(23,165</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(34,724</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">34,747</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>
</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>
    <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>
    <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>
    <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: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balances at
December&nbsp;31, 2006,
as restated</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">89,676,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,678</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109,166,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,090</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89,296,613</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">19,957,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(29,332,141</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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">Cumulative-effect
adjustment of
adopting FASB Staff
Position No.&nbsp;EITF
00-19-2 (see Note
3)</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,116,751</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">12,239,688</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">30,356,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR><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>&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">(22,142,040</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">(22,142,040</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(22,142,040</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of change in
fair value of
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">&#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">4,792</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">4,792</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,792</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of stock
options</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">575,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">576</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">441,040</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">441,616</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">Issuance of stock
options 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">&#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">2,414,077</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">2,414,077</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">Issuance of stock
options to
non-employee</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,908</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">1,908</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 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>
    <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>
    <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>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balances at
December&nbsp;31, 2007</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">90,252,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">130,140,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(99,198,965</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">31,034,540</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(22,137,248</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>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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">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>&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">(26,647,493</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">(26,647,493</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(26,647,493</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Effect of change in
fair value of
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">&#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">(2,702</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">(2,702</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,702</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Exercise of stock
options</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">&#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>&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">Issuance of stock
options 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">&#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">1,605,908</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">1,605,908</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">Issuance of stock
options to
non-employee</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">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,982</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">4,982</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 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>
    <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>
    <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>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Balances at
December&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</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>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,252,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">90,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">131,751,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(125,846,458</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">5,995,235</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(26,650,195</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: 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>
    <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: 12pt">See accompanying notes to consolidated financial statements.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-17<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)
</DIV>

<DIV align="left">
<A name="308"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Consolidated Statements of Cash Flows</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>Inception</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>(June 12, 1996)</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>Through</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>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>2008</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>(as restated)</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:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(26,647,493</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(22,142,040</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(138,581,749</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; 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:30px; text-indent:-15px">Depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">168,039</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">197,783</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,348,071</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Gain on disposal of fixed assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(3,598</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">(3,598</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Loss on fair value of warrants</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">12,239,688</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Amortization of debt discount</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">450,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Forgiveness of employee 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">30,036</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:30px; text-indent:-15px">Impairment loss &#151; write-off of goodwill</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">5,702,130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expenses related to employee stock options
and restricted stock issued</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,605,907</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,414,077</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,852,562</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expenses related to options issued to
non-employees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,908</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">204,664</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expenses paid by issuance of common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">78,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,341,372</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expenses paid by issuance of warrants</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">573,357</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expenses paid by issuance of 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">142,501</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Expenses related to stock warrants issued</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">612,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Equity in loss of investee</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">178,936</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">In-process research and development</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">10,422,130</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Write-off of license agreement</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">152,866</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Write-off assets available-for-sale</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">108,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cumulative effect of change in accounting
principle</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">25,821</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accretion of discount</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(208,103</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,041,750</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,249,853</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Accretion of discount on investments in
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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(354,641</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Changes in assets and liabilities, net of
effect of acquisitions:</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">Increase in prepaid and other assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">85,723</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(174,388</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(907,671</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Increase in accounts payable and
accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,221,208</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,044,291</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,890,731</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Decrease in long-term liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,270</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(21,404</TD>
    <TD nowrap>)</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" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net cash used in operating activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(23,787,604</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(19,643,190</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(85,822,647</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">
    <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" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds from sales and maturities of
short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,243,602</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">59,240,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">112,788,378</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Purchases of short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(14,355,784</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(51,104,469</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(111,183,884</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Purchases of property and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(64,955</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(127,259</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,030,354</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Proceeds from sale of property and
equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,906</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">33,906</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Purchase of certificate of deposit</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">(1,016,330</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Consolidated Statements of Cash Flows</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>Inception</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>(June 12, 1996)</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>Through</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>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>2008</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>(as restated)</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Maturity of certificate of deposit</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">1,016,330</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Cash paid for acquisitions, net of cash
acquired</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">32,395</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Payment on obligation under license
agreement</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">(106,250</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of note receivable &#151; related party</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">(35,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments on note 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">405,993</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Advance to investee</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">(90,475</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash transferred in rescission of acquisition</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">(19,475</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cash received in rescission of acquisition</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">230,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; 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:30px; text-indent:-15px">Net cash provided by investing activities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,856,769</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">8,008,272</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,025,234</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; 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: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 sale of common 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">84,151,342</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from exercise of stock options</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">441,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">712,367</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale or exercise of warrants</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">11,382,894</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from sale of 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">4,200,993</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Repurchase of warrants</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">(55,279</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments for financing and offering 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 nowrap align="left">&nbsp;</TD>
    <TD align="right">(6,483,809</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Payments on
notes payable and long &#150;term
debt</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">(605,909</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Proceeds from issuance of notes payable and
detachable warrants</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">1,344,718</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; 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:30px; text-indent:-15px">Net cash provided by financing activities</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">441,616</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">94,647,317</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; 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><TD>&nbsp;</TD></TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net (decrease)&nbsp;increase in cash and cash
equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(4,930,835</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,193,302</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents at beginning of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">14,780,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,974,041</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:45px; 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:15px; text-indent:-15px">Cash and cash equivalents at end of period</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">14,780,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:45px; 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: 12pt">See accompanying notes to consolidated financial statements.
</DIV>



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

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)
</DIV>

<DIV align="left">
<A name="309"></A>
</DIV>
<DIV align="center" style="font-size: 10pt"><B>Notes to Consolidated Financial Statements</B></DIV>


<DIV align="center" style="font-size: 10pt"><B>December&nbsp;31, 2008</B></DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(1)&nbsp;Description of Business</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ADVENTRX Pharmaceuticals, Inc., a Delaware corporation (&#147;ADVENTRX,&#148; &#147;we&#148; or the &#147;Company&#148;), is
a development-stage biopharmaceutical company whose fundamental business is focused on
in-licensing, developing and commercializing proprietary product candidates for the treatment of
cancer. Through our acquisition of SD Pharmaceuticals, Inc. (&#147;SDP&#148;) in 2006 and our license
agreements with the University of Southern California, we have rights to product candidates in
varying stages of development. We have not yet marketed or sold any products or generated any
significant revenue.
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2000, we merged our wholly-owned subsidiary, Biokeys Acquisition Corp., with and into
Biokeys, Inc. and changed our name to Biokeys Pharmaceuticals, Inc. In May&nbsp;2003, we merged Biokeys
Inc., our wholly-owned subsidiary, with and into us and changed our name to ADVENTRX
Pharmaceuticals, Inc. The merger had no effect on our financial statements. In July&nbsp;2004, we formed
a wholly-owned subsidiary, ADVENTRX (Europe) Ltd., in the United Kingdom primarily to facilitate
conducting clinical trials in the European Union. In April&nbsp;2006, we acquired all of the outstanding
capital stock of SDP through a merger with our newly created wholly-owned subsidiary, Speed
Acquisition, Inc. (the &#147;Merger Sub&#148;) and changed the name of the Merger Sub to SD Pharmaceuticals,
Inc.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Currently, we are focused primarily on evaluating strategic options, including the sale or
exclusive license of one or more of our product candidate programs, a strategic business merger and
other similar transactions. We implemented restructuring and cost-cutting measures in October&nbsp;2008,
January&nbsp;2009 and March&nbsp;2009 and will eliminate all but a select, small number of personnel and
discontinue substantially all of our development activities and fundamental business operations to
provide additional time to consummate a strategic transaction or otherwise obtain financing.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(2)&nbsp;Going Concern</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The accompanying consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. Going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a reasonable length of time.
However, as a result of the Company&#146;s continued losses and current cash and financing position,
such realization of assets or satisfaction of liabilities, without substantial adjustments is
uncertain. The future of the Company is dependent upon its ability to obtain additional funding.
Management is evaluating various strategic options, including the sale or exclusive license of one
or more of the Company&#146;s product candidate programs, a strategic business merger and other similar
transactions, certain of which may result in a change of control of the Company. There can be no
assurances that the Company will be successful in consummating a strategic transaction on a timely
basis or at all. The Company likely will not be able to continue as a going concern, unless, as
part of a strategic transaction or otherwise, it raises adequate capital. The Company will
eliminate all but a select, small number of personnel and discontinue substantially all of its
development activities and fundamental business operations and its ability to further curtail
expenses to provide additional time to consummate a strategic transaction or otherwise obtain
financing is limited. Given this uncertainty, there is significant doubt as to the Company&#146;s
ability to continue as a going concern.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company&#146;s consolidated financial statements for the year ended December&nbsp;31, 2008 do not include
any adjustments related to the recovery and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company cannot continue as a
going concern.
</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"><A HREF="#tocpage">Table of Contents</A></H5><P>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(3)&nbsp;Summary of Significant Accounting Policies</B>
</DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries, SDP and ADVENTRX (Europe) Ltd. All intercompany accounts and transactions have been
eliminated in consolidation.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Use of </B><B><I>Estimates</I></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 (&#147;U.S.&#148;) requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B><I>Change in Accounting Principle for Registration Payment Arrangements and Correction of Error</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;1, 2007, we adopted the provisions of the Financial Accounting Standards Board (&#147;FASB&#148;)
Staff Position on No.&nbsp;EITF 00-19-2, &#147;Accounting for Registration Payment Arrangements"(&#147;FSP EITF
00-19-2&#148;). In December&nbsp;2007, management determined that it was not probable that we would have any
payment obligation under the July&nbsp;2005 Registration Payment Arrangement; therefore, no accrual for
contingent obligation was required under the provisions of FSP EITF 00-19-2. Accordingly, the
warrant liability account was eliminated and the comparative condensed consolidated financial
statements of the prior periods and as of December&nbsp;31, 2006 were adjusted to apply the new method
retrospectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounted for FSP EITF 00-19-2 appropriately by eliminating the warrant liability as of
December&nbsp;31, 2007, but upon further review in 2008, management determined that it was not correct
to adjust the prior period comparative financial statements. Accordingly, the Company has made the
appropriate adjustments to reinstate the warrant liability accounting as originally recorded.
</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"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">(A Development Stage Enterprise)

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Notes to Consolidated Financial Statements</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>December&nbsp;31, 2008</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">The following consolidated financial statement line items were affected by the correction of the
error:
</DIV>


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

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><I>Inception (June&nbsp;12, 1996) through December&nbsp;31, 2008</I>
</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>As previously</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" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on fair value of warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Condensed Consolidated Statements of Operations (Unaudited)</B>

</DIV>
<DIV align="center">
<TABLE style="font-size: 6pt" 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="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="35" style="border-bottom: 1px solid #000000"><B>Inception (June 12, 1996) through:</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>March 31, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>September 30, 2007</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As previously</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>As previously</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>As previously</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: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on fair value of warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss before cumulative effect of change in
accounting principle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(82,650,521</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(94,890,209</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(88,373,349</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(100,613,037</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(94,287,473</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(106,527,161</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</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="right">&nbsp;</TD>
    <TD align="right">(82,676,342</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(94,916,030</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(88,399,170</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(100,638,858</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(94,313,294</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(106,552,982</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss applicable to common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(83,297,582</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(95,537,270</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(89,020,410</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(101,260,098</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(94,934,534</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(107,174,222</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 6pt" 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="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="35" style="border-bottom: 1px solid #000000"><B>Inception (June 12, 1996) through:</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>March 31, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>June 30, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>September 30, 2008</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As previously</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>As previously</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>As previously</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: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on fair value of warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss before cumulative effect of change in
accounting principle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(105,601,819</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(117,841,507</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(112,027,349</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(124,267,037</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(118,804,212</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(131,043,900</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</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="right">&nbsp;</TD>
    <TD align="right">(105,627,640</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(117,867,328</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(112,053,170</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(124,292,858</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(118,830,033</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(131,069,721</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss applicable to common stock</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(106,248,880</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(118,488,568</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(112,674,410</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(124,914,098</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(119,451,273</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(131,690,961</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Consolidated Statements of Stockholders&#146; Equity (Deficit)</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 nowrap align="center" colspan="2"><B>As previously</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2">&nbsp;</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 nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Effect of change</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"><I>For the year ended December&nbsp;31, 2005:</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(13,202,986</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(24,782,646</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">$</TD>
    <TD align="right">(11,579,660</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in-capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">70,222,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,105,329</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,116,751</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deficit accumulated during the development stage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(48,385,180</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(59,964,840</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(11,579,660</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">21,867,795</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,828,616</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,696,411</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>For the year ended December&nbsp;31, 2006:</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="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">(28,671,745</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(29,331,773</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(660,028</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in-capital</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">127,283,254</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">109,166,773</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(18,116,751</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deficit accumulated during the development stage</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(77,056,925</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(89,296,613</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,314,187</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">19,957,748</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(30,356,439</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><I>At December&nbsp;31, 2007:</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cumulative-effect of adopting FASB Staff
Position No.&nbsp;EITF 00-19-2:</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>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Additional paid-in-capital</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">18,116,751</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">18,116,751</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deficit accumulated during the development stage</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">12,239,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,239,688</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total stockholders&#146; equity</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">30,356,439</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">30,356,439</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>Consolidated Statement of Cash Flows</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:15px; text-indent:-15px"><I>Inception (June&nbsp;12, 1996) through December&nbsp;31,
2008</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>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on fair value of warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,239,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">12,239,688</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-22<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements<BR>
December&nbsp;31, 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Condensed Consolidated Statements of Cash Flow (Unaudited)</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 6pt" 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="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="35" style="border-bottom: 1px solid #000000"><B>Inception (June 12, 1996) through:</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>March 31, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>June 30, 2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>September 30, 2007</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As previously</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>As previously</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>As previously</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: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(82,676,342</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(94,916,030</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(88,399,170</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(100,638,858</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(94,313,294</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(106,552,982</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on fair value
of warrants</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">12,239,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,239,688</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">12,239,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,239,688</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">12,239,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,239,688</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 6pt" 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="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="35" style="border-bottom: 1px solid #000000"><B>Inception (June 12, 1996) through:</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>March 31, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>June 30, 2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>September 30, 2008</B></TD>
</TR>
<TR style="font-size: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>As previously</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>As previously</B></TD>
    <TD>&nbsp;</TD>
    <TD>&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>As previously</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: 6pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>reported</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>As restated</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Effect of change</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net loss</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(105,627,640</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(117,867,328</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(112,053,170</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(124,292,858</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(118,830,033</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(131,069,721</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(12,239,688</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Loss on fair value
of warrants</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">12,239,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,239,688</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">12,239,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,239,688</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">12,239,688</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">12,239,688</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-23<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Cash equivalents consist of highly liquid investments with original maturities of three months or
less at the date of purchase.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We account for and report our investments in accordance with SFAS No.&nbsp;115, <I>Accounting for Certain
Investments in Debt and Equity Securities. </I>Investments are comprised of marketable securities
consisting primarily of certificates of deposit, federal, state and municipal government
obligations and corporate bonds. Short-term investments are marketable securities with maturities
of less than one year from the balance sheet date. All marketable securities are held in our name
and primarily under the custodianship of two major financial institutions. Our policy is to protect
the principal value of our investment portfolio and minimize principal risk.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our marketable securities are classified as &#147;available-for-sale&#148; and stated at fair value, with net
unrealized gains or losses recorded as a component of accumulated other comprehensive income
(loss). The amortized cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity with all amortization and accretion included in interest income.
Realized gains and losses on available-for-sale securities are included in other income (loss). The
cost of securities sold is based on the specific identification method. Interest on securities
classified as available-for-sale is included in interest income. Marketable securities are
evaluated periodically for impairment. If it is determined that a decline of any investment is
other than temporary, then the investment basis would be written down to fair value and the
write-down would be included in earnings as a loss.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Financial instruments that potentially subject us to concentrations of credit risk consist
principally of cash and cash equivalents and investment securities. We maintain our cash and cash
equivalents in high-credit quality financial institutions. At times, such balances may exceed
Federally insured limits. At December&nbsp;31, 2008, our cash and cash equivalents were in excess of the
Federal Deposit Insurance Corporation limit.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2008, approximately 12% or $2.3&nbsp;million of our total vendor payments were made to a
manufacturer that provided process development and scale-up manufacturing services. If we were to
lose this vendor, our progress in completing a New Drug Application (&#147;NDA&#148;) would be severely
impeded. During 2007, approximately 14% or $2.3&nbsp;million of our total vendor payments were made to a
contract research organization (&#147;CRO&#148;) that was assisting us in our clinical trial administration
and data management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Fair Value of Financial Instruments</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2008, our financial instruments included cash and cash equivalents, accounts
payable, accrued expenses and accrued compensation and payroll taxes. At December&nbsp;31, 2007, our
financial instruments also included short-term investments. The carrying amounts of cash and cash
equivalents, accounts payable, accrued expenses and accrued compensation and payroll taxes
approximate fair value due to the short-term maturities of these instruments. Our short-term
investments in securities are carried at fair value based on quoted market prices.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property and equipment are stated at cost. Depreciation and amortization are calculated using the
straight-line method over the estimated useful lives of the assets. The costs of improvements that
extend the lives of the assets are capitalized. Repairs and maintenance are expensed as incurred.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-24<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Impairment of Long-Lived Assets</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Long-lived assets with finite lives are evaluated for impairment whenever events or changes in
circumstances indicate that their carrying value may not be recoverable. If the evaluation
indicates that intangibles or long-lived assets are not recoverable (i.e., carrying amount is less
than the future projected undiscounted cash flows), their carrying amount would be reduced to fair
value. Since inception through December&nbsp;31, 2008, we recognized an impairment loss of the value of
goodwill in the amount of $5.7&nbsp;million, which was recorded in the year ended December&nbsp;31, 2001.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We recognize revenue in accordance with the Securities and Exchange Commission&#146;s (&#147;SEC&#148;) Staff
Accounting Bulletin Topic 13, <I>Revenue Recognition </I>(&#147;Topic 13&#148;), and Emerging Issues Task Force
Issue (&#147;EITF&#148;) No.&nbsp;00-21, <I>Revenue Arrangements with Multiple Deliverables </I>, or EITF 00-21. Revenue
is recognized when all of the following criteria are met: (1)&nbsp;persuasive evidence of an arrangement
exists; (2)&nbsp;delivery has occurred or services have been rendered; (3)&nbsp;the seller&#146;s price to the
buyer is fixed and determinable; and (4)&nbsp;collectibility is reasonably assured.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Revenue from licensing agreements is recognized based on the performance requirements of the
agreement. Revenue is deferred for fees received before earned. Nonrefundable upfront fees that are
not contingent on any future performance by us are recognized as revenue when revenue recognition
criteria under Topic 13 and EITF 00-21 are met and the license term commences. Nonrefundable
upfront fees, where we have ongoing involvement or performance obligations, are recorded as
deferred revenue and recognized as revenue over the life of the contract, the period of the
performance obligation or the development period, whichever is appropriate in light of the
circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payments related to substantive, performance-based milestones in an agreement are recognized as
revenue upon the achievement of the milestones as specified in the underlying agreement when they
represent the culmination of the earnings process. Royalty revenue from licensed products will be
recognized when earned in accordance with the terms of the applicable license agreements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Research and Development Expenses</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Research and development (&#147;R&#038;D&#148;) expenses consist of expenses incurred in performing R&#038;D
activities, including salaries and benefits, facilities and other overhead expenses, bioequivalence
and clinical trials, research-related manufacturing services, contract services and other outside
expenses. R&#038;D expenses are charged to operations as they are incurred. Advance payments, including
nonrefundable amounts, for goods or services that will be used or rendered for future R&#038;D
activities are deferred and capitalized. Such amounts will be recognized as an expense as the
related goods are delivered or the related services are performed. If the goods will not be
delivered, or services will not be rendered, then the capitalized advance payment is charged to
expense.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Milestone payments that we make in connection with in-licensed technology or product candidates are
expensed as incurred when there is uncertainty in receiving future economic benefits from the
licensed technology or product candidates. We consider the future economic benefits from the
licensed technology or product candidates to be uncertain until such licensed technology or product
candidates are approved for marketing by the U.S. Food and Drug Administration (&#147;FDA&#148;) or when
other significant risk factors are abated. For expense accounting purposes, management has viewed
future economic benefits for all of our licensed technology or product candidates to be uncertain.
</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"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Payments in connection with our bioequivalence and clinical trials are often made under contracts
with multiple CROs that conduct and manage these trials on our behalf. The financial terms of these
agreements are subject to negotiation and vary from contract to contract and may result in uneven
payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed
fee or unit price or on a time-and-material basis. Payments under these contracts depend on factors
such as the successful enrollment or treatment of patients or the completion of other milestones.
Expenses related to bioequivalence and clinical trials are accrued based on our estimates and/or
representations from service providers regarding work performed, including actual level of patient
enrollment, completion of patient studies, and trials progress. Other incidental costs related to
patient enrollment and treatment are accrued when reasonably certain. If the contracted amounts are
modified (for instance, as a result of changes in the bioequivalence or clinical trial protocol or
scope of work to be performed), we modify our accruals accordingly on a prospective basis.
Revisions in scope of contract are charged to expense in the period in which the facts that give
rise to the revision become reasonably certain. Because of the uncertainty of possible future
changes to the scope of work in bioequivalence and clinical trials contracts, we are unable to
quantify an estimate of the reasonably likely effect of any such changes on our consolidated
results of operations or financial position. Historically, we have had no material changes in our
bioequivalence or clinical trial expense accruals that would have had a material impact on our
consolidated results of operations or financial position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Purchased In-Process Research and Development</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In accordance with SFAS No.&nbsp;141, <I>Business Combinations</I>, we immediately charge the costs associated
with purchased IPR&#038;D to statement of operations upon acquisition. These amounts represent an
estimate of the fair value of purchased IPR&#038;D for projects that, as of the acquisition date, had
not yet reached technological feasibility, had no alternative future use, and had uncertainty in
receiving future economic benefits from the purchased IPR&#038;D. We determine the future economic
benefits from the purchased IPR&#038;D to be uncertain until such technology is approved by the FDA or
when other significant risk factors are abated. In the year ended December&nbsp;31, 2006, we recorded
approximately $10.4&nbsp;million of IPR&#038;D expense related to our acquisition of SD Pharmaceuticals, Inc.
in April&nbsp;2006.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Accounting for Stock-Based Compensation</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;1, 2006, we adopted the provisions of revised SFAS No.&nbsp;123, &#147;Share-Based Payment
<I>&#148; </I>(&#147;SFAS 123(R)&#148;), including the provisions of Staff Accounting Bulletins No.&nbsp;107 (&#147;SAB 107&#148;) and
No.&nbsp;110 (&#147;SAB 110&#148;). Under SFAS 123(R), stock-based compensation cost is measured at the grant
date, based on the estimated fair value of the award, and is recognized as expense over the
employee&#146;s requisite service period. We have no awards with market or performance conditions. We
adopted the provisions of SFAS 123(R) using the modified prospective transition method.
Accordingly, prior periods were not revised for comparative purposes.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On November&nbsp;10, 2005, the FASB issued FASB Staff Position No.&nbsp;SFAS 123(R)-3, &#147;Transition Election
Related to Accounting for Tax Effects of Share-Based Payment Awards&#148;. We elected to adopt the
alternative transition method provided in SFAS 123(R). The alternative transition method included a
simplified method to establish the beginning balance of the additional paid-in capital pool (&#147;APIC
pool&#148;) related to the tax effects of employee stock-based compensation, which is available to
absorb tax deficiencies recognized subsequent to the adoption of SFAS 123(R).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The valuation provisions of SFAS 123(R) apply to new awards and to awards that are outstanding on
the effective date, January&nbsp;1, 2006, which are subsequently modified or cancelled. Prior to 2006,
we accounted for stock-based compensation under the recognition and measurement principles of SFAS
No.&nbsp;123, &#147;Accounting for Stock-Based Compensation&#148; (&#147;SFAS 123&#148;) <I>. </I>Estimated compensation expense
for awards outstanding at January&nbsp;1, 2006 is recognized over the remaining service period using the
compensation cost calculated for recognition purposes under SFAS 123.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Stock-based compensation expense recognized in our consolidated statement of operations for the
years ended December&nbsp;31, 2008 and 2007 included compensation expense for stock-based payment awards
granted prior to, but not yet vested as of, December&nbsp;31, 2005 based on the grant date fair value
estimated in accordance with the recognition provisions of SFAS 123 and stock-based payment awards
granted subsequent to December&nbsp;31, 2005 based on the grant date fair value estimated in accordance
with SFAS 123(R). For share awards granted during the year ended December&nbsp;31, 2008 and 2007,
expenses are amortized under the straight-line method. For share awards granted prior to 2006,
expenses are amortized under the straight-line method prescribed by SFAS 123. As stock-based
compensation expense recognized in the consolidated statement of operations for the years ended
December&nbsp;31, 2008 and 2007 is based on awards ultimately expected to vest, it has been reduced for
estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In
the year ended December&nbsp;31, 2005, we accounted for forfeitures as they occurred in accordance with
the recognition provisions of SFAS
</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"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">123.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We account for stock-based compensation awards granted to non-employees in accordance with EITF No.
96-18, &#147;Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services <I>&#148; </I>(&#147;EITF 96-18&#148;). Under EITF 96-18, we determine
the fair value of the stock-based compensation awards granted as either the fair value of the
consideration received or the fair value of the equity instruments issued, whichever is more
reliably measurable. If the fair value of the equity instruments issued is used, it is measured
using the stock price and other measurement assumptions as of the earlier of either of (1)&nbsp;the date
at which a commitment for performance by the counterparty to earn the equity instruments is reached
or (2)&nbsp;the date at which the counterparty&#146;s performance is complete.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Legal costs in connection with approved patents and patent applications are expensed as incurred
and classified as selling, general and administrative expense in our consolidated statement of
operations.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We account for income taxes and the related accounts under the liability method. Deferred tax
assets and liabilities are determined based on the differences between the financial statement
carrying amounts and the income tax bases of assets and liabilities. A valuation allowance is
applied against any net deferred tax asset if, based on available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In July&nbsp;2006, FASB issued
Financial Interpretation No.&nbsp;48, <I>Accounting for Uncertainty in Income Taxes-an Interpretation of
FASB Statement 109 </I>(&#147;FIN 48&#148;), which clarifies the accounting for uncertainty in tax positions.
FIN 48 provides that the tax effects from an uncertain tax position can be recognized in our
consolidated financial statements only if the position is more likely than not of being sustained
upon an examination by tax authorities. An uncertain income tax position will not be recognized if
it has less than a 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure
and transition. The provisions of FIN 48 were effective for us as of January&nbsp;1, 2007, with the
cumulative effect of the change in accounting principle recorded as an adjustment to opening
retained earnings in the year of adoption. We adopted FIN 48 on January&nbsp;1, 2007, which did not have
a material impact on our consolidated results of operations or financial position. See Note 13,
<I>Income Taxes </I>.
</DIV>

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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Comprehensive income or loss is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner sources, including
foreign currency translation adjustments and unrealized gains and losses on marketable securities.
We present comprehensive loss in our consolidated statements of stockholders&#146; equity (deficit)&nbsp;and
comprehensive loss.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B><I>Computation of Net Loss per Common Share</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We calculate basic and diluted net loss per share in accordance with the SFAS No.&nbsp;128, &#147;Earnings
Per Share&#148;. Basic net loss per share was calculated by dividing the net loss by the
weighted-average number of common shares outstanding during the period. Diluted net loss per share
was calculated by dividing the net loss by the weighted-average number of common stock equivalents
outstanding during the period. For purposes of this calculation, options and warrants are
considered to be common stock equivalents and are only included in the calculation of diluted
earnings per share when their effect is dilutive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have excluded the following options and warrants from the calculation of diluted net loss per
common share for 2008 and 2007 because their effect is anti-dilutive:
</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><DIV style="margin-left:15px; text-indent:-15px">Warrants</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,373,549</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">13,373,549</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,364,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,020,940</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" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,738,382</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">17,394,489</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: 12pt"><B><I>Supplemental Cash Flow Information</I></B>
</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"><A HREF="#tocpage">Table of Contents</A></H5><P>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</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="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>Inception</B></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>(June 12, 1996)</B></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>Through</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: 1px solid #000000"><B>Years Ended December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><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" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosures of cash flow information:</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">Interest paid</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">179,090</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income taxes paid</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>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Supplemental disclosures of non-cash investing and
financing 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" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of warrants, common stock and preferred
stock for:</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: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:45px; text-indent:-15px">Conversion of notes payable and accrued
interest</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">1,213,988</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Prepaid services to consultants</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">1,482,781</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Conversion of 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">2,705</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Acquisitions</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">24,781,555</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Payment of dividends</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">213,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Financial advisor services in conjunction
with private placement</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">1,137,456</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Acquisition of treasury stock in settlement of a
claim</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">34,737</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cancellation of treasury 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="right">&nbsp;</TD>
    <TD align="right">(34,737</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Assumptions of liabilities in acquisitions</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">1,235,907</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:30px; text-indent:-15px">Acquisition of license agreement for long-term
debt</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">161,180</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cashless exercise of warrants</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">4,312</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends accrued</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">621,040</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade asset converted to available for sale asset</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">108,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Dividends extinguished</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">408,240</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Trade payable converted to note payable</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">83,948</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Issuance of warrants for return of common 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">50,852</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Detachable warrants issued with notes payable</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">450,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Unrealized (gain)&nbsp;loss on short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,702</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(4,792</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2007, the FASB issued SFAS No.&nbsp;141 (revised 2007) (&#147;SFAS 141(R)&#148;), &#147;Business
Combinations,&#148; which replaces SFAS No.&nbsp;141. SFAS 141(R) retains the purchase method of accounting
for acquisitions, but requires a number of changes, including changes in the way assets and
liabilities are recognized in purchase accounting. It also changes the recognition of assets
acquired and liabilities assumed arising from contingencies, requires the capitalization of
in-process research and development at fair value, and requires the expensing of
acquisition-related costs as incurred. SFAS 141(R) is effective for financial statements issued for
fiscal year 2009 and will apply prospectively to business combinations completed on or after
January&nbsp;1, 2009. We do not expect the adoption of SFAS 141(R) to have a material effect on our
consolidated financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Effective January&nbsp;1, 2008, we adopted SFAS No.&nbsp;157, &#147;Fair Value Measurements&#148; (&#147;SFAS 157&#148;). In
February&nbsp;2008, the FASB issued FASB Staff Position (&#147;FSP&#148;) No.&nbsp;SFAS 157-2, &#147;Effective Date of FASB
Statement No.&nbsp;157,&#148; which provides a one year deferral of the effective date of SFAS 157 for
non-financial assets and non-financial liabilities, except those that are recognized or disclosed
in the financial statements at fair value at least annually. As a result, we only partially adopted
SFAS 157 as it relates to our financial assets and liabilities until we are required to apply this
pronouncement to our non-financial assets and liabilities beginning with fiscal year 2009. The
adoption of SFAS 157 did not have a material impact on our consolidated results of operations or
financial condition.
</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"><A HREF="#tocpage">Table of Contents</A></H5><P>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2008, the FASB issued FSP. No.&nbsp;157-2, &#147;Effective Date of FASB Statement No.&nbsp;157&#148; (&#147;FSP
157-2&#148;). FSP 157-2 delays, for one year, the effective date of SFAS 157 for all nonfinancial assets
and liabilities, except those that are recognized or disclosed in the consolidated financial
statements on at least an annual basis.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In May&nbsp;2008, the FASB issued SFAS No.&nbsp;162, &#147;The Hierarchy of Generally Accepted Accounting
Principles.&#148; SFAS No.&nbsp;162 is intended to improve financial reporting by identifying a consistent
hierarchy for selecting accounting principles to be used in preparing financial statements that are
prepared in conformance with accounting principles generally accepted in the United States of
America. Unlike Statement on Auditing Standards (SAS)&nbsp;No.&nbsp;69, &#147;The Meaning of Present Fairly in
Conformity With GAAP,&#148; SFAS No.&nbsp;162 is directed to the entity rather than the auditor. SFAS No.&nbsp;162
is effective 60&nbsp;days following the SEC&#146;s approval of the Public Company Accounting Oversight Board
(&#147;PCAOB&#148;) amendments to AU Section&nbsp;411, &#147;The Meaning of Present Fairly in Conformity with GAAP,&#148;
and is not expected to have any impact on the Company&#146;s consolidated results of operations,
financial condition or liquidity.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2008, the FASB issued FSP No.&nbsp;SFAS 157-3 &#147;Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active&#148; (&#147;FSP SFAS 157-3&#148;). FSP SFAS 157-3 clarifies
the application of SFAS No.&nbsp;157, in a market that is not active and provides an example to
illustrate key considerations in determining the fair value of a financial asset when the market
for that financial asset is not active. FSP SFAS 157-3 is effective upon issuance, including prior
periods for which financial statements have not been issued. The adoption of FSP SFAS 157-3 had no
impact on our consolidated results of operations, financial position or cash flows.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">SFAS 157 was effective for the Company beginning January&nbsp;1, 2008 for financial assets and
liabilities recognized or disclosed in the Company&#146;s consolidated financial statements. SFAS 157
defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances
disclosures about fair value measurements. Fair value is defined under SFAS 157 as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Valuation techniques used to measure fair value under
SFAS 157 must maximize the use of observable inputs and minimize the use of unobservable inputs.
SFAS 157 describes a fair value hierarchy based on three levels of inputs, of which the first two
are considered observable and the last unobservable, that may be used to measure fair value which
are the following:
</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>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Level 1 &#151;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Quoted prices in active markets for identical assets or liabilities.</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">Level 2 &#151;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or
liabilities.</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" nowrap><DIV style="margin-left:0px; text-indent:-0px">Level 3 &#151;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<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"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table represents our fair value hierarchy for our financial assets (which consisted
solely of cash equivalents) measured at fair value based on quoted market prices on a recurring
basis as of December&nbsp;31, 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="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 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>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Total</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Money market funds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</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:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</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">Effective January&nbsp;1, 2008, we adopted SFAS No.&nbsp;159, &#147;The Fair Value Option for Financial Assets and
Financial Liabilities&#148; (&#147;SFAS 159&#148;). SFAS 159 allows an entity the irrevocable option to elect to
measure specified financial assets and liabilities in their entirety at fair value on a
contract-by-contract basis. If an entity elects the fair value option for an eligible item, changes
in the item&#146;s fair value must be reported as unrealized gains and losses in earnings at each
subsequent reporting date. In adopting SFAS 159, we did not elect the fair value option for any of
our financial assets or financial liabilities.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(4)&nbsp;Investments in Securities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes our investments in securities, all of which are classified as
available- for- sale:
</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 nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>2008</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 nowrap align="center" colspan="2"><B>Gross 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: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Cost</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Gains (Losses)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Fair Value</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Cash and cash equivalents:</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</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total cash and cash equivalents</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,849,904</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">9,849,904</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: 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="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 nowrap align="center" colspan="10" style="border-bottom: 1px solid #000000"><B>2007</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 nowrap align="center" colspan="2"><B>Gross 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: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Cost</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Gains (Losses)</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Fair Value</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">Short-term investments:</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">Commercial paper</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,494,050</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,420</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,496,470</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Government debt securities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,438,669</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(1,617</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7,437,052</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Corporate bonds</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,748,504</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,748,895</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:30px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:45px; text-indent:-15px">Total short-term investments</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,681,223</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,194</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">18,682,417</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: 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: 12pt"><B>(5)&nbsp;Property and Equipment</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Property and equipment at December&nbsp;31, 2008 and 2007 were as follows:
</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="7%">&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" style="border-bottom: 1px solid #000000"><B>Useful Lives</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" colspan="2" style="border-bottom: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" 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><DIV style="margin-left:15px; text-indent:-15px">Office furniture, computer and lab equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3 - 5 years</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">720,257</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">754,990</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Computer software</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">3 years</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">103,306</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">122,162</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">823,563</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">877,152</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Less accumulated depreciation and amortization</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(624,511</TD>
    <TD nowrap valign="top">)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">(544,708</TD>
    <TD nowrap valign="top">)</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property and equipment, net</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">199,052</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$</TD>
    <TD align="right" valign="top">332,444</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Depreciation and amortization expense was $168,039 and $197,783 for the years ended December&nbsp;31,
2008 and 2007, respectively.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-30<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(6)&nbsp;Accrued Liabilities</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Accrued liabilities at December&nbsp;31, 2008 and 2007 were as follows:
</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><DIV style="margin-left:15px; text-indent:-15px">Accrued contracts and study expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,620,988</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,953,472</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Other accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">434,172</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">326,428</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Deferred rent</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,028</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,010</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:30px; text-indent:-15px">Accrued liabilities</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,077,188</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,317,910</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: 12pt"><B>(7)&nbsp;Capital Stock and Warrants</B>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2008, we issued no new additional common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">During 2007, we issued an aggregate of 575,833 shares of our common stock in connection with the
exercises of employee stock options at a weighted average price of $0.77 per share for cash in the
aggregate amount of approximately $442,000.
</DIV>

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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In July&nbsp;2005, we issued warrants to purchase 10,810,809 shares of common stock at an exercise price
of $2.26 per share in connection with the sale of 10,810,809 shares of common stock in July&nbsp;2005.
See Note 11, <I>Registration Payment Arrangement </I>, for a detailed discussion.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2008, outstanding warrants to purchase shares of common stock are as follows:
</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="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>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Warrants</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Expiration Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" nowrap>1,872,693</TD>
    <TD nowrap valign="top">*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.98</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Apr-09</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">117,000</TD>
    <TD nowrap valign="top">*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">2.38</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Apr-09</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">573,047</TD>
    <TD nowrap valign="top">*</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">1.98</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Jun-09</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">10,810,809</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">$</TD>
    <TD align="right" valign="top">2.26</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Jul-12</TD>
</TR>
<TR style="font-size: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">13,373,549</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&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">*</TD>
    <TD>&nbsp;</TD>
    <TD>These warrants contain price-based anti-dilution protection. Among other things, this protection
lowers the exercise price of these warrants in the event we issue common stock at a price per share
that is less than the warrants&#146; then-effective exercise price, thereby allowing the warrant holders
to receive the same number of shares of our common stock for less consideration.</TD>
</TR>

</TABLE>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(8)&nbsp;Equity Incentive Plans</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2008, we had the 2005 Equity Incentive Plan (the &#147;2005 Plan&#148;), the 2005 Employee
Stock Purchase Plan (the &#147;Purchase Plan&#148;), and the 2008 Omnibus Incentive Plan (the &#147;2008 Plan&#148;)
which are described below. The stock-based compensation expense from all stock-based awards that
has been charged to our consolidated statements of operations in the years ended December&nbsp;31, 2008
and 2007 was comprised of the following:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-31<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</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="6" style="border-bottom: 1px solid #000000"><B>Years Ended 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>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Selling, general and administrative expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">885,427</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,440,081</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Research and development expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">725,464</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,054,237</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" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock-based compensation expense before taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,610,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,494,318</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Related income tax benefits</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 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:15px; text-indent:-15px">Stock-based compensation expense</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,610,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,494,318</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">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net stock-based compensation expense per common
share &#151; basic and diluted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.02</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.03</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><DIV style="margin-left:15px; text-indent:-15px">Stock-based compensation expense from:</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">Stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,610,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,415,985</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Share grant</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">78,333</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Restricted stock awards</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 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:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1,610,890</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2,494,318</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">Since we accounted for employee stock-based awards using the recognition method under the
provisions of SFAS 123 prior to 2006, the adoption of SFAS 123(R) did not have a material impact on
our consolidated results of operations. Since we have net operating losses carry forward as of
December&nbsp;31, 2008, no excess tax benefits for the tax deductions related to stock-based awards were
recognized in the consolidated statement of operations. Additionally, no incremental tax benefits
were recognized from stock options exercised in the years ended December&nbsp;31, 2008 and 2007 that
would have resulted in a reclassification to reduce net cash provided by operating activities with
an offsetting increase in net cash provided by financing activities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>2005 Equity Incentive Plan and 2008 Omnibus Incentive Plan</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The 2005 and the 2008 Plans, which are stockholder-approved, are intended to encourage ownership of
shares of common stock by our directors, officers, employees, consultants and advisors and to
provide additional incentive for them to promote the success of our business through the grant of
stock-based awards. Both plans provide for the grant of incentive and non-statutory stock options
as well as share appreciation rights, restricted shares, restricted share units, performance units,
shares and other stock-based awards. Stock-based awards are subject to terms and conditions
established by the Board of Directors or the Compensation Committee of our Board of Directors. Our
policy is to issue new common shares upon the exercise of stock options, conversion of share units
or issuance of shares or restricted stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Since the 2008 Plan was approved by the Company&#146;s stockholders in May&nbsp;2008, no awards have been or
will be granted under the 2005 Plan. As of December&nbsp;31, 2008, the maximum aggregate number of
shares of common stock which may be issued pursuant to or subject to the foregoing types of awards
granted under the 2008 Plan is 13,097,500 shares. Any shares of common stock that are subject to
options or stock appreciation rights granted under the 2008 Plan shall be counted against this
limit as one (1)&nbsp;share of common stock for every one (1)&nbsp;share of common stock granted. Any shares
of common stock that are subject to awards other than options or stock appreciation rights granted
under the 2008 Plan shall be counted against this limit as 1.2 shares of common stock for every one
(1)&nbsp;share of common stock granted. If any shares of common stock subject to an award under the 2008
Plan or the 2005 Plan are forfeited, expire or are settled for cash pursuant to the terms of an
award, the shares subject to the award may be used again for awards under the 2008 Plan to the
extent of the forfeiture, expiration or settlement. The shares of common stock will be added back
as one (1)&nbsp;share for every share of common stock if the shares were subject to options or stock
appreciation rights granted under the 2008 Plan or under the 2005 Plan, and as 1.2 shares for every
share of common stock if the shares were subject to awards other than options or stock appreciation
rights granted under the 2008 Plan or the 2005 Plan. The following shares of common stock will not
be added to the shares issuable under the 2008 Plan: (i)&nbsp;shares tendered by the participant or
withheld by the Company in payment of the purchase price of an option, (ii)&nbsp;shares tendered by the
participant or withheld by the Company to satisfy tax withholding with respect to an award, and
(iii)&nbsp;shares subject to a stock appreciation right that are not issued in connection with the stock
settlement of the stock appreciation right on exercise. Shares of common stock under awards made in
substitution or exchange for awards granted by a company acquired by the Company, or with which the
Company combines, do not reduce the maximum number of shares that may be issued under the 2008
Plan. In addition, if a company acquired by the Company, or with which the Company combines, has
shares remaining available under a plan approved by its stockholders, the available shares
(adjusted to reflect the exchange or valuation ratio in the acquisition or combination) may be used
for awards under the 2008 Plan and will not reduce the maximum
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-32<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">number of shares of common stock that may be issued under the 2008 Plan; provided, however that
awards using such available shares shall not be made after the date awards or grants could have
been made under the pre-existing plan, absent the acquisition or combination, and shall only be
made to individuals who were not our employees or directors prior to the acquisition or
combination.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under the 2008 Plan, the purchase price of shares of common stock covered by a stock option cannot
be less than 100% of the fair market value of the common stock on the date the option is granted.
Fair market value of the common stock is generally equal to the closing price for the common stock
on the principal securities exchange on which the common stock is traded on the date the option is
granted (or if there was no closing price on that date, on the last preceding date on which a
closing price is reported). Option awards generally have ten-year contractual terms and vest over
four years based on continuous service; however, the 2005 Plan and the 2008 Plan allow for other
vesting periods and we have granted employees options where the requisite service period is three
years and we grant our directors options where the requisite service period is one year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We cancelled 2,536,607 and 341,063 options in the years ended December&nbsp;31, 2008 and 2007,
respectively, related to terminated employees and board directors. The shares underlying such
options were returned to and are available for re-issuance under the 2008 Plan pursuant to the
terms described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The only types of awards granted under the 2005 Plan and the 2008 Plan in the years ended December
31, 2008 and 2007 were stock options. A summary of all of our option activity as of December&nbsp;31,
2008 and 2007 and of changes in options outstanding under the plans during the years then ended are
as follows:
</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"><B>Weighted-</B></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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Average</B></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"><B>Weighted-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Aggregate</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 nowrap align="center" colspan="2"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>Intrinsic</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>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Years</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2" style="border-bottom: 1px solid #000000"><B>Value</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">Options outstanding at December&nbsp;31, 2006</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,767,103</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.39</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,170,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.63</TD>
    <TD>&nbsp;</TD>
    <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">Exercised</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(575,833</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Canceled/forfeited/expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(341,063</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">3.52</TD>
    <TD>&nbsp;</TD>
    <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>&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">Options outstanding at December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,020,940</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.60</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">6.90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Granted</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,880,500</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">0.49</TD>
    <TD>&nbsp;</TD>
    <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">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 valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Cancelled/forfeited/expired</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,536,607</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.62</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options outstanding at December&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">4,364,833</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">1.77</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">7.09</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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <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: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">Options exercisable at December&nbsp;31, 2008</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,126,952</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.67</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.82</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Options exercisable at December&nbsp;31, 2007</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,153,968</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">2.29</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5.30</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-33<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The weighted-average grant-date fair value of options granted during the years ended December&nbsp;31,
2008 and 2007 was $0.49 and $2.63, respectively. As of December&nbsp;31, 2008, there was approximately
$2.0&nbsp;million of unamortized compensation cost related to unvested stock option awards, which is
expected to be recognized over a weighted-average remaining period of approximately 3.0&nbsp;years.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There were no options exercised during the year ended December&nbsp;31, 2008. The total intrinsic value
of options exercised during the year ended December&nbsp;31, 2007 was approximately $865,000, based on
the difference in the market price on the dates of exercise and the applicable option exercise
price. During the year ended December&nbsp;31, 2007, we received $442,000 in cash from exercised options
under all stock-based payment arrangements. No tax benefit was realized for the tax deductions from
option exercises of the stock-based payment arrangements in the years ended December&nbsp;31, 2008 and
2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our determination of fair value is affected by our stock price as well as a number of assumptions
that require judgment. The fair value of each option award is estimated on the date of grant using
the Black-Scholes option-valuation model. The assumptions used in the Black-Scholes
option-valuation model for option grants during the years ended December&nbsp;31, 2008 and 2007 are as
follows:
</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" style="border-bottom: 1px solid #000000"><B>Years Ended December 31,</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: 1px solid #000000"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">2.75 &#150; 3.3</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">4.6 &#150; 4.8</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 align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.0</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="right">125 &#150; 149</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">137%  &#150; 138</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Weighted-average volatility</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">146</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">138</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Expected term (in years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">6.2 years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">6.1 years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent
with the expected term of the option in effect at the time of the grant. We have not paid any
dividends on common stock since our inception and do not anticipate paying dividends on our common
stock in the foreseeable future. The expected option term is computed using the &#147;simplified&#148; method
as permitted under the provisions of SAB 107 and SAB 110. The expected volatility is based on the
historical volatility of our common stock and other factors. In 2006, we began using an alternative
historical volatility based on the daily close price of our common stock, which we determined was a
better indicator of volatility than the method used in the prior years. The effect of this change
on stock-based compensation was immaterial.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In 2007, we granted 15,000 options to consultants. No options were granted to consultants in 2008.
These option grants were valued as of the date at which the consultants&#146; performance is complete
using the Black-Scholes pricing model. The assumptions used in the Black-Scholes model for
non-employee option grants for the years ended December&nbsp;31, 2008 and 2007 are as follows:
</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"><B>2008</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>2007</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Risk-free interest rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">3.3 &#150; 3.7</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">4.0 &#150; 4.8</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 align="right">0.0</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">0.0</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 align="right">147</TD>
    <TD nowrap>%</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD nowrap align="right">125% &#150; 147</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Contractual term (in years)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">6.5 &#150; 7.3 years</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" nowrap align="center">2.5 &#150; 8.3 years</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We recognized approximately $5,000 and $2,000 in stock-based compensation expense associated with
non-employee options in the years ended December&nbsp;31, 2008 and 2007, respectively.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-34<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements  (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following table summarizes information concerning our outstanding and exercisable stock options
as of December&nbsp;31, 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="40%">&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 nowrap align="center" colspan="11" style="border-bottom: 1px solid #000000"><B>Options Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Options Exercisable</B></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"><B>Weighted-</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&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>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Weighted-</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"><B>Remaining</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Average</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Outstanding</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Contractual</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercisable</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Exercise</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Range of Exercise Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>in 000&#146;s</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Life</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Price</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>in 000&#146;s</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Price</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">$0.19 to $0.54
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,196</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">8.63</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.46</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">338</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">0.44</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$2.28 to $2.75
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,442</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.65</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.52</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1,171</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.50</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">$2.86 to $4.89
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">727</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">5.29</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.20</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">618</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4.23</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD 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 nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">4,365</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">7.09</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">1.77</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2,127</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.67</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Purchase Plan was approved by our stockholders in 2005; however, we have not implemented the
Purchase Plan. The Purchase Plan allows all eligible employees to purchase shares of common stock
at 85% of the lower of the fair market value on the first or the last day of each offering period.
Employees may authorize us to withhold up to 15% of their compensation during any offering period,
subject to certain limitations. The maximum aggregate number of shares of common stock which may be
issued under the Purchase Plan is 3,173,634 as of December&nbsp;31, 2008. This maximum number is subject
to an annual automatic increase beginning on January&nbsp;1, 2006 equal to the lesser of (i)&nbsp;1% of the
number of outstanding shares of common stock on such day, (ii)&nbsp;750,000 or (iii)&nbsp;such other amount
as our board of directors may specify. At December&nbsp;31, 2008, no shares of common stock have been
issued under the Purchase Plan. On January&nbsp;1, 2009, the number of shares of common stock available
for issuance under the Purchase Plan increased by 750,000 in accordance with the provisions for
annual increases under the Purchase Plan.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(9)&nbsp;Commitments</B>
</DIV>


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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are obligated under operating leases for office space and equipment. In July&nbsp;2004, we entered
into a lease for our current office space in San Diego, California. In June&nbsp;2005, we leased
additional space in the same facility. At December&nbsp;31, 2008, the office lease requires a monthly
payment of approximately $21,000, excluding common area maintenance charges. The lease expires in
August&nbsp;2009. We lease copiers and an automobile, which leases expire in 2010 and 2011,
respectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Rent expense was approximately $258,000 and $246,000 during the years ended December&nbsp;31, 2008 and
2007, respectively. Future rental commitments under all operating leases are as follows:
</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 nowrap align="left" style="border-bottom: 1px solid #000000"><B>Year Ending December 31,</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</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">$</TD>
    <TD align="right">192,731</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2010</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">10,375</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">2011</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,452</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">205,558</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>


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

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements  (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(10)&nbsp;Material License AgreementsTheragenex Agreement</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2006, we entered into a license agreement with Theragenex, LLC. Under the agreement, we
granted Theragenex exclusive rights to develop and commercialize ANX-211 in the U.S. in exchange
for a licensing fee of $1.0&nbsp;million ($0.5&nbsp;million of which we received in January&nbsp;2007 and $0.5
million of which was due in June&nbsp;2007), milestone payments and royalties. In May&nbsp;2007, we received
a letter from TRx Pharma, a subsidiary of Theragenex, that we believed was intended to constitute
notice of termination of the agreement with Theragenex, though the letter did not explicitly state
that it constituted notice of termination. In its letter, TRx Pharma requested a refund of the
initial $0.5&nbsp;million payment and, in subsequent discussions, indicated that it did not intend to
pay the remaining $0.5&nbsp;million. On July&nbsp;3, 2007, we notified Theragenex that, among other things,
its failure to make the final $0.5&nbsp;million payment constituted a material breach of the agreement.
On August&nbsp;9, 2007, we delivered a letter to Theragenex confirming our termination of the agreement
as a result of Theragenex&#146;s breach, pursuant to the terms of the agreement. On October&nbsp;11, 2007, we
filed a demand for arbitration against Theragenex (doing business as TRx Pharma, LLC and/or TRx
Pharmaceuticals, LLC) and David M. Preston, founder, Chairman, President and Chief Executive
Officer of Theragenex in his individual capacity as the alter ego of Theragenex, seeking damages of
up to $10&nbsp;million with respect to breach of the agreement. On November&nbsp;8, 2007, Theragenex
responded to our demand, asserting numerous affirmative defenses counterclaiming intentional
misrepresentation, negligent misrepresentation and rescission and seeking a refund of its $0.5
million payment, plus interest, rescission of the agreement and that we pay its reasonable
attorneys fees and costs associated with the action. Also on November&nbsp;8, 2007, Mr.&nbsp;Preston objected
to his participation and being named as a respondent in the arbitration. In May&nbsp;2008, we settled
our dispute with Theragenex. In consideration of and conditioned upon Theragenex paying us $0.6
million, we and Theragenex agreed to jointly move to dismiss the underlying arbitration action, and
in connection with dismissing the arbitration, we and Theragenex agreed to release each other from
any and all claims related to our past relationship, including Theragenex&#146;s license rights to the
product.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We recognized revenue of $0.5&nbsp;million for each of the years ended December&nbsp;31, 2008 and 2007.
Revenue in 2007 represents nonrefundable licensing fees paid under the agreement with Theragenex.
Revenue in 2008 represents a portion of a settlement payment from Theragenex. We recognized $0.5
million as revenue in 2008, which represents a portion of the $0.6&nbsp;million settlement payment,
because under the agreement Theragenex was required to pay a total nonrefundable, up front
licensing fee of $1.0&nbsp;million ($0.5&nbsp;million of which we received in January&nbsp;2007 and $0.5&nbsp;million
of which was due in June&nbsp;2007) and because we met the criteria for revenue recognition. The
remainder of the settlement payment, $0.1&nbsp;million, was recorded as other income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(11)&nbsp;Registration Payment Arrangement</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On July&nbsp;21, 2005, we entered into a securities purchase agreement (the &#147;Agreement&#148;) with certain
accredited institutional investors (the &#147;Purchasers&#148;) for the sale of 10,810,809 shares of our
common stock (the &#147;Shares&#148;) at a purchase price of $1.85 per share for aggregate gross proceeds of
$19,999,997. In connection with this financing, we issued the Purchasers seven-year warrants to
purchase 10,810,809 shares of our common stock (the &#147;Warrant Shares&#148;) at an exercise price of $2.26
per share. We received net proceeds of $18,116,751, after deducting commissions and offering fees
and expenses, which included cash payments of $1,403,000 to placement agents and $283,246 in legal
and accounting fees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Pursuant to the terms of the Agreement, if (i)&nbsp;a registration statement covering (A)&nbsp;all of the
Shares and the Warrant Shares and (B)&nbsp;any other shares of common stock issued or issuable in
respect to the Shares and the Warrant Shares because of stock splits, stock dividends,
reclassifications, recapitalizations or similar events (together, the &#147;Registrable Shares&#148;)
required to be covered thereby and required to be filed by us is (A)&nbsp;not filed with the SEC on or
before 45&nbsp;days after the closing of such financing (a &#147;Filing Failure&#148;) or (B)&nbsp;if such registration
statement is not declared effective by the SEC on or before 90&nbsp;days after the closing of such
financing (an &#147;Effectiveness Failure&#148;) or (ii)&nbsp;on any day after the effective date of the
registration statement sales of all the Registrable Shares required to be included on such
registration statement cannot be made (other than as permitted during a suspension pursuant to the
Agreement) pursuant to such registration statement (including, without limitation, because of a
failure to keep the registration statement effective, to disclose such information as is necessary
for sales to be made pursuant to such registration statement or to register sufficient number of
Shares) (a &#147;Maintenance Failure&#148;), then, we will be obligated, without limiting any other remedies
of any Purchaser, to pay as liquidated damages (the &#147;Liquidated Damages&#148;) for such failure and not
as a penalty to any Purchaser an amount in cash determined in accordance with the formula set forth
below:
</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"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For each 30-day period that a Filing Failure, Effectiveness Failure or Maintenance
Failure remains uncured, we will pay an amount equal to the purchase price paid to us
for all Shares then held by such Purchaser multiplied by 1% for the first 30-day period
or any portion thereof and increasing by an additional 1% with regard to each additional
30-day period until such Filing Failure, Effectiveness Failure or Maintenance Failure is
cured.</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-36<!-- /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>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements  (continued)<BR>
December&nbsp;31, 2008</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="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>For any partial 30-day period in which a Filing Failure, Effectiveness Failure or
Maintenance Failure exists but is cured prior to the end of the 30-day period, we will
pay the Purchasers a pro rata portion of the amount which would be due if the failure
continued for the entire 30-day period. For example, if the purchase price paid for all
Shares then held by a Purchaser is $5,000,000, then, (a)&nbsp;at the end of the 30th day, the
Liquidated Damages would be 1% or $50,000, (b)&nbsp;at the end of the 60th day, the
Liquidated Damages for the first 30-day period would have been 1% or $50,000 and for the
second 30-day period would be 2% or $100,000, and (c)&nbsp;at the end of the 105th day, the
Liquidated Damages for the first 30-day period would have been 1% or $50,000, for the
second 30-day period 2% or $100,000, for the third 30-day period 3% or $150,000, and for
the final 15-day period, 4% applied pro rata to such 15&nbsp;days, or $100,000.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">There is no cap to the amount of Liquidated Damages that we may be obligated to pay. Payments to be
made pursuant to the July&nbsp;2005 Registration Payment Arrangement will be due and payable to the
Purchasers at the end of each calendar month during which Liquidated Damages will have accrued. No
Liquidated Damages will be due or payable to a Purchaser in any event if as of the date of the
Filing Failure, Effectiveness Failure or Maintenance Failure such Purchaser could sell all of the
Registrable Shares such Purchaser then holds without registration by reason of subsection (k)&nbsp;of
Rule&nbsp;144 under the Securities Act of 1933, as amended. Recent changes to Rule&nbsp;144 eliminated
subsection (k)&nbsp;of Rule&nbsp;144. These changes liberalized the rules governing the resale of securities
issued in private transactions; however, resales of securities held by affiliates are still subject
to the current public information, volume, manner of sale and notice requirements contained in Rule
144 and, as a result, we do not expect such changes to Rule&nbsp;144 to necessarily reduce the potential
length of our payment obligations in the event of a Maintenance Failure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The registration statement was filed and declared effective by the SEC on September&nbsp;2, 2005, which
was within the allowed time. We have not incurred nor paid any Liquidated Damages in connection
with the July&nbsp;2005 Registration Payment Arrangement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">On January&nbsp;1, 2007, we adopted the provisions of FSP EITF 00-19-2. In December&nbsp;2007, management
determined that it was not probable that we would have any payment obligation under the July&nbsp;2005
Registration Payment Arrangement; therefore, no accrual for contingent obligation was required
under the provisions of FSP EITF 00-19-2. Accordingly, the warrant liability account was eliminated
and the comparative condensed consolidated financial statements of the prior periods and as of
December&nbsp;31, 2006 were adjusted to apply the new method retrospectively.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Company accounted for FSP EITF 00-19-2 appropriately by eliminating the warrant liability as of
December&nbsp;31, 2007, but upon further review in 2008, management determined that it was not correct
to adjust the prior period comparative financial statements. Accordingly, the Company has made the
appropriate adjustments to reinstate the warrant liability accounting as originally recorded.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(12)&nbsp;Income Taxes</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Due to our net loss for the years ended December&nbsp;31, 2008 and 2007, and as we have recorded a full
valuation allowance against deferred tax assets, there was no provision or benefit for income taxes
recorded. There were no components of current or deferred federal, state or foreign tax provisions
for the years ended December&nbsp;31, 2008 and 2007.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->F-37<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The income tax provision is different from that which would be obtained by applying the statutory
Federal income tax rate (34%) to income before income tax expense. The items causing this
difference for the periods are as follows:
</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><DIV style="margin-left:15px; text-indent:-15px">Income tax expense at federal statutory rate</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">9,060,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">7,503,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">State taxes</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(2,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R &#038; D Credit</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">310,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">628,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stock options</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(542,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(432,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Net operating true-ups</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,600,000</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">Other</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">49,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(152,000</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Change in federal valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(10,475,000</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(7,545,000</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"><!-- 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">Total Tax Expense/(Benefit) on Continuing Operations</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>
</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">On July&nbsp;13, 2006, the FASB issued FIN 48. Under FIN 48, the impact of an uncertain income tax
position on the income tax return must be recognized at the largest amount that is
more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain
income tax position will not be recognized if it has less than a 50% likelihood of being sustained.
Additionally, FIN 48 provides guidance on de-recognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years
beginning after December&nbsp;15, 2006. We adopted the provisions of FIN 48 on January&nbsp;1, 2007. There
were no unrecognized tax benefits as of the date of adoption. As of December&nbsp;31, 2008 we continue
to have no unrecognized tax benefits. As a result of the implementation of FIN 48, we did not
recognize an increase in the liability for unrecognized tax benefits. There are no unrecognized tax
benefits included in the balance sheet that would, if recognized, affect the effective tax rate.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Our policy is to recognize interest and/or penalties related to income tax matters in income tax
expense. We had no accrual for interest or penalties on our balance sheets at December&nbsp;31, 2008 and
2007, and has not recognized interest and/or penalties in the statement of operations for the year
ended December&nbsp;31, 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We are subject to taxation in the United States and the state of California. All of our tax years
are subject to examination by the United States and California tax authorities due to the carry
forward of unutilized net operating losses and R&#038;D credits.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The adoption of FIN 48 did not impact our consolidated financial condition, results of operations
or cash flows. At December&nbsp;31, 2008, we had net deferred tax assets of approximately $39.6&nbsp;million.
Due to uncertainties surrounding our ability to generate future taxable income to realize these
assets, a full valuation has been established to offset the net deferred tax asset.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Subsequent to the filing of our 2007 Form&nbsp;10K, we completed an Internal Revenue Code Section&nbsp;382
study. As a result of this study, we determined that based upon ownership changes, only $158,000 of
the $4.5&nbsp;million net operating losses we had previously removed from the deferred tax assets in
2007 would expire unused. Accordingly, we have re-established approximately $1.6&nbsp;million of the
deferred tax assets related to these net operating losses with a corresponding increase to the
valuation allowance.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-38<!-- /Folio -->
</DIV>



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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Deferred income taxes reflect the net tax effect of temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of deferred tax assets and liabilities at December&nbsp;31, 2008
and 2007 are as follows:
</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="6" style="border-bottom: 1px 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>
</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">Accrued expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">248,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">150,210</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Stock options expense under SFAS No.&nbsp;123</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,677,809</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,675,824</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Net operating loss carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">33,102,741</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">22,338,915</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Income tax credit carryforwards</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,262,374</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,729,194</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Property, plant and equipment</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">41,056</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">38,065</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Intangibles</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,285,263</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,535,487</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">6,553</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">577</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"><!-- 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">Total deferred tax assets</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">39,624,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">27,468,272</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">Less: valuation allowance</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(39,624,572</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left">&nbsp;</TD>
    <TD align="right">(27,468,272</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:30px; text-indent:-15px">Total deferred tax assets, net of valuation allowance</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>
</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: 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">We have established a valuation allowance against our deferred tax asset due to the uncertainty
surrounding the realization of such assets. Management periodically evaluates the recoverability of
the deferred tax asset. At such time as it is determined that it is more likely than not that the
deferred tax assets are realizable, the valuation allowance will be reduced. We have recorded a
valuation allowance of approximately $39.6&nbsp;million as of December&nbsp;31, 2008 to reflect the estimated
amount of deferred taxes that may not be realized. We increased the valuation allowance by
approximately $12.1&nbsp;million for the year ended December&nbsp;31, 2008. The deferred tax asset for the
net operating losses and the related valuation allowance includes approximately $47,000 related to
stock option deductions, the benefit of which may eventually be credited to equity. As a result of
our subsequent adoption of SFAS 123(R), we recognize windfall tax benefits associated with the
exercise of stock options directly to stockholders&#146; equity only when realized. Accordingly, as we
are in a cumulative loss position, deferred tax assets have not been recognized for net operating
loss carryforwards resulting from windfall tax benefits generated under SFAS 123(R). At December
31, 2008, we do not have any windfall tax benefits under SFAS 123(R).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">At December&nbsp;31, 2008, we had Federal and California tax loss carryforwards of approximately $90.4
million and $41.4&nbsp;million, respectively. The Federal and California net operating loss
carryforwards begin to expire in 2020 and 2012 respectively, if unused. At December&nbsp;31, 2008, we
had Federal and state tax credit carryforwards of approximately $1.6&nbsp;million and $973,000,
respectively. The federal credits will begin to expire in 2024. The California research and
experimentation credit does not expire.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(13)&nbsp;Litigation</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In the normal course of business, we may become subject to lawsuits and other claims and
proceedings. Such matters are subject to uncertainty and outcomes are often not predictable with
assurance.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(14)&nbsp;401(k) Plan</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We have a defined contribution savings plan pursuant to Section 401(k) of the IRC. The plan is for
the benefit of all qualifying employees and permits voluntary contributions by employees up to 100%
of eligible compensation, subject to the Internal Revenue Service (&#147;IRS&#148;)-imposed maximum limits.
Up until January&nbsp;1, 2008, we were required to make matching contributions in the amount
of 100% of employee contributions to 3% of eligible compensation and 50% of employee contributions
between 3% and 5% of eligible compensation. Effective January&nbsp;1, 2008, our 401(k) Plan was amended,
which required us to make matching contributions equal to 100% of employee contributions up to 6%
of eligible compensation, limited by the IRS-imposed maximum. We incurred total expenses of
approximately $218,150 and $118,000 in employer matching contributions in 2008 and 2007,
respectively.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-39<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(15)&nbsp;Segment Information</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We operate our business on the basis of a single reportable segment, which, fundamentally, is the
business of in-licensing, developing and commercializing proprietary product candidates for the
treatment of cancer. We evaluate our company as a single operating segment. The majority of our
operating activities and work performed by our employees are currently conducted from a single
location in the U.S. We recognized revenues of $0.5&nbsp;million in each of 2008 and 2007, which
revenues were derived solely from license fees under a license agreement with Theragenex, LLC,
which we terminated in August&nbsp;2007.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(16)&nbsp;Summary of Quarterly Financial Data (unaudited)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The following is a summary of the unaudited quarterly results of operations for the years ended
December&nbsp;31, 2008 and 2007:
</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 nowrap align="left" style="border-bottom: 0px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Quarters Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

<TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Quarterly statement of operations data</B> <B>for 2008 (unaudited):</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>March 31</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>June 30</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>September 30</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Licensing revenue</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">500,000</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>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross margin</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">500,000</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">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,232,280</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,691,199</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,856,013</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,530,343</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 nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,933,072</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,425,530</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,776,863</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(7,512,028</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted net loss per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.08</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.08</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted weighted average
number of shares of common stock
outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,252,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,252,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,252,572</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,252,572</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="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 nowrap align="left" style="border-bottom: 0px solid #000000"><B></B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="15" style="border-bottom: 1px solid #000000"><B>Quarters Ended</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

<TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Quarterly statement of operations data for 2007 (unaudited):</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>March 31</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>June 30</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>September 30</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>December 31</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Licensing revenue</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">500,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</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>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gross margin</DIV></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">&#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">Loss from operations</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,745,998</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,299,042</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(6,446,415</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,819,590</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 nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,123,814</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,722,828</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,914,124</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">(5,381,274</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted net income (loss)&nbsp;per share</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.07</TD>
    <TD nowrap>)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">$</TD>
    <TD align="right">(0.06</TD>
    <TD nowrap>)</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Basic and diluted weighted average number of
shares of common stock outstanding</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,676,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">89,706,739</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,007,509</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">90,252,572</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(17)&nbsp;Severance Related Expenses</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2008, a letter agreement regarding terms of separation of employment with James A.
Merritt, our former president and chief medical officer, became effective. Dr.&nbsp;Merritt&#146;s employment
relationship with us ended in January&nbsp;2008. As a result of his separation, we recorded $185,916 in
severance payments and related employer taxes and $16,038 for payments to cover the health, welfare
and retirement benefits that we would have incurred had Dr.&nbsp;Merritt remained employed by us for 6
months after the end of our employment relationship. Severance-related charges were recorded in the
first, second and third quarters of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In April&nbsp;2008, a letter agreement regarding terms of separation of employment with Gregory P.
Hanson, our former chief financial officer, treasurer and senior vice president, became effective.
Mr.&nbsp;Hanson&#146;s employment relationship with us ended in April&nbsp;2008. As a result of his separation, we
recorded $128,157 in severance payments and related employer taxes and $20,997 for payments to
cover the health, welfare and retirement benefits that we would have incurred had Mr.&nbsp;Hanson
remained employed by us for 6&nbsp;months after the end of our employment relationship. Total
severance-related charges were recorded in the second, third and fourth quarters of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In October&nbsp;2008, as part of a restructuring to reduce operating costs, we completed a work force
reduction of nine employees in October&nbsp;2008. As a result of the reduction in force, in accordance
with FAS No.&nbsp;146, &#147;Accounting for Costs Associated with Exit or
Disposal Activities,&#148; we recorded severance-related charges of $403,000, of which $384,000 was
recorded as research and development expenses and the remainder as selling, general and
administrative expenses. Of the severance-related charges, $372,000 relates to severance payments
and related employer taxes, and $31,000 relates to health benefit allowance payments that eligible
</DIV>

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</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>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">former employees may use, at their discretion, to pay the premiums required to continue their group
health care coverage under COBRA or any other health care related expenses. Severance-related
charges of $244,000 were recorded in the fourth quarter of 2008 and the remainder will be recorded
in the first and second quarters of 2009.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In December&nbsp;2008, the Confidential Separation Agreement and General Release of All Claims governing
the terms of separation of employment with Evan M. Levine, our former chief executive officer and
president and member of our Board of Directors, became effective. Mr.&nbsp;Levine&#146;s employment
relationship with us ended in October&nbsp;2008 and he resigned from our Board of Directors in December
2008. As a result of his separation, we recorded $275,752 in severance payments and related
employer taxes, $19,870 in health benefit allowance payments that Mr.&nbsp;Levine may use, at his
discretion, to pay the premiums required to continue his group health care coverage under COBRA or
any other health care related expenses and an additional payment of $110,650 in lieu of issuing
shares of stock. Severance-related charges were recorded in the fourth quarter of 2008.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>(18)&nbsp;Subsequent Events</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2009, the Confidential Separation Agreement and General Release of All Claims governing
the terms of separation of employment with Mark N.K. Bagnall, our former executive vice president
and chief financial officer, which was agreed to by Mr.&nbsp;Bagnall in December&nbsp;2008, became effective.
Mr.&nbsp;Bagnall&#146;s employment relationship with us ended in December&nbsp;2008. As a result of his
separation, we recorded $174,787 in severance payments and related employer taxes and $18,352 in
health benefit allowance payments that Mr.&nbsp;Bagnall may use, at his discretion, to pay the premiums
required to continue his group health care coverage under COBRA or any other health care related
expenses. Severance-related charges were recorded in the fourth quarter of 2008.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2009, in order to further reduce operating costs, we completed a work force reduction of
six employees. As a result of the reduction in force, we estimate recording severance-related
charges of approximately $192,000, of which we estimate approximately $95,000 will be recorded as
research and development and the remainder as selling, general and administrative expenses. Of the
severance-related charges, we estimate that approximately $173,000 will relate to severance
payments and related employer taxes and approximately $19,000 will relate to health benefit
allowance payments that eligible former employees may use, at their discretion, to pay the premiums
required to continue their group health care coverage under COBRA or any other health care related
expenses. We estimate that severance-related charges of approximately $132,000 will be recorded in
the first quarter of 2009 and the remainder will be recorded in the second quarter of 2009. The
severance-related charges that we expect to incur in connection with the reduction in force are
subject to a number of assumptions and actual results may differ. We may also incur other charges
not currently contemplated due to events that may occur as a result of, or associated with, the
restructuring.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In January&nbsp;2009, we entered into retention and incentive agreements with seven employees, including
our executive officers, and granted under the 2008 Plan restricted stock units to these employees
that represented the right to receive in the aggregate 3,700,000 shares of our common stock,
including 1,200,000 units to our chief business officer and senior vice president, 850,000 units to
our general counsel, 650,000 units to our senior vice president of operations and 450,000 units to
our vice president of regulatory and quality. These units will vest immediately prior to a
strategic transaction (as defined in the documentation evidencing the grant of the units). The
retention and incentive agreements and associated restricted stock units awards are primarily
intended to reinforce and encourage these employees&#146; continued employment with and dedication to
our company without distraction from the possibility of involuntary termination or a change in
control and related events and circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2009, our Board of Directors appointed Brian M. Culley, our chief business officer and
senior vice president, to additionally serve as our principal executive officer and appointed Mr.
Bagnall to additionally serve as our principal financial officer and principal accounting officer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In February&nbsp;2009, we announced that we have received written indications of interest from numerous
companies representing a range of strategic transactions and currently are evaluating all proposals
and options. We also indicated that continued cost-containment measures may impact the timeline of
our regulatory filings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2009, we announced that, effective April&nbsp;3, 2009, we will reduce our full-time workforce
to five employees and will discontinue substantially all of our development activities and
fundamental business operations to provide additional time to consummate a strategic transaction or
otherwise obtain financing. Our remaining employees, which consist of our chief business officer
and senior vice president, our general counsel, our senior vice president of operations, our vice
president of regulatory affairs and quality and our manager of accounting, will focus their efforts
primarily on continuing to evaluate and execute strategic options.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->F-41<!-- /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>ADVENTRX Pharmaceuticals, Inc. and Subsidiaries</B><BR>
(A Development Stage Enterprise)<BR>
<B>Notes to Consolidated Financial Statements (continued)<BR>
December&nbsp;31, 2008</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">We stated that, along with the reductions we implemented in October&nbsp;2008 and January&nbsp;2009, and our
prior cost-containment measures, the reduction and other efforts will extend our cash cliff and
increase the opportunity for us to close a strategic transaction with one of the parties with whom
we currently are in discussions or another company that we identify in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">In March&nbsp;2009, we announced that we and SDP had entered into a license agreement (the &#147;License
Agreement&#148;) with Shin Poong Pharmaceutical Co., Ltd., a company organized under the laws of the
Republic of Korea (&#147;Shin Poong&#148;), pursuant to which we granted to Shin Poong an exclusive license,
including the right to sublicense, to research, develop, make, have made, use, offer for sale, sell
and import licensed products, in each case solely for the treatment of cancer by intravenous
administration of formulations of docetaxel as emulsified products and solely in South Korea. Under
the terms of the License Agreement, we will receive an upfront licensing fee of $300,000, a
regulatory milestone payment of either $200,000 or $400,000 (depending on whether Shin Poong is
required by the Korea Food and Drug Administration to conduct a bioequivalence or clinical study in
human subjects prior to receipt of regulatory approval) upon receipt of regulatory approval for
marketing a licensed product in South Korea, one-time commercial milestone payments tied to annual
net sales of licensed products in an aggregate amount of up to $1,500,000 and royalty payments on
net sales of licensed products. Shin Poong is responsible for all development and commercial
activities related to ANX-514 in South Korea. If Shin Poong is required by the Korea Food and Drug
Administration to conduct a bioequivalence or clinical trial in human subjects prior to receipt of
regulatory approval and we elect not to supply product to conduct such trial, which supply
obligation is subject to limitations, we will pay Shin Poong $100,000.
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->F-42<!-- /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>ADVENTRX PHARMACEUTICALS, INC.</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;<B>&#149;</B>&#093; Shares of &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Warrants to Purchase up to &#091;<B>&#149;</B>&#093; Shares of Common Stock</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>&#091;<B>&#149;</B>&#093; Shares of Common Stock Underlying the Convertible Preferred Stock and the Warrants</B>

</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 6pt">Prospectus<BR>
<U>&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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<DIV style="font-family: 'Times New Roman',Times,serif">




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


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>INFORMATION NOT REQUIRED IN THE PROSPECTUS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the fees and expenses incurred or expected to be incurred by us
in connection with the issuance and distribution of the securities being registered hereby, other
than placement agent fees. All of the amounts shown are estimated except the SEC registration fee.
Estimated fees and expenses can only reflect information that is known at the time of filing this
registration statement and are subject to future contingencies, including additional expenses for
future offerings.
</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">Securities and Exchange Commission registration fee</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">558</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Transfer agent fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">15,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Escrow agent fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Printing and engraving expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">25,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Legal fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">150,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Accounting fees and expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Miscellaneous expenses</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">5,000</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Total</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="right">$</TD>
    <TD align="right">250,558</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145 of the Delaware General Corporation Law, or the DGCL, authorizes a corporation to
indemnify its directors and officers against liabilities arising out of actions, suits and
proceedings to which they are made or threatened to be made a party by reason of the fact of their
prior or current service to a corporation as a director or officer, in accordance with the
provisions of Section&nbsp;145, which are sufficiently broad to permit indemnification under certain
circumstances for liabilities arising under the Securities Act of 1933, as amended, or the
Securities Act. The indemnity may cover expenses (including attorneys&#146; fees) judgments, fines and
amounts paid in settlement actually and reasonably incurred by the director or officer in
connection with any such action, suit or proceeding. Section&nbsp;145 permits corporations to pay
expenses (including attorneys&#146; fees) incurred by directors and officers in advance of the final
disposition of such action, suit or proceeding. In addition, Section&nbsp;145 provides that a
corporation has the power to purchase and maintain insurance on behalf of its directors and
officers against any liability asserted against them and incurred by them in their capacity as a
director or officer, or arising out of their status as such, whether or not the corporation would
have the power to indemnify the director or officer against such liability under Section&nbsp;145.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our certificate of incorporation provides that, to the fullest extent permitted by the DGCL,
(a)&nbsp;a director shall not be personally liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director, and (b)&nbsp;we shall indemnify any director or officer made a
party to an action or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact of such person&#146;s current or prior service as a director or officer of ours, any
predecessor of ours or any other enterprise per our or any predecessor of ours request.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our bylaws provide that (a)&nbsp;we shall indemnify our directors and officers to the maximum
extent and in the manner permitted by the DGCL against expenses (including attorneys&#146; fees),
judgments, fines, ERISA excise taxes, settlements and other amounts actually and reasonably
incurred in connection with any proceeding, whether civil, criminal, administrative or
investigative, arising by reason of the fact that such person is or was an agent of ours, subject
to certain limited exceptions, (b)&nbsp;we shall advance expenses incurred by any director or officer
prior to the final disposition of any proceeding to which the director or officer was or is or is
threatened to be made a party promptly following a request therefore, subject to certain limited
exceptions, and (c)&nbsp;the rights conferred in our bylaws are not exclusive.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have entered into indemnification agreements with each of our directors and officers to
give such directors and officers additional contractual assurances regarding the scope of the
indemnification set forth in our certificate of incorporation and bylaws and to provide additional
procedural protections. These agreements, among other things, provide that we will indemnify our
directors and officers for expenses (including attorneys&#146; fees), judgments, fines, penalties and
amounts paid in settlement (including all interest, assessments and other charges paid or payable
in connection therewith) actually and reasonably incurred by a director or officer in connection
with any action or proceeding to which such person was, is or is threatened to be made a party, a
witness or other participant by reason of such person&#146;s services as a director or officer of ours,
any of our subsidiaries or any other company or
</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">enterprise to which the person provides services at our request, and any federal, state, local
or foreign taxes imposed on the director or officer as a result of the actual or deemed receipt of
any payments under the indemnification agreements.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the indemnification agreements provide that, upon the request of a director or
officer, we shall advance expenses (including attorneys&#146; fees) to the director or officer. We
intend to enter into indemnification agreements with any new directors and officers in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, Alexander J. Denner, a director of ours, is further indemnified against
liabilities arising in connection with his services as a director of ours through his employment
arrangement with entities controlled by Mr.&nbsp;Carl C. Icahn. Such indemnification may be broader than
the indemnification provided by the DGCL and includes indemnification for expenses (including
attorneys&#146; fees), judgments and fines incurred and amounts paid in settlement by Dr.&nbsp;Denner in
connection with any action or proceeding to which Dr.&nbsp;Denner was, is or is threatened to be made a
party or participant by reason of his services as a director of ours.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have also obtained an insurance policy covering our directors and officers with respect to
certain liabilities, including liabilities arising under the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the three-year period preceding the date of the filing of this registration statement,
we have issued securities in the transactions described below without registration under the
Securities Act. These securities were offered and sold by us in reliance upon exemptions from the
registration statement requirements provided by Section&nbsp;4(2) of the Securities Act or Regulation&nbsp;D
under the Securities Act as transactions by an issuer not involving a public offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;12, 2009, in connection with the closing of our registered direct offering of
convertible preferred stock and warrants to purchase common stock, we issued to Rodman &#038; Renshaw,
LLC, as additional consideration for its services as placement agent, warrants to purchase up to
901,810 shares of the Company&#146;s common stock at an exercise price of $0.15 per share. The warrants
are exercisable at the option of the holder at any time beginning on December&nbsp;13, 2009 through and
including June&nbsp;12, 2014.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;6, 2009, in connection with the closing of the Company&#146;s registered direct offering of
its convertible preferred stock, the Company issued to Rodman &#038; Renshaw, LLC, as additional
consideration for its services as placement agent, warrants to purchase up to 475,209 shares of the
Company&#146;s common stock at an exercise price of $0.179 per share. The warrants are exercisable at
the option of the holder at any time beginning on January&nbsp;7, 2010 through and including July&nbsp;6,
2014.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since July&nbsp;16, 2006, we issued an aggregate of 2,770,871 shares of common stock to 68 of our
warrant holders and received gross proceeds of approximately $4.5&nbsp;million upon the exercise of
certain outstanding warrants at a weighted average exercise price of $1.64. Pursuant to the terms
of an agreement we entered into with Burnham Hill Partners, a division of Pali Capital, Inc., in
March&nbsp;2004, we have an obligation to pay a 4% cash commission to Burnham Hill Partners with respect
to the cash we receive upon exercise of each warrant issued in a financing we consummated in April
2004. Accordingly, we have paid Burnham Hill Partners approximately $145,000 in connection with the
warrants exercised since July&nbsp;16, 2006. No other commission or other remuneration was paid or given
directly or indirectly in connection with these warrant exercises.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>ITEM 16. EXHIBITS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A list of exhibits filed herewith is contained in the exhibit index that immediately precedes
such exhibits and is incorporated herein by reference.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>ITEM 17. UNDERTAKINGS</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification for liabilities arising under the Securities Act 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 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 it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned registrant hereby undertakes that:
</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">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this registration statement in
reliance upon Rule&nbsp;430A and contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b) (1)&nbsp;or (4)&nbsp;or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;For the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus 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.
</DIV>


<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"><A HREF="#tocpage">Table of Contents</A></H5><P>

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




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


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused
this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of San Diego, State of California, on July 24, 2009.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">ADVENTRX PHARMACEUTICALS, INC.<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ Brian M. Culley
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Brian M. Culley&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Business Officer and<BR>

Senior Vice President&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

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



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Brian M. Culley and Patrick L. Keran, and each of them acting individually, as his
true and lawful attorneys-in-fact and agent, with full power of each to act alone, with full powers
of substitution and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this registration statement (including post-effective
amendments and any related registration statements filed pursuant to Rule&nbsp;462 and otherwise), and
to file the same with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully for 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
substitute or resubstitute, 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 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="35%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<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 M. Culley
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chief Business Officer and Senior Vice President&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 24, 2009&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Brian M. Culley
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Principal Executive Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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/ Patrick L. Keran
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>General Counsel, Secretary and Vice President, Legal&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 24, 2009&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Patrick L. Keran
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">(Principal Financial and Accounting Officer)</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</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/ Jack Lief
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Chair of the Board&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 24, 2009&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Jack Lief</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"><!-- 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/ Mark N.K. Bagnall
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 24, 2009&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark N.K. Bagnall</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"><!-- 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/ Alexander J. Denner
<DIV style="font-size: 10pt; border-top: 1px solid #000000"></DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 24, 2009</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Alexander J. Denner</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"><!-- 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 M. Goldberg
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 24, 2009&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Michael M. Goldberg</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"><!-- 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/ Mark J. Pykett
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 24, 2009&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Mark J. Pykett</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"><!-- 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/ Eric K. Rowinsky
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">July 24, 2009&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Eric K. Rowinsky</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-4<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

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


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</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="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2.1(1)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement and Plan of Merger, dated April&nbsp;7, 2006, among the registrant, Speed Acquisition, Inc., SD Pharmaceuticals, Inc. and certain individuals named therein
(including exhibits thereto)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.1(2)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Certificate of Incorporation of the registrant</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.2(3)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Designation of Preferences, Rights and Limitations of 0% Series&nbsp;A Convertible Preferred Stock</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.3(4)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Designation of Preferences, Rights and Limitations of 5% Series&nbsp;B Convertible Preferred Stock</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.4&#177;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Certificate of Designation of Preferences, Rights and Limitations of &#091;<B>&#149;</B>&#093;% Series&nbsp;C Convertible Preferred Stock</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">3.5(5)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Bylaws of the registrant (formerly known as Biokeys Pharmaceuticals, Inc.)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.1(6)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registration Rights Agreement entered into in October and November&nbsp;2001 (including the original schedule of holders)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.2(7)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$2.50 Warrant to Purchase Common Stock issued on April&nbsp;12, 2002 to Emisphere Technologies, Inc.</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.3(6)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of $0.60 Warrant to Purchase Common Stock issued May&nbsp;28, 2003 (including the original schedule of holders)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.4(6)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of $1.25 Warrant to Purchase Common Stock issued between October&nbsp;15, 2003 and December&nbsp;29, 2003 (including the original schedule of holders)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.5(6)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Common Stock and Warrant Purchase Agreement, dated as of April&nbsp;5, 2004, among the registrant and the Investors (as defined therein)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.6(6)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement, dated April&nbsp;5, 2004, among the registrant and the Investors (as defined therein)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.7(6)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of $2.00 A-1 Warrant to Purchase Common Stock issued April&nbsp;8, 2004 (including the original schedule of holders)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.8(6)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of $2.50 A-2 Warrant to Purchase Common Stock issued April&nbsp;8, 2004 (including the original schedule of holders)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.9(8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Common Stock and Warrant Purchase Agreement, dated April&nbsp;8, 2004, between the registrant and CD Investment Partners, Ltd.</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.10(8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement, dated April&nbsp;8, 2004, between the registrant and CD Investment Partners, Ltd.</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.11(8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$2.00 A-1 Warrant to Purchase Common Stock issued on April&nbsp;8, 2004 to CD Investment Partners, Ltd.</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.12(8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$2.00 A-1 Warrant to Purchase Common Stock issued on April&nbsp;8, 2004 to Burnham Hill Partners</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.13(8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$2.00 A-1 Warrant to Purchase Common Stock issued on April&nbsp;8, 2004 to Ernest Pernet</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.14(8)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$2.00 A-1 Warrant to Purchase Common Stock issued on April&nbsp;8, 2004 to W.R. Hambrecht &#043; Co., LLC</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.15(9)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Common Stock and Warrant Purchase Agreement, dated April&nbsp;19, 2004, between the registrant and Franklin M. Berger</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.16(9)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Registration Rights Agreement, dated April&nbsp;19, 2004, between the registrant and Franklin M. Berger</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<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"><A HREF="#tocpage">Table of Contents</A></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="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.17(9)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$2.00 A-1 Warrant to Purchase Common Stock issued on April&nbsp;19, 2004 to Franklin M. Berger</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.18(10)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement, dated July&nbsp;21, 2005, among the registrant and the Purchasers (as defined therein)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.19(10)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Rights Agreement, dated July&nbsp;27, 2005, among the registrant, the Icahn Purchasers and Viking (each as defined therein)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.20(11)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to Rights Agreement, dated September&nbsp;22, 2006, among the registrant and the Icahn Purchasers (as defined therein)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.21(12)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Rights Agreement, dated February&nbsp;25, 2008, among the registrant and the Icahn purchasers (as defined therein)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.22(10)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of $2.26 Common Stock Warrant issued on July&nbsp;27, 2005 (including the original schedule of holders)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.23(10)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of $2.26 Common Stock Warrant issued on July&nbsp;27, 2005 (including the original schedule of holders)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.24(12)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$0.50 Warrant (WC-291) to Purchase Common Stock transferred on June&nbsp;15, 2005 to S. Neborsky and R
Neborsky TTEE Robert J. Neborsky MD Inc Comb Retirement Trust</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.25(12)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$0.50 Warrant (WC-292) to Purchase Common Stock transferred on June&nbsp;15, 2005 to S. Neborsky and R
Neborsky TTEE Robert J. Neborsky MD Inc Comb Retirement Trust</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.26(12)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">$2.50 Warrant to Purchase Common Stock issued on October&nbsp;22, 2004 to Thomas J. DePetrillo</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.27(3)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement, dated June&nbsp;8, 2009, by and between ADVENTRX Pharmaceuticals, Inc. and
the purchasers listed on the signature pages thereto</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.28(3)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Common Stock Purchase Warrants issued on July&nbsp;6, 2009 by ADVENTRX Pharmaceuticals, Inc. to the
Rodman &#038; Renshaw, LLC</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.29(4)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement, dated June&nbsp;29, 2009, by and between ADVENTRX Pharmaceuticals, Inc. and
the purchasers listed on the signature pages thereto</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.30(4)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Common Stock Purchase Warrant issued on July&nbsp;6, 2009 by ADVENTRX Pharmaceuticals, Inc. to
Rodman &#038; Renshaw, LLC</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.31&#177;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities Purchase Agreement, dated &#091;<B>&#149;</B>&#093;, 2009, by and between ADVENTRX Pharmaceuticals, Inc. and the
purchasers listed on the signature pages thereto</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">4.32&#177;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Common Stock Purchase Warrant</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">5.1&#177;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Opinion of DLA Piper LLP (US)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.1#(14)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2005 Equity Incentive Plan</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.2#(15)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Option Agreement under the 2005 Equity Incentive Plan</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.3#(16)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Option Agreement under the 2005 Equity Incentive Plan (for director option grants
beginning in 2008)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>10.4#(17)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Option Agreement under the 2005 Equity Incentive Plan (for option grants to employees
approved in March&nbsp;2008)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.5#(2)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Restricted Share Award Agreement under the 2005 Equity Incentive Plan</TD>
</TR>
<!-- End Table Body -->
</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"><A HREF="#tocpage">Table of Contents</A></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="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.6#(15)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2005 Employee Stock Purchase Plan</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.7#(15)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Subscription Agreement under the 2005 Employee Stock Purchase Plan</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.8#(18)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2008 Omnibus Incentive Plan</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.9#(19)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Notice of Grant of Restricted Stock Units under the 2008 Omnibus Incentive Plan (for grants to
employees in January&nbsp;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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>10.10#(19)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Restricted Stock Units Agreement under the 2008 Omnibus Incentive Plan</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.11#(20)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Non-Statutory Stock Option Grant Agreement (for directors) under the 2008 Omnibus Incentive Plan</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.12#(20)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Non-Statutory/Incentive Stock Option Grant Agreement (for consultants / employees) under the
2008 Omnibus Incentive Plan</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.13#(17)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2008 Incentive Plan</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>10.14&#134;(21)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Option and License Agreement, dated January&nbsp;23, 1998, between the registrant and the University of
Southern California</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.15(5)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to License Agreement, dated August&nbsp;16, 2000, between the registrant and the University
of Southern California</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.16&#134;(21)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Option and License Agreement, dated August&nbsp;17, 2000, between the registrant and the University of
Southern California</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.17&#134;(22)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment to Option and License Agreement, dated April&nbsp;21, 2003, between the registrant and the
University of Southern California</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.18&#134;(23)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Second Amendment to Option and License Agreement, dated January&nbsp;25, 2007, between the registrant and
the University of Southern California</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.19&#134;(2)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Agreement, effective as of May&nbsp;1, 2005, between the registrant and Pharm-Olam International Ltd.</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.20(2)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amendment dated July&nbsp;19, 2005 to the Agreement between the registrant and Pharm-Olam International Ltd.</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.21(24)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">License Agreement, dated October&nbsp;20, 2006, between the registrant, through its wholly-owned subsidiary
SD Pharmaceuticals, Inc., and Theragenex, LLC</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.22(16)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">License Agreement, dated December&nbsp;10, 2005, between SD Pharmaceuticals, Latitude Pharmaceuticals and
Andrew Chen, including a certain letter, dated November&nbsp;20, 2007, clarifying the scope of rights
thereunder</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.23&#134;(25)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">License Agreement, dated March&nbsp;25, 2009, between the registrant, SD Pharmaceuticals, Inc. and Shin
Poong Pharmaceutical Co., Ltd.</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.24(26)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Standard Multi-Tenant Office Lease &#151; Gross, dated June&nbsp;3, 2004, between the registrant and George V.
Casey &#038; Ellen M. Casey, Trustees of the Casey Family Trust dated June&nbsp;22, 1998</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.25(2)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">First Amendment to the Standard Multi-Tenant Office Lease &#151; Gross, dated June&nbsp;3, 2004 between the
registrant and George V. &#038; Ellen M. Casey, Trustees of the Casey Family Trust dated June&nbsp;22, 1998</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.26#(27)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer letter, dated March&nbsp;5, 2003, to Joan M. Robbins</TD>
</TR>
<!-- End Table Body -->
</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"><A HREF="#tocpage">Table of Contents</A></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="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.27#(28)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Confidential Separation Agreement and General Release of All Claims, effective December&nbsp;4, 2008,
between the registrant and Joan M. Robbins</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.28#(29)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer letter, dated November&nbsp;15, 2004, to Brian M. Culley</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.29#(19)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retention and Incentive Agreement, dated January&nbsp;28, 2009, between the registrant and Brian M. Culley</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.30#(30)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Severance Agreement and Release of All Claims, dated September&nbsp;7, 2006, with Carrie Carlander</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.31#(30)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement, dated September&nbsp;7, 2006, with Carrie Carlander</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.32#(30)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer letter, dated September&nbsp;7, 2006, to James A. Merritt</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.33#(16)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letter agreement regarding terms of separation with James A. Merritt, effective as of February&nbsp;12, 2008</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.34#(30)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Stock Option Agreement between the registrant and James A. Merritt (included in Exhibit&nbsp;10.28)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.35#(31)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer letter, dated December&nbsp;13, 2006, to Gregory P. Hanson</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.36#(31)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Stock Option Agreement, effective December&nbsp;20, 2006, between the registrant and Gregory P. Hanson</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.37#(32)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Letter Agreement regarding terms of separation with Gregory P. Hanson, dated April&nbsp;2, 2008</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.38#(32)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consulting Agreement, dated April&nbsp;2, 2008, with Gregory P. Hanson</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.39#(20)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Offer letter, dated April&nbsp;1, 2008, to Mark N.K. Bagnall (including Exhibits A, B and C thereto)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.40#(25)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Confidential Separation Agreement and General Release of All Claims, effective January&nbsp;8, 2009, between
the registrant and Mark N.K. Bagnall</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.41#(28)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Confidential Separation Agreement and General Release of All Claims, effective December&nbsp;31, 2008,
between the registrant and Evan M. Levine, including letter, dated November&nbsp;7, 2008, related thereto</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>10.42#(25)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retention and Incentive Agreement, dated January&nbsp;28, 2009, between the registrant and Patrick L. Keran</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.43#(25)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retention and Incentive Agreement, dated January&nbsp;28, 2009, between the registrant and Mark E. Erwin</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.44#(25)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retention and Incentive Agreement, dated January&nbsp;28, 2009, between the registrant and Michele L. Yelmene</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.45(24)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Director and Officer Indemnification Agreement</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.46#(33)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director compensation policy</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.47(34)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Placement Agency Agreement, dated November&nbsp;2, 2006, among the registrant, ThinkEquity Partners LLC and
Fortis Securities LLC</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.48(3)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Engagement Letter Agreement, dated June&nbsp;7, 2009, by and between ADVENTRX Pharmaceuticals, Inc. and
Rodman &#038; Renshaw, LLC</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.49(4)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Engagement Letter Agreement, dated June&nbsp;26, 2009, by and between ADVENTRX Pharmaceuticals, Inc. and
Rodman &#038; Renshaw, LLC</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-8<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></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="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="88%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Exhibit</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left" style="border-bottom: 1px solid #000000">Description</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.50&#177;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Engagement Letter Agreement, dated &#091;<B>&#149;</B>&#093;, 2009, by and between ADVENTRX Pharmaceuticals, Inc. and Rodman
&#038; Renshaw, LLC</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.51#(35)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive Plan (for grant to Brian M.
Culley in July&nbsp;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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" nowrap>10.52#(35)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive Plan (for grant to Patrick L.
Keran in July&nbsp;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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.53#(35)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2009 Mid-Year Incentive Plan</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">10.54#(35)
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Retention and Severance Plan (as of July&nbsp;21, 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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">21.1*
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">List of Subsidiaries</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">23.1*
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of J.H. Cohn LLP, Independent Registered Public Accounting Firm</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">23.2&#177;
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of DLA Piper LLP (US) (included in Exhibit&nbsp;5.1)</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">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">24.1*
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of attorney (included on the
signature page to the registration statement)</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">&#134;</TD>
    <TD>&nbsp;</TD>
    <TD>Indicates that confidential treatment has been requested or granted to
certain portions, which portions have been omitted and filed
separately with the SEC

</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left"># </TD>
    <TD>&nbsp;</TD>
    <TD>Indicates management contract or compensatory plan</TD></TR>

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

<TR valign="top">
    <TD nowrap align="left">&#177;</TD>
    <TD>&nbsp;</TD>
    <TD> To be filed by amendment</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 with the registrant&#146;s Amendment No.&nbsp;1 to Current Report on Form 8-K/A on May&nbsp;1, 2006
(SEC file number 001-32157-06796248)</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 with the registrant&#146;s Annual Report on Form 10-K on March&nbsp;16, 2006 (SEC file number
001-32157-06693266)</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 with the registrant&#146;s Current Report on Form 8-K on June&nbsp;8, 2009 (SEC file number
001-32157-09878961)</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 with the registrant&#146;s Current Report on Form 8-K on June&nbsp;30, 2009 (SEC file number
001-32157- 09917820)</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 with the registrant&#146;s Current Report on Form 8-K on December&nbsp;15, 2008 (SEC file number
001-32157-081249921)</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 with the registrant&#146;s Registration Statement on Form S-3 on June&nbsp;30, 2004 (SEC file
number 333-117022-03848890)</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 with the registrant&#146;s Amendment No.&nbsp;1 to Quarterly Report on Form 10-Q/A on October&nbsp;30,
2006 (SEC file number 001-32157-061170484)</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 with the registrant&#146;s Current Report on Form 8-K/A on April&nbsp;13, 2004 (SEC file number
000-33219-04730584)</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 with the registrant&#146;s Quarterly Report on Form 10-QSB on May&nbsp;12, 2004 (SEC file number
001-32157-04797806)</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 with the registrant&#146;s Quarterly Report on Form 10-Q on August&nbsp;12, 2005 (SEC file number
001-32157-051022046)</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 with the registrant&#146;s Current Report on Form 8-K on September&nbsp;22, 2006 (SEC file number
001-32157-061103268)</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 with the registrant&#146;s Current Report on Form 8-K on February&nbsp;25, 2008 (SEC file number
001-32157-08638638)</TD>
</TR>

</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-9<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></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 with the registrant&#146;s Registration Statement on Form S-3 on August&nbsp;26, 2005 (SEC file
number 333-127857-051050073)</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 with the registrant&#146;s Annual Report on Form 10-K on March&nbsp;15, 2007 (SEC file number
001-32157-07697283)</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 with the registrant&#146;s Registration Statement on Form S-8 on July&nbsp;13, 2005 (SEC file
number 333-126551-05951362)</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 with registrant&#146;s Annual Report on Form 10-K on March&nbsp;17, 2008 (SEC file number
001-32157-08690952)</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 with the registrant&#146;s Quarterly Report on Form 10-Q on May&nbsp;12, 2008 (SEC file number
001-32157-08820541)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(18)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Current Report on Form 8-K on June&nbsp;7, 2008 (SEC file number
001-32157-08874724)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(19)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Current Report on Form 8-K on February&nbsp;2, 2009 (SEC file number
001-32157- 09561715)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(20)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Quarterly Report on Form 10-Q on August&nbsp;11, 2008 (SEC file number
001-32157-081005744)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(21)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Registration Statement on Form&nbsp;10SB/A on January&nbsp;14, 2002 (SEC
file number 000-33219-2508012)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(22)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Quarterly Report on Form 10-QSB on August&nbsp;14, 2003 (SEC file
number 000-33219-03848890)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(23)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Quarterly Report on Form 10-Q on May&nbsp;8, 2007 (SEC file number
001-32157-07829156)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(24)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Current Report on Form 8-K on October&nbsp;23, 2006 (SEC file number
001-32157-061156993)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(25)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Quarterly Report on Form 10-Q on May&nbsp;15, 2009 (SEC file number
001-32157-09878961)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(26)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Quarterly Report on Form 10-QSB on August&nbsp;10, 2004 (SEC file
number 001-32157-04963741)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(27)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Annual Report on Form 10-KSB on April&nbsp;16, 2003 (SEC file number
000-33219-03651464)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(28)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Annual Report on Form 10-K on March&nbsp;23, 2009 (SEC file number
001-32157-09708145)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(29)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Annual Report on Form 10-KSB on March&nbsp;31, 2005 (SEC file number
001-32157-05719975)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(30)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Current Report on Form 8-K on September&nbsp;8, 2006 (SEC file number
001-32157-061082484)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(31)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Current Report on Form 8-K on December&nbsp;20, 2006 (SEC file number
001-32157-061290689)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(32)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Current Report on Form 8-K on April&nbsp;16, 2008 (SEC file number
001-32157-08760483)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(33)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Current Report on Form 8-K on June&nbsp;23, 2006 (SEC file number
001-32157-06922676)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(34)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Current Report on Form 8-K on November&nbsp;3, 2006 (SEC file number
001-32157-061184445)</TD>
</TR>

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

<TR valign="top">
    <TD nowrap align="left">(35)</TD>
    <TD>&nbsp;</TD>
    <TD>Filed with the registrant&#146;s Current Report on Form 8-K on July&nbsp;22, 2009 (SEC file number
001-32157-09957353)</TD>
</TR>

</TABLE>




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

</BODY>
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sv1
Table of Contents
As filed with the Securities and Exchange Commission on July 24, 2009
Registration No. 333-_________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ADVENTRX
Pharmaceuticals, 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)
84-1318182
(I.R.S. Employer
Identification Number)
6725 Mesa Ridge Road,
Suite 100,
San Diego, CA 92121
(858) 552-0866
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Brian M. Culley
Chief Business Officer and Senior Vice President
ADVENTRX Pharmaceuticals, Inc.
6725 Mesa Ridge Road, Suite 100
San Diego, CA 92121
Telephone: (858) 552-0866
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
With a Copy to:
Michael S. Kagnoff
DLA Piper LLP (US)
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Telephone: (858) 677-1400
Facsimile: (858) 677-1401
Approximate date of commencement of proposed sale to the public:
As soon as practicable after
the effective date of this Registration Statement.
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.
o
If this Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please 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 statement for the same offering
o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of "large accelerated
filer," "accelerated filer" 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
(Do not check if a smaller reporting company)
Smaller reporting company
þ
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Title of Each Class of Securities
Aggregate
Amount of
To Be Registered (1)
Offering Price (2)
Registration Fee (2)
Convertible Preferred Stock, par value $0.001 per share
— (3)
— (3)
Shares of Common Stock, par value $0.001 per share, underlying
Convertible Preferred Stock
$[____]
$[____]
Warrants
— (3)
— (3)
Shares of Common Stock, par value $0.001 per share,
underlying Warrants
$[____]
$[____]
Total
$10,000,000
$558
(1)
Any securities registered hereunder may be sold separately or together with other securities
registered hereunder.
(2)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o)
under the Securities Act. Pursuant to Rule 416 under the Securities Act of 1933, as amended
(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, anti-dilution provisions,
or similar transactions. No additional registration fee is being paid for these shares.
(3)
Pursuant to Rule 457(g) under the Securities Act, no separate registration fee is required
for the convertible preferred stock or the warrants because the registrant is registering
these securities in the same registration statement as the underlying common stock to be
offered pursuant thereto.
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, as amended, or until the registration statement shall
become effective on such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
Table of Contents
The information in this prospectus is not complete and may be changed. We may not sell these
securities 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 JULY 24, 2009
ADVENTRX PHARMACEUTICALS, INC.
[
•
] Shares of [
•
]% Series C Convertible Preferred Stock
Warrants to Purchase up to [
•
] Shares of Common Stock
[
•
] Shares of Common Stock Underlying the Convertible Preferred Stock and the Warrants
We are offering [
•
] shares of our [
•
]% Series C Convertible Preferred Stock, par value $0.001
per share, and warrants to purchase up to [
•
] shares of our common stock to purchasers in this
offering. We are also offering an aggregate of [
•
] shares of our common stock, par value $0.001 per
share, issuable upon conversion of the convertible preferred stock and exercise of the warrants.
The convertible preferred stock and warrants will be sold in units, with each unit consisting of
one share of convertible preferred stock and a warrant to purchase up to approximately [
•
] shares
of common stock. Subject to certain ownership limitations, the convertible preferred stock is
convertible at any time at the option of the holder into shares of our common stock at a conversion
price of $[
•
] per share and will accrue a [
•
]% dividend until [
•
]. The warrants are exercisable at
any time after the six-month anniversary of their date of issuance and on or before the fifth
anniversary of their initial exercise date at an exercise price of $[
•
] per share of common stock.
In the event that the convertible preferred stock is converted at any time prior to [
•
], we will
pay to the holder of such converted convertible preferred stock an amount equal to the total
dividend that would accrue on the preferred stock from the conversion date through [
•
], or $[
•
] per
$1,000 in stated value of the shares of convertible preferred stock converted, less any dividend
payments previously made with respect to such shares. Each unit will be sold at a negotiated price
of $1,000. Units will not be issued or certificated. The shares of convertible preferred stock and
warrants are immediately separable and will be issued separately.
We will place [
•
]%, or approximately $[
•
], of the gross proceeds in an escrow account, which
amounts will be released to make the dividend and "make-whole" payments due on the convertible
preferred stock.
Our common stock is listed on the NYSE Amex (formerly, the American Stock Exchange) under the
symbol "ANX." The last reported sale price of our common stock on the NYSE Amex on July 23, 2009
was $0.14 per share. We do not intend to list the convertible preferred stock or warrants on any
securities exchange.
Investing in our securities involves a high degree of risk and purchasers of our securities
may lose their entire investment. See "Risk Factors" beginning on page 7 of this prospectus for
factors you should consider before buying our securities. You should carefully read this prospectus
before you invest in our securities.
Per Unit
Maximum Total
Public offering price
$
[
•
]
$
[
•
]
Placement agent's fees
$
[
•
]
$
[
•
]
Proceeds, before expenses, to ADVENTRX Pharmaceuticals, Inc.
$
[
•
]
$
[
•
]
We have retained Rodman & Renshaw, LLC as placement agent to use its reasonable best efforts
to solicit offers to purchase our securities in this offering. The placement agent is not
purchasing or selling any of the securities in this offering. There is no minimum amount of
securities that must be sold as a condition to closing this offering. The offering will end on [
•
],
2009. We expect that delivery of the securities being offered pursuant to this prospectus will be
made to purchasers on or about [
•
], 2009. We have agreed to indemnify the placement agent against
some liabilities, including liabilities under the Securities Act of 1933, as amended, or the
Securities Act, and to contribute to payments that the placement agent may be required to make in
respect thereof. In consideration for its services, in addition to the cash fees set forth in the
table above, we have agreed to issue to the placement agent five-year warrants to purchase up to an
aggregate of [
•
] shares of our common stock at an exercise price of $[
•
] per share. The placement
agent warrants are not covered by this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
Rodman & Renshaw
The date of this prospectus is               , 2009.
You should rely only on the information contained in this prospectus and any free writing
prospectus prepared by us or on our behalf. We have not authorized anyone to provide you with
different or additional information. If anyone provides you with different or additional
information, you should not rely on it. We are not making offers to sell, or seeking offers to buy,
these securities in any state or other jurisdiction where the offers and sales are not permitted.
The information contained in this prospectus is accurate only as of the date hereof, regardless of
the time of delivery of this prospectus or of any sale of the securities offered hereby. Our
business, financial condition, results of operations and prospects may have changed since the date
of this prospectus.
TABLE OF CONTENTS
Page
Prospectus Summary
1
Risk Factors
7
Special Note Regarding Forward-Looking Statements
29
Use of Proceeds
30
Dividend Policy
31
Capitalization
32
Dilution
34
Management's Discussion and Analysis of Financial Condition and Results of Operations
36
Business
46
Management
59
Executive & Director Compensation
64
Security Ownership of Certain Beneficial Owners and Management
76
Description of Capital Stock
79
Description of Warrants
83
Plan of Distribution
84
Legal Matters
86
Experts
86
Where You Can Find More Information
86
Index to Financial Statements
F-1
EX-21.1
EX-23.1
Our trademark CoFactor® is registered in the United States Patent and Trademark Office (in the
Supplemental Register) under Registration No. 2,946,934, for use in connection with chemotherapy
modulators derived from folic acid. We are developing commercial names for our other product
candidates. All other trademarks, service marks or trade names appearing in this prospectus,
including but not limited to Navelbine® and Taxotere®, are the property of their respective owners.
Use or display by us of other parties' trademarks, service marks, trade names, trade dress or
products is not intended to and does not imply a relationship with, or endorsements or sponsorship
of, us by the trademark, service mark, trade name, trade dress or product owners. As indicated in
this prospectus, we have included market data and industry forecasts that were obtained from
industry publications.
Table of Contents
PROSPECTUS SUMMARY
This summary highlights selected information about us and this offering contained elsewhere in
this prospectus and is qualified in its entirety by the more detailed information and financial
statements contained elsewhere in this prospectus. It may not contain all of the information that
is important to you. You should carefully read this entire prospectus, including the risks and
uncertainties discussed under the heading "Risk Factors" below, our consolidated financial
statements and the notes related thereto, our condensed consolidated financial statements and the
notes related thereto, and the other documents included in or to which this prospectus refers,
before making an investment decision. When used in this prospectus, the terms "ADVENTRX," "we,"
"our," "us" and the "Company" refer to ADVENTRX Pharmaceuticals, Inc. and its subsidiaries, unless
otherwise indicated or the context otherwise requires.
About ADVENTRX Pharmaceuticals, Inc.
We are a development-stage biopharmaceutical company whose fundamental business is focused on
in-licensing, developing and commercializing proprietary product candidates for the treatment of
cancer. We seek to improve the performance and commercial potential of existing treatments by
addressing limitations associated principally with their safety and use. We have devoted
substantially all of our resources to research and development or to acquisition of our product
candidates. We have not yet marketed or sold any products or generated any significant revenue.
Our lead product candidates, ANX-530 and ANX-514, are novel emulsion formulations of currently
marketed chemotherapy drugs. We believe ANX-530 and ANX-514 may improve the safety of and have
greater commercial potential than the currently marketed reference products, Navelbine and
Taxotere, respectively, by:
•
Reducing the incidence and severity of adverse effects; and
•
Increasing their pharmacoeconomics and convenience to healthcare practitioners and
patients
We have experienced significant operating losses in funding the development of our product
candidates, accumulating operating losses totaling approximately $133.9 million as of March 31,
2009, and we expect to incur substantial operating losses for the foreseeable future. Our
independent auditor's report for the year ended December 31, 2008 includes an explanatory paragraph
stating that our recurring losses from operations and negative cash flows raise substantial doubt
about our ability to continue as a going concern. Our consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty. As of March 31,
2009, we had approximately $5.3 million in cash and cash equivalents and $2.8 million in working
capital and we do not expect to generate positive net cash flows for the foreseeable future.
Historically, we have funded our operations primarily through sales of our equity securities.
In March 2009, due to an immediate need to raise additional capital to continue our business,
we suspended substantially all of our development activities and fundamental business operations to
conserve cash while we evaluated strategic options, including the sale or exclusive license of one
or more of our product candidate programs, a strategic business merger and other similar
transactions, pursued financing alternatives and considered whether to liquidate our assets,
wind-up our operations and distribute any remaining cash to our stockholders.
On June 12, 2009, we completed an approximately $2.0 million registered direct equity
financing involving the issuance of shares of our 0% Series A Convertible Preferred Stock,
convertible into 18,036,199 shares of our common stock, and warrants to purchase up to 8,116,290
shares of our common stock. We received approximately $1.7 million in net proceeds from the
offering, after deducting the placement agent's fees and our estimated offering expenses. All of the shares
of the 0% Series A Convertible Preferred Stock subsequently have been converted. We may
receive up to approximately $1.2 million of additional proceeds from the exercise of the warrants
issued in that offering; however, those warrants are not exercisable until December 13, 2009 and
their exercise is subject to certain ownership limitations.
Following the completion of the June 2009 financing, we re-started the final manufacturing
activities related to submitting a New Drug Application, or NDA, for ANX-530 to seek approval of
the United States Food and Drug Administration, or FDA, to market ANX-530 in the United States. In
addition, we intend to continue to evaluate the data from our recently-completed bioequivalence
study of ANX-514 and we plan to seek a meeting with the FDA to discuss the results. However, even
following the offering described in this prospectus, we may need to raise substantial additional
capital to fund our operations, including pre-launch activities for ANX-530, during the regulatory
review period of an ANX-530 NDA, if an ANX-530 NDA is submitted, launch activities for ANX-530,
should an ANX-530 NDA be approved, and pre-NDA development activities for ANX-514.
Table of Contents
On July 6, 2009,
we completed an approximately $1.4 million registered direct equity financing involving the issuance of
shares of our 5% Series B Convertible Preferred Stock, convertible into 9,504,189 shares of our common stock.
We received approximately $1.2 million in net proceeds from the offering, after deducting the placement agent's
fees and our estimated offering expenses. The convertible preferred shares were to accrue a 5% dividend
until July 6, 2014, unless converted prior to such date.  Upon any conversion of these preferred shares we
were obligated to pay the holder an amount equal to the total dividend that would have otherwise accrued on
the shares through July 6, 2014, less any dividend payment previously made with respect to such converted
shares. Twenty-five percent, or $340,250, of the gross proceeds of the financing were placed in an escrow
account for payment of the dividend and conversion amounts payable on the 5% Series B Convertible Preferred
Stock. All of the shares of the 5% Series B Convertible Preferred Stock subsequently have been converted and,
pursuant to the terms of the 5% Series B Convertible Preferred Stock, we paid an aggregate of $340,250 from
the escrow account to the holder of the converted preferred shares in connection with such conversions.
Our Strategy
Our goal is to be a leading biopharmaceutical company focused on in-licensing, developing and
commercializing proprietary product candidates primarily for the treatment of cancer. Our near-term
strategy is to obtain marketing approval of our lead product candidates and either partner or
establish an infrastructure to support marketing, distributing and selling these products in the
U.S. and abroad, should they be approved. Longer term, we intend to acquire additional product
candidates that fit our areas of expertise. Specifically, we intend to:
•
Seek marketing-approval for ANX-530 and ANX-514 in the U.S
. We are applying
our operational experience to complete and seek approval of NDAs for ANX-530 and ANX-514
that we intend to submit to the FDA. In June 2009, we announced that an update regarding
our NDA submission timeline will be provided as critical activities are completed;
however, our goal is to submit the NDA around the end of 2009. In addition, we are
continuing to evaluate the data from our recently-completed bioequivalence study of
ANX-514 and plan to seek a meeting with the FDA to discuss the results.
•
Establish sales and marketing capabilities for ANX-530 and ANX-514 in the
U.S
. We intend to gain access to a substantial portion of the U.S. markets for
ANX-530 and ANX-514 through a small, specialized sales force targeting distributors,
provider networks and group purchasing organizations. For the near-term, we intend to
maintain our current cost-efficient and flexible infrastructure by limiting the number
of our full-time employees, engaging consultants on a project basis and outsourcing
substantially all of our development activities to specialized vendors and contract
development organizations. As we near regulatory approval of our product candidates, we
plan to establish the infrastructure and relationships necessary to access what we
believe will be concentrated markets for ANX-530 and ANX-514. However, we also remain
receptive to partnering these product candidates in the U.S. if presented with terms
that are sufficiently attractive.
•
Partner with leading organizations to develop and market ANX-530 and ANX-514
outside the U.S. or globally
. We plan to draw on the development, regulatory and
commercial expertise of other companies in instances where we believe our product
candidates would benefit from such expertise. For example, for markets in which a large
sales force is required to gain access, and for markets outside the U.S. and possibly
within the U.S., we plan to commercialize products for which we obtain regulatory
approval through a variety of licensing, collaboration and distribution arrangements
with other pharmaceutical and biotechnology companies.
•
Pursue additional indications and commercial opportunities for ANX-530 and
ANX-514 independently and through collaborations
. We may increase the value of our
product candidates by seeking approval for label changes and pursuing other commercial
opportunities. For example, we or a future partner may conduct clinical and non-clinical
studies that seek to differentiate ANX-530 and ANX-514 from Navelbine and Taxotere,
respectively.
•
Acquire new and improved formulations of currently marketed products
. We may
pursue other currently approved products that we believe can be improved, the U.S.
markets for which are concentrated and to which we can apply our operational experience.
Risk Factors
We face numerous risks and uncertainties that could materially and adversely affect our
business, results of operations and financial condition, including the risk that we may not be able
to raise sufficient capital to continue our business operations, which could result in our
inability to continue as a going concern, and the risk that we may be unable to regain compliance
with the continued listing requirements of the NYSE Amex, the securities exchange on which our
common stock is listed, and our common
2
Table of Contents
stock may be delisted from that exchange. For additional discussion of the risk and
uncertainties we face, see "Risk Factors" below.
Corporate Information
Our business was incorporated in Delaware in December 1995. In October 2000, we merged our
wholly-owned subsidiary, Biokeys Acquisition Corp., with and into Biokeys, Inc. and changed our
name to Biokeys Pharmaceuticals, Inc. In May 2003, we merged Biokeys, Inc., our wholly-owned
subsidiary, with and into us and changed our name to ADVENTRX Pharmaceuticals, Inc. In July 2004,
we formed a wholly-owned subsidiary, ADVENTRX (Europe) Ltd., in the United Kingdom primarily to
facilitate conducting clinical trials in the European Union and to obtain favorable pricing for
discussions with the European Medicines Agency. In April 2006, we acquired SD Pharmaceuticals, Inc.
as a wholly-owned subsidiary.
Our executive offices are located at 6725 Mesa Ridge Road, Suite 100, San Diego, California
92121, and our telephone number is (858) 552-0866. Our corporate website is located at
www.adventrx.com. Information on our website does not constitute part of this prospectus.
3
Table of Contents
The Offering
Securities offered by us:
•
Up to [
•
] shares of
convertible preferred stock, par
value $0.001 per share;
•
[
•
] shares of common
stock issuable upon conversion of
the convertible preferred stock;
•
Warrants to purchase up to [
•
] shares of common stock; and
•
[
•
] shares of common
stock issuable upon exercise of
the warrants.
Common stock to be outstanding after this offering:
[
•
] shares of common stock, or [
•
] shares of common stock if the
convertible preferred stock and
warrants offered hereby are
converted and exercised in full.
Make-Whole Payment:
In the event that the convertible
preferred stock is converted at
any time prior to [
•
], we will
pay to the holder an amount equal
to $[
•
] per $1,000 in stated
value of the shares of
convertible preferred stock
converted, less any dividend
payments previously made with
respect to such shares.
Escrow:
An amount of the proceeds of the
offering equal to the aggregate
potential make-whole payment will
be deposited with [
•
], as escrow
agent, to be held for a period of
[
•
] months from the date of
closing. Amounts in the escrow
account will be released to pay
dividends and any make-whole
payments with respect to
convertible preferred stock
converted during the escrow
period. At the end of the escrow
period, the amount remaining in
the escrow account will be
released to us.
Use of proceeds:
We currently intend to use the
net proceeds from this offering
to fund activities relating to
seeking FDA approval to market
ANX-530 and ANX-514 in the United
States, pre-launch activities
related to commercialization of
ANX-530, and for general
corporate purposes, including
working capital. Please see "Use
of Proceeds" below.
NYSE Amex symbol:
ANX
Risk factors:
Investing in our securities
involves a high degree of risk
and purchasers of our convertible
preferred stock and warrants and
the underlying common stock may
lose their entire investment. See
"Risk Factors" below and the
other information included
elsewhere in this prospectus for
a discussion of factors you
should carefully consider before
deciding to invest in our
securities.
The number of shares of our common stock to be outstanding immediately after this offering is
based on 117,792,960 shares of our common stock outstanding as of July 22, 2009. This number
does not include, as of July 22, 2009:
•
5,973,884 shares of common stock issuable upon the exercise of outstanding stock
options issued under our equity incentive plans prior to this offering, at a weighted
average exercise price of $0.82 per share;
•
650,000 shares of common stock issuable upon vesting and settlement of outstanding
restricted stock units issued under our 2008 Omnibus Incentive Plan prior to this
offering;
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•
10,568,772 shares of common stock available for future issuance under our 2008
Omnibus Incentive Plan;
•
20,304,118 shares of common stock issuable upon the exercise of outstanding warrants
issued prior to this offering, at a weighted average exercise price of $1.27 per share;
•
[
•
] shares of common stock issuable upon exercise of warrants to be issued to the
purchasers in this offering, at an exercise price of $[
•
] per share; and
•
[
•
] shares of common stock issuable upon exercise of warrants to be issued to the
placement agent for this offering, which are not covered by this prospectus, at an
exercise price of $[
•
] per share.
5
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Summary Financial Data
The following tables set forth our summary statement of operations data for the fiscal years
ended December 31, 2008 and 2007, for the three months ended March 31, 2009 and 2008, and for
inception through March 31, 2009, and our summary balance sheet as of March 31, 2009. Our statement
of operations data for the fiscal years ended December 31, 2008 and 2007 were derived from our
audited consolidated financial statements included elsewhere in this prospectus. Our statement of
operations data for the three months ended March 31, 2009 and 2008 and for inception through March
31, 2009 and our balance sheet data as of March 31, 2009 were derived from our unaudited condensed
consolidated financial statements included elsewhere in this prospectus. In the opinion of
management the unaudited condensed consolidated financial statements have been prepared on the same
basis as the audited consolidated financial statements and include all adjustments, consisting of
only normal recurring adjustments, necessary for a fair presentation of our operating results and
financial position for those periods and as of such dates. The results for any interim period are
not necessarily indicative of the results that may be expected for a full year.
The results indicated below and elsewhere in this prospectus are not necessarily indicative of
our future performance. You should read this information together with "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of Operations," our
consolidated financial statements and related notes and our unaudited condensed consolidated
financial statements and related notes included elsewhere in this prospectus.
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RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the
risk factors discussed below, together with all the other information contained in this prospectus
before deciding whether to purchase any of our securities. Each of the risk factors could adversely
affect our business, operating results and financial condition, as well as adversely affect the
value of an investment in our securities, and the occurrence of any of these risks might cause you
to lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
Risks Related to Our Financial Performance, Operations and Ability to Continue as a Going Concern
We have incurred losses since our inception, we expect our operating expenses to continue to exceed
our revenues for the foreseeable future and we may never generate revenues sufficient to achieve
profitability.
We are a development stage company and have not generated sustainable revenues from operations
or been profitable since inception, and it is possible we will never achieve profitability. We have
devoted our resources to developing a new generation of therapeutic products, but such products
cannot be marketed until the regulatory process is completed and governmental approvals have been
obtained. Accordingly, there is no current source of revenues from operations, much less profits,
to sustain our present activities, and no revenues from operations will likely be available until,
and unless, our product candidates are approved by the U.S. Food and Drug Administration, or FDA,
or other regulatory agencies and successfully marketed, either by us or a partner, an outcome which
we are not able to guarantee.
Our financial resources are limited, we will require substantial additional funding to continue our
operations and pursue our business strategy, and, if we are unable to raise sufficient additional
capital, we may cease operating as a going concern and seek protection under the U.S. Bankruptcy
Code or liquidate our assets.
We have experienced significant operating losses in funding the development of our product
candidates, accumulating operating losses totaling approximately $141.7 million as of March 31,
2009, and we expect to continue to incur substantial operating losses for the foreseeable future,
even if we or a future partner of ours is successful in advancing our product candidates to market.
As of March 31, 2009, we had approximately $5.3 million in cash and cash equivalents and $2.8
million in working capital and we do not expect to generate positive net cash flows for the
foreseeable future. Following the equity financing we completed in June 2009, in which we raised
net proceeds of approximately $1.7 million, we re-started the final manufacturing activities
related to submitting a New Drug Application, or NDA, for ANX-530 to seek approval of the FDA to
market ANX-530 in the United States, or U.S., and intend to continue to evaluate the data from our
recently-completed bioequivalence study of ANX-514. We expect to incur substantial costs in
connection with activities relating to submitting an NDA for ANX-530 and advancing ANX-530 toward
commercialization in the U.S. We may also incur substantial costs in connection with evaluating,
negotiating and consummating capital-raising and/or strategic or partnering transactions or
liquidating our assets and winding-up our operations. We cannot currently predict the extent of
these costs. Even if we incur costs in pursuing, evaluating and negotiating particular
capital-raising and/or strategic or partnering transactions, our efforts may not prove successful.
Excluding the potentially significant costs associated with evaluating, negotiating and
consummating capital-raising and/or strategic or partnering transactions or seeking protection
under the provisions of the U.S. Bankruptcy Code or liquidating our assets and winding-up our
operations, we anticipate that our cash and cash equivalents as of March 31, 2009, together with
the net proceeds from the equity financings we completed on June 12, 2009 and July 6, 2009, will be
sufficient to permit us to conduct our business through at least September 30, 2009. We will need
to raise substantial additional capital to continue our business after this period.
Our independent auditor's report for the year ended December 31, 2008 includes an explanatory
paragraph stating that our recurring losses from operations and negative cash flows raise
substantial doubt about our ability to continue as a going concern. If we are unable to obtain
additional financing or consummate a strategic transaction on commercially reasonable terms, our
business, financial condition and results of operations will be materially and adversely affected
and we may be unable to continue as a going concern. If we are unable to continue as a going
concern, we may have to seek protection under the provisions of the U.S. Bankruptcy Code or
liquidate our assets and dissolve our company. In either case, we may receive less than the value
at which those assets are carried on our financial statements. Based on our current working capital
and estimated costs of implementing an orderly liquidation of our assets, we do not expect that
there will be material cash available for distribution to our stockholders.
We are seeking to raise additional capital as soon as possible in order to continue our
business and our recently re-started development activities, including activities related to
submitting an NDA to seek approval of the FDA for marketing ANX-530 in the U.S. Our future
expenditures on our programs are subject to many uncertainties, including whether our product
candidates will be
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developed with a partner or independently. Our future capital requirements will depend on, and
could increase significantly as a result of, many factors, including:
•
the costs of seeking regulatory approval for our lead product candidates, ANX-530 and
ANX-514, including any bioequivalence or clinical studies, process development, scale-up
and other manufacturing activities, or other work required to achieve such approval, as
well as the timing of such activities and approval;
•
the timing and terms of any collaborative, licensing and other strategic arrangements
that we may establish;
•
the cost related to establishing or contracting for sales and marketing capabilities and
other commercial capabilities;
•
the scope, prioritization and number of development and/or commercialization programs we
pursue and the rate of progress and costs with respect to such programs;
•
the extent to which we will need to rebuild our workforce, which currently consists of
two full-time employees, and the cost involved in hiring, training and incentivizing new
employees;
•
the extent to which we invest in or acquire new technologies, products or businesses;
•
the effect of competing technological and market developments; and
•
the cost involved in establishing, enforcing or defending patent claims and other
intellectual property rights.
We are seeking additional funding through public or private sales of our equity securities,
debt financings, collaborations, licensing arrangements or other strategic transactions. However,
we may not be able to obtain sufficient additional funding on satisfactory terms, if at all. We
believe global economic conditions, including the recent credit crisis, have adversely impacted our
ability to raise additional capital and may continue to do so.
In addition, we have been evaluating and continue to evaluate strategic options, including the
sale or exclusive license of one or more of our product candidate programs, a strategic business
merger and similar transactions. However, to date, discussions with potential strategic transaction
partners have been unsuccessful, protracted or on terms that we determined were unacceptable.
Our ability to raise capital may be limited by applicable laws and regulations.
Although we have an effective "shelf" registration statement on Form S-3 that allows us to
raise up to $25 million from the sale of common stock, preferred stock, debt securities, warrants
and units, we may not be able to use that registration statement to raise substantial additional
capital, if any. Under current SEC regulations, we will not be eligible to use a registration
statement on Form S-3 for primary offerings of our common stock or securities convertible into our
common stock unless our common stock is listed and registered on a national securities exchange or
unless the aggregate market value of our common stock held by non-affiliates reaches $75 million or
more. The NYSE Amex will review the appropriateness of continued listing of any issuer that falls
below the exchange's continued listing standards and may, in its discretion, at any time, and
without notice, suspend dealings in, or may remove any security from, listing privileges. The NYSE
Amex will normally consider suspending dealings in, or removing from the list, securities of an
issuer which has stockholders' equity of less than $6.0 million if such issuer has sustained losses
from continuing operations and/or net losses in its five most recent fiscal years. On June 1, 2009,
we received notice from the NYSE Amex staff that, based on their review of our Form 10-Q for the
period ended March 31, 2009, we are not in compliance with certain stockholders' equity continued
listing standards. Specifically, the NYSE Amex staff noted that we are not in compliance with
Section 1003(a)(ii) of the NYSE Amex Company Guide because we reported stockholders' equity of less
than $4,000,000 and losses from continuing operations and net losses in three of our four most
recent fiscal years, or with Section 1003(a)(iii) of the Company Guide because we reported
stockholders' equity of less than $6,000,000 and losses from continuing operations and net losses
in our five most recent fiscal years. In addition, the NYSE Amex staff notified us, in accordance
with Section 1003(f)(v) of the Company Guide, that it deems it appropriate for us to effect a
reverse stock split of our common stock to address our low selling price per share, and that if a
reverse stock split is not completed within a reasonable amount of time after June 1, 2009, the
NYSE Amex may consider suspending dealings in, or removing from the list, our common stock. See
the risk factor below headed, "We are currently not in compliance with NYSE Amex continuing listing
standards and are at risk of being delisted from the NYSE Amex equities market," for additional
information regarding the risk of our common stock being delisted from the NYSE Amex. If our common
stock were delisted from the NYSE Amex, our ability to raise capital on terms and conditions we
deem acceptable, if at all, may be materially impaired. Currently, we do not anticipate being
eligible to register and list our common stock on any other national securities exchange.
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In addition, even if we maintain our listing with the NYSE Amex, under current SEC
regulations, at any time during which the aggregate market value of our common stock held by
non-affiliates, or public float, is less than $75.0 million (calculated as set forth in Form S-3
and SEC rules and regulations), the amount we can raise through primary offerings of our securities
in any twelve-month period using a registration statement on Form S-3 will be limited to an
aggregate of one-third of our public float. As of July 22, 2009, our public float was approximately
109 million shares. Based on a market value of $0.22 per share, which was the closing price of our
common stock on June 11, 2009, a date within 60 days prior to the date hereof, the aggregate market
value of our public float was approximately $24 million. The value of one-third of that public
float was approximately $8 million; however, the market value of all securities sold by us under
our Form S-3 registration statement in the past 12 months will be subtracted from that amount to
determine any future amount we can raise using our Form S-3 registration statement. Alternative
means of raising capital through sales of our securities, including through the use of a Form S-1
registration statement, may be more costly and time-consuming.
Even if we maintain our listing with the NYSE Amex, our ability to timely raise sufficient
capital may be limited by the exchange's requirements relating to stockholder approval for
transactions involving the issuance of our common stock or securities convertible into our common
stock. For instance, the NYSE Amex requires that we obtain stockholder approval of any transaction
involving the sale, issuance or potential issuance by us of our common stock (or securities
convertible into our common stock) at a price less than the greater of book or market value, which
(together with sales by our officers, directors and principal stockholders) equals 20% or more of
our presently outstanding common stock, unless the transaction is deemed a "public offering" by the
NYSE Amex staff. Based on our outstanding common stock as of July 22, 2009 and a closing price of $0.13, which was the
closing price of our common stock on July 22, 2009, we could not raise more than approximately $2.8 million without stockholder approval, unless the transaction is deemed a public offering or does
not involve the sale, issuance or potential issuance by us of our common stock (or securities
convertible into our common stock) at a price less than the greater of book or market value.
However, certain prior sales by us may be aggregated to any offering we may propose in the
near-term, further limiting the amount we could raise in any future offering that is not deemed a
public offering by the NYSE Amex and would involve the sale, issuance or potential issuance by us
of our common stock (or securities convertible into our common stock) at a price less than the
greater of book or market value.
Obtaining stockholder approval is a costly and time-consuming process. If we are required to
obtain stockholder approval, we would expect to spend substantial additional money and resources.
In addition, seeking stockholder approval would delay our receipt of otherwise available capital,
which may materially and adversely affect our ability to continue as a going concern, and there is
no guarantee our stockholders would ultimately approve a proposed transaction. A public offering
under NYSE Amex rules typically involves broadly announcing the proposed transaction, which often
times has the effect of depressing the issuer's stock price. Accordingly, the price at which we
could sell our securities in a public offering may be less and the dilution existing stockholders
experience may in turn be greater than if we were able to raise capital through other means.
Raising additional capital may cause dilution to our existing stockholders, require us to
relinquish proprietary rights or restrict our operations.
We may raise additional capital at any time and may do so through one or more financing
alternatives, including public or private sales of our equity securities, debt financings,
collaborations, licensing arrangements or other strategic transactions. Each of these financing
alternatives carries certain risks. Raising capital through the issuance of common stock may
depress the market price of our stock and may substantially dilute our existing stockholders. If we
instead seek to raise capital through strategic transactions, such as licensing arrangements or
sales of one or more of our technologies or product candidates, we may be required to relinquish
valuable rights. For example, any licensing arrangement would likely require us to share a
significant portion of any revenues generated by our licensed technologies with our licensees.
Additionally, the development of any product candidates licensed or sold to third parties will no
longer be in our control and thus we may not realize the full value of any such product candidates.
Debt financings could involve covenants that restrict our operations. These restrictive covenants
may include limitations on additional borrowing and specific restrictions on the use of our assets,
as well as prohibitions on our ability to create liens or make investments and may, among other
things, preclude us from making distributions to stockholders (either by paying dividends or
redeeming stock) and taking other actions beneficial to our stockholders. In addition, investors
could impose more one-sided investment terms and conditions on companies that have or are perceived
to have limited remaining funds or limited ability to raise additional funds. As we continue to use
our cash and cash equivalents to fund our operations, it will likely become increasingly difficult
to raise additional capital on commercially reasonable terms, or at all.
If we are unable to raise sufficient additional capital, we may be not be able to continue our
recently re-started development programs or we may be forced to partner product candidates at
inopportune times or pursue less-expensive but higher-risk development paths.
In March 2009, we suspended substantially all of our development activities and fundamental
business operations. Additionally,
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since October 2008, we have significantly reduced our workforce in order to provide additional
time to consummate a strategic transaction or otherwise obtain financing. Following the equity
financing we completed in June 2009, we re-started the final manufacturing activities related to
submitting an NDA for ANX-530 and intend to continue to evaluate the data from our
recently-completed bioequivalence study of ANX-514. However, even if we complete the offering
described in this prospectus, we may need to raise substantial additional capital to fund our
operations, including activities relating to the commercialization of ANX-530, if an NDA for
ANX-530 is submitted and ANX-530 is approved by the FDA for marketing in the U.S., and activities
relating to the development and regulatory review process and, ultimately, commercialization of
ANX-514. If we are not able to raise adequate funds to continue our recently re-started development
programs and operations at levels we believe would enable us to capitalize on our assets, we may
have to abandon some or all of them altogether or attempt to continue our development and
commercialization efforts by entering into arrangements with partners or others that, if available
at all, may not be on favorable terms and may require us to relinquish some or all of our rights to
our product candidates or the financial benefits thereof or we may determine to liquidate our
assets and may receive less than the value at which those assets are carried on our financial
statements.
To conserve funds, we may pursue less expensive but higher-risk development paths. For
instance, we may limit our process development activities to the minimum we feel is sufficient to
support our development and commercialization goals, in particular, with respect to ANX-530.
Process development helps define the various parameters and specifications for manufacturing
products at commercial-scale. Without comprehensive process development activities, we may lack the
information necessary to develop an accurate validation plan to support an NDA and may be unable to
successfully manufacture at commercial scale. If we are unable to validate the manufacturing
processes included in an NDA, we may be required to amend the NDA, which could result in
substantial delays in commercializing the subject drug, as well as call into question our ability
to ultimately obtain marketing approval for that drug. In addition, we would expect to spend
significant funds undertaking the activities necessary to support an amendment to an NDA.
We may seek to merge with or be acquired by another company and that transaction may adversely
affect our business and the value of our securities.
Because of our limited ability to raise funds, including for the reasons noted above, we may
seek to merge with another company with a stronger cash position, complementary work force or
product candidate portfolio or for other reasons. We believe the market price for our common stock
may not accurately reflect the value of our business. While we will continue to seek to maximize
the value of our business to our stockholders, the most attractive option for doing so may require
us to consummate a transaction involving an exchange of our common stock with that of another
company.
There are numerous risks associated with merging or being acquired. These risks include, among
others, incorrectly assessing the quality of a prospective acquirer or merger-partner, encountering
greater than anticipated costs in integrating businesses, facing resistance from employees and
being unable to profitably deploy the assets of the new entity. The operations, financial
condition, and prospects of the post-transaction entity depend in part on our and our
acquirer/merger-partner's ability to successfully integrate the operations related to our product
candidates, business and technologies. We may be unable to integrate operations successfully or to
achieve expected cost savings and any cost savings which are realized may be offset by losses in
revenues or other charges to operations. As a result, our stockholders may not realize the full
value of their investment.
If we fail to maintain registration of the shares of common stock issued or issuable pursuant to
the exercise of warrants we issued in our July 2005 private placement, we will be required to pay
the holders of those securities liquidated damages, which could be material in amount.
The terms of the securities purchase agreement that we entered into in connection with our
July 2005 private placement require us to pay liquidated damages to the purchasers of those
securities in the event any shares issued or issuable pursuant to the exercise of warrants we
issued in the private placement cannot be resold pursuant to our registration statement on Form S-3
(No. 333-127857) filed with and declared effective by the SEC on September 2, 2005. We refer to
this as a maintenance failure. For each 30-day period or portion thereof during which a maintenance
failure remains uncured, we are obligated to pay each purchaser an amount in cash equal to 1% of
the purchaser's aggregate purchase price for any shares of common stock or shares of common stock
issuable upon exercise of warrants then held by the purchaser (pro rated for any period less than a
month), increasing by an additional 1% with regard to each additional 30-day period or portion
thereof until the maintenance failure is cured. There is no cap with respect to the total amount of
these liquidated damages. The aggregate gross proceeds from our July 2005 private placement were
approximately $20 million. We are required to maintain the registration statement until the earlier
of the date (i) all of the securities issued in our July 2005 private placement have been resold
and (ii) each purchaser can resell the securities pursuant to Rule 144 under the Securities Act of
1933, as amended, without regard to the adequate current public information, volume, manner of sale
or notice filing restrictions. The amount of these liquidated damages could be substantial and
could have a material adverse effect on our financial
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condition.
For additional information, see Note 11 of the Notes to Consolidated Financial Statements,
"Registration Payment Arrangement," of our annual report on Form 10-K for the year ended December
31, 2008.
We may be unable to retain the services of key personnel, and, even if we are successful in raising
additional funds to continue our business and recently re-started development activities, we may
not be successful in rebuilding our workforce to carry out the development and commercialization
activities necessary for our product candidates.
We have only two full-time employees and we depend on the services of these employees to
continue our business. We do not have a chief executive officer or chief financial officer. Our
Chief Business Officer and Senior Vice President is currently acting as our interim principal
executive officer and our General Counsel, Secretary and Vice President, Legal is currently acting
as our interim principal financial and accounting officer. To the extent we are successful in
raising additional funds to continue our business and further advance our product candidates toward
commercialization, we may need to expand our managerial, financial, regulatory, research and
development, manufacturing, commercial, quality, compliance and other resources in order to manage
our operations, submit applications to and respond to inquiries from the FDA and, if approved,
commercialize our products. We do not expect that our current management and personnel, systems and
facilities will be adequate to support these activities.
The success of our business will depend, in part, on our ability to attract and retain highly
qualified management, scientific and other personnel, and on our ability to develop and maintain
important relationships with respected service providers and industry-leading consultants and
advisors. Competition for these types of personnel and relationships is intense from numerous
pharmaceutical and biotechnology companies, universities and other research institutions,
particularly in the San Diego, California area. In connection with the cost-cutting measures we
implemented in October 2008, January 2009 and March 2009, we eliminated, among others, our
scientific staff and our manufacturing and regulatory personnel, who had a deep background in our
product candidates and our research and development programs. Recruiting and retaining employees,
including senior-level personnel, with relevant product development experience in cancer and
process development experience with emulsified cytotoxic drugs may be costly and time-consuming. We
have historically provided incentive compensation to our officers and employees in part through
grants of stock options and, more recently, restricted stock units under our equity compensation
plans. Decreases in the trading price of our common stock, however, have substantially reduced the
value of equity compensation awards made to our officers and employees in prior years and such
awards may not provide adequate compensation to retain such individuals. Our ability to provide
competitive compensation to our officers and employees may also be adversely affected by our
limited capital resources and anticipated need to raise substantial additional capital to continue
our business. We cannot ensure that we will be able to retain existing employees or attract and
retain additional skilled personnel on acceptable terms as a result of these factors and,
accordingly, we may not achieve our development and commercialization goals.
We have significant incentive and may, under certain circumstances, have significant severance and
other obligations under agreements with our current officers.
In July 2009, we adopted a 2009 mid-year incentive plan and a retention and severance plan,
both of which apply to Mr. Culley and Mr. Keran, our two remaining employees. Under the incentive
plan, each of Mr. Culley and Mr. Keran are eligible for incentive awards based upon the achievement
of corporate performance objectives in effect at the end of 2009. Awards generally will be paid in
cash. The potential award of each of Mr. Culley and Mr. Keran will be based 100% on our
achievement of corporate objectives and the target award amount for each of them is $150,000. The
target amount of each award may be increased or decreased by multiplying the target amount by a
corporate performance multiplier, as will be determined by the compensation committee of our board
of directors in the first quarter of 2010. Award multipliers will range from zero to 1.5. Payment
of awards under the incentive plan will be made after December 31, 2009 and on or before March 14,
2010. Under the retention plan, if the employment of either of our two remaining employees
terminates at any time as a result of an involuntary termination, and such employee delivers and
does not revoke a general release of claims, which will also confirm any post-termination
obligations and/or restrictions applicable to such employee, such employee will be entitled to an
amount equal to twelve (12) months of such employee's then-current base salary, less applicable
withholdings, and an amount equal to the estimated cost of continuing such employee's health care
coverage and the coverage of such employee's dependents who are covered at the time of the
involuntary termination under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, for a period equal to twelve (12) months. These severance benefits will be paid in a
lump-sum on the date the general release of claims becomes effective. Our aggregate contractual
obligation under the retention plan, including applicable payroll and employer taxes, is approximately $650,000.
We believe these plans are necessary to incentivize and retain these key employees and
reinforce their dedication to us during a period when they would otherwise likely seek alternative
employment. Our contractual responsibility for our current and any future
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incentive and/or severance obligations may cause us to cease or curtail our operations at an earlier date than would
otherwise be the case if we were not required to satisfy these obligations. In addition, part or
all of the proceeds from a future capital raising transaction may be used to satisfy these obligations.
The use of our net operating loss carryforwards may be limited.
Net operating loss carryforwards may expire and not be used. As of December 31, 2008, we had
generated federal net operating loss carryforwards of approximately $90.4 million and state net
operating loss carryforwards of approximately $41.4 million. Federal net operating loss
carryforwards have a 20-year carryforward period and begin to expire in 2020. State net operating
loss carryforwards have a ten year carry forward period and begin to expire in 2012.
Pursuant to Section 382 of the Internal Revenue Code, annual use of our net operating loss
carryforwards may be limited in the event a cumulative change in ownership of more than 50 percent
occurs within a three-year period. We determined that, as of January 1, 2009, no such ownership
change had occurred. However, recent and potential future financing events, including this
offering, may cause changes in ownership under Section 382, which could cause our net operating
loss carryforwards to be subject to limitations and restrictions. If a change in ownership were to
occur, our net operating loss carryforwards could be eliminated or restricted. Inability to fully
utilize our net operating loss carryforwards could have an adverse impact on our financial position
and results of operations.
If we fail to maintain an effective system of internal control over financial reporting, we may not
be able to accurately report our financial results. As a result, current and potential investors
could lose confidence in our financial reporting, which could harm our business and have an adverse
effect on our stock price.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we are required to annually furnish
a report by our management on our internal control over financial reporting. Such report must
contain, among other matters, an assessment by our principal executive officer and our principal
financial officer on the effectiveness of our internal control over financial reporting, including
a statement as to whether or not our internal control over financial reporting is effective as of
the end of our fiscal year. This assessment must include disclosure of any material weakness in our
internal control over financial reporting identified by management. In addition, under current SEC
rules, we will be required to obtain an attestation from our independent registered public
accounting firm as to our internal control over financial reporting for our annual report on Form
10-K for our fiscal year ending December 31, 2009. Performing the system and process documentation
and evaluation needed to comply with Section 404 is both costly and challenging. We have in the
past discovered, and may in the future discover, areas of internal controls that need improvement.
For example, during the fourth quarter of 2008, we discovered that we did not correctly apply
generally accepted accounting principles as they related to accounting for warrant liability
because our accounting staff did not have adequate training or expertise, and determined that we
had a material weakness in our internal control over financial reporting as of December 31, 2007. A
material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of
our annual or interim financial statements will not be prevented or detected on a timely basis. For
a detailed description of this material weakness and our remediation of this material weakness, see
"Part II — Item 9A(T) — Controls and Procedures" of our annual report on Form 10-K for the year
ended December 31, 2008. If additional material weaknesses are identified in our internal control
over financial reporting, neither our management nor our independent registered public accounting
firm will be able to assert that our internal control over financial reporting and/or our
disclosure controls and procedures are effective, and we could be required to further implement
expensive and time-consuming remedial measures. We cannot be certain that any measures we take will
ensure that we implement and maintain adequate internal control over financial reporting and that
we will remediate the material weakness. As a result of recent reductions in our workforce and
other personnel departures, we have experienced substantial turnover in our personnel responsible
for performing activities related to our internal control over financial reporting. We have used
third-party contractors to maintain effective internal control over financial reporting during this
turn-over. However, if we fail to maintain effective internal control over financial reporting
and/or disclosure controls and procedures we could lose investor confidence in the accuracy and
completeness of our financial reports, which could have a material adverse effect on our stock
price.
Our operations might be interrupted by the occurrence of a natural disaster or other catastrophic
event.
Our corporate headquarters are located at a single business park in San Diego, California.
Important documents and records, including copies of our regulatory documents and other records for
our product candidates, are located at our facilities and we depend on our facilities for the
continued operation of our business. Natural disasters and other catastrophic events, such as
wildfires and other fires, earthquakes and extended power interruptions, which have impacted San
Diego businesses in the past, and terrorist attacks, drought or flood, could significantly disrupt
our operations and result in additional, unplanned expense. As a small company, we have
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limited capability to establish and maintain a comprehensive disaster recovery program and, accordingly, we
do not have a formal business continuity or disaster recovery plan, and any natural disaster or
catastrophic event could delay our development and commercialization efforts. Even though we
believe we carry commercially reasonable insurance, we might suffer losses that exceed the coverage available under these insurance policies. In addition, we are not insured against
terrorist attacks or earthquakes.
Risks Related to Drug Development and Commercialization
Further testing of and/or validation of manufacturing processes with respect to our product
candidates is required and regulatory approval may be delayed or denied, which would limit or
prevent us from marketing our product candidates and significantly impair our ability to generate
revenues.
Human pharmaceutical products generally are subject to rigorous preclinical testing and
clinical trials and other approval procedures mandated by the FDA and foreign regulatory
authorities. Various federal and foreign statutes and regulations also govern or influence the
manufacturing, safety, labeling, storage, record keeping and marketing of pharmaceutical products.
The process of obtaining these approvals and the subsequent compliance with appropriate U.S. and
foreign statutes and regulations is time-consuming and requires the expenditure of substantial
resources. In addition, these requirements and processes vary widely from country to country.
To varying degrees based on the regulatory plan for each product candidate, the effect of
government regulation and the need for FDA and other regulatory agency approval will delay
commercialization of our product candidates, impose costly procedures upon our activities, and put
us at a disadvantage relative to larger companies with which we compete. There can be no assurance
that FDA or other regulatory approval for any product candidates developed by us will be granted on
a timely basis, or at all. Even though the FDA has confirmed the appropriateness of a Section
505(b)(2) regulatory path for ANX-530 and ANX-514, the FDA's views may change. If the FDA requires
the longer-term regulatory approval pathway associated with traditional drug development for
ANX-530 and ANX-514, we may determine that the associated time and cost is not financially
justifiable and, as a result, discontinue those programs. If we discontinue the development of one
or both of these product candidates, our business and stock price may suffer.
In connection with any NDA that we file under Section 505(b)(2) of the Federal Food, Drug and
Cosmetic Act, or FDCA, we may be required to notify third parties that we have certified to the FDA
that any patents listed for the approved drug in the FDA's Orange Book publication are invalid or
will not be infringed by the manufacture, use or sale of our drug. If the third-party files a
patent infringement lawsuit against us within 45 days of its receipt of notice of our
certification, the FDA is automatically prevented from approving our NDA until, subject to certain
adjustments, the earliest of 30 months, expiration of the patent, settlement of the lawsuit or a
decision in the infringement case that is favorable to us. Accordingly, we may invest significant
time and expense in the development of our product candidates, including ANX-530 and ANX-514, only
to be subject to significant delay and patent litigation before our products may be commercialized.
We may not achieve our projected development and commercialization goals in the time frames we
announce. Delays in the commencement or completion of pre/non-clinical testing, bioequivalence or
clinical trials or manufacturing, regulatory or launch activities could result in increased costs
to us and delay or limit our ability to generate revenues.
We set goals for and make public statements regarding our estimates of the timing of the
accomplishment of objectives material to successful development and commercialization of our
product candidates. The actual timing of these events can vary dramatically due to any number of
factors, including delays or failures in our pre/non-clinical testing, bioequivalence and clinical
trials and manufacturing, regulatory and launch activities and the uncertainties inherent in the
regulatory approval process. While our regulatory strategy for ANX-530 and ANX-514 has been to
demonstrate the pharmacokinetic equivalence of each to the currently approved reference product in
small, bioequivalence trials in humans, we may determine to conduct clinical studies to support
uses in new indications or other label changes or for other reasons.
We conduct pre/non-clinical activities in the course of our development programs, including in
connection with the manufacture of our product candidates, and in response to requests by
regulatory authorities, as well as for other reasons. Delays in our pre/non-clinical activities
could occur for a number of reasons, including:
•
delays in reaching agreement on acceptable terms with prospective contract research
organizations, or CROs, and contract manufacturing organizations, or CMOs, the terms of
which can be subject to extensive negotiation and may vary significantly among different
CROs and CMOs;
•
failures on the part of our CROs and CMOs in developing procedures and protocols or
otherwise conducting activities on
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timeframes requested by us;
•
changes in regulatory requirements or other standards or guidance relating to
preclinical testing, including testing of pharmaceutical products in animals;
•
a lack of availability of animals that are suitable for the types of studies we plan to
conduct;
•
a lack of availability of capacity at our CMOs, or of the component materials, including
the active pharmaceutical ingredient, or API, or related materials, including vials and
stoppers, necessary to manufacture our product candidates or products; and
•
unforeseen results of preclinical or nonclinical testing that require us to amend study
or test designs or delay future testing or bioequivalence or clinical trials and related
regulatory filings.
In addition, we do not know whether planned bioequivalence or clinical trials will commence on
time or be completed on schedule, if at all. The commencement and completion of trials can be
delayed for a variety of reasons, including delays related to:
•
obtaining regulatory approval to commence a trial;
•
identifying appropriate trial sites and reaching agreement on acceptable terms with
prospective CROs, trial sites and investigators, the terms of which can be subject to
extensive negotiation and may vary significantly among different CROs, trial sites and
investigators;
•
manufacturing sufficient quantities of a product candidate;
•
obtaining institutional review board, or IRB, approval to conduct a trial at a
prospective site;
•
recruiting and enrolling patients to participate in trials for a variety of reasons,
including competition from other clinical trials for the same indication as our product
candidates and the perception that the design of a trial or the proposed treatment regimen
is less beneficial to patients than available alternatives; and
•
retaining patients who have initiated a trial but may be prone to withdraw due to side
effects from the therapy, lack of efficacy or personal issues, or who are lost to further
follow-up.
For example, in October 2007, we announced results of our phase 2b clinical trial of ANX-510,
or CoFactor, for the first-line treatment of metastatic colorectal cancer, which demonstrated that
the CoFactor/5-FU arm did not demonstrate statistically significant improved safety in the trial's
primary endpoint. In November 2007, we announced that we would discontinue enrolling patients in
our phase 3 clinical trial of CoFactor for the first-line treatment of metastatic colorectal cancer
and, in October 2008, we announced that we had discontinued active work on all product candidates
other than ANX-530 and ANX-514, including CoFactor. In addition, in May 2009, we announced that we
did not meet the primary endpoint in our bioequivalence study of ANX-514, resulting in additional
uncertainty around the cost and timeline to obtaining FDA approval for that product candidate.
In addition, a trial may be suspended or terminated by us, the FDA or other regulatory
authorities due to a number of factors, including:
•
failure to conduct the trial in accordance with regulatory requirements or the trial's
protocol;
•
inspection of trial operations or trial sites by the FDA or other regulatory authorities
resulting in the imposition of a clinical hold;
•
unforeseen safety issues; or
•
lack of adequate funding to continue the trial.
Additionally, changes in regulatory requirements and guidance relating to clinical trials may
occur and we may need to amend clinical trial protocols to reflect these changes. Amendments may
require us to resubmit our clinical trial protocols to IRBs for reexamination or renegotiate terms
with CROs, trial sites and clinical investigators, all of which may impact the costs, timing or
successful completion of a clinical trial.
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There can be no assurance that our preclinical and nonclinical testing and bioequivalence
and/or clinical trials will commence or be completed, that we will make regulatory submissions or
receive regulatory approvals as planned or that we will be able to adhere to our current schedule for the development or commercialization of any of our product
candidates. If we experience delays in completion of, or if we terminate, our bioequivalence or
clinical trials or preclinical and nonclinical testing, the commercial prospects for our product
candidates will be harmed, and our ability to generate product revenues will be delayed. In
addition, many of the factors that cause, or lead to, a delay in the commencement or completion of
bioequivalence or clinical trials or preclinical and nonclinical testing may also ultimately lead
to the denial of regulatory approval of a product candidate. Even if we are able to ultimately
commercialize our product candidates, other therapies for the same indications may have been
introduced to the market and established a competitive advantage.
Positive results in our preclinical testing and/or bioequivalence trials do not ensure that future
bioequivalence or clinical trials will be successful or that our product candidates will receive
the regulatory approvals necessary for their commercialization.
Before obtaining regulatory approvals for the commercial sale of any of our product
candidates, we must demonstrate through preclinical testing and bioequivalence or clinical trials
that each product is safe and effective for use in each target indication. Success in preclinical
testing and/or bioequivalence trials does not ensure that subsequent or large-scale trials will be
successful. Additionally, throughout development, we must provide adequate assurance to the FDA and
other regulatory authorities that we can consistently produce our product candidates in conformance
with current good manufacturing practices, or cGMP, and other regulatory standards. Bioequivalence
and clinical trial results are frequently susceptible to varying interpretations and regulatory
authorities may disagree on what are appropriate methods for analyzing data, which may delay, limit
or prevent regulatory approvals. For instance, with respect to our bioequivalence trial of ANX-530,
the FDA may perform its pharmacokinetic equivalence analysis based a patient population other than
the population on which we based our analysis, which may result in the FDA determining that ANX-530
and Navelbine are not bioequivalent, requiring that we evaluate additional patients, re-perform the
study or take other remedial action. In addition, the FDA may inquire regarding the manufacturing
source, in-process and product release specifications and overall uniformity of reference product
used in the bioequivalence trial of ANX-530, particularly since it was conducted at sites in
multiple countries, and we may be unable to provide documentation satisfactory to the FDA with
respect to such reference product, which may result in the FDA requiring that we evaluate
additional patients, re-perform the study or take other remedial measures. Further, the ANX-530
bioequivalence trial was open-label, meaning physician-investigators, as well as patients, may have
been aware of which drug was being administered. There is a risk of investigator bias in reporting
adverse events as a result of the study's open-label nature, including bias that increased the
reporting of adverse events associated with Navelbine and/or that decreased the reporting of
adverse events associated with ANX-530. With respect to ANX-514, despite positive preclinical
testing that indicated pharmacokinetic equivalence between ANX-514 and the reference product, our
bioequivalence trial of ANX-514 did not demonstrate pharmacokinetic equivalence between ANX-514 and
the reference product based on benchmark regulatory standards.
The length of time necessary to complete bioequivalence or clinical trials and manufacturing
development work and to submit an application for marketing approval for a final decision by a
regulatory authority varies significantly and may be difficult to predict. In addition, delays or
rejections may be encountered based upon changes in FDA policy for drug approval during the period
of product development and FDA regulatory review of each submitted NDA. There is a significant risk
that any of our product candidates could fail to show satisfactory results in human trials, as was
the case in our bioequivalence study of ANX-514, or manufacturing development, and, as a result, we
may not continue their development. A failure to obtain requisite regulatory approvals or to obtain
approvals of the scope requested will delay or preclude us from marketing our products or limit the
commercial use of the products, and would have a material adverse effect on our business, financial
condition and results of operations.
If any of our product candidates for which we receive regulatory approval do not achieve broad
market acceptance (including as a result of failing to differentiate our products from competitor
products or as a result of failing to obtain reimbursement rates for our products that are
competitive from the healthcare provider's perspective), the revenues we generate from their sales
will be limited and our business may not be profitable.
Our success will depend in substantial part on the extent to which our products for which we
obtain marketing approval from the FDA and comparable foreign regulatory authorities are accepted
by the medical community and reimbursed by third-party payors, including government payors. The
degree of market acceptance will depend upon a number of factors, including, among other things:
•
our product's perceived advantages over existing treatment methods (including relative
convenience and ease of administration and prevalence and severity of any adverse side
effects);
•
claims or other information (including limitations or warnings) in our product's
approved labeling;
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•
reimbursement and coverage policies of government and other third-party payors;
•
pricing and cost-effectiveness;
•
in the U.S., the ability of group purchasing organizations, or GPOs (including
distributors and other network providers), to sell our products to their constituencies;
•
the establishment and demonstration in the medical community of the safety and efficacy
of our products and our ability to provide acceptable evidence of safety and efficacy;
•
availability of alternative treatments; and
•
the prevalence of off-label substitution of chemically equivalent products.
We cannot predict whether physicians, patients, healthcare insurers or maintenance
organizations, or the medical community in general, will accept or utilize any of our products. If
our products are approved but do not achieve an adequate level of acceptance by these parties, we
may not generate sufficient revenues from these products to become or remain profitable. In
addition, our efforts to educate the medical community and third-party payors regarding the
benefits of our products may require significant resources and may never be successful.
Under our Section 505(b)(2) regulatory strategy for ANX-530 and ANX-514, because we anticipate
submitting NDAs based on pharmacokinetic data, our ability to differentiate our products from
competitor products will be limited unless the FDA allows us to include certain data in our
products' labels. Even if our products demonstrate clinical or pharmacoeconomic benefits, we may be
unable to market our products based on these benefits.
If we fail to obtain a unique Healthcare Common Procedure Coding System, or HCPCS, product
code for ANX-530, it is unlikely we will be able to sell that product at a price that exceeds its
manufacturing, marketing and distribution costs. Even if we obtain separate HCPCS codes for our
products, if our products are perceived to provide little or no advantage relative to competitive
products or for other reasons, we may be required to price our products at levels that do not cover
our costs to manufacture, market and distribute the products or provide any profit, or to price our
products at levels at which they are not competitive.
We do not have manufacturing capabilities and are dependent on single source manufacturers and
suppliers for certain of our product candidates and their component materials, and the loss of any
of these manufacturers or suppliers, or their failure to provide us with an adequate supply of
products or component materials on commercially acceptable terms, or at all, could harm our
business.
We do not have any manufacturing capability. We rely on third-party manufacturers and
component materials suppliers for the manufacture of our product candidates for bioequivalence or
clinical trial purposes and we anticipate establishing relationships with third-party manufacturers
and component materials suppliers for the commercial production of our products. Currently we do
not have any commercial supply agreements or commitments with our third-party manufacturers or
component suppliers, and we cannot ensure that we will be able to establish relationships with
these parties on commercially acceptable terms, or at all. If we fail to establish and maintain
such relationships, we expect it would have a material and adverse effect on our operations. Even
if we successfully establish relationships with third-party manufacturers and component suppliers
on commercially acceptable terms, our manufacturers and suppliers may not perform as agreed or may
terminate their agreements with us. Because many of our single source suppliers provide
manufacturing services to a number of other pharmaceutical companies, our suppliers may experience
capacity constraints or choose to prioritize one or more of their other customers over us. Any
significant problem that our single source manufacturers or suppliers experience could delay or
interrupt the supply to us of bioequivalence or clinical trial materials or products until the
manufacturer or supplier cures the problem or until we locate an alternative source of supply, if
an alternative source is available, and any such delay or interruption could materially and
adversely affect our development and commercial activities and operations.
For instance, ANX-530 is an emulsified cytotoxic product that must be aseptically-filled.
There are a limited number of CMOs capable and willing to manufacture this type of product at the
commercial scale at which we anticipate requiring in accordance with our marketing plans for
ANX-530, which will make identifying and establishing short- or long-term relationships with
willing manufacturers more difficult and provide them with substantial leverage over us in any
negotiations. Furthermore, certain of the component materials of ANX-530 are available only from a
particular supplier, and currently we do not have any short- or long-term agreements for the supply
of those materials.
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Even if we successfully establish a long-term relationship with our current CMO for ANX-530 on
commercially acceptable terms, our CMO may be unable to successfully and consistently manufacture
ANX-530 at commercial scale. We and this manufacturer have limited experience manufacturing ANX-530. Because data from a single bioequivalence trial of
ANX-530 may be sufficient to support an NDA for ANX-530, our and our current contract
manufacturer's ability to gain experience manufacturing ANX-530, in particular at various scales,
has been limited. If our current CMO is unable to manufacture ANX-530 successfully and consistently
at commercial scale and within established parameters, we may be unable to validate our
manufacturing process, even if the FDA otherwise would approve our NDA, and therefore unable to
sell ANX-530. Our current CMO has similarly limited experience with ANX-514.
All manufacturers of our products and product candidates must comply with cGMP requirements
enforced by the FDA through its facilities inspection program, as well as applicable requirements
of foreign regulatory authorities. These requirements include quality control, quality assurance
and the maintenance of records and documentation. Manufacturers of our products and product
candidates may be unable to comply with these cGMP requirements and with other FDA, state and
foreign regulatory requirements. While we or our representatives generally monitor and audit our
manufacturer's systems, we have little control over our manufacturers' ongoing compliance with
these regulations and standards. A failure to comply with these requirements may result in fines
and civil penalties, suspension of production, suspension or delay in product approval, product
seizure or recall, or withdrawal of product approval.
Furthermore, the manufacture of pharmaceutical products requires significant expertise and
capital investment, including the development of advanced manufacturing techniques and process
controls. Manufacturers of pharmaceutical products often encounter difficulties in production,
particularly in scaling up initial production. These problems include difficulties with production
costs and yields, quality control, including stability of the product candidate and quality
assurance testing and shortages of qualified personnel.
If our manufacturers were to encounter any of these difficulties or otherwise fail to comply
with their contractual obligations, our ability to provide product candidates to patients in our
future bioequivalence or clinical trials may be jeopardized. Any delay or interruption in the
supply of supplies could delay the completion of our future trials, increase the costs associated
with maintaining our development programs and, depending upon the period of delay, require us to
commence new trials at significant additional expense or terminate the trials completely. We cannot
ensure that manufacturing or quality control problems will not arise in connection with the
manufacture of our products or product candidates, or that third-party manufacturers will be able
to maintain the necessary governmental licenses and approvals to continue manufacturing such
products or product candidates. Any of the above factors could cause us to delay or suspend
anticipated or on-going trials, regulatory submissions, required approvals or commercialization of
our product candidates, entail higher costs or result in our being unable to effectively
commercialize our products. Our dependence upon third parties for the manufacture of our products
and product candidates may adversely affect our future costs and our ability to develop and
commercialize our products and product candidates on a timely and competitive basis.
If any of our product candidates should be approved, any problems or delays experienced in
their manufacturing processes may impair our ability to provide commercial quantities of the
products, which would limit our ability to sell the products and would adversely affect our
business. It could take significant time to redesign our manufacturing processes or identify
alternative suppliers in response to problems we may encounter as we manufacture our products, if
such alternative processes and suppliers are available at all. Even if we are able to identify
alternative suppliers, they may be unwilling to manufacture our products on commercially reasonable
terms. Neither ANX-530 nor ANX-514 have been manufactured at the scales we believe will be
necessary to maximize their commercial value to us and, accordingly, we may encounter difficulties
in production while scaling-up initial production and may not be successful at all in scaling-up
initial production.
Any new supplier of products or component materials, including API, would be required to
qualify under applicable regulatory requirements and would need to have sufficient rights under
applicable intellectual property laws to the method of manufacturing such products or ingredients.
The FDA may require us to conduct additional bioequivalence or clinical trials, collect stability
data and provide additional information concerning any new supplier, or change in a validated
manufacturing process, before we could distribute products from that supplier or revised process.
Obtaining the necessary FDA approvals or other qualifications under applicable regulatory
requirements and ensuring non-infringement of third-party intellectual property rights could result
in a significant interruption of supply and could require the new supplier to bear significant
additional costs which may be passed on to us. For instance, with respect to ANX-530, the form of
API used in the manufacture of ANX-530 for purposes of our bioequivalence study of ANX-530 will not
be the same form of API used in the manufacture of ANX-530 for purposes of process validation
batches or commercial supply. To ensure the comparability of the ANX-530 used in the bioequivalence
study and the ANX-530 intended for commercial sale, FDA may require that we evaluate both forms of
ANX-530 in additional patients, re-perform the bioequivalence study or take other remedial actions.
We may have insufficient quantities of both forms of ANX-530 and could incur substantial cost and
delay in acquiring such quantities, in addition to the time and expense associated with conducting
the evaluation, re-performing the study or taking other remedial measures.
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We rely in part on third parties to conduct our preclinical and nonclinical testing and
bioequivalence and clinical studies and other aspects of our development programs and if those third parties do not satisfactorily perform their
contractual obligations or meet anticipated deadlines, the development of our product candidates
could be adversely affected.
We do not employ personnel or possess the facilities necessary to conduct the activities
associated with our programs, particularly since we implemented severe cost-cutting measures in
late 2008 and early 2009. We engage consultants, advisors, CROs, CMOs and others to design and
conduct preclinical and nonclinical tests and bioequivalence and clinical studies in connection
with the research and development of our product candidates. As a result, many important aspects of
our product candidates' development are outside our direct control. There can be no assurance that
such third parties will perform all of their obligations under arrangements with us or will perform
those obligations satisfactorily.
The CROs with which we contract for execution of our bioequivalence and clinical studies play
a significant role in the conduct of the studies and subsequent collection and analysis of data,
and we will likely depend on these and other CROs and clinical investigators to conduct our future
bioequivalence or clinical or studies or assist with our analysis of completed bioequivalence
studies. Individuals working at the CROs with which we contract, as well as investigators at the
sites at which our studies are conducted, are not our employees, and we cannot control the amount
or timing of resources that they devote to our programs. If these CROs fail to devote sufficient
time and resources to our studies, or if their performance is substandard, it will delay the
approval of our applications to regulatory agencies and the introduction of our products. Failure
of these CROs to meet their obligations could adversely affect development of our product
candidates. Moreover, these CROs may have relationships with other commercial entities, some of
which may compete with us. If they assist our competitors at our expense, it could harm our
competitive position.
For instance, we lack the internal capabilities to fully analyze the data from our
bioequivalence study of ANX-514 and will rely on multiple third-party consultants to help us
interpret and understand the data. Because of the impact different analyses of the data may have on
our business, we believe an employee likely would approach the data and analysis in a substantially
more rigorous, thoughtful and creative manner than a consultant or contractor.
We currently have no sales or marketing capability and our failure to develop these and related
capabilities internally or contract with third parties to perform these activities successfully
could delay and/or limit our ability to generate revenues in the event one or more of our product
candidates obtains regulatory approval.
We currently do not have sales, marketing or commercialization personnel. We have limited
business development personnel. To commercialize our products, including ANX-530, we will have to
acquire or develop sales, marketing and distribution capabilities, or rely on marketing partners or
other arrangements with third parties for the marketing, distribution and sale of our products.
There is no guarantee that we will be able to establish marketing, distribution or sales
capabilities or make arrangements with third parties to perform those activities on terms
satisfactory to us, or that any internal capabilities or third party arrangements will be
cost-effective. The acquisition or development of a sales and distribution and associated
regulatory compliance infrastructure will require substantial resources, which may divert the
attention of our management and key personnel and negatively impact our product development
efforts.
In addition, any third parties with which we establish marketing, distribution or sales
arrangements may have significant control over important aspects of the commercialization of our
products, including market identification, marketing methods, pricing, composition of sales force
and promotional activities. If we retain third-party service providers to perform functions related
to the sale and distribution of our products, key aspects of those functions that would be out of
our direct control could include warehousing and inventory management, distribution, contract
administration and chargeback processing, accounts receivable management and call center
management. In this event, we would place substantial reliance on third-party providers to perform
services for us, including entrusting our inventories of products to their care and handling. If
these third-party service providers fail to comply with applicable laws and regulations, fail to
meet expected deadlines, or otherwise do not carry out their contractual duties to us, or encounter
natural or other disasters at their facilitates, our ability to deliver product to meet commercial
demand could be significantly impaired. In addition, we may use third parties to perform various
other services for us relating to sample accountability and regulatory monitoring, including
adverse event reporting, safety database management and other product maintenance services. If the
quality or accuracy of the data maintained by these service providers is insufficient, our ability
to continue to market our products could be jeopardized or we could be subject to regulatory
sanctions. We do not currently have the internal capacity to perform these important commercial
functions, and we may not be able to maintain commercial arrangements for these services on
reasonable terms, or at all. Even if we are successful in establishing and maintaining these
arrangement, there can be no assurance that we will be able to control the amount and timing of
resources that any third party may devote to our products or prevent any third party from pursuing
alternative technologies or products that could result in the development of products that compete
with, or the withdrawal of support for, our products.
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If we receive regulatory approval for one or more of our product candidates, we may face
competition from generic products, which could exert downward pressure on the pricing and market
share of our products and limit our ability to generate revenues.
Many of the currently marketed and anticipated products against which our product candidates
may compete are, or we anticipate will be, available as generics. For instance, ANX-530 will
compete against Navelbine, for which generic equivalents are already available. ANX-514 will
compete against Taxotere. We anticipate that ANX-514 will also compete against other formulations
of docetaxel and that generic Taxotere will enter the market in November 2013 or May 2014
(depending on whether a period of pediatric exclusivity is granted in the future). Even if we
obtain unique HCPCS codes for our products, the existence of generic products could make it more
difficult for our branded products, including ANX-530 and ANX-514, to gain or maintain market share
and could cause prices for our products to drop, each of which could adversely affect our business.
We may also face competition for our products from lower priced products from foreign
countries that have placed price controls on pharmaceutical products. Proposed federal legislative
changes may expand consumers' ability to import lower priced versions of our and competing products
from Canada. Further, several states and local governments have implemented importation schemes for
their citizens, and, in the absence of federal action to curtail such activities, we expect other
states and local governments to launch importation efforts. The importation of foreign products
that compete with our own products could negatively impact our business and prospects.
Even if we receive regulatory approval in the U.S. for ANX-530 and/or ANX-514, we will likely
depend on a limited number of group purchasing organizations for retail distribution of these
products, and if we subsequently lose any significant GPO relationship, our business could be
harmed.
Our current U.S. commercialization strategy for our lead emulsion formulations initially
involves marketing and selling these products through a limited number of GPOs. Even if we are
successful in securing relationships with these entities, the subsequent loss of any one or more of
these GPO accounts or a material reduction in their participation could harm our business,
financial condition or results of operations. In addition, we may face pricing pressure from these
GPOs.
Even if we receive regulatory approval for one or more of our product candidates, they may still
face future development and regulatory difficulties that could materially and adversely affect our
business, financial condition and results of operations and cause our stock price to decline.
Even if initial regulatory approval is obtained, the FDA or a foreign regulatory agency may
still impose significant restrictions on a product's indicated uses or marketing or impose ongoing
requirements for potentially costly post-approval studies or marketing surveillance programs. Our
product candidates will also be subject to ongoing FDA requirements related to the labeling,
packaging, storage, advertising, promotion, record-keeping and submission of safety and other
post-market information on the product. For instance, in September 2007, amendments to the FDCA
were signed into law. These amendments significantly strengthen the FDA's regulatory authority over
drugs, including new controls over the post-approval monitoring of drugs. The FDA may now require
changes to approved drug labels, require post-approval clinical trials and impose distribution and
use restrictions on certain drugs. In addition, approved products, manufacturers and manufacturers'
facilities are subject to continuing regulatory review and periodic inspections. If previously
unknown problems with a product are discovered, such as adverse events of unanticipated severity or
frequency, or problems with the facility where the product is manufactured, the FDA may impose
restrictions on that product or us, including requiring withdrawal of the product from the market.
If we or a CMO of ours fail to comply with applicable regulatory requirements, a regulatory agency
may:
•
issue warning letters or untitled letters;
•
impose civil or criminal penalties;
•
suspend or withdraw regulatory approval;
•
suspend or terminate any ongoing bioequivalence or clinical trials;
•
refuse to approve pending applications or supplements to approved applications;
•
impose restrictions or affirmative obligations on our or our CMO's operations, including
costly new manufacturing requirements;
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•
close the facilities of a CMO; or
•
seize or detain products or require a product recall.
Even if one or more of our product candidates receive regulatory approval in the U.S., we may never
receive approval or commercialize our products outside of the U.S., which would limit our ability
to realize the full market potential of our product candidates.
In order to market any products outside of the U.S., we must establish and comply with
numerous and varying regulatory requirements of other countries regarding safety and efficacy.
Approval procedures vary among countries and can involve additional product testing and validation
and additional administrative review periods. The time required to obtain approval in other
countries might differ from that required to obtain FDA approval. In particular, other countries
may not have a comparable regulatory as is available under Section 505(b)(2) of FDCA. Even if a
country did have a comparable procedure, that country may require a more robust data package than
the pharmacokinetic data package that we intend to submit in support of NDAs for ANX-530 and
ANX-514. The regulatory approval process in other countries may include all of the risks detailed
above regarding FDA approval in the U.S., as well as other risks. Regulatory approval in one
country does not ensure regulatory approval in another, but a failure or delay in obtaining
regulatory approval in one country may have a negative effect on the regulatory process in others.
Failure to obtain regulatory approval in other countries or any delay or setback in obtaining such
approval could have the same adverse effects detailed above regarding FDA approval in the U.S. As
described above, such effects include the risks that our product candidates may not be approved for
all indications requested, which could limit the uses of our product candidates and have an adverse
effect on product sales, and that such approval may be subject to limitations on the indicated uses
for which the product may be marketed or require costly, post-marketing follow-up studies.
Our product candidates may cause undesirable side effects or have other properties that could delay
or prevent their regulatory approval or commercialization.
Undesirable side effects caused by our product candidates could interrupt, delay or halt
bioequivalence or clinical trials and could result in the denial of regulatory approval by the FDA
or other regulatory authorities for any or all indications, and in turn prevent us from
commercializing our product candidates and generating revenues from their sale.
In addition, if any of our product candidates receive marketing approval and we or others
later identify undesirable side effects caused by the product or the reference product:
•
regulatory authorities may require the addition of labeling statements, such as a "black
box" warning or a contraindication;
•
regulatory authorities may withdraw their approval of the product;
•
we may be required to change the way the product is administered, conduct additional
clinical trials or change the labeling of the product; and
•
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the
affected product or could substantially increase the costs and expenses of commercializing the
product, which in turn could delay or prevent us from generating significant revenues from its
sale.
Risks Related to Our Intellectual Property
Our success will depend on patents and other protection we obtain on our product candidates and
proprietary technology.
Our success will depend in part on our ability to:
•
obtain and maintain patent protection with respect to our products;
•
prevent third parties from infringing upon our proprietary rights;
•
maintain trade secrets;
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•
operate without infringing upon the patents and proprietary rights of others; and
•
obtain appropriate licenses to patents or proprietary rights held by third parties if
infringement would otherwise occur, both in the U.S. and in foreign countries.
The patent and intellectual property positions of biopharmaceutical companies, including ours,
are uncertain and involve complex legal and factual questions. There is no guarantee that we have
or will develop or obtain the rights to products or processes that are patentable, that patents
will issue from any pending applications or that claims allowed will be sufficient to protect the
technology we develop or have developed or that is used by us, our CMOs or our other service
providers. In addition, we cannot be certain that patents issued to us will not be challenged,
invalidated, infringed or circumvented, including by our competitors, or that the rights granted
thereunder will provide competitive advantages to us.
Furthermore, patent applications in the U.S. are confidential for a period of time until they
are published, and publication of discoveries in scientific or patent literature typically lags
actual discoveries by several months. As a result, we cannot be certain that the inventors listed
in any patent or patent application owned by us were the first to conceive of the inventions
covered by such patents and patent applications or that such inventors were the first to file
patent applications for such inventions.
We may also rely on unpatented trade secrets and know-how and continuing technological
innovation to develop and maintain our competitive position, which we seek to protect, in part, by
confidentiality agreements with employees, consultants, collaborators and others. We also have
invention or patent assignment agreements with our employees and certain consultants. There can be
no assurance, however, that binding agreements will not be breached, that we will have adequate
remedies for any breach, or that trade secrets will not otherwise become known or be independently
discovered by competitors. In addition, there can be no assurance that inventions relevant to us
will not be developed by a person not bound by an invention assignment agreement with us.
Exclusivity for our emulsion-formulation product candidates may be limited because of the nature of
patent protection available for these candidates.
While the patent applications covering our emulsion-formulation product candidates, including
ANX-530 and ANX-514, include product claims, they cover only specific formulations of the
underlying chemical entity, or API, and not the API itself. Such product claims are not as strong
as claims covering new APIs, which are widely viewed as the strongest form of intellectual property
protection for pharmaceutical products, as they apply without regard to how the API is formulated
or the method in which the API is used. A competitor may modify our formulations and obtain
regulatory approval for products with the same API as our products. Such competitive products may
not infringe the patents we hold covering our specific formulations of the API.
If we are sued for infringing the proprietary rights of third parties, it will be costly and time
consuming, and an unfavorable outcome would have an adverse effect on our business.
Our commercial success depends on our ability and the ability of our CMOs and component
suppliers to develop, manufacture, market and sell our products and product candidates and use our
proprietary technologies without infringing the proprietary rights of third parties. Numerous U.S.
and foreign issued patents and pending patent applications, which are owned by third parties, exist
in the fields in which we are or may be developing products. As the biotechnology and
pharmaceutical industry expands and more patents are issued, the risk increases that our products
and product candidates may give rise to claims that our products or product candidates infringe the
rights of others. Because patent applications can take many years to publish and issue, there may
be currently pending applications, unknown to us, that may later result in issued patents that our
products, product candidates or technologies infringe, or that the process of manufacturing our
products or any of their respective component materials, or the component materials themselves,
infringe.
We or our CMOs or component material suppliers may be exposed to, or threatened with, future
litigation by third parties having patent or other intellectual property rights alleging that our
products, product candidates and/or technologies infringe their intellectual property rights or
that the process of manufacturing our products or any of their respective component materials, or
the component materials themselves, infringe their intellectual property rights. If one of these
patents was found to cover our products, product candidates, technologies or their uses, or any of
the underlying manufacturing processes or components, we could be required to pay damages and could
be unable to commercialize our products or use our technologies or methods unless we are able to
obtain a license to the patent or intellectual property right. A license may not be available to us
on acceptable terms, if at all. In addition, during litigation, a patent holder could obtain a
preliminary injunction or other equitable remedy that could prohibit us from making, using or
selling our products, technologies or methods.
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In connection with any NDA that we file under Section 505(b)(2) of the FDCA, we may be
required to notify third parties that we have certified to the FDA that any patents listed for the
approved drug in the FDA's Orange Book publication are invalid or will not be infringed by the
manufacture, use or sale of our drug. If the third-party files a patent infringement lawsuit
against us within 45 days of its receipt of notice of our certification, the FDA is automatically
prevented from approving our Section 505(b)(2) NDA until, subject to certain adjustments, the
earliest of 30 months, expiration of the patent, settlement of the lawsuit or a decision in the
infringement case that is favorable to us. Accordingly, we may invest significant time and expense
in the development of our product candidates, including ANX-514, only to be subject to significant
delay and patent litigation before our product candidates may be commercialized.
There is a substantial amount of litigation involving patent and other intellectual property
rights in the biotechnology and pharmaceutical industries generally. If a third party claims that
we or our CMOs or component material suppliers infringe its intellectual property rights, we may
face a number of issues, including, but not limited to:
•
infringement and other intellectual property claims which, with or without merit, may be
expensive and time consuming to litigate and may divert our management's attention from our
core business;
•
substantial damages for infringement, including treble damages and attorneys' fees,
which we may have to pay if a court decides that the product at issue infringes on or
violates the third party's rights;
•
a court prohibiting us from selling or licensing the product unless the third party
licenses its product rights to us, which it may not be required to do;
•
if a license is available from the third party, we may have to pay substantial
royalties, fees and/or grant cross-licenses to our products; and
•
redesigning our products or processes so they do not infringe, which may not be possible
or may require substantial funds and time.
No assurance can be given that patents do not exist, have not been filed, or could not be
filed or issued, which contain claims covering our products, technology or methods or those of our
CMOs or component material suppliers. Because of the number of patents issued and patent
applications filed in our field, we believe there is a risk that third parties may allege they have
patent rights encompassing our products, technology or methods or those of our CMOs or component
material suppliers.
In addition, it may be necessary for us to enforce patents under which we have rights, or to
determine the scope, validity and unenforceability of other parties' proprietary rights, which may
affect our rights. There can be no assurance that our patents would be held valid by a court or
administrative body or that an alleged infringer would be found to be infringing. The uncertainty
resulting from the mere institution and continuation of any technology-related litigation or
interference proceeding could have a material and adverse effect on us.
RISKS RELATED TO OUR INDUSTRY
We expect intense competition in the marketplace for all of our product candidates.
The industry in which we operate is highly competitive and rapidly changing. If successfully
developed and approved, all of our products will likely compete with existing and new products and
therapies and our competitors may succeed in commercializing products more rapidly or effectively
than us, which would have a material and adverse effect on our results of operations and financial
condition. In addition, there are numerous companies with a focus in oncology and/or that are
pursuing the development of pharmaceuticals that target the same diseases as are targeted by the
products being developed by us or that focus on reformulating currently approved drugs. We
anticipate that we will face intense and increasing competition in the future as new products enter
the market and advanced technologies become available. There is no assurance that existing products
or new products developed by competitors will not be more effective, or more effectively marketed
and sold, than those we may market and sell. Competitive products may render our products and
product candidates obsolete or noncompetitive.
For instance, numerous companies are focused on reformulating currently approved
chemotherapeutic agents. In particular, the taxanes, the class of drugs of which Taxotere is a
member, have experienced substantial commercial success, in part as a result of their effectiveness
in treating a wide variety of cancers, which has generated significant interest in reformulating
Taxotere and other taxanes. In addition to our approach of emulsifying docetaxel, other companies
are pursuing alternative delivery vehicles, including
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the use of albumin nanoparticles, prodrugs, polyglutamates, analogs, co-solvents, liposomes
and microspheres. Many of these or similar approaches could be applied to vinorelbine. Relative to
our formulations, formulations based on one or more of these other methods may result in greater
efficacy or safety, provide better drug delivery to tumor sites or otherwise increase benefits to
patients and healthcare providers.
In particular, ANX-530 and ANX-514, if approved, may compete against Navelbine and Taxotere,
respectively, as well as their generic equivalents and other formulations of vinorelbine and
docetaxel. In addition to Navelbine, currently there are at least 6 generic versions of vinorelbine
on the market. In addition, there is an oral formulation of vinorelbine approved for use in the
European Union, or EU, against which we would compete if our emulsion formulation of vinorelbine
were approved for use in the EU. In the U.S., in May 2010 (but subject to any period of pediatric
exclusivity that may be granted in the future), patent protection ends for docetaxel and, in
November 2013 (but subject to any period of pediatric exclusivity that may be granted in the
future), patent protection ends for Taxotere. We are aware of two leading generics companies that
each have developed or acquired a formulation of docetaxel and have certified that, after May 2010,
their respective formulations of docetaxel will not infringe any unexpired Taxotere patents.
Under our current regulatory strategy, because we anticipate submitting Section 505(b)(2) NDAs
with only bioequivalence data, the ability to differentiate our products from competitor products
will be limited. Even if we believe our products demonstrate clinical or pharmacoeconomic benefits,
we may be unable to market our products based on these benefits. If our products fail to obtain
unique HCPCS codes, we may be required to price our products at levels that do not cover our costs
to manufacture, market and distribute the products or provide any profit, or to price our products
at levels at which they are not competitive.
Companies likely to have products that will compete with our product candidates have
significantly greater financial, technical and human resources and are better equipped to develop,
manufacture, market and distribute products. Many of these companies have extensive experience in
preclinical testing and clinical trials, obtaining FDA and other regulatory approvals and
manufacturing and marketing products and have products that have been approved or are in late-stage
development and operate large, well-funded research and development programs.
Smaller companies may also prove to be significant competitors, particularly through
collaborative arrangements with large pharmaceutical and biotechnology companies. Furthermore,
academic institutions, government agencies and other public and private research organizations are
becoming increasingly aware of the commercial value of their inventions and are actively seeking to
commercialize the technology they have developed.
We are subject to uncertainty relating to healthcare reform measures and reimbursement policies
that, if not favorable to our products, could hinder or prevent our products' commercial success.
Our ability to commercialize our products successfully will depend in part on the extent to
which reimbursement for the costs of such products and related treatments will be available from
government health administration authorities, private health insurers and other third-party payors.
Significant uncertainty exists as to the reimbursement status of newly approved medical products.
The continuing efforts of the government, insurance companies, managed care organizations and other
payors of healthcare services to contain or reduce costs of healthcare may adversely effect:
•
our ability to set a price we believe is fair for our products;
•
our ability to generate revenues or achieve or maintain profitability;
•
the future revenues and profitability of our potential customers, suppliers and
collaborators; and
•
the availability to us of capital.
If we are successful in obtaining FDA approval for ANX-530, we will compete with Navelbine and
several generic versions of Navelbine. Our ability to commercialize ANX-530 will depend in part on
the extent to which governmental authorities, private health insurers and other organizations
establish appropriate coverage and reimbursement levels for the cost of our products and related
treatments. These payors are increasingly attempting to contain healthcare costs by limiting both
coverage and the level of reimbursement, particularly for new therapeutic products or if there is a
perception that the target indication of the new product is well-served by existing treatments.
Accordingly, even if coverage and reimbursement are provided, market acceptance of our products
would be adversely affected if the amount of coverage and/or reimbursement available for the use of
our products proved to be unprofitable for healthcare providers or less profitable than alternative
treatments.
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There have been federal and state proposals to subject the pricing of healthcare goods and
services to government control and to make other changes to the U.S. healthcare system. While we
cannot predict the outcome of current or future legislation, we anticipate, particularly given
President Obama's focus on healthcare reform, that Congress and state legislatures will introduce
initiatives directed at lowering the total cost of healthcare. In addition, in certain foreign
markets, the pricing of drugs is subject to government control and reimbursement may in some cases
be unavailable or insufficient. It is uncertain if future legislative proposals, whether domestic
or abroad, will be adopted that might affect our product candidates or what actions federal, state,
or private payors for healthcare treatment and services may take in response to any such healthcare
reform proposals or legislation. Any such healthcare reforms could have a material and adverse
effect on the marketability of any products for which we ultimately receive FDA or other regulatory
agency approval.
We face potential product liability exposure and, if successful claims are brought against us, we
may incur substantial liability for a product or product candidate and may have to limit its
commercialization. In the future, we anticipate that we will need to obtain additional or increased
product liability insurance coverage and it is uncertain that such increased or additional
insurance coverage can be obtained on commercially reasonable terms.
Our business (in particular, the use of our product candidates in clinical trials and the sale
of our products for which we obtain marketing approval) will expose us to product liability risks.
Product liability claims might be brought against us by patients, health care providers,
pharmaceutical companies or others selling our products. If we cannot successfully defend ourselves
against these claims, we will incur substantial liabilities. Regardless of merit or eventual
outcome, liability claims may result in:
•
decreased demand for our products or product candidates;
•
impairment of our business reputation;
•
withdrawal of bioequivalence or clinical trial participants;
•
costs of related litigation;
•
substantial monetary awards to patients or other claimants;
•
loss of revenues; and
•
the inability to commercialize our products and product candidates.
We maintain limited product liability insurance for our bioequivalence and clinical trials,
but our insurance coverage may not reimburse us or may not be sufficient to reimburse us for any
expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive
and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in
sufficient amounts to protect us against losses.
We intend to expand our insurance coverage to include the sale of commercial products if we
obtain marketing approval of any of our product candidates, but we may be unable to obtain product
liability insurance on commercially acceptable terms or may not be able to maintain such insurance
at a reasonable cost or in sufficient amounts to protect us against potential losses. Large
judgments have been awarded in class action lawsuits based on drugs that had unanticipated side
effects. A successful product liability claim or series of claims brought against us could cause
our stock price to fall and, if judgments exceed our insurance coverage, could decrease our cash
and adversely affect our business.
RISKS RELATED TO OUR COMMON STOCK
We are currently not in compliance with NYSE Amex continuing listing standards and are at risk of
being delisted from the NYSE Amex equities market.
Our common stock currently trades on the NYSE Amex. NYSE Amex will normally consider
suspending dealings in, or removing from the list, securities of an issuer which has stockholders'
equity of less than $6.0 million if such issuer has sustained losses from continuing operations
and/or net losses in its five most recent fiscal years. As of March 31, 2009, our stockholders'
equity was approximately $3.0 million and we have incurred annual net losses since inception. In
addition, NYSE Amex will normally consider suspending dealings in, or removing from the list,
securities selling for a substantial period of time at a low price per share if the issuer fails to
effect a reverse split of such stock within a reasonable time after being notified that the NYSE
Amex deems such
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action to be appropriate under the circumstances. Since October 1, 2007 through the date
hereof, the closing price of a share of our common stock has been less than $1.00.
On June 1, 2009, we received notice from the NYSE Amex staff that, based on their review of
our Form 10-Q for the period ended March 31, 2009, we are not in compliance with certain
stockholders' equity continued listing standards. Specifically, the NYSE Amex staff noted that we
are not in compliance with Section 1003(a)(ii) of the NYSE Amex Company Guide because we reported
stockholders' equity of less than $4,000,000 and losses from continuing operations and net losses
in three of our four most recent fiscal years, or with Section 1003(a)(iii) of the Company Guide
because we reported stockholders' equity of less than $6,000,000 and losses from continuing
operations and net losses in our five most recent fiscal years. In addition, the NYSE Amex staff
notified us, in accordance with Section 1003(f)(v) of the Company Guide, that it deems it
appropriate for us to effect a reverse stock split of our common stock to address its low selling
price per share, and that if a reverse stock split is not completed within a reasonable amount of
time after June 1, 2009, the NYSE Amex may consider suspending dealings in, or removing from the
list, our common stock.
To maintain listing of our common stock on the NYSE Amex, the
NYSE Amex required us to submit a plan by July 1,
2009, advising the exchange of the actions we have taken, or will take, to regain compliance with
Sections 1003(a)(ii) and (iii) of the Company Guide by December 1, 2010. On July 1, 2009, we
submitted a plan to attempt to resolve our listing deficiencies and regain compliance with the continued
listing requirements. If the NYSE Amex accepts our plan, then we may be able to continue our
listing during the plan period, up to December 1, 2010, during which time we will be subject to
periodic reviews to determine whether we are making progress consistent with the plan. If the plan
we submitted is not accepted by the NYSE Amex or, if the plan is accepted but the NYSE Amex
determines that we are not making progress consistent with the plan or that we are not in
compliance with all continued listing standards of the Company Guide by November 29, 2010, then we
expect the NYSE Amex will initiate delisting proceedings.
As a result of the NYSE Amex's warning that if we do not complete a reverse stock split of our
common stock to address its low selling price per share within a reasonable amount of time after
June 1, 2009 it may consider suspending dealings in, or removing from the list, our common stock,
our board of directors has called a special meeting of our stockholders to be held on August 25,
2009. We have recommended to our stockholders that at this special meeting they approve
authorizing our board of directors to effect a reverse stock split in any ratio in the board's
discretion that is not less than 2:1 nor greater than 50:1. If our stockholders do not provide
this authorization, the NYSE Amex may subsequently notify us that it has determined to suspend
dealings in, or remove from the list, our common stock.
The delisting of our common stock from the NYSE Amex would likely reduce the trading volume
and liquidity in our common stock and may lead to further decreases in the trading price of our
common stock. The delisting of our common stock may also materially impair our stockholders'
ability to buy and sell shares of our common stock. In addition, the delisting of our common stock
could significantly impair our ability to raise capital, which is critical to the continuation of
our business.
If our common stock were delisted and determined to be a "penny stock," a broker-dealer may find it
more difficult to trade our common stock and an investor may find it more difficult to acquire or
dispose of our common stock in the secondary market.
In addition, if our common stock were removed from listing with the NYSE Amex, it may be
subject to the so-called "penny stock" rules. The SEC has adopted regulations that define a "penny
stock" to be any equity security that has a market price per share of less than $5.00, subject to
certain exceptions, such as any securities listed on a national securities exchange. For any
transaction involving a "penny stock," unless exempt, the rules impose additional sales practice
requirements on broker-dealers, subject to certain exceptions. If our common stock were delisted
and determined to be a "penny stock," a broker-dealer may find it more difficult to trade our
common stock and an investor may find it more difficult to acquire or dispose of our common stock
on the secondary market. Investors in penny stocks should be prepared for the possibility that they
may lose their whole investment.
The market price of our common stock has been and is likely to continue to be highly volatile.
On October 1, 2007, the market price for our common stock dropped almost 80% following our
announcement of the results of our phase 2b clinical trial of CoFactor for the first-line treatment
of metastatic colorectal cancer. In addition, the market price for our common stock has
historically been highly volatile, and the market for our common stock has from time to time
experienced significant price and volume fluctuations that are unrelated to our operating
performance. The market price of our common stock may fluctuate significantly in response to a
number of factors, including:
•
the level of our financial resources and ability to continue as a going concern;
•
announcements of entry into or consummation of a financing or strategic transaction;
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•
any decision by us to liquidate our assets and wind-up operations;
•
changes in the regulatory status of our product candidates, including results of our
bioequivalence and clinical trials and other research and development programs;
•
FDA or international regulatory actions and regulatory developments in the U.S. and
foreign countries;
•
announcements of new products or technologies, commercial relationships or other events
(including bioequivalence and clinical trial results and regulatory events and actions) by
us or our competitors;
•
market conditions in the pharmaceutical, biopharmaceutical and biotechnology sectors;
•
developments concerning intellectual property rights generally or those of us or our
competitors;
•
litigation or public concern about the safety of our products or product candidates;
•
changes in securities analysts' estimates of our financial performance or deviations in
our business and the trading price of our common stock from the estimates of securities
analysts;
•
events affecting any future collaborations, commercial agreements and grants;
•
fluctuations in stock market prices and trading volumes of similar companies;
•
sales of large blocks of our common stock, including sales by our executive officers,
directors and significant stockholders or pursuant to shelf or resale registration
statements that register shares of our common stock that may be sold by certain of our
current or future stockholders;
•
discussion of us or our stock price by the financial and scientific press and in online
investor communities;
•
additions or departures of key personnel; and
•
changes in third party reimbursement policies.
As evidenced by the October 1, 2007 decline, the realization of any of the foregoing could
have a dramatic and adverse impact on the market price of our common stock. In addition, class
action litigation has often been instituted against companies whose securities have experienced
periods of volatility in market price. Moreover, regulatory entities often undertake investigations
of investor transactions in securities that experience volatility following an announcement of a
significant event or condition. Any such litigation brought against us or investigation involving
our investors could result in substantial costs and a diversion of management's attention and
resources, which could hurt our business, operating results and financial condition.
Sales of substantial amounts of our common stock or the perception that such sales may occur could
cause the market price of our common stock to drop significantly, even if our business is
performing well.
The market price of our common stock could decline as a result of sales by, or the perceived
possibility of sales by, us or our existing stockholders of shares of our common stock. These sales
might also make it more difficult for us to sell equity securities at a time and price that we deem
appropriate. In addition, this shelf registration statement and our resale registration statements
register a significant number of shares of our common stock, and securities convertible into our
common stock, that may be sold by us or certain of our stockholders, which may increase the
likelihood of sales by, or the perception of an increased likelihood of sales by, us or our
existing stockholders of shares of our common stock.
Anti-takeover provisions in our charter documents and under Delaware law may make an acquisition of
us, which may be beneficial to our stockholders, more difficult, which could depress our stock
price. Alternatively, prohibitions on anti-takeover provisions in our charter documents may
restrict us from acting in the best interests of our stockholders.
We are incorporated in Delaware. Certain anti-takeover provisions of Delaware law and our
charter documents as currently in effect may make a change in control of our company more
difficult, even if a change in control would be beneficial to our stockholders. Our bylaws limit
who may call a special meeting of stockholders and establish advance notice requirements for
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nomination of individuals for election to our board of directors or for proposing matters that
can be acted upon at stockholders' meetings. Delaware law also prohibits corporations from engaging
in a business combination with any holders of 15% or more of their capital stock until the holder
has held the stock for three years unless, among other possibilities, the board of directors
approves the transaction. Our board of directors may use these provisions to prevent changes in the
management and control of our company. Also, under applicable Delaware law, our board of directors
may adopt additional anti-takeover measures in the future. In addition, provisions of certain
compensatory contracts with our management, such as equity award agreements and retention and
incentive agreements with our executive officers, may have an anti-takeover effect by resulting in
accelerated vesting of outstanding equity securities held by these officers and cash payments upon
termination without cause or involuntary termination following a change in control.
In connection with a July 2005 private placement, we agreed with the investors in that
transaction that we would not implement certain additional measures that would have an
anti-takeover effect. As a result, under our amended and restated certificate of incorporation, we
are prohibited from dividing our board of directors into classes and adopting or approving any
"rights plan," "poison pill" or other similar plan or device. A classified board of directors could
serve to protect our stockholders against unfair treatment in takeover situations, by making it
more difficult and time-consuming for a potential acquirer to take control of our board of
directors. A company may also adopt a classified board of directors to ensure stability in the
board of directors and thereby improve long-term planning, which may benefit stockholders. A
"poison pill" or similar plan or device may encourage potential acquirers to discuss their
intentions with the board of directors of a company and avoid the time, expense and distraction of
a hostile take-over. Any benefit to us and our stockholders from instituting a classified board or
adopting or approving a "poison pill" or similar plan or device in these and other circumstances is
unavailable.
Because we do not expect to pay dividends with respect to our common stock in the foreseeable
future, you must rely on stock appreciation for any return on your investment.
We have paid no cash dividends on any of our common stock to date, and we currently intend to
retain our future earnings, if any, to fund the development and growth of our business. As a
result, with respect to our common stock, we do not expect to pay any cash dividends in the
foreseeable future, and payment of cash dividends, if any, will also depend on our financial
condition, results of operations, capital requirements and other factors and will be at the
discretion of our board of directors. Furthermore, we are subject to various laws and regulations
that may restrict our ability to pay dividends and we may in the future become subject to
contractual restrictions on, or prohibitions against, the payment of dividends. Accordingly, the
success of your investment in our common stock will likely depend entirely upon any future
appreciation and there is no guarantee that our common stock will appreciate in value.
RISKS RELATED TO THIS OFFERING
Since we have broad discretion in how we use the proceeds from this offering, we may use the
proceeds in ways with which you disagree.
Although we describe under the heading "Use of Proceeds" in this prospectus our currently
intended use of the net proceeds from this offering, we cannot estimate the allocation of the net
proceeds of this offering among those uses and we reserve the right to change the use of proceeds
as a result of certain contingencies, including any future partnering or strategic transaction
opportunity. Accordingly, our management will have significant flexibility in applying the net
proceeds of this offering. You will be relying on the judgment of our management and our board of
directors with regard to the use of these net proceeds, and you will not have the opportunity, as
part of your investment decision, to assess whether the proceeds are being used appropriately. It
is possible that the net proceeds will be used in a way that does not improve our operating results
or enhance the value of our common stock. In addition, if we are unable to obtain additional
capital or complete a strategic transaction on a timely basis, net proceeds from this offering may
be used for expenses related to seeking protection under the provisions of the U.S. Bankruptcy Code
or conducting an orderly liquidation of our assets and winding up of our corporate affairs. In
either case, you could lose part or all of your investment.
Investors in this offering will pay a much higher price than the book value of our stock.
The public offering price of the securities offered hereby is likely to be substantially
higher than the book value per share of our common stock. Investors purchasing securities in this
offering may, therefore, incur immediate dilution in net tangible book value per share of the
common stock issuable upon conversion or exercise of the securities purchased in this offering. See
"Dilution" below for a more detailed discussion of the dilution you will incur in this offering.
Provisions of the Delaware General Corporation Law may prohibit us from making dividend payments
with respect to our Series C convertible preferred stock or make-whole payments that may be due to
the holders of our Series C convertible preferred stock.
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We are incorporated in the State of Delaware and are subject to the provisions of the Delaware
General Corporation Law (the "DGCL"). Section 170 of the DGCL provides, among other things, that a
Delaware corporation may declare and pay dividends upon shares of its capital stock out of its
surplus, as defined in and computed in accordance with Sections 154 and 244 of the DGCL. As of the
date hereof, we have sufficient surplus to make dividend payments with respect to the Series C
convertible preferred stock to be issued hereunder, as well as sufficient surplus to make the
make-whole payments that may be due to the holders of our Series C convertible preferred stock,
should such make-whole payments be deemed a dividend under the DGCL. However, our surplus will
decrease as we spend our capital on development and other operational activities, including the
development and commercialization activities related to ANX-530 and ANX-514, unless our spending is
offset by capital-raising transactions. If our surplus is less than then-due dividend payments,
including make-whole payments if they are deemed a dividend under the DGCL, we will be prohibited
by the DGCL from making the dividend or make-whole payment, which may constitute a violation of our
certificate of incorporation or a breach of our contractual obligations to the holders of our
Series C convertible preferred stock.
There is no public market for the convertible preferred stock or the warrants being offered in this offering.
There is no established trading market for the convertible preferred stock or the warrants
being offered in this offering, and we do not expect a market to develop. In addition, we do not
intend to apply to list the convertible preferred stock or warrants on any securities exchange or
automated quotation system. Without an active market, the liquidity of the convertible preferred
stock and warrants will be limited.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the registration statement of which it forms a part, and any final or free
writing prospectus, contain forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical fact, are statements that could be
deemed forward-looking statements, including, but not limited to, statements regarding our business
strategy, expectations and plans, our objectives for future operations, including product
development, and our future financial position. We use words such as "goal," "anticipate,"
"believe," "may," "could," "will," "estimate," "continue," "anticipate," "intend," "expect,"
"indicate" and similar expressions to identify forward-looking statements. We base these
forward-looking statements on our current expectations and projections about future events and
trends that we believe may affect our financial condition, results of operations, business
strategy, short-term and long-term business operations and objectives, and financial needs,
including our ability to satisfy our need for additional capital. These forward-looking statements
are subject to risks and uncertainties that could cause our actual results to differ materially
from those reflected in the forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, those discussed in under "Risk Factors" above and
"Management's Discussion and Analysis of Financial Condition and Results of Operations" below.
Any forward-looking statement speaks only as of the date on which it is made and, except as
required by law, we do not intend to update any forward-looking statements publicly to reflect
events or circumstances after the date on which such statement is made or to update the reasons
actual results could differ materially from those anticipated in the forward-looking statements,
even if new information becomes available in the future. You should not place undue reliance on
any forward-looking statement. Before you invest in our common stock or securities convertible
into or exercisable for our common stock, you should be aware that the occurrence of any of the
events described under "Risk Factors" above or elsewhere in this prospectus could have a material
adverse effect on our business, financial condition and results of operation. In such case, the
trading price of our common stock could decline and you could lose all or part of your investment.
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USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the securities offered under this
prospectus, after deducting placement agent's fees and our estimated offering expenses, will be
approximately $[
•
] if we sell the maximum amount of convertible preferred stock and warrants
offered hereby. Because there is no minimum offering amount required as a condition to closing
this offering, we may sell less than all of the securities offered hereby, which may significantly
reduce the amount of proceeds received by us.
We currently intend to use the majority of the net proceeds to fund activities necessary to
advance ANX-530 toward commercialization in the U.S. should we submit an ANX-530 NDA and obtain FDA
approval. We also intend to use net proceeds to fund continued evaluation of the data from our
recently completed bioequivalence study of ANX-514 (docetaxel emulsion) and development activities
necessary to advance our ability to submit an NDA for ANX-514, and for general corporate purposes.
At this time we cannot estimate the allocation of the net proceeds of this offering among these
anticipated uses. The amounts and timing of the expenditures may vary significantly depending on
numerous factors, including our need for and ability to raise additional capital to advance ANX-530
toward commercialization. If we are unable to raise sufficient capital to fund continuation of the
activities necessary to seeking FDA approval to market ANX-530 and ANX-514 and advancing those
product candidates toward commercialization, we may cease operating as a going concern and seek
protection under the provisions of the U.S. Bankruptcy Code or, if sufficient funds are available,
conduct an orderly liquidation of our assets. We reserve the right to change the use of proceeds as
a result of certain contingencies, such as those discussed above and any future opportunities to
evaluate, negotiate and complete one or more strategic or partnering transactions. Accordingly, our
management will have broad discretion in the application of the net proceeds of this offering.
Pending use of the net proceeds, we intent to invest the net proceeds in money market accounts.
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MARKET PRICE OF COMMON STOCK
Our common stock trades under the symbol "ANX" on the NYSE Amex (formerly, the American Stock
Exchange). The following table sets forth the high and low closing prices for our common stock, as
reported by the NYSE Amex, for the periods indicated.
Period
High
Low
2009
First Quarter
$
0.18
$
0.09
Second Quarter
$
0.22
$
0.11
2008
First Quarter
$
0.64
$
0.36
Second Quarter
$
0.54
$
0.33
Third Quarter
$
0.38
$
0.18
Fourth Quarter
$
0.21
$
0.07
2007
First Quarter
$
2.84
$
1.98
Second Quarter
$
2.90
$
2.31
Third Quarter
$
2.80
$
2.07
Fourth Quarter
$
0.88
$
0.43
On July 22, 2009, the closing price of our common stock, as reported by the NYSE Amex, was
$0.13. As of July 22, 2009, we had approximately 165 holders of record of our common stock. We
believe that the number of beneficial owners is substantially greater than the number of record
holders because a large portion of our common stock is held of record through brokerage firms in
"street name."
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock and do not anticipate
declaring or paying any cash dividends on our common stock in the foreseeable future.
Our 5% Series B Convertible Preferred Stock would have accrued cumulative dividends at a rate of 5%
per annum until July 6, 2014, payable on a quarterly basis beginning on October 1, 2009. However, all of the
shares of the 5% Series B Convertible Preferred Stock were converted into common stock prior to the initial
dividend payment date.  Pursuant to the terms of the 5% Series B Convertible Preferred Stock, in connection
with conversion of the preferred shares, we paid an amount equal to $250 per $1,000 stated value of such
converted shares, or an aggregate of $340,250, in lieu of our dividend obligation.  Such payments may be
deemed dividends under the DGCL. Except for
dividends, or amounts that may be deemed dividends, payable on our [
•
]% Series C Convertible Preferred Stock offered hereby, we expect to
retain all available funds and any future earnings to support operations and fund the development
and growth of our business. Our board of directors will determine whether we pay and the amount of
future dividends (including cash dividends), if any.
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CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2009:
•
on an actual basis;
•
on a pro forma basis to give effect to our issuance of 27,540,388 shares of common
stock issued upon full conversion of the 1,993 shares of our 0% Series A Convertible
Preferred Stock sold to investors in an approximately $2.0 million convertible preferred
stock and warrant financing we completed on June 12, 2009 and the 1,361 shares of our 5%
Series B Convertible Preferred Stock sold to investors in an approximately $1.4 million
convertible preferred stock financing we completed on July 6, 2009; and
•
on a pro forma as adjusted basis to give effect to our sale of [
•
] shares of our
convertible preferred stock in this offering, or [
•
] shares of common stock issuable
upon conversion of the convertible preferred stock, at an assumed offering price of
$1,000 per share and conversion price of $[
•
] per share, less the placement agent's fees
and our estimated offering expenses.
You should read this table in conjunction with the section of this prospectus entitled
"Management's Discussion and Analysis of Financial Condition and Results of Operations" and with
our consolidated financial statements and the notes thereto and our unaudited interim condensed
consolidated financial statements and the notes thereto, all of which is included elsewhere in this
prospectus.
As of March 31, 2009
Pro Forma
Actual
Pro Forma
As Adjusted
(unaudited)
(unaudited)
(unaudited)
Preferred stock, $0.001 par value; 1,000,000
shares authorized; 0 shares issued and
outstanding at March 31, 2009, 1,993 0% Series
A shares issued and 0 shares outstanding and
1,361 5% Series B shares issued and 0 shares
outstanding pro forma, 1,993 0% Series A shares
issued and 0 shares outstanding, 1,361 5%
Series B shares issued and 0 shares
outstanding, and [
•
] [
•
]% Series C shares
issued and outstanding pro forma as adjusted
$
—
$
—
[
•
]
Common stock, $0.001 par value; 200,000,000
shares authorized; 90,252,572 shares issued and
outstanding at March 31, 2009, 117,792,960
shares issued and outstanding pro forma, and
[
•
] shares issued and outstanding pro forma as
adjusted
90,254
117,793
[
•
]
Additional paid-in capital
131,925,397
135,179,099
[
•
]
Deficit accumulated during the development stage
(129,003,468
)
(129,715,898
)
[
•
]
Total stockholders' equity (deficit)
3,012,183
5,580,995
[
•
]
The outstanding shares information in the table above excludes:
•
3,509,897 shares of common stock issuable upon the exercise of stock options issued
under our equity incentive plans and outstanding as of March 31, 2009, at a weighted
average exercise price of $1.70 per share;
•
3,250,000 shares of common stock issuable upon vesting and settlement of restricted
stock units outstanding as of March 31, 2009;
•
13,032,759 shares of common stock available for future issuance under our 2008
Omnibus Incentive Plan as of March 31, 2009;
•
13,373,549 shares of common stock issuable upon the exercise of warrants outstanding
as of March 31, 2009, at a
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weighted average exercise price of $2.21 per share;
•
8,116,290 shares of common stock issuable upon the exercise of outstanding warrants
issued to the purchaser in the convertible preferred stock and warrant financing we
completed on June 12, 2009, at an exercise price of $0.15 per share;
•
901,810 shares of common stock issuable upon the exercise of outstanding warrants
issued to the placement agent in connection with the convertible preferred stock and
warrant financing we completed on June 12, 2009, at an exercise price of $0.15 per
share;
•
475,209 shares of common stock issuable upon the exercise of outstanding warrants
issued to the placement agent in connection with the convertible preferred stock
financing we completed on July 6, 2009, at an exercise price of $0.179 per share;
•
[
•
] shares of our common stock issuable upon the exercise of warrants to be
issued to the purchasers in this offering, at an exercise price of $[
•
] per share;
and
•
[
•
] shares of our common stock issuable upon the exercise of warrants to be
issued to the placement agent in connection with this offering, at an exercise price of
$[
•
] per share.
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DILUTION
If you invest in the securities being offered by this prospectus, you will suffer immediate
and substantial dilution in the net tangible book value per share of common stock. Our net tangible
book value as of March 31, 2009 was approximately $2.8 million, or approximately $0.03 per share of
common stock. Net tangible book value per share is determined by dividing our net tangible book
value, which consists of our total tangible assets less total liabilities, by the number of shares
of our common stock outstanding on that date.
Dilution in net tangible book value per share represents the difference between the amount per
share of common stock underlying the convertible preferred stock paid by purchasers in this
offering and the net tangible book value per share of our common stock immediately after this
offering. Without taking into account any other changes in the net tangible book value after March
31, 2009, other than to give effect to:
•
our receipt of the estimated proceeds from the sale of 1,993 shares of convertible
preferred stock, or 18,036,199 shares of common stock issuable upon conversion of the
convertible preferred stock at a conversion price of $0.1105 per share, in our financing
that closed on June 12, 2009, less the placement agent's fees and our estimated offering
expenses,
•
our receipt of the estimated proceeds from the sale of 1,361 shares of convertible
preferred stock, or 9,504,189 shares of common stock issuable upon conversion of the
convertible preferred stock at a conversion price of $0.1432 per share, in our financing
that closed on July 6, 2009, less the placement agent's fees and our estimated offering
expenses, and
•
our receipt of the estimated proceeds from the sale of [
•
] shares of our convertible
preferred stock in this offering, or [
•
] shares of common stock issuable upon conversion
of the convertible preferred stock, at an assumed offering price of $1,000 per share and
conversion price of $[
•
] per share, less the placement agent's fees and our estimated
offering expenses,
our net tangible book value as of March 31, 2009, after giving effect to the items above, would
have been approximately $[
•
] million, or approximately $[
•
] per share of common stock. This
represents an immediate increase of $[
•
] in net tangible book value per share to our existing
stockholders and an immediate dilution of $[
•
] per share to purchasers of securities in this
offering. The following table illustrates this per share dilution:
Assumed public offering price per share
$
[
•
]
Net tangible book value per share as of March 31, 2009
$
0.03
Increase in net tangible book value per share attributable to offering closed June 12, 2009
$
0.01
Increase in net tangible book value per share attributable to offering closed July 6, 2009
$
0.01
Increase in net tangible book value per share attributable to this offering
$
[
•
]
Pro forma net tangible book value per share as of March 31, 2009, after giving effect to offering
closed on June 12, 2009
$
0.04
Pro forma net tangible book value per share as of March 31, 2009, after giving effect to offering
closed on July 6, 2009
$
0.05
Pro forma net tangible book value per share as of March 31, 2009, after giving effect to this offering
$
[
•
]
Dilution in net tangible book value per share to new investors in this offering
$
[
•
]
The above table is based on 90,252,572 shares of our common stock outstanding as of March 31,
2009 (as adjusted for 18,036,199 shares of common stock issued upon conversion of the convertible
preferred stock issued in our financing that closed on June 12, 2009, 9,504,189 shares of common
stock issued upon conversion of the convertible preferred stock issued in our financing that closed
on July 6, 2009, [
•
] shares of common stock issuable upon conversion of the convertible preferred
stock to be issued in this offering), and excludes:
•
3,509,897 shares of common stock issuable upon the exercise of stock options issued
under our equity incentive plans and outstanding as of March 31, 2009, at a weighted
average exercise price of $1.70 per share;
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•
3,250,000 shares of common stock issuable upon vesting and settlement of restricted
stock units outstanding as of March 31, 2009;
•
13,032,759 shares of common stock available for future issuance under our 2008
Omnibus Incentive Plan as of March 31, 2009;
•
13,373,549 shares of common stock issuable upon the exercise of warrants outstanding
as of March 31, 2009, at a weighted average exercise price of $2.21 per share;
•
8,116,290 shares of common stock issuable upon the exercise of outstanding warrants
issued to the purchaser in the convertible preferred stock and warrant financing we
completed on June 12, 2009, at an exercise price of $0.15 per share;
•
901,810 shares of common stock issuable upon the exercise of outstanding warrants
issued to the placement agent in connection with the convertible preferred stock and
warrant financing we completed on June 12, 2009, at an exercise price of $0.15 per
share;
•
475,209 shares of common stock issuable upon the exercise of outstanding warrants
issued to the placement agent in connection with the convertible preferred stock and
warrant financing we completed on July 6, 2009, at an exercise price of $0.179 per
share;
•
[
•
] shares of our common stock issuable upon the exercise of warrants to be
issued to the purchasers in this offering, at an exercise price of $[
•
] per share;
and
•
[
•
] shares of our common stock issuable upon the exercise of warrants to be
issued to the placement agent in connection with this offering, at an exercise price of
$[
•
] per share.
To the extent that any options or warrants are exercised, restricted stock units are settled,
new options or other equity awards are issued under our 2008 Omnibus Incentive Plan, or we
otherwise issue additional shares of common stock in the future, there will be further dilution to
new investors.
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Table of Contents
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with our financial statements and related notes appearing elsewhere
in this prospectus. In addition to historical information, this discussion and analysis contains
forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results
may differ materially from those anticipated in these forward-looking statements.
Overview
We are a development-stage biopharmaceutical company whose fundamental business is focused on
in-licensing, developing and commercializing proprietary product candidates for the treatment of
cancer. We seek to improve the performance and commercial potential of existing treatments by
addressing limitations associated principally with their safety and use. We have devoted
substantially all of our resources to research and development, or R&D, or to acquisition of our
product candidates. We have not yet marketed or sold any products or generated any significant
revenue. Our lead product candidates, ANX-530 and ANX-514, are novel emulsion formulations of
currently marketed chemotherapy drugs.
We have incurred annual net losses since inception. We had a net loss of $3.2 million in the
first quarter of 2009, which included charges associated with our October 2008 and January and
March 2009 reductions in force, and cash and cash equivalents of approximately $5.3 million and
working capital of $2.8 million at March 31, 2009. These factors raise substantial doubt about our
ability to continue as a going concern. Our unaudited condensed consolidated financial statements
for the period ended and at March 31, 2009 have been prepared assuming we will continue as a going
concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of
liabilities in the normal course of business and does not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or the amounts and
classification of liabilities that might be necessary should we be unable to continue as a going
concern.
In March 2009, we announced that we and our wholly-owned subsidiary, SD Pharmaceuticals, Inc.,
entered into a license agreement with respect to ANX-514 with Shin Poong Pharmaceutical Co., Ltd.,
a company organized under the laws of the Republic of Korea, pursuant to which we granted to Shin
Poong an exclusive license, including the right to sublicense, to research, develop, make, have
made, use, offer for sale, sell and import licensed products, in each case solely for the treatment
of cancer by intravenous administration of formulations of docetaxel as emulsified products and
solely in South Korea. Under the terms of the license agreement, we received an upfront licensing
fee of $0.3 million in April 2009 (which we recognized as licensing revenue in the three-month
period ended March 31, 2009 because we met the criteria under our revenue recognition policy in
that period), a regulatory milestone payment of either $0.2 million or $0.4 million (depending on
whether Shin Poong is required by the Korea Food and Drug Administration to conduct a
bioequivalence or clinical study in human subjects prior to receipt of regulatory approval) upon
receipt of regulatory approval for marketing a licensed product in South Korea, one-time commercial
milestone payments tied to annual net sales of licensed products in an aggregate amount of up to
$1.5 million and royalty payments on net sales of licensed products. Shin Poong is responsible for
all development and commercial activities related to ANX-514 in South Korea. If Shin Poong is
required by the Korea Food and Drug Administration to conduct a bioequivalence or clinical trial in
human subjects prior to receipt of regulatory approval and we elect not to supply product to
conduct such trial, which supply obligation is subject to limitations, we will pay Shin Poong $0.1
million.
On June 12, 2009, we completed an approximately $2.0 million registered direct equity
financing, involving of the issuance and sale of shares of our 0% Series A Convertible Preferred
Stock, convertible into 18,036,199 shares of our common stock, and warrants to purchase up to
8,116,290 shares of our common stock. We received approximately $1.7 million in net proceeds from
the offering, after deducting the placement agent's fees and our estimated offering expenses. We
may receive up to approximately $1.2 million of additional proceeds from the exercise of the
warrants issued in that offering; however, those warrants are not exercisable until December 13,
2009 and their exercise is subject to certain ownership limitations. In connection with the
offering, we also issued warrants to purchase up to 910,810 shares of our common stock at an
exercise price of $0.15 per share to our placement agent in consideration for its services.
On July 6, 2009, we
completed an approximately $1.4 million registered direct equity financing involving the issuance of shares of
our 5% Series B Convertible Preferred Stock, convertible into 9,504,189 shares of our common stock. We received
approximately $1.2 million in net proceeds from the offering, after deducting the placement agent's fees and
our estimated offering expenses. The convertible preferred shares were to accrue a 5% dividend until July 6,
2014, unless converted prior to such date.  Upon any conversion of these preferred shares we were obligated to
pay the holder an amount equal to the total dividend that would have otherwise accrued on the shares through
July 6, 2014, less any dividend payment previously made with respect to such converted shares. Twenty-five
percent, or $340,250, of the gross proceeds of the financing were placed in an escrow account for payment of
the dividend and conversion amounts payable on the 5% Series B Convertible Preferred Stock. All of the shares
of the 5% Series B Convertible Preferred Stock have been converted and, pursuant to the terms of the 5% Series
B Convertible Preferred Stock, we paid an aggregate of $340,250 from the escrow account to the holder of the
converted preferred shares in connection with such conversions.
All of the shares of
our 0% Series A Convertible Preferred Stock and 5% Series B Convertible Preferred Stock issued in the June and
July 2009 financings have been converted and, as a result, an additional 27,540,388 shares of our common stock
have been issued since March 31, 2009.
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Following the completion of the June 2009 financing, we re-started the final manufacturing
activities related to submitting an NDA for ANX-530 to seek approval of the FDA to market ANX-530
in the U.S. In addition, we intend to continue to evaluate the data from our recently-completed
bioequivalence study of ANX-514 and we plan to seek a meeting with the FDA to discuss the results.
However, even following the offering described in this prospectus, we may need to raise substantial
additional capital to fund our operations, including activities relating to the commercialization
of ANX-530 in the U.S., if an NDA for ANX-530 is submitted and ANX-530 is approved by the FDA, and
activities relating to the development and regulatory review process and, ultimately,
commercialization of ANX-514.
There can be no assurances that we will be able to obtain additional financing on a timely
basis, or at all. If we are unable to raise sufficient additional capital on a timely basis to
continue our fundamental business operations, we may seek protection under the provisions of the
U.S. Bankruptcy Code or liquidate our assets and wind-up our operations. If we pursue an orderly
liquidation of our assets, based on our current working capital and the estimated costs associated
with seeking approval for and implementing a liquidation plan, we expect the remaining cash
available for distribution to our stockholders, if any, to be insignificant.
Reverse Stock Split
Our board of directors has called a special meeting of our stockholders to be held on August
25, 2009. We have recommended to our stockholders that, at this special meeting, they approve
authorizing our board of directors to effect a reverse stock split of our outstanding common stock
at a ratio in the discretion of the board of directors that is not less than 2:1 nor greater than
50:1.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based upon
consolidated financial statements that we have prepared in accordance with accounting principles
generally accepted in the United States of America, or U.S. The preparation of these consolidated
financial statements requires management to make a number of assumptions and estimates that affect
the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial
statements and accompanying notes. On an on-going basis, we evaluate these estimates and
assumptions, including those related to recognition of expenses in service contracts, license
agreements, share-based compensation and registration payment arrangements. Management bases its
estimates on historical information and assumptions believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about the carrying values
of assets and liabilities not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
Revenue Recognition
. We recognize revenue in accordance with the SEC's Staff Accounting
Bulletin Topic 13, "Revenue Recognition," or Topic 13, and Emerging Issues Task Force Issue, or
EITF, No. 00-21, "Revenue Arrangements with Multiple Deliverables," or EITF 00-21. Revenue is
recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred or services have been rendered; (3) the seller's price to the
buyer is fixed and determinable; and (4) collectability is reasonably assured.
Revenue from licensing agreements is recognized based on the performance requirements of the
agreement. Revenue is deferred for fees received before earned. Nonrefundable upfront fees that are
not contingent on any future performance by us are recognized as revenue when the license term
commences and the revenue recognition criteria under Topic 13 and EITF 00-21 are met. Nonrefundable
upfront fees, where we have ongoing involvement or performance obligations, are recorded as
deferred revenue and recognized as revenue over the life of the contract, the period of the
performance obligation or the development period, whichever is appropriate in light of the
circumstances.
Payments related to substantive, performance-based milestones in an agreement are recognized
as revenue upon the achievement of the milestones as specified in the underlying agreement when
they represent the culmination of the earnings process. Royalty
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revenue from licensed products will be recognized when earned in accordance with the terms of
the applicable license agreements.
R&D Expenses
. R&D expenses consist of expenses incurred in performing R&D activities,
including salaries and benefits, facilities and other overhead expenses, bioequivalence and
clinical trials, research-related manufacturing services, contract services and other outside
expenses. R&D expenses are charged to operations as the underlying work is performed. Advance
payments, including nonrefundable amounts, for goods or services that will be used or rendered for
future R&D activities are deferred and capitalized. Such amounts will be recognized as an expense
as the related goods are delivered or the related services are performed. If the goods will not be
delivered, or services will not be rendered, then the capitalized advance payment is charged to
expense.
Milestone payments that we make in connection with in-licensed technology or product
candidates are expensed as incurred when there is uncertainty in receiving future economic benefits
from the licensed technology or product candidates. We consider the future economic benefits from
the licensed technology or product candidates to be uncertain until such licensed technology or
product candidates are approved for marketing by the FDA or when other significant risk factors are
abated. For accounting purposes, management has viewed future economic benefits for all of our
licensed technology or product candidates to be uncertain.
Payments in connection with our bioequivalence and clinical trials are often made under
contracts with multiple contract research organizations that conduct and manage these trials on our
behalf. The financial terms of these agreements are subject to negotiation and vary from contract
to contract and may result in uneven payment flows. Generally, these agreements set forth the scope
of work to be performed at a fixed fee or unit price or on a time-and-material basis. Payments
under these contracts depend on factors such as the successful enrollment or treatment of patients
or the completion of other milestones. Expenses related to bioequivalence and clinical trials are
accrued based on our estimates and/or representations from service providers regarding work
performed, including actual level of patient enrollment, completion of patient studies, and trials
progress. Other incidental costs related to patient enrollment or treatment are accrued when
reasonably certain. If the contracted amounts are modified (for instance, as a result of changes in
the bioequivalence or clinical trial protocol or scope of work to be performed), we modify our
accruals accordingly on a prospective basis. Revisions in scope of contract are charged to expense
in the period in which the facts that give rise to the revision become reasonably certain. Because
of the uncertainty of possible future changes to the scope of work in bioequivalence and clinical
trials contracts, we are unable to quantify an estimate of the reasonably likely effect of any such
changes on our consolidated results of operations or financial position. Historically, we have had
no material changes in our bioequivalence and clinical trial expense accruals that would have had a
material impact on our consolidated results of operations or financial position.
Purchased In-Process Research and Development
. In accordance with SFAS No. 141, "Business
Combinations," through December 31, 2008, we accounted for the costs associated with any purchased
in-process research and development, or IPR&D, to the statement of operations upon acquisition.
These amounts represent an estimate of the fair value of purchased IPR&D for projects that, as of
the acquisition date, had not yet reached technological feasibility, had no alternative future use,
and had uncertainty in generating future economic benefits. We determine the future economic
benefits from the purchased IPR&D to be uncertain until such technology is incorporated into
products approved for marketing by the FDA or when other significant risk factors are abated.
We adopted SFAS No. 141(R)-1, "Business Combinations", effective for fiscal years beginning on
or after December 15, 2008. The adoption of SFAS 141(R) did not have a material effect on our
consolidated results of operations and financial condition.
Share-based Compensation Expenses
. Effective January 1, 2006, we accounted for share-based
compensation awards granted to employees, including members of our board of directors, in
accordance with the revised SFAS No. 123, "Share-Based Payment," or SFAS 123R, including the
provisions of Staff Accounting Bulletins No. 107 and No. 110. Share-based compensation cost is
measured at the grant date, based on the estimated fair value of the award, and is recognized as
expense over the employee's requisite service period. As of March 31, 2009, we had no awards with
market or performance conditions other than the restricted stock units that we granted in January
2009, which would have vested, if at all, immediately prior to a strategic transaction (as defined
in the documentation evidencing the grant of the units), but which were terminated in July 2009. As
share-based compensation expense is based on awards ultimately expected to vest, it has been
reduced for estimated forfeitures. SFAS 123R requires forfeitures to be estimated at the time of
grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those
estimates. Forfeitures were estimated based on historical experience. Although estimates of
share-based compensation expenses are significant to our consolidated financial statements, they
are not related to the payment of any cash by us. Prior to January 1, 2006, we accounted for
stock-based compensation under the recognition and measurement principles of SFAS 123, "Accounting
for Stock-Based Compensation."
We estimate the fair value of stock option awards on the date of grant using the Black-Scholes
option-pricing model, or Black-Scholes model. The determination of the fair value of share-based
payment awards on the date of grant using an option-pricing model is affected by our share price as
well as assumptions regarding a number of complex and subjective variables. These variables
include,
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but are not limited to, our expected share price volatility over the term of the awards,
actual and projected employee stock option exercise behaviors, a risk-free interest rate and
expected dividends. We may elect to use different assumptions under the Black-Scholes model in the
future, which could materially affect our net income or loss and net income or loss per share.
We account for share-based compensation awards granted to non-employees in accordance with
EITF No. 96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services," or EITF 96-18. Under EITF 96-18, we
determine the fair value of the share-based compensation awards granted as either the fair value of
the consideration received or the fair value of the equity instruments issued, whichever is more
reliably measurable. If the fair value of the equity instruments issued is used, it is measured
using the share price and other measurement assumptions as of the earlier of (1) the date at which
a commitment for performance by the counterparty to earn the equity instruments is reached or (2)
the date at which the counterparty's performance is complete.
Income Taxes
. In June 2006, FASB issued Financial Interpretation No., or FIN, 48, "Accounting
for Uncertainty in Income Taxes-an Interpretation of FASB Statement 109," which clarifies the
accounting for uncertainty in tax positions. FIN 48 provides that the tax effects from an uncertain
tax position can be recognized in our consolidated financial statements only if the position is
more likely than not of being sustained upon an examination by tax authorities. An uncertain income
tax position will not be recognized if it has less than a 50% likelihood of being sustained.
Additionally, FIN 48 provides guidance on derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. The provisions of FIN 48 were effective
for us as of January 1, 2007, with the cumulative effect of the change in accounting principle
recorded as an adjustment to opening retained earnings in the year of adoption. We adopted FIN 48
on January 1, 2007, which did not have a material impact on our consolidated results of operations
or financial position.
Costs Associated with Exit or Disposal Activities
. As part of our efforts to reduce operating
costs, we completed the following three work force reductions since the end of the third quarter of
2008, each of which was accounted for in accordance with SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities:"
•
In October 2008, we completed a work force reduction of nine employees. As a result,
we recorded severance-related charges of $403,000, of which approximately $384,000 was
recorded in R&D and the remainder in selling, general and administrative, or SG&A. In
connection with the October 2008 reduction in workforce, severance-related charges of
$244,000 were recorded in the fourth quarter of 2008, $120,000 were recorded in the
first quarter of 2009, and the remainder was recorded in the second quarter of 2009.
•
In January 2009, we completed a work force reduction of six employees. As a result,
we recorded severance-related charges of $174,000, of which $86,000 was recorded in R&D
and the remainder in SG&A. In connection with the January 2009 reduction in workforce,
severance-related charges of $144,000 were recorded in the first quarter of 2009 and the
remainder was recorded in the second quarter of 2009.
•
In April 2009, we completed a work force reduction of nine employees. As a result, we
recorded severance-related charges of $160,000, of which $101,000 was recorded in R&D
and the remainder in SG&A. In connection with the April 2009 reduction in workforce,
severance-related charges of $114,000 were recorded in the first quarter of 2009 and the
remainder was recorded in the second quarter of 2009.
The foregoing is not intended to be a comprehensive list of all of our accounting policies. In
most cases, the accounting treatment of a particular transaction is specifically dictated by
accounting principles generally accepted in the U.S.
Results of Operations
A general understanding of the drug development process is critical to understanding our
results of operations. Drug development in the U.S. and most countries throughout the world is a
process that includes several steps defined by the FDA and similar regulatory authorities in
foreign countries. The FDA approval processes relating to new drugs differ, depending on the nature
of the particular drug for which approval is sought. With respect to any drug product with active
ingredients not previously approved by the FDA, a prospective drug manufacturer is required to
submit a new drug application, or NDA, which includes complete reports of pre-clinical, clinical
and laboratory studies and extensive manufacturing information to prove such product's safety and
effectiveness. The NDA process generally requires, before the submission of the NDA, filing of an
investigational new drug application, or IND, pursuant to which permission is sought to begin
clinical testing of the new drug product. An NDA based on published safety and effectiveness
studies conducted by others, or previous findings of safety and effectiveness by the FDA, may be
submitted under Section 505(b)(2) of the Federal Food, Drug and Cosmetic Act, or FDCA. Development
of new formulations of pharmaceutical products under Section
39
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505(b)(2) of the FDCA may have shorter timelines than those associated with developing new
chemical entities.
Generally, with respect to any drug product with active ingredients not previously approved by
the FDA, an NDA must be supported by data from at least phase 1, phase 2 and phase 3 clinical
trials. Phase 1 clinical trials can be expected to last from 6 to 18 months, phase 2 clinical
trials can be expected to last from 12 to 24 months and phase 3 clinical trials can be expected to
last from 18 to 36 months. However, clinical development timelines vary widely, as do the total
costs of clinical trials and the likelihood of success. We anticipate that we will make
determinations as to which of our programs to pursue and how much funding to direct to each program
on an ongoing basis in response to the scientific and clinical success of the underlying product
candidate, our ongoing assessment of its market potential and our available resources.
Future expenditures on R&D programs are subject to many uncertainties, including whether our
product candidates will be further developed with a partner or independently. At this time, due to
such uncertainties and the risks inherent in drug development and the associated regulatory
process, we cannot estimate with reasonable certainty the duration of or costs to complete our R&D
programs or whether or when or to what extent revenues will be generated from the commercialization
and sale of any of our product candidates. The duration and costs of our R&D programs, in
particular those associated with bioequivalence trials and research-related manufacturing, can vary
significantly among programs as a result of a variety of factors, including:
•
the number and location of sites included in trials and the rate of site approval for
the trial;
•
the rates of patient recruitment and enrollment;
•
the ratio of randomized to evaluable patients;
•
the availability and cost of reference product in the jurisdiction of each site;
•
the time and cost of process development activities related to our product
candidates;
•
the costs of manufacturing our product candidates; and
•
the costs, requirements, timing of and the ability to secure regulatory approvals.
The difficult process of seeking regulatory approvals for our product candidates and
compliance with applicable regulations requires the expenditure of substantial resources. Any
failure by us to obtain, or any delay in obtaining, regulatory approvals could cause our R&D
expenditures to increase and, in turn, have a material and unfavorable effect on our results of
operations. We cannot be certain when, if ever, we will generate revenues from sales of any of our
products.
While many of our R&D expenses are transacted in U.S. dollars, certain significant expenses
are required to be paid in foreign currencies and expose us to transaction gains and losses that
could result from changes in foreign currency exchange rates. In particular, our current contract
manufacturer for both ANX-530 and ANX-514 is located outside the U.S. and generally we pay for its
services, including the final manufacturing activities related to submitting an NDA for ANX-530, in
Euros. As a result, our exposure to currency risk likely will increase as we move our products
towards commercialization and increase the services we request from our current contract
manufacturer. We include realized gains and losses from foreign currency transactions in operations
as incurred.
We operate our business and evaluate our company on the basis of a single reportable segment,
which, fundamentally, is the business of in-licensing, developing and commercializing proprietary
product candidates for the treatment of cancer. We recognized revenues of $0.5 million in each of
2008 and 2007, which revenues were derived solely from license fees under a license agreement with
Theragenex, LLC, which we terminated in August 2007.
Operating Expenses
Years Ended
December 31,
2008
2007
Research and development
64
%
64
%
Selling, general and administrative
35
%
35
%
Depreciation and amortization
1
%
1
%
Total operating expenses
100
%
100
%
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Comparison of Three Months Ended March 31, 2009 and 2008
Revenue
.
Revenue recognized for the three months ended March 31, 2009 represents a $0.3
million nonrefundable license fee under our license agreement with Shin Poong Pharmaceutical Co.,
Ltd. Consistent with our revenue recognition policy, we recognized the license fee as revenue in
the three-month period ended March 31, 2009 because, in that period, persuasive evidence of an
arrangement existed, services had been rendered, the amount of the payment was fixed and
determinable and collectability was reasonably assured. No revenue was recognized for the three
months ended March 31, 2008.
We have not generated any revenue from product sales to date, and we do not expect to generate
revenue from product sales until such time that we have obtained approval from a regulatory agency
to sell one of our product candidates, the timing of which, if it occurs at all, we cannot
currently predict.
R&D Expenses
.
We maintain and evaluate our R&D expenses by the type of cost incurred rather
than by project. We maintain and evaluate R&D expenses by type primarily because of the
uncertainties described above, as well as because we out-source a substantial portion of our work
and our R&D personnel work across multiple programs rather than dedicating their time to one
particular program. We began maintaining such expenses by type on January 1, 2005. The following
table summarizes our consolidated R&D expenses by type for the three months ended March 31, 2009
compared to the same period in 2008, and for the period from January 1, 2005 through March 31,
2009:
January 1, 2005
Three months ended March 31,
through
2009
2008
$ Variance
% Variance
March 31, 2009
External clinical study fees
and expenses
$
578,992
$
1,021,920
$
(442,928
)
(43
%)
$
23,778,472
External non-clinical study
fees and expenses (1)
470,248
1,418,985
(948,737
)
(67
%)
19,415,722
Personnel costs
623,436
1,073,706
(450,270
)
(42
%)
10,134,624
Share-based compensation expense
(25,376
)
305,696
(331,072
)
(108
%)
2,858,784
Total
$
1,647,300
$
3,820,307
$
(2,173,007
)
(57
%)
$
56,187,602
(1)
External non-clinical study fees and expenses include preclinical,
research-related manufacturing, quality assurance and regulatory expenses.
R&D expenses decreased by $2.2 million, or 57%, to $1.6 million for the three months ended
March 31, 2009, compared to $3.8 million for the comparable period in 2008. The decrease in R&D
expenses was primarily due to a $0.6 million decrease in external clinical trial expenses related
to CoFactor, a $1.0 million decrease in non-clinical expenses related to ANX-514 and ANX-530, a
$0.5 million decrease in personnel costs related to the reductions in staff and a $0.3 million
decrease in share-based compensation expense, offset by a $0.2 million increase in clinical trial
expenses related to ANX-514. We expect that our recent reductions in full-time employees will
result in R&D cost savings. However, we also expect such cost-savings will be offset in part or
entirely by costs related to our recently re-started activities related to ANX-530 and ANX-514.
Selling, General and Administrative Expenses
.
SG&A expenses decreased by $0.6 million, or 25%,
to $1.8 million for the three months ended March 31, 2009, compared to $2.4 million for the
comparable period in 2008. The decrease was primarily due to a $0.3 million decrease in personnel
costs related to reductions in staff, a $0.2 million decrease in legal and professional services
and a $0.1 million decrease in business insurance. We expect SG&A expenses to continue to decline
given our recent reductions in full-time employees. However, we also expect such cost-savings will
be offset in part or entirely by costs related to capital-raising activities, which costs will be
expensed unless and until the closing of the applicable capital-raising transaction.
Interest Income and Other Income
.
Interest income and other income decreased by $0.3 million,
or 99%, to $1,776 for the three months ended March 31, 2009, compared to $0.3 million for the
comparable period in 2008. The decrease was primarily attributable to lower interest income based
on lower cash balances. We expect that interest income will continue to decline as forecasted
interest rates decline along with lower cash balances.
Net Loss.
Net loss was $3.2 million, or $0.03 per share, for the three months ended March 31,
2009, compared to a net loss of
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$5.9 million, or $0.07 per share, for the comparable period in 2008. Included in the net loss
for the three months ended March 31, 2009 were charges associated with our October 2008 and January
and March 2009 reductions in force.
Comparison of Years Ended December 31, 2008 and 2007
Revenue
. We recognized revenue of $0.5 million for each of the years ended December 31, 2008
and 2007. Revenue in 2007 represents nonrefundable licensing fees paid under our license agreement
with Theragenex LLC, which we terminated in August 2007 as a result of Theragenex's breach of the
agreement. Revenue in 2008 represents a portion of a settlement payment from Theragenex. In May
2008, we settled our dispute with Theragenex arising out of its breach of the license agreement
and, in accordance with such settlement, Theragenex paid us $0.6 million. We recognized $0.5
million as revenue in 2008, which represents a portion of the $0.6 million settlement payment,
because under the license agreement Theragenex was required to pay a total nonrefundable, up front
licensing fee of $1.0 million ($0.5 million of which we received in January 2007 and $0.5 million
of which was due in June 2007) and because we met the criteria for revenue recognition. The
remainder of the settlement payment, $0.1 million, was recorded as other income.
R&D Expenses
. The following table summarizes our consolidated R&D expenses by type for the
year ended December 31, 2008, compared to the same period in 2007, and for the period from January
1, 2005 through December 31, 2008:
January 1, 2005
Year ended December 31,
through
2008
2007
$ Variance
% Variance
December 31, 2008
External clinical
study fees and
expenses
$
3,373,865
$
7,535,923
$
(4,162,058
)
(55
)%
$
23,199,479
External
non-clinical study
fees and expenses
(1)
10,585,695
4,346,397
6,239,298
144
%
18,945,474
Personnel costs
3,237,158
2,997,852
239,306
8
%
9,511,188
Share-based
compensation
expense
725,465
1,054,237
(328,772
)
(31
)%
2,884,161
Total
$
17,922,183
$
15,934,409
$
1,987,774
12
%
$
54,540,302
(1)
External non-clinical study fees and expenses include preclinical,
research-related manufacturing, quality assurance and regulatory expenses.
R&D expenses increased by $2.0 million, or 12%, to $17.9 million for the year ended December
31, 2008, compared to $15.9 million in 2007. The increase in R&D expenses was primarily due to a
$6.2 million increase in expenses related to external research-related manufacturing and regulatory
and quality assurance activities related to ANX-530 and ANX-514, a $1.3 million increase in
external clinical trial expenses related to ANX-514 and a $0.2 million increase in personnel costs,
offset by a $5.4 million decrease in external clinical trial expenses related to CoFactor and
ANX-530 and a $0.3 million decrease in non-cash, share-based compensation expense.
Selling, General and Administrative Expenses
. SG&A expenses increased by $1.0 million, or 12%,
to $9.7 million for 2008, compared to $8.7 million in 2007. The increase was substantially due to a
$0.7 million increase for severance expenses, a $0.4 million increase for consulting expenses
related to market research, a $0.3 million increase in personnel expenses and a $0.1 million
increase in professional services, offset by a decrease of $0.5 million in non-cash, share-based
compensation expense.
Interest Income and Other Income
. Interest income and other income for 2008 decreased by $1.5
million, or 69%, to $0.7 million in 2008, compared to $2.2 million in 2007. The decrease was
primarily attributable to lower interest income based on lower invested balances. The decrease was
partially offset by $0.1 million received as part of the Theragenex settlement, which was recorded
as other income.
Net Loss
. Net loss was $26.6 million or $0.30 per share in 2008, compared to a net loss of
$22.1 million or $0.25 per share in 2007.
Liquidity and Capital Resources
We have a history of recurring losses from operations and we have funded our operations
primarily through sales of our equity securities. We had a net loss of $3.2 million in the first
quarter of 2009, which included charges associated with our October 2008 and January and March 2009
reductions in force, and cash and cash equivalents of approximately $5.3 million and working
capital of $2.8
42
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million at March 31, 2009.
On June 12, 2009, we completed an approximately $2.0 million registered direct equity
financing involving the issuance of shares of our 0% Series A Convertible Preferred Stock,
convertible into 18,036,199 shares of our common stock, and warrants to purchase up to 8,116,290
shares of our common stock. We received approximately $1.7 million in net proceeds from the
offering, after deducting the placement agent's fees and our estimated offering expenses.
All of the shares of the 0% Series A Convertible Preferred Stock subsequently have been converted. We may
receive up to approximately $1.2 million of additional proceeds from the exercise of the warrants
issued in that offering; however, those warrants are not exercisable until December 13, 2009 and
their exercise is subject to certain ownership limitations. In connection with the offering, we
also issued warrants to purchase up to 910,810 shares of our common stock at an exercise price of
$0.15 per share to the placement agent in the offering as additional consideration for its
services. The placement agent's warrant is not exercisable until December 13, 2009.
On July 6, 2009, we
completed an approximately $1.4 million registered direct equity financing involving the issuance of shares of
our 5% Series B Convertible Preferred Stock, convertible into 9,504,189 shares of our common stock. We
received approximately $1.2 million in net proceeds from the offering, after deducting the placement agent's
fees and our estimated offering expenses. The convertible preferred shares were to accrue a 5% dividend until
July 6, 2014, unless converted prior to such date.  Upon any conversion of these preferred shares we were
obligated to pay the holder an amount equal to the total dividend that would have otherwise accrued on the
shares through July 6, 2014, less any dividend payment previously made with respect to such converted shares.
Twenty-five percent, or $340,250, of the gross proceeds of the financing were placed in an escrow account for
payment of the dividend and conversion amounts payable on the 5% Series B Convertible Preferred Stock. All of
the shares of the 5% Series B Convertible Preferred Stock subsequently have been converted and, pursuant to
the terms of the 5% Series B Convertible Preferred Stock, we paid an aggregate of $340,250 from the escrow
account to the holder of the converted preferred shares in connection with such conversions.
In connection with the offering, we also issued warrants to purchase up to 475,209
shares of our common stock at an exercise price of $0.179 per share to the placement agent in the
offering as additional consideration for its services. The placement agent's warrant is not
exercisable until January 7, 2010.
We have an on-going need to raise additional capital to support our operations, which we have
historically done primarily through the issuance of our equity securities. In the current
financial and economic environment it is uncertain that we can obtain funding through our
traditional sources of capital. These factors raise substantial doubt about our ability to
continue as a going concern. We expect to incur substantial costs in connection with activities
relating to submitting an NDA for ANX-530, advancing ANX-530 toward commercialization in the U.S.
and continuing development and regulatory related activities for ANX-514. We may also incur
substantial costs in connection with evaluating, negotiating and consummating future
capital-raising and/or strategic or partnering transactions or liquidating our assets and
winding-up our operations. We cannot currently predict the extent of these costs. Even if we incur
costs in pursuing, evaluating and negotiating particular capital-raising and/or strategic or
partnering transactions, our efforts may not prove successful. Excluding the potentially
significant costs associated with evaluating, negotiating and consummating capital-raising and/or
strategic or partnering transactions or seeking protection under the provisions of the U.S.
Bankruptcy Code or liquidating our assets and winding-up our operations, we anticipate that our
cash and cash equivalents as of March 31, 2009, together with the net proceeds from the equity
financings we completed on June 12, 2009 and July 6, 2009, will be sufficient to permit us to
conduct our business through at least September 30, 2009. We will need to raise substantial
additional capital to continue our business after this period.
Three months ended March 31, 2009 and 2008
Operating Activities
.
Net cash used in operating activities was $4.5 million for the three months
ended March 31, 2009, compared to $4.8 million for the comparable period in 2008. The decrease in
cash used in operating activities was primarily due to reductions in development activities and
fundamental business operations, as well as a $0.3 million increase in licensing revenue. Included
in cash used in operating activities for the three months ended March 31, 2009 were charges
associated with our October 2008 and January and March 2009 reductions in force. Accordingly, the
decreased expenses we otherwise would have realized in the first quarter of 2009 were offset by
charges associated with our October 2008 and January and March 2009 reductions in force.
Investing Activities.
Net cash provided by investing activities was $0 for the three months ended
March 31, 2009, compared to cash used in investing activities of $10.3 million for the comparable
period in 2008.
Financing Activities.
There were no financing activities in the three months ended March 31,
2009 and 2008.
Accrued Compensation and Payroll Taxes
.
Accrued compensation and payroll taxes were $0.8
million at March 31, 2009, compared to $0.9 million at December 31, 2008, a decrease of $0.1
million, or 15%. The decrease was primarily due to the paying-down of severance-related expenses
associated with our October 2008 reduction in staff, offset by severance-related expenses
associated with our January and March 2009 reductions in staff.
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Years Ended December 31, 2008 and 2007
Explanations of cash flow from operating, investing and financing activities are provided
below.
December 31,
Decrease
December 31,
2008
During 2008
2007
Cash and cash equivalents and investments in securities
$
9,849,904
$
(23,613,252
)
$
33,463,156
Net working capital
$
5,735,519
$
(24,922,542
)
$
30,658,061
Year Ended
Change
Year Ended
December 31,
Between
December 31,
2008
Periods
2007
Cash used in operating activities
$
(23,787,604
)
$
(4,144,414
)
$
(19,643,190
)
Cash provided by investing activities
18,856,769
10,848,497
8,008,272
Cash provided by financing activities
—
(441,616
)
441,616
Net (decrease) increase in cash and cash equivalents
$
(4,930,835
)
$
6,262,467
$
(11,193,302
)
Operating activities.
Net cash used in operating activities was $23.8 million in 2008, compared to
$19.6 million in 2007. The increase in cash used in operating activities in 2008 was mainly due to
the increase in our R&D and SG&A expenses.
Investing activities
. Net cash provided by investing activities was $18.9 million in 2008,
compared to cash used in investing activities of $8.0 million in 2007. Cash provided by investing
activities in 2008 and 2007 was mainly net proceeds from sales of short-term investments.
Financing activities.
There was no cash provided by financing activities in 2008. In 2007,
net cash provided by financing activities was $0.4 million, consisting of proceeds from option
exercises.
Management Outlook
We have an on-going need to raise additional capital to support our operations. Despite the
equity financings we completed on June 12, 2009 and July 6, 2009, we believe our ability to raise
capital has been materially and adversely affected by the current financial and economic
environment. In addition, our ability to timely raise capital on commercially reasonable terms may
be limited by requirements, rules and regulations of the Securities and Exchange Commission and the
NYSE Amex (formerly, the American Stock Exchange).
Although the funds raised in our June and July 2009 equity financings have enabled us to
re-start activities necessary to submit an NDA seeking FDA approval to market ANX-530 in the U.S.
and engage consultants to assist us in analyzing the results of our recently completed
bioequivalence study of ANX-514, we will require substantial additional capital to continue to seek
FDA approval of and ultimately commercialize ANX-530 and ANX-514. Currently, in addition to
pursuing activities necessary to submit an ANX-530 NDA and continuing to evaluate the data from the
ANX-514 bioequivalence study, we are focused primarily on raising additional capital as soon as
possible to continue to advance ANX-530 and ANX-514 toward commercialization in the U.S. We also
intend to continue to evaluate any strategic or partnering options, including the sale or exclusive
license of one or more of our product candidate programs, a strategic business merger, co-marketing
partnerships and other similar transactions. However, there can be no assurances that we will
continue to pursue capital-raising transactions or strategic or partnering alternatives or, if we
do, that we will be successful in consummating a transaction on a timely basis, or at all. We
likely will not be able to continue as a going concern unless we raise adequate additional capital.
Given our recent restructuring and cost-cutting measures, our ability to further curtail expenses
to provide additional time to obtain financing or to consummate a strategic or partnering
transaction is limited.
We are unable to predict when, if ever, we will be able to raise additional capital or the
form, structure or terms of any potential strategic or partnering transaction, including whether we
will continue as a going concern, or whether we will seek protection under the provisions of the
U.S. Bankruptcy Code or liquidate our assets and entirely wind-up our operations. As a result, the
duration that our existing cash and cash equivalents will sustain our current operations is
uncertain. However, excluding the potentially significant costs associated with evaluating,
negotiating and consummating capital-raising and/or strategic or partnering transactions or seeking
protection under the provisions of the U.S. Bankruptcy Code or liquidating our assets and
winding-up our operations, we anticipate that our cash and cash equivalents as of March 31, 2009,
together with the net proceeds from the equity financings we completed on
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June 12, 2009 and July 6, 2009, will be sufficient to permit us to conduct our business
through at least September 30, 2009. We will need to raise substantial additional capital to
continue our business after this period.
Recent Accounting Pronouncements
See Note 8, "Recent Accounting Pronouncements," of the Notes to the Condensed Consolidated
Financial Statements (unaudited) in this prospectus for a discussion of recent accounting
announcements and their effect, if any, on us.
Off-Balance Sheet Arrangements
We had no off-balance sheet arrangements as of December 31, 2008 or 2007 or as of March 31,
2009 or 2008, as defined in Item 303(a)(4) of Regulation S-K promulgated by the SEC. Accordingly,
no such arrangements are likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to investors.
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BUSINESS
Overview
We are a development-stage biopharmaceutical company whose fundamental business is focused on
in-licensing, developing and commercializing proprietary product candidates for the treatment of
cancer. We seek to improve the performance and commercial potential of existing treatments by
addressing limitations associated principally with their safety and use. We have not yet marketed
or sold any products or generated any significant revenue.
Our lead product candidates, ANX-530 and ANX-514, are novel emulsion formulations of currently
marketed chemotherapy drugs. We believe ANX-530 (vinorelbine emulsion) and ANX-514 (docetaxel
emulsion) may improve the safety of and have greater commercial potential than the currently
marketed reference products, Navelbine and Taxotere, respectively, by:
•
Reducing the incidence and severity of adverse effects; and
•
Increasing their pharmacoeconomics and convenience to healthcare practitioners and
patients.
We have recently re-started certain of our fundamental business operations, which we had
previously suspended to conserve working capital. Specifically, following completion of our equity
financing in June 2009, we have been conducting activities necessary to submit an NDA seeking FDA
approval to market ANX-530 in the U.S. and evaluating the data from our recently completed
bioequivalence study of ANX-514. In addition, we have remained focused on raising additional
capital as soon as possible to continue to advance ANX-530 and ANX-514 toward commercialization in
the U.S. We also plan to continue to evaluate any strategic or partnering options, including the
sale or exclusive license of one or more of our product candidate programs, a strategic business
merger, co-marketing partnerships and other similar transactions.
Beginning in October 2008 and through June 2009, we implemented numerous restructuring,
cost-cutting and re-prioritization initiatives to reduce operating costs and focus on those of our
options that we believed maximized the value of our assets. For instance, during that period, we
effected three reductions in our full-time employee workforce and, currently, we have two full-time
employees. We engage consultants on a project or as-needed basis and outsource substantially all
of our development activities to specialized vendors and contract development organizations. In
addition, in October 2008, we discontinued our ANX-510, or CoFactor, program, in December 2008, we
began exploring a range of strategic options, including the sale or disposition or one or more of
our product candidate programs, a strategic business merger and other similar transactions, and, in
March 2009, we suspended substantially all of our development activities and fundamental business
operations to provide additional time to consummate a strategic transaction or otherwise obtain
financing.
Throughout 2008 and the first half of 2009, we experienced substantial turn-over in our
executive and management ranks. In January and April 2008, our employment relationship with our
former president and chief medical officer and former chief financial officer and senior vice
president, respectively, ended. In April 2008, Mark N.K. Bagnall, the former chair of the audit
committee of our board of directors, who was also a member of the compensation and nominating and
governance committees of our board of directors, joined our management team as executive vice
president and chief financial officer and, in December 2008, Mr. Bagnall stepped down as executive
vice president and chief financial officer and resumed his role as solely a member of our board of
directors but also serves as a consultant to us. In October 2008, as part of a reduction in our
workforce, we ended our employment relationship with our former chief scientific officer and senior
vice president, our former vice president of medical affairs and our former vice president of
research and development and promoted our former vice president of commercialization to senior vice
president of operations. At the same time, our former chief executive officer and president
resigned his management positions, though remained on our board of directors until December 2008,
at which time he resigned his position on our board of directors. In January 2009, as part of an
additional reduction in our work force, we ended our employment relationship with our vice
president of manufacturing. In May 2009, our senior vice president of operations, resigned and, in
July 2009, our vice president of regulatory affairs and quality assurance resigned. Beginning in
October 2008, our company was led by a committee of executive officers. In February 2009, our board
of directors appointed Brian M. Culley, our chief business officer and senior vice president, to
additionally serve as our principal executive officer and, in July 2009, appointed Patrick L.
Keran, our general counsel, secretary and vice president, legal, to additionally serve as our
principal financial officer and principal accounting officer. However, as of the date of this
prospectus, we have not hired or appointed a chief executive officer or chief financial officer. In
addition, as of the date of this prospectus, we have only two employees, both full-time, Mr. Culley
and Mr. Keran. It is unclear whether or to what extent the departure of our former executives and
management personnel, our reduced workforce or our reliance on consultants, vendors and contract
organizations for assistance with our research and development and our selling, general and
administrative activities or our leadership by officers who do not have substantial previous
experience in executive leadership roles will negatively impact our ability to execute our business
plan or to
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maintain effective disclosure controls and procedures or internal control over financial
reporting.
On June 12, 2009, we completed an approximately $2.0 million registered direct equity
financing involving the issuance of shares of our 0% Series A Convertible Preferred Stock,
convertible into 18,036,199 shares of our common stock, and warrants to purchase up to 8,116,290
shares of our common stock. We received approximately $1.7 million in net proceeds from the
offering, after deducting the placement agent's fees and our estimated offering expenses. All of the shares of
the 0% Series A Convertible Preferred Stock subsequently have been converted.
Following the June 2009 financing, we re-started the final manufacturing activities related to
submitting an NDA for ANX-530 to seek approval of the FDA to market ANX-530 in the U.S. and engaged
consultants with expertise in taxane pharmacokinetics to assist us in analyzing the results of our
bioequivalence study of ANX-514.
On July 6, 2009, we
completed an approximately $1.4 million registered direct equity financing involving the issuance of shares of
our 5% Series B Convertible Preferred Stock, convertible into 9,504,189 shares of our common stock. We received
approximately $1.2 million in net proceeds from the offering, after deducting the placement agent's fees and
our estimated offering expenses. The convertible preferred shares were to accrue a 5% dividend until July 6,
2014, unless converted prior to such date.  Upon any conversion of these preferred shares we were obligated to
pay the holder an amount equal to the total dividend that would have otherwise accrued on the shares through
July 6, 2014, less any dividend payment previously made with respect to such converted shares. Twenty-five
percent, or $340,250, of the gross proceeds of the financing were placed in an escrow account for payment of
the dividend and conversion amounts payable on the 5% Series B Convertible Preferred Stock. All of the shares
of the 5% Series B Convertible Preferred Stock subsequently have been converted and, pursuant to the terms of
the 5% Series B Convertible Preferred Stock, we paid an aggregate of $340,250 from the escrow account to the
holder of the converted preferred shares in connection with such conversions.
We expect that, even if we complete the offering described in this prospectus, we may need to
raise substantial additional capital to fund our operations, including activities relating to the
commercialization of ANX-530, if an NDA for ANX-530 is submitted and if ANX-530 is approved by the
FDA, and activities relating to the development and regulatory review process and, ultimately,
commercialization of ANX-514. If we are unable to raise sufficient additional capital through this
offering or through future transactions following this offering, we may seek protection under the
provisions of the U.S. Bankruptcy Code or liquidate our assets and wind-up our operations. We are
unable to predict when, if ever, we will be able to raise additional capital to support our
operations or the form, structure or terms of any future equity or debt financing or strategic or
partnering transaction.
Our business was incorporated in Delaware in December 1995. In October 2000, we merged our
wholly-owned subsidiary, Biokeys Acquisition Corp., with and into Biokeys, Inc. and changed our
name to Biokeys Pharmaceuticals, Inc. In May 2003, we merged Biokeys, Inc., our wholly-owned
subsidiary, with and into us and changed our name to ADVENTRX Pharmaceuticals, Inc. In July 2004,
we formed a wholly-owned subsidiary, ADVENTRX (Europe) Ltd., in the United Kingdom primarily to
facilitate conducting clinical trials in the European Union and to obtain favorable pricing for
discussions with the European Medicines Agency. In April 2006, we acquired SD Pharmaceuticals, Inc.
as a wholly-owned subsidiary. Our executive offices are located at 6725 Mesa Ridge Road, Suite 100,
San Diego, California 92121, and our telephone number is (858) 552-0866. Our corporate website is
located at www.adventrx.com.
Oncology Focus
Our lead product candidates are designed to improve treatments for cancer patients. Each year,
almost 11 million people worldwide are diagnosed with and nearly 7 million people die from cancer.
According to the American Cancer Society, cancer is the second most common cause of death in the
U.S., accounting for 1 of every 4 deaths. It is estimated that over 1.4 million new cancer cases
were diagnosed and over 550,000 people died from cancer in the U.S. in 2007.
Treatment choices for cancer patients depend on the type, stage and progression of the cancer,
along with the number and types of prior therapies, if any. Treatment options include surgery,
radiation, chemotherapy, hormone therapy and immunotherapy, both alone and in combination with each
other. Treatment of cancer with chemicals is referred to as chemotherapy. Adjuvant therapy refers
to additional treatment, typically chemotherapy or radiation, following removal of detectable
cancerous growths, typically by surgery. In 2006, chemotherapies generated over $40 billion in
revenues.
Our Lead Product Candidates (ANX-530 and ANX-514)
Opportunities for New Formulations
Reformulating existing pharmaceutical products is an increasingly common product
lifecycle-management technique. Between 2002 and 2005, nearly 40% of the products launched by the
top 50 pharmaceutical manufacturers were reformulations. Finding new
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markets for and ways to modify and improve existing products is often an essential element of
pharmaceutical companies' efforts to maintain or grow revenues in the face of patent expirations
and competitive pressures.
Navelbine and Taxotere are intravenously-injected chemotherapy drugs commonly used to treat
solid tumors. We believe the current formulations of these drugs have limitations that present
opportunities for improvement. We are developing novel ways to formulate the active ingredient
underlying each of these drugs that we believe may improve their safety profiles without adversely
affecting efficacy. In addition, we believe our formulations may provide benefits to patients and
practioners that do not manifest themselves in traditional measures of safety or efficacy.
Regulatory Strategy
The regulatory strategy for our lead product candidates is to demonstrate the bioequivalence
of each of ANX-530 and ANX-514 to the currently marketed reference product. The bioequivalence of
two drugs can be demonstrated in a single trial of as few as 28 patients, typically in an
open-label, single-dose, cross-over comparison of the drugs. For each of ANX-530 and ANX-514, the
FDA has indicated that data from a single study of approximately 28 patients that demonstrates the
bioequivalence of our product candidates to the reference product may be sufficient to support an
NDA. Accordingly, we view these bioequivalence trials as registrational studies in that they have
the potential to support a marketing application. If approved, the drug prescribing information, or
"label," for our products may reflect data generated during the bioequivalence trials, including
comparative adverse event information.
The relatively low number of required patients and the single-dose treatment cycles associated
with these bioequivalence trials can decrease study timelines and costs relative to typical pivotal
studies. Accordingly, with relatively modest financial investment, we are able to assess the
pharmacokinetic equivalence of each of our product candidates to the reference product in as little
as 12 to 18 months from initiation of the trial, which information should provide the data
necessary to support an NDA. By securing in advance clarity from the FDA regarding our planned
regulatory pathway, as we have done for ANX-530 and ANX-514, we mitigate aspects of the regulatory
risk associated with drug development. Furthermore, after we obtain marketing approval, we can
conduct clinical studies while marketing our products to expand product labels in ways that might
increase their commercial value.
Furthermore, if any clinical studies we conduct, in addition to our bioequivalence studies,
are essential to the FDA's approval of an application to use our products or product candidates to
treat a new indication, or to support a label change in product use, the product may be eligible
for three years of marketing exclusivity for that indication or use. Marketing exclusivity means
that the FDA will not approve an abbreviated NDA, or ANDA (an ANDA is for a generic drug product)
or Section 505(b)(2) NDA during the exclusivity period based on the conditions of approval of our
product.
Commercialization Strategy
HCPCS Product Codes and Reimbursement
In the U.S. and elsewhere, healthcare providers, including hospitals, nursing homes and
physician offices, typically purchase and administer to patients the drugs that patients are
restricted from self-administering and then seek reimbursement, primarily from third party payors
such as Medicare, Medicaid and private insurance companies. As a result, sales of
physician-administered prescription pharmaceuticals are dependent in large part on the availability
and rate of reimbursement to healthcare providers from third party payors.
The Healthcare Common Procedure Coding System, or HCPCS, was established to identify and
provide unique codes for healthcare goods and procedures, including codes for injectable oncology
drugs such as ANX-530 and ANX-514, should they be approved. Ultimately, the Centers for Medicare
and Medicaid Services, or CMS, is responsible for reviewing and approving applications for new
HCPCS codes for healthcare goods. Generic equivalents of drugs are assigned the same HCPCS code as
the original drug. Virtually all U.S. payors, including Medicare and private insurance plans, use
the Healthcare Common Procedure Coding System, including the product codes assigned by CMS.
In determining a specific reimbursement rate for a drug, CMS publishes an average sales price
for the drug based on manufacturer-reported sales data for all drugs within the same HCPCS product
code, including applicable discounts and rebates, as well as a reimbursement rate, expressed as a
percentage of the average sales price. Because generic equivalents of drugs are assigned the same
HCPCS code as the original drug, generic competition can be expected to decrease the level of
reimbursement for all drugs with the same HCPCS product code (both the original drug and its
generic equivalents) until price equilibrium is reached. Most private payors use similar methods
for determining reimbursement rates, sometimes based on average wholesale prices or CMS'
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published average sales price.
Our commercial strategy in the U.S. for ANX-530 and ANX-514 is to seek HCPCS product codes
that are distinct from those for Navelbine and Taxotere, respectively. If our products are provided
unique HCPCS codes, they will be reimbursed based on their own sales prices, without including
sales prices of the applicable reference product or its generic competition. We believe this will
provide greater freedom to price our products at a premium to competitive products, thereby
enhancing their value, and our plans include pricing ANX-530 at a premium to competitive products.
Group Purchasing Organizations
Group purchasing organizations, or GPOs, including provider networks, are entities that help
health care providers, such as hospitals, nursing homes and physician offices, realize savings and
efficiencies by aggregating purchasing volume and using that scale to negotiate discounts with
manufacturers and other vendors. The U.S. healthcare industry spends more than $200 billion
annually in medical and non-medical products, with more than 70% allocated through GPOs.
We believe up to 80% of the U.S. markets for ANX-530 and ANX-514 are concentrated within eight
to ten GPOs and that a small, specialized sales force may be able to effectively market and sell
our products, if approved, through these organizations. As consolidation within the industry and
attempts to further enhance economies of scale and marketing advantages continue, we believe these
markets will concentrate further. If our products demonstrate equivalent efficacy and superior
tolerability or pharmacoeconomic benefits relative to the reference product, we believe the
well-established utility of the reference product should enable GPOs to enact broad and rapid
shifts among their constituents from the reference product to our novel emulsion formulations.
In October 2008, we announced that, until we secured additional funding, we may delay or
significantly reduce spending on activities related to product launches. Since then, we have
deferred conducting most activities related to acquiring or developing sales, marketing and
distribution capabilities, establishing commercial relationships with contract manufacturers and
suppliers and building the associated regulatory compliance infrastructure. We will spend
considerable resources, both financial and otherwise, to prepare for the commercial launch of, and
to launch commercially, our product candidates, should any of them be approved and we determine to
launch them independently.
ANX-530 (vinorelbine emulsion)
Background; Limitations of Current Formulations
ANX-530 is a novel emulsion formulation of the chemotherapy drug vinorelbine. Navelbine, a
branded formulation of vinorelbine, is approved in the U.S. to treat advanced non-small cell lung
cancer as a single agent or in combination with cisplatin, and approved in the European Union, or
EU, to treat non-small cell lung cancer and advanced or metastatic breast cancer. Since February
2003, generic equivalents of Navelbine have been available in the U.S.
Navelbine and its generic equivalents are often associated with injection site reactions,
including phlebitis, erythema and pain at the site of injection. Studies have shown these reactions
occur in approximately one-third of patients, with 5% of the reactions categorized as severe.
ANX-530 is designed to reduce the incidence and severity of these injection site reactions.
Our formulation emulsifies vinorelbine into a homogeneous suspension of nanoparticles that is
designed protect the venous endothelium during administration into a peripheral vein, thereby
reducing irritation associated with administration of the drug.
Clinical and Regulatory Developments
In November 2007, we announced positive results from a bioequivalence study of ANX-530.
Pharmacokinetic equivalence, the primary endpoint of the study, was observed between ANX-530 and
Navelbine. Based on federal regulations and FDA guidance regarding bioequivalence studies,
pharmacokinetic equivalence was demonstrated by a statistical comparison of both the areas under
the curve (AUC) and maximum plasma concentrations (Cmax).
In January 2008, we announced safety results from the study. In post hoc analyses, relative to
Navelbine, ANX-530 demonstrated a statistically significant reduction in injection site reactions.
Notably, the incidence of injection site reactions attributed to Navelbine was consistent with its
product label. Furthermore, ANX-530 was determined to be safe and well-tolerated with no
significant differences observed in any other safety parameters.
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Throughout 2008, we conducted various activities related to our ANX-530 NDA submission. In
particular, we engaged a new contract manufacturer and met with the FDA regarding our NDA
submission. At this meeting, the FDA requested additional information regarding our new contract
manufacturer and material manufactured by our new contract manufacturer.
In March 2009, due to an immediate need to raise additional capital to continue our business,
we suspended substantially all of our development activities and fundamental business operations to
conserve cash while we pursued financing alternatives, evaluated strategic options and considered
whether to liquidate our assets, wind-up our operations and distribute any remaining cash to our
stockholders.
Following the equity financing that we completed in June 2009, in which we raised net proceeds
of approximately $1.7 million, we re-started the final manufacturing activities related to
submitting an NDA for ANX-530. An update on the ANX-530 NDA submission timeline will be provided as
critical activities are completed. However, assuming the continued availability of capital to us,
our goal is to submit the NDA around the end of 2009.
Market and Opportunity
Worldwide sales of Navelbine and generic formulations of vinorelbine in 2006 were in excess of
$200 million, with approximately 13% of these revenues generated in the U.S. Between 2004 and 2007,
U.S. unit sales of Navelbine and its generic equivalents grew at a compounded annual rate of
approximately 9%. If ANX-530 is granted a separate HCPCS code and is sold at a price-premium to
Navelbine and its generic equivalents, the potential dollar value of this market could increase
substantially.
Additionally, based in part on recent clinical studies, we believe the market for
vinorelbine-based treatments, both in the U.S. and abroad, will grow in the coming years. In 2005,
the New England Journal of Medicine published a study reporting a statistically significant
improvement in overall survival among patients with early-stage lung cancer who received adjuvant
therapy consisting of vinorelbine plus cisplatin following tumor resection relative to patients
receiving no adjuvant therapy. In addition, a second study presented at the 2005 annual meeting of
the American Society of Clinical Oncology reported similarly positive results. Research involving
vinorelbine to treat other cancer types, including breast and ovarian cancer, is ongoing. We
believe that if ongoing research yields additional positive results, demand may increase for
vinorelbine-based treatments, including ANX-530.
We believe ANX-530 is well-positioned as an alternative to Navelbine and its generic
equivalents. In post hoc analyses, relative to Navelbine, ANX-530 demonstrated a statistically
significant reduction in injection site reactions in our registrational bioequivalence study while
maintaining comparable pharmacokinetics. We believe an improved safety profile of ANX-530 will be
compelling to healthcare practitioners and patients.
Our market research, conducted among practicing oncologists and oncology nurses, suggests that
healthcare practitioners prefer and would use a formulation of vinorelbine that reduced or
eliminated injection site reactions while providing comparable efficacy, provided the financial
impact to the practitioner of using such a formulation, relative to alternative formulations, is
neutral or positive. Furthermore, for a variety of reasons, including anticipated frequent
intravenous drug delivery and to avoid injection site reactions and loss of venous access,
Navelbine often is administered through a central line, a more invasive procedure in which a
catheter is inserted into and left for a period of time in a large vein in the neck, chest or
groin. We believe ANX-530 may provide an alternative to placing a central line for those patients
for whom central lines are used primarily to avoid injection site reactions.
ANX-514 (docetaxel emulsion)
Background; Limitations of Taxotere
ANX-514 is a novel emulsion formulation of the chemotherapy drug docetaxel. Taxotere, a
branded formulation of docetaxel, is approved to treat breast, non-small cell lung, prostate,
gastric and head and neck cancers. In the U.S., aspects of Taxotere are covered by patents through
November 2013.
According to Taxotere's label, patients should be observed closely for hypersensitivity, or
allergic, reactions, which may occur within a few minutes following initiation of Taxotere
administration. These reactions generally are believed to be associated with polysorbate 80, which
is present in Taxotere, and range from mild, including flushing, rash, breathing difficulty and
drop in blood pressure, to severe, including generalized rash/erythema, hypotension and, in rare
cases, fatal anaphylaxis. Taxotere's label recommends that all patients should be premedicated with
oral corticosteroids for three days starting one day prior to Taxotere administration to reduce the
severity of hypersensitivity reactions, among other reasons. Even following premedication,
hypersensitivity reactions have been observed, including, very rarely, fatal anaphylaxis.
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ANX-514 is formulated without polysorbate 80 or other detergents and is designed to reduce the
incidence and severity of hypersensitivity reactions.
Preclinical Efficacy and Safety; Data from Bioequivalence Study
In preclinical testing, we demonstrated that ANX-514 reduced hypersensitivity reactions
without impacting pharmacokinetics or antitumor activity when compared to Taxotere. In an animal
model, we observed anaphylactic reactions following Taxotere administration, including decreased
respiration, swelling and tremors. Furthermore, decreases in blood pressure and increases in
histamine levels were observed within 10-20 minutes of Taxotere administration. In contrast, we did
not observe hypersensitivity reactions following administration of ANX-514. Specifically, we did
not observe treatment-related changes in blood pressure or increases in histamine levels. On
rechallenge at three weeks, hypersensitivity reactions were observed only in the Taxotere-treated
animals.
In addition, in two separate studies in different animal species, ANX-514 showed equivalent
pharmacokinetics to Taxotere. In animal models, ANX-514 demonstrated dose-dependent inhibition of
tumor growth with equivalent antitumor activity when compared to Taxotere at equal dose levels.
In April 2008, we initiated enrollment in a registrational bioequivalence study of ANX-514
and, in February 2009, we announced that enrollment in the study was complete. In May 2009, we
announced that ANX-514 was determined to have comparable overall safety as Taxotere, with no
differences between treatment groups in severe toxicities. However, pharmacokinetic equivalence,
the primary endpoint of the study, was not demonstrated based on benchmark regulatory standards.
The study data revealed higher blood-levels of docetaxel during and immediately following
infusion of the study drug (i.e., during the first hour of treatment) in patients receiving ANX-514
relative to those receiving Taxotere, but, at 10 minutes after the completion of infusion,
docetaxel blood-levels were comparable and remained so through the end of the observation period.
We are analyzing these short-term increased levels, which were the reason ANX-514 was outside the
bounds established by the FDA for determining bioequivalence. Following preliminary discussions
with clinicians and experts in taxane pharmacokinetics, we believe that the increased blood-levels
of docetaxel do not affect the safety or efficacy of the drug and are not clinically relevant. We
intend to continue to evaluate the data from this study and plan to seek a meeting with the FDA in
the fourth quarter of 2009 to discuss the results.
Market and Opportunity
Worldwide annual sales of Taxotere in 2007 were approximately $2.9 billion, making it one of
the top-selling anti-cancer agents in the world. Based on its early success, substantial investment
into researching the use of Taxotere in new indications has led to numerous label expansions in the
U.S. and abroad.
Assuming we are able to demonstrate that the increased blood-levels of docetaxel do not affect
the safety or efficacy of docetaxel, we believe ANX-514 is well-positioned as an alternative to
Taxotere and any of its future generic equivalents. In established animal models, we demonstrated
ANX-514 reduces hypersensitivity reactions relative to Taxotere. Our market research, conducted
among practicing oncologists and oncology nurses, suggests a preference for a formulation of
docetaxel that reduces hypersensitivity reactions, which are perceived as a significant issue. In
addition, patients with a history of allergic reactions to Taxotere, but for whom docetaxel is the
best or only therapeutic option, may benefit from ANX-514, particularly as Taxotere's label
recommends against rechallenging patients with a history of severe hypersensitivity reactions.
If clinical studies validate our preclinical work, the need to premedicate patients, which is
intended to reduce the severity of hypersensitivity reactions, may be reduced or eliminated. Many
patients prefer to avoid premedication and the side effects often associated with steroids, which
include agitation, altered mental state, sleeplessness and altered blood/sugar levels. In addition,
ANX-514 may be well-suited for patients for whom steroid premedication causes other complications,
such as diabetics.
In addition to the improved safety and comparable efficacy observed in preclinical testing,
ANX-514 may provide nonclinical benefits to patients and healthcare practitioners. ANX-514 is
formulated without polysorbate 80, which can present practical problems during administration.
Taxotere's label indicates foaming may occur when mixing Taxotere and the accompanying diluent due
to the presence of polysorbate 80. Our market research suggests foaming is frequent, which can
cause delays in administering the drug or disruption during administration if too much foam is
present during administration. Practitioners have also expressed concern that foaming, as well as
the physical process of extracting the initially diluted Taxotere mixture from the mixing vial, may
result in patient underdosing.
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Polysorbate 80 also is incompatible with plasticized polyvinyl chloride, or PVC, which is used
in making the IV bags and tubing commonly used to infuse chemotherapy drugs. Polysorbate 80 can
leach diethylhexyl phthalate, a potentially hepatotoxic and carcinogenic acid, from plasticized PVC
bags and tubing, resulting in the addition of diethylhexyl phthalate into the infusion solution.
Taxotere's label warns against contact between Taxotere and plasticized PVC equipment and
recommends storing the fully-prepared Taxotere mixture in glass or polypropylene bottles or
polypropylene or polyolefin plastic bags and administering through polyethylene-lined
administration sets. As a result, healthcare providers must have available and remember to use more
costly non-PVC supplies to prepare and administer Taxotere, the costs of which generally are not
separately reimbursed.
Finally, infusion of the fully-prepared Taxotere mixture should begin within three hours of
preparation. Our stability testing suggests fully-prepared ANX-514 is stable for up to 48 hours. In
hospital settings, where a central pharmacy may prepare products for administration, the limited
stability of the fully-prepared Taxotere mixture may result in expired doses. In addition to wasted
product, patients must wait while additional Taxotere is prepared for administration and additional
stress is placed on hospital resources, including room availability.
While in the U.S. aspects of Taxotere retain patent protection through November 2013, the
active ingredient, docetaxel, loses its patent protection in May 2010; however, if an outstanding
request for pediatric exclusivity is granted, this date would be extended by six months. This
creates a significant opportunity to develop a formulation of docetaxel that does not infringe any
of the remaining Taxotere patents. Without challenging the remaining Taxotere patents, a generic
equivalent of Taxotere cannot be approved in the U.S. until November 2013, which could provide
other formulations of docetaxel, including ANX-514, over three years (less any period of pediatric
exclusivity that may be granted in the future) of marketing in the U.S. before the introduction of
Taxotere generic equivalents. We believe this potential lead time over generic competition provides
an additional opportunity to establish ANX-514 as an alternative to Taxotere and to establish
pricing for ANX-514 prior to the introduction of Taxotere generic equivalents.
Other Development Programs
In the past, we spent significant resources on the development of ANX-510, or CoFactor,
including a phase 2b clinical trial and a discontinued phase 3 clinical trial in the first line
treatment of metastatic colorectal cancer, and a phase 2 clinical trial in the treatment of
advanced breast cancer. Following our announcement in October 2007 that the CoFactor/5-FU arm of
our phase 2b clinical trial of CoFactor did not demonstrate statistically significant improved
safety in the trial's primary endpoint, we discontinued enrolling patients in our phase 3 clinical
trial of CoFactor and, in October 2008, we discontinued all active work on Co-Factor.
In 2008, we also discontinued active work on all other compounds (other than ANX-530 and
ANX-514) to which we have or had rights and on which we may have previously spent resources
developing. We do not plan to resume development activities with respect to CoFactor or any of such
other compounds in the next 12 months.
Competition
If regulatory authorities approve the marketing and selling of any of our product candidates,
they will face significant and long-term competition from pharmaceutical companies, pharmaceutical
divisions of companies and biotechnology, biopharmaceutical and specialty pharmaceuticals
companies, among others. This competition likely will become more intense if any of our products or
competitor products achieve commercial success. Most of our competitors, particularly large
pharmaceutical companies, have greater clinical, regulatory, manufacturing, marketing,
distribution, compliance and financial resources and experience than we have. Many of these
companies have commercial arrangements with other companies to supplement their internal
capabilities.
ANX-530 and ANX-514, if approved, may compete against Navelbine and Taxotere, respectively, as
well as their generic equivalents and other formulations of vinorelbine and docetaxel. In addition
to Navelbine, currently there are at least 6 generic versions of vinorelbine on the market. In the
U.S., in May 2010 (but subject to any period of pediatric exclusivity that may be granted in the
future), patent protection ends for docetaxel and, in November 2013, patent protection ends for
Taxotere. We are aware of two leading generics companies that each have developed or acquired a
formulation of docetaxel and have certified that, after May 2010, their respective formulations of
docetaxel will not infringe any unexpired Taxotere patents.
Under our current regulatory strategy, because we anticipate submitting NDAs with only
bioequivalence data, the ability to differentiate our products from competitor products will be
limited. Even if we believe our products demonstrate clinical or pharmacoeconomic benefits, we may
be unable to market our products based on these benefits. If our products fail to obtain separate
HCPCS codes, we may be required to price our products at levels that do not cover our costs to
manufacture, market and distribute the products or provide any profit, or to price our products at
levels at which they are not competitive.
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In addition, numerous companies are focused on reformulating currently marketed drugs. In
particular, the taxanes, the class of drugs of which Taxotere is a member, have experienced
substantial commercial success, in part as a result of their effectiveness in treating a wide
variety of cancers. This commercial success has generated significant interest in reformulating
Taxotere and other taxanes. In addition to our approach of emulsifying docetaxel, other companies
are pursuing alternative delivery vehicles, including the use of albumin nanoparticles, prodrugs,
polyglutamates, analogs, co-solvents, liposomes and microspheres. Many of these or similar
approaches could be applied to vinorelbine. Relative to our formulations, formulations based on one
or more of these other methods may result in greater efficacy or safety, provide better drug
delivery to tumor sites or otherwise improve benefits to patients and healthcare providers. For
instance, there is an oral formulation of vinorelbine approved for use in the EU against which we
would compete if our emulsion formulation of vinorelbine were approved for use in the EU.
Over the longer term, our ability, independently or with a strategic or other partner, to
successfully manufacture, market, distribute and sell any of our or their approved products, expand
their usage and bring new products to the marketplace will depend on many factors, including, but
not limited to, the effectiveness and safety of those products, FDA and foreign regulatory
agencies' approvals of new products and indications, the degree of patent protection afforded to
particular products and the rates at which those products are reimbursed.
Manufacturing
We do not have our own manufacturing facilities. We meet our preclinical and clinical trial
manufacturing requirements (including manufacturing active pharmaceutical ingredient, or API,
formulating and assembling final drug product, labeling, testing and release, packaging, storing
API and finished drug product and similar activities) by establishing relationships with
third-party manufacturers and other service providers to perform these services for us. In the
past, we relied on individual proposals and purchase orders to meet our needs and typically relied
on terms and conditions proposed by the third party or us to govern our rights and obligations
under each order (including provisions with respect to intellectual property, if any). In 2008, we
entered into a master services agreement with a new contract manufacturer, as well as individual
work orders that are governed by the master services agreement, under which the manufacturer will
provide process development and scale-up activities for ANX-530 and ANX-514. We do not have any
long-term agreements or commitments for these services. Likewise, we do not have any long-term
agreements or commitments with vendors to supply the underlying component materials of our product
candidates, some of which are available from only a single supplier. In January 2009, as part of
on-going cost-containment measures, we substantially reduced or delayed spending on third-party
consulting and vendor services, including contract manufacturing. In March 2009, we suspended
substantially all of our development activities and fundamental business operations to provide
additional time to consummate a strategic transaction or otherwise obtain financing. In June 2009,
following the completion of an equity financing in which we raised net proceeds of approximately
$1.7 million, we resumed the final manufacturing activities related to submitting an NDA for
ANX-530.
Should any of our product candidates obtain marketing approval, relationships with third-party
manufacturers and other service providers in connection with the commercial production of our
products would need to be established. There is some flexibility in securing other manufacturers to
produce our product candidates; however, our alternatives may be limited due to proprietary
technologies or methods used in the manufacture of some of our product candidates. In addition, if
we seek to make certain changes to an approved product, such as changing vendors who supply the
underlying component materials of our product candidates, we may need FDA review and approval
before the change can be implemented.
Intellectual Property
ANX-530
(vinorelbine emulsion)
We own world-wide rights (excluding China, Hong Kong, Macau and Taiwan) to patent applications
covering the composition and use of our vinorelbine emulsion product candidate, subject to the
exclusive license we granted to Latitude Pharmaceuticals (described below under "Licensing
Agreements"). Patent applications, entitled "Compositions for Delivering Highly Water Soluble
Drugs," currently are pending in the U.S., Canada and 13 additional countries, and regional patent
applications are also pending in the European Patent Office and the Eurasian Patent Office. These
applications have a priority date of July 12, 2004, and any patents granted thereon have an
expected expiration date of July 2025 in the U.S. and July 2025 in the other countries.
ANX-514
(docetaxel emulsion)
We own world-wide rights (excluding China, Hong Kong, Macau and Taiwan) to patent applications
covering the composition and use of our docetaxel emulsion product candidate for the treatment of
cancer, subject to the exclusive license we granted to Latitude Pharmaceuticals (described below
under "Licensing Agreements"). Patent applications, entitled "Low Oil Emulsion
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Compositions for Delivering Taxoids and Other Insoluble Drugs," currently are pending in the
U.S., Canada and 9 additional countries, and a regional patent application is also pending in the
European Patent Office. These applications have a priority date of September 28, 2004, and any
patents granted thereon will expire in September 2025. Patent applications, entitled "Vitamin E
Succinate Stabilized Pharmaceutical Compositions, Methods for the Preparation and Use Thereof," are
also currently pending in the U.S., Canada and 8 additional countries, and regional patent
applications are also pending in the European Patent Office and the Eurasian Patent Office. These
applications have a priority date of February 1, 2006, and any patents granted on these
applications have an expected expiration date in February 2027.
We are aware of a substantial number of patents issued and patent applications filed in our
technical areas or fields. There is a risk that third parties may allege that they have patent
rights encompassing our product candidates or methods and no assurance can be given that patents do
not exist, have not been filed, or could not be filed or issued, which contain claims covering our
product candidates or methods.
We cannot provide assurance that our pending patent applications will issue as patents, that
any issued patents will provide us with significant competitive advantages, or that the validity or
enforceability of any of our patents will not be challenged or, if instituted, that these
challenges will not be successful. The cost of litigation to uphold the validity and prevent
infringement of our patents could be substantial. Furthermore, we cannot provide assurance that
others will not independently develop similar technologies or duplicate our technologies or design
around the patented aspects of our technologies. We can provide no assurance that our proposed
technologies will not infringe patents or rights owned by others, licenses to which might not be
available to us.
In addition, the approval process for patent applications in different countries may differ
significantly. The patent authorities in each country administer that country's laws and
regulations relating to patents independently of the laws and regulations of any other country and
the patents must be sought and obtained separately, which can add substantial cost and expense. In
addition, a favorable outcome or approval in one country does not necessarily indicate that a
favorable outcome or approval can be obtained in other countries.
Research and Development
Our research and development expenses were $17.9 million in 2008 and $15.9 million in 2007.
Our research and development expenses consist primarily of salaries and related employee benefits,
costs associated with bioequivalence and clinical trials managed by contract research
organizations, or CROs, and costs associated with non-clinical activities, such as research-related
manufacturing, preclinical research studies, quality assurance and regulatory activities. In 2007,
our most significant costs were for bioequivalence and clinical trials and, in 2008 our most
significant costs were for research-related manufacturing, including the cost of API and other raw
materials and components. Our bioequivalence and clinical trial expenses include payments to
vendors such as CROs, investigators, clinical suppliers and related consulting. Our
research-related manufacturing expenses include purchasing API, manufacturing materials for
bioequivalence and clinical trials and stability testing to support regulatory filings and related
labeling, testing and release, packaging and storing.
Licensing Agreements
SD Pharmaceuticals
In April 2006, we acquired SD Pharmaceuticals, Inc. in exchange for shares of our common
stock. Under a prior license agreement between SD Pharmaceuticals, Latitude Pharmaceuticals, Inc.
and Andrew X. Chen, the sole owner of Latitude Pharmaceuticals, Dr. Chen had assigned to SD
Pharmaceuticals all rights and interests of Dr. Chen and Latitude Pharmaceuticals to certain
patents throughout the world other than in China, Hong Kong, Macau and Taiwan. Under this
agreement, SD Pharmaceuticals granted back to Latitude Pharmaceuticals a worldwide, exclusive,
royalty-free and irrevocable license to use the assigned patents in all fields of use other than
certain excluded fields as specified in the agreement. Our rights in ANX-530 (vinorelbine emulsion)
and ANX-514 (docetaxel emulsion) arise through our interest in SD Pharmaceuticals. Accordingly, we
have no rights in these product candidates in China, Hong Kong, Macau and Taiwan, and our rights
under the assigned patents in the rest of the world are limited to the following fields:
•
For ANX-530, vinca alkaloid intravenous emulsion formulation for cancer treatment and
any other disease indication.
•
For ANX-514, docetaxel intravenous emulsion formulation for cancer treatment and any
other disease indication.
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Government Regulations
Governmental authorities in the U.S. and other countries extensively regulate the testing,
manufacturing, labeling, storage, recordkeeping, advertising, promotion, export, marketing and
distribution, among other things, of pharmaceutical products. In the U.S., the FDA, under the
Federal Food, Drug and Cosmetic Act, or FDCA, and other federal statutes and regulations, subjects
pharmaceutical products to rigorous review. If we do not comply with applicable requirements, we
may be fined, the government may refuse to approve our marketing applications or allow us to
manufacture or market our products, and we may be criminally prosecuted.
We and our third-party manufacturers, distributors and CROs may also be subject to regulations
under other federal, state, and local laws, including the Occupational Safety and Health Act, the
Environmental Protection Act, the Clean Air Act, the Health Insurance Portability and
Accountability Act, privacy laws and import, export and customs regulations as well as the laws and
regulations of other countries.
FDA Approval Process
To obtain approval of a new product from the FDA, we must, among other requirements, submit
data supporting safety and efficacy as well as detailed information on the manufacture and
composition of the product and proposed labeling. The testing and collection of data and the
preparation of necessary applications are expensive and time-consuming. The FDA may not act quickly
or favorably in reviewing these applications, and we may encounter significant difficulties or
costs in our efforts to obtain FDA approvals that could delay or preclude us from marketing our
products.
The process required by the FDA before a new drug may be marketed in the U.S. generally
involves the following: completion of preclinical laboratory and animal testing in compliance with
FDA regulations; submission of an investigational new drug application, which must become effective
before human clinical trials may begin; performance of adequate and well-controlled human clinical
trials to establish the safety and efficacy of the proposed drug for its intended use; and
submission and approval of an NDA by the FDA. The sponsor typically conducts human clinical trials
in three sequential phases, but the phases may overlap. In phase 1 clinical trials, the product is
tested in a small number of patients or healthy volunteers, primarily for safety at one or more
doses. In phase 2, in addition to safety, the sponsor evaluates the efficacy of the product on
targeted indications, and identifies possible adverse effects and safety risks, in a patient
population somewhat larger than phase 1 clinical trials. Phase 3 clinical trials typically involve
additional testing for safety and clinical efficacy in an expanded population at
geographically-dispersed test sites.
As a product candidate moves through the clinical phases, manufacturing processes are further
defined, refined, controlled and validated. The level of control and validation required by the FDA
increases as clinical studies progress.
Clinical trials must be conducted in accordance with the FDA's good clinical practices
requirements. The FDA may order the temporary or permanent discontinuation of a clinical trial at
any time or impose other sanctions if it believes that the clinical trial is not being conducted in
accordance with FDA requirements or presents an unacceptable risk to the clinical trial patients.
An institutional review board, or IRB, generally must approve the clinical trial design and patient
informed consent at each clinical site and may also require the clinical trial at that site to be
halted, either temporarily or permanently, for failure to comply with the IRB's requirements, or
may impose other conditions.
The applicant must submit to the FDA the results of the preclinical and clinical trials,
together with, among other things, detailed information on the manufacture and composition of the
product and proposed labeling, in the form of an NDA, including payment of a user fee. The FDA
reviews all NDAs submitted before it accepts them for filing and may request additional information
rather than accepting an NDA for filing. Once the submission is accepted for filing, the FDA begins
an in-depth review of the NDA. Under the Prescription Drug User Fee Act, or PDUFA, the FDA
ordinarily has 10 months in which to complete its initial review of the NDA and respond to the
applicant. However, the PDUFA goal dates are not legal mandates and the FDA response often occurs
several months beyond the original goal date. The review process and the target response date under
PDUFA may be extended if the FDA requests or the NDA sponsor otherwise provides additional
information or clarification regarding information already provided in the submission. Following
completion of the FDA's initial review of the NDA and the clinical and manufacturing procedures and
facilities, the FDA will issue an complete response or action letter, which will either include an
approval authorizing commercial marketing of the drug for certain indications or contain the
conditions that must be met in order to secure final approval of the NDA. If the FDA's evaluation
of the NDA submission and the clinical and manufacturing procedures and facilities is not
favorable, the FDA may refuse to approve the NDA.
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Section
505(b)(2)
New Drug Applications
As an alternate path to FDA approval for new formulations of previously approved products, a
company may file an NDA under Section 505(b)(2) of the FDCA. Section 505(b)(2) was enacted as part
of the Drug Price Competition and Patent Term Restoration Act of 1984, otherwise known as the
Hatch-Waxman Act. Section 505(b)(2) permits the submission of an NDA where at least some of the
information required for approval comes from studies not conducted by or for the applicant and for
which the applicant has not obtained a right of reference. The Hatch-Waxman Act permits the
applicant to rely upon certain published preclinical or clinical studies conducted for an approved
product or the FDA's conclusions from prior review of such studies. The FDA may also require
companies to perform additional studies or measurements to support the change from the approved
product. The FDA may then approve the new product for all or some of the label indications for
which the referenced product has been approved, as well as for any new indication sought by the
Section 505(b)(2) applicant. While references to preclinical and clinical data not generated by the
applicant or for which the applicant does not have a right of reference are allowed, all
development, process, stability, qualification and validation data related to the manufacturing and
quality of the new product must be included in an NDA submitted under Section 505(b)(2) of the
FDCA. Our regulatory strategy for both ANX-530 and ANX-514 involves submitting NDAs under Section
505(b)(2).
To the extent that the Section 505(b)(2) applicant is relying on the FDA's conclusions
regarding studies conducted for an already approved product, the applicant is required to certify
to the FDA concerning any patents listed for the approved product in the FDA's Orange Book
publication. Specifically, the applicant must certify that: (i) the required patent information has
not been filed; (ii) the listed patent has expired; (iii) the listed patent has not expired, but
will expire on a particular date and approval is sought after patent expiration; or (iv) the listed
patent is invalid or will not be infringed by the new product. A certification that the new product
will not infringe the already approved product's listed patents or that such patents are invalid is
called a paragraph IV certification. If the applicant does not challenge the listed patents, the
Section 505(b)(2) application will not be approved until all the listed patents claiming the
referenced product have expired. The Section 505(b)(2) application also will not be approved until
any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity,
listed in the Orange Book for the referenced product has expired.
If the applicant has provided a paragraph IV certification to the FDA, the applicant must also
send notice of the paragraph IV certification to the NDA and patent holders for the referenced
product once the applicant's NDA has been accepted for filing by the FDA. The NDA and patent
holders may then initiate a legal challenge to the paragraph IV certification. The filing of a
patent infringement lawsuit within 45 days of their receipt of a paragraph IV certification
automatically prevents the FDA from approving the Section 505(b)(2) NDA until the earlier of 30
months, expiration of the patent, settlement of the lawsuit or a decision in the infringement case
that is favorable to the Section 505(b)(2) applicant. Thus, the Section 505(b)(2) applicant may
invest a significant amount of time and expense in the development of its products only to be
subject to significant delay and patent litigation before its products may be commercialized.
Alternatively, if the listed patent holder does not file a patent infringement lawsuit within the
required 45-day period, the applicant's NDA will not be subject to the 30-month stay. A paragraph
IV certification would be required in connection with a Section 505(b)(2) NDA for ANX-514 that is
filed before November 2013.
Other Regulatory Requirements
Even if the FDA approves one or more of our product candidates, we will continue to be subject
to a number of post-approval regulatory requirements. If we seek to make certain changes to an
approved product, such as the addition of a new labeled indication or making certain manufacturing
changes or product enhancements, we will need FDA review and approval before the change can be
implemented. While physicians may use products for indications that have not been approved by the
FDA, we may not label or promote the product for an indication that has not been approved. Securing
FDA approval for new indications or product enhancements and, in some cases, for labeling claims or
changes in manufacturing, is generally a time-consuming and expensive process that may require us
to conduct clinical studies under the FDA's investigational new drug regulations. Even if such
studies are conducted, the FDA may not approve any change in a timely fashion, or at all. In
addition, adverse experiences associated with use of the products must be reported to the FDA, and
FDA rules govern how we can label, advertise or otherwise commercialize our products. The FDA also
may, in its discretion, require post-marketing testing and surveillance to monitor the effects of
approved products or place conditions on any approvals that could restrict the commercial
applications of these products.
In addition to FDA restrictions on marketing of pharmaceutical products, several other types
of state and federal laws have been applied to restrict certain marketing practices in the
pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims
statutes. The federal healthcare program anti-kickback statute prohibits, among other things,
knowingly and willfully offering, paying, soliciting or receiving remuneration to induce or in
return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any
healthcare item or service reimbursable under Medicare, Medicaid or other federally financed
healthcare programs. This statute has been interpreted to apply to arrangements between
pharmaceutical manufacturers on the one
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hand and prescribers, purchasers and formulary managers on the other. Violations of the
anti-kickback statute are punishable by imprisonment, criminal fines, civil monetary penalties and
exclusion from participation in federal healthcare programs. Although there are a number of
statutory exemptions and regulatory safe harbors protecting certain common activities from
prosecution or other regulatory sanctions, the exemptions and safe harbors are drawn narrowly, and
practices that involve remuneration intended to induce prescribing, purchases or recommendations
may be subject to scrutiny if they do not qualify for an exemption or safe harbor.
Federal false claims laws prohibit any person from knowingly presenting, or causing to be
presented, a false claim for payment to the federal government, or knowingly making, or causing to
be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other
healthcare companies have been prosecuted under these laws for allegedly inflating drug prices they
report to pricing services, which in turn are used by the government to set Medicare and Medicaid
reimbursement rates, and for allegedly providing free product to customers with the expectation
that the customers would bill federal programs for the product. In addition, certain marketing
practices, including off-label promotion, may also violate false claims laws. The majority of
states also have statutes or regulations similar to the federal anti-kickback law and false claims
laws, which apply to items and services reimbursed under Medicaid and other state programs, or, in
several states, apply regardless of the payor.
In addition, we and the third-party manufacturers on which we rely for the manufacture of our
products or their respective underlying components (including API) are subject to requirements that
drugs be manufactured, packaged and labeled in conformity with current Good Manufacturing Practices
promulgated by the FDA, or cGMP. To comply with cGMP requirements, manufacturers must continue to
spend time, money and effort to meet requirements relating to personnel, facilities, equipment,
production and process, labeling and packaging, quality control, recordkeeping and other
requirements. The FDA periodically inspects drug manufacturing facilities to evaluate compliance
with cGMP requirements.
Also, as part of the sales and marketing process, pharmaceutical companies frequently provide
samples of approved drugs to physicians. This practice is regulated by the FDA and other
governmental authorities, including, in particular, requirements concerning recordkeeping and
control procedures.
Outside of the U.S., the ability to market our products will also depend on receiving
marketing authorizations from the appropriate regulatory authorities. The foreign regulatory
approval process includes all of the risks associated with the FDA approval described above. In
addition, the requirements governing the conduct of clinical trials and marketing authorization
vary widely from country to country, and the time may be longer or shorter than that required for
FDA approval. In addition, 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 any collaborator of ours.
Employees
We have two employees, our chief business officer and senior vice president and our general
counsel, secretary and vice president, legal, both of whom are full-time. Our employees are not
unionized and we believe that our relationship with our employees is good. We engage a number of
consultants, vendors and contract organizations to assist us with our research and development
activities, including research-related manufacturing and regulatory affairs, and our selling,
general and administrative activities, such as finance, accounting, human resources, marketing,
legal and investor relations.
Legal Proceedings
In the normal course of business, we may become subject to lawsuits and other claims and
proceedings. Such matters are subject to uncertainty and outcomes are often not predictable with
assurance. We are not currently involved in any material legal proceedings.
Facilities
Our offices are located at 6725 Mesa Ridge Road, San Diego, California 92121. Our offices
consist of 12,038 square feet of primarily office space, which we use pursuant to a lease that will
expire on August 31, 2009. The base rent for this space currently is $262,000 annually, excluding
incremental operating cost adjustments.
We are negotiating a 9-month extension under our existing lease agreement, beginning September
1, 2009, for a portion of our existing office space, which would consist of approximately 3,173
square feet. The aggregate rent for this portion of our existing offices for the extended term of
the lease agreement would be approximately $33,000.
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Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K
and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 are available free of charge on our corporate website
(www.adventrx.com) as soon as reasonably practicable after they are filed with, or furnished to,
the Securities and Exchange Commission.
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MANAGEMENT
Management and Board of Directors
Our executive officers and directors, their ages and positions as of July 22, 2009 are as
follows:
Name
Age
Position/Affiliation
Brian M. Culley
38
Interim Principal Executive Officer, Chief Business Officer and Senior Vice President
Patrick L. Keran
38
Interim Principal Financial and Accounting Officer, General Counsel, Secretary and Vice President, Legal
Jack Lief
63
Chairman of the Board
Mark N.K. Bagnall
52
Director
Alexander J. Denner
40
Director
Michael M. Goldberg
50
Director
Mark J. Pykett
45
Director
Eric K. Rowinsky
52
Director
Executive Officers
Brian M. Culley, M.S., M.B.A.
Mr. Culley currently is the Company's interim principal
executive officer, a position he has held since February 2009, and chief business officer and a
senior vice president, positions he has held since January 2007. Mr. Culley served as vice
president, business development since joining the Company in December 2004, and was appointed
senior vice president, business development in February 2006. From 2002 until 2004, Mr. Culley
managed all strategic collaborations and licensing agreements for Immusol, Inc. in San Diego, where
his most recent title was director of business development and marketing. From 1999 until 2000, he
was a licensing and marketing associate at the University of California, San Diego, department of
technology transfer & intellectual property services and from 1996 to 1999, he was a research
associate for Neurocrine Biosciences, Inc., where he performed drug discovery research. Mr. Culley
has over 15 years of experience in the biotechnology industry, including deal structure and
negotiation, licensing, due diligence, market and competitive research, and venture funding. He
received a B.S. in biology from Boston College, an M.S. in biochemistry from the University of
California, Santa Barbara and an M.B.A. from The Johnson School of Business at Cornell University
with an emphasis on private equity and entrepreneurship.
Patrick L. Keran, J.D.
Mr. Keran currently is the Company's interim principal financial and
accounting officer, a position he has held since July 2009, general counsel, a position he has held
since August 2006, secretary, a position he has held since September 2006, and vice president,
legal, a position he has held since January 2007. From April 2004 to August 2006, Mr. Keran was
associate general counsel at Isis Pharmaceuticals, a publicly held drug discovery and development
company. From February 2003 to April 2004, Mr. Keran practiced corporate law at the law firm of
Heller Ehrman LLP, specializing in public and private financings, licensing arrangements, mergers
and acquisitions and corporate governance matters. From September 1999 to February 2003, Mr. Keran
practiced law at the law firm of Brobeck Phleger & Harrison LLP where he had a similar corporate
practice. Mr. Keran is licensed to practice law in the State of California. Mr. Keran received a
B.A. from the University of California at San Diego and a J.D. from the University of California at
Berkeley, Boalt Hall School of Law.
Board of Directors
Mark N.K. Bagnall, C.P.A.
Mr. Bagnall has served as a director since February 2004. Mr.
Bagnall currently serves as president of ProGenTech Limited, a life science and
molecular diagnostics company committed to developing next generation instrumentation for nucleic
acid and protein purification and molecular diagnostic testing, a position he has held since July
2009. From March 2009 to July 2009, Mr. Bagnall served as chief financial officer of ProGenTech Limited. Mr. Bagnall has held senior management positions in the biotechnology industry for over 20
years. During his time in the industry, he has held positions in both finance and business
development and has managed equity and debt financings, corporate partnering and licensing deals
and mergers and acquisitions transactions. From April 2008 to December 2008, Mr. Bagnall served as
the Company's chief financial officer, executive vice president and treasurer, and from November
2008 to December 2008, he served as interim principal executive officer. Since December 2008, he
has served as a consultant to the Company, and from February 2009 to July 2009, he served as the Company's
interim principal financial and accounting officer. From June 2000 to June 2007, Mr. Bagnall served
as senior vice president and chief finance and operations officer of Metabolex, Inc., a
biotechnology company dedicated to the discovery and development of novel therapeutics for diabetes
and related metabolic disorders. Prior to joining Metabolex, Mr. Bagnall held the top financial
position at four life science companies: Metrika, Inc., a privately held diagnostics company, and
three publicly held
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biotechnology companies, Progenitor, Inc., Somatix Therapy Corporation, and Hana Biologics,
Inc. Mr. Bagnall is a director of VIA Pharmaceuticals, Inc., a publicly held biotechnology company
focused on the development of compounds for the treatment of cardiovascular disease. In addition,
he is a co-founder and director of the Association of Bioscience Financial Officers, an
international organization of life science finance professionals. Mr. Bagnall received his B.S. in
Business Administration from the University of California at Berkeley, Haas School of Business and
is a Certified Public Accountant.
Alexander J. Denner, Ph.D.
Dr. Denner has served as a director since October 2006. Dr. Denner
currently serves as managing director of entities affiliated with Carl C. Icahn, including Icahn
Partners, Icahn Master, Icahn Master II and Icahn Master III. Icahn Partners, Icahn Master, Icahn
Master II and Icahn Master III are private investment funds. Dr. Denner has served in this position
since August 2006. From April 2005 to May 2006, Dr. Denner served as a portfolio manager
specializing in healthcare investments for Viking Global Investors. Previously, he served in a
variety of roles at Morgan Stanley, beginning in 1996, including as portfolio manager of healthcare
and biotechnology mutual funds. Dr. Denner is a director of Biogen Idec Inc., a publicly held
global biotechnology company that creates new standards of care in therapeutic areas with high
unmet medical needs, and Amylin Pharmaceuticals, Inc., a publicly held biopharmaceutical company
committed to improving the lives of people with diabetes, obesity and other diseases through the
discovery, development and commercialization of innovative medicines. Dr. Denner was the chairman
of the executive committee of ImClone Systems Incorporated, a publicly held biopharmaceutical
company, and a director from April 2006 until the company was purchased in November 2008. Dr.
Denner received his S.B. degree from the Massachusetts Institute of Technology and his M.S.,
M.Phil. and Ph.D. degrees from Yale University. Dr. Denner was nominated by, among others, entities
affiliated with Carl C. Icahn. Information regarding the arrangement by which Dr. Denner was
selected as a director is located below under "
Director Arrangements
."
Michael M. Goldberg, M.D.
Dr. Goldberg has served as a director since January 2004. Dr.
Goldberg currently is a managing partner of Montaur Capital Partners, an investment firm, a
position he has held since January 2007. From August 1990 to January 2007, Dr. Goldberg was
chairman and chief executive officer of Emisphere Technologies, Inc., a biopharmaceutical company.
Prior to this, Dr. Goldberg was a vice president for The First Boston Corporation, where he was a
founding member of the Healthcare Banking Group. He received a B.S. from Rensselaer Polytechnic
Institute, an M.D. from Albany Medical College of Union University and an M.B.A. from Columbia
University Graduate School of Business.
Jack Lief.
Mr. Lief has served as a director since September 2006 and as chair of the Board
since May 2007. Mr. Lief is a co-founder and since April 1997 has served as president, chief
executive officer and a director of Arena Pharmaceuticals, Inc., a publicly held clinical-stage
biopharmaceutical company focused on the discovery, development and commercialization of small
molecule drugs targeting G protein-coupled receptors. From 1995 to April 1997, Mr. Lief served as
an advisor and consultant to numerous biopharmaceutical organizations. From 1989 to 1994, Mr. Lief
served as senior vice president, corporate development and secretary of Cephalon, Inc., a
biopharmaceutical company. From 1983 to 1989, Mr. Lief served as director of business development
and strategic planning for Alpha Therapeutic Corporation, a manufacturer of biological products.
Mr. Lief joined Abbott Laboratories, a pharmaceutical company, in 1972, where he served until 1983,
most recently as the head of international marketing research. Mr. Lief is a director of
Accumetrics, Inc., a developer and marketer of diagnostic tests, ReqMed Company, Ltd., a provider
of partnering opportunities, R&D strategies and bio-venture funding, and TaiGen Biotechnology Co.,
Ltd., a biotechnology company. Mr. Lief is also an executive board member of BIOCOM, a life science
industry association representing more than 450 member companies in San Diego and Southern
California, and he was the chairman of BIOCOM from March 2005 to March 2006. Mr. Lief holds a B.A.
from Rutgers University and an M.S. in Psychology (Experimental and Neurobiology) from Lehigh
University.
Mark J. Pykett, Ph.D., M.B.A., V.M.D.
Dr. Pykett has served as a director since February 2004.
Dr. Pykett currently is president and chief operating officer of Alseres Pharmaceuticals, Inc.
(formerly Boston Life Sciences, Inc.), positions he has held since November 2004. From May 1996
until April 2003, Dr. Pykett served as president and chief executive officer and a director of
Cytomatrix, LLC, a privately held biotechnology company focused on the research, development and
commercialization of novel cell-based therapies that Dr. Pykett co-founded. Cytomatrix was acquired
by Cordlife, Pte. Ltd., a subsidiary of CyGenics Ltd., a publicly held biotechnology company listed
on the Australian Stock Exchange. From April 2003 to February 2004, Dr. Pykett served as president
of Cordlife and then as president and director of CyGenics from February 2004 until November 2004.
In addition, Dr. Pykett served as a director of Cordlife from April 2003 through November 2005 and
a director of Oramax, LLC, a development stage dental implant company developing biomaterials for
dental prostheses, from 2000 through 2006. Dr. Pykett graduated Phi Beta Kappa, Summa Cum Laude
from Amherst College, holds a veterinary degree, Phi Zeta, Summa Cum Laude, a doctorate in
molecular biology from the University of Pennsylvania, and received an M.B.A., Beta Gamma Sigma,
from Northeastern University. He completed post-doctoral fellowships at the University of
Pennsylvania and Harvard University. Dr. Pykett held an adjunct faculty position at the Harvard
School of Public Health from 1997 to 2004.
Eric K. Rowinsky, M.D.
Dr. Rowinsky has served as a director since February 2008. Dr. Rowinsky
currently is chief medical
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officer, a position he has held since February 2005, and executive vice president, a position
he has held since December 2007, of ImClone Systems Incorporated, a wholly-owned subsidiary of Eli
Lilly and Company. Dr. Rowinsky held the position of director of the Institute of Drug Development
("IDD") at the Cancer Therapy and Research Center from 2002 to 2004 and was the director of
clinical research at the IDD from 1996 to 2002. In addition, he held the SBC Endowed Chair for
Early Drug Development at the IDD. From 1996 to 2006, Dr Rowinsky was also a clinical professor of
medicine (division of medical oncology) at the University of Texas Health Science Center, San
Antonio, Texas. Dr. Rowinsky also served as an associate professor of oncology at Johns Hopkins
University from 1988 until 1996. He served on the Board of Scientific Counselors of the National
Cancer Institute from 2004 to 2007. Dr. Rowinsky received a B.A. degree from New York University
and an M.D. degree from the Vanderbilt University School of Medicine. Following his residency in
internal medicine, he completed fellowship training in medical oncology at the Johns Hopkins
University School of Medicine.
There are no family relationships among any of the Company's directors or executive officers.
Director Arrangements
Pursuant to that certain Rights Agreement, dated July 27, 2005, as amended, or the Rights
Agreement, we are required to cause our board of directors to nominate to our board of directors an
individual, who we refer to as the Purchaser Designee, selected by the "Purchasers" who at the time
own a majority of the "Purchased Shares." Dr. Denner is the current Purchaser Designee.
"Purchasers," as defined in the Rights Agreement, refers to those entities that purchased our
common stock and warrants in a private transaction in July 2005. "Purchased Shares," as defined in
the Rights Agreement, refers to those shares of common stock outstanding and issuable upon exercise
of warrants issued to the Purchasers in connection with July 2005 transaction. The Purchasers'
right to select a Purchaser Designee for nomination to our board of directors shall terminate upon
the earlier of (i) July 27, 2012, (ii) the date that the Purchasers' aggregate holdings of
Purchased Shares (either of record or beneficially) is, as a result of sales or other dispositions
thereof, equal to less than 50% of the aggregate number of shares purchased by the Purchasers in
connection with the July 2005 transaction, and (iii) at the time of a change of control of our
company.
Pursuant to that certain Second Amendment to Rights Agreement, dated February 25, 2008, or the
Second Amendment, the Rights Agreement was amended to allow our board of directors to increase the
authorized number of directors from six to seven if the vacancy created by such action was filled
by a majority of the directors then in office, which majority must include the Purchaser Designee
(as defined in the Rights Agreement), if any; provided that, if at any time there are seven members
of our board of directors and one of such members is removed, resigns, retires or dies and the
Purchaser Designee, if any, does not approve a successor, we will do those things reasonably
necessary and within our control to, as soon as reasonably practicable after the effective date of
such removal, resignation, retirement or death, set the authorized number of our board of directors
at six. The Second Amendment confirmed that Dr. Denner, and not Dr. Rowinsky, is the Purchaser
Designee. Following the resignation of Evan M. Levine as a member of our board of directors in
December 2008, our board of directors set the authorized number of directors constituting our board
of directors at six.
Board Composition
Our bylaws allow the authorized number of directors to be not less than three or more than
nine; currently, the size of our board of directors is set at six. Each of our directors serves a
one-year term and are elected at each year's annual meeting of stockholders. Our board of directors
has determined that Dr. Denner, Dr. Goldberg, Mr. Lief, Dr. Pykett and Dr. Rowinsky are
"independent" under the rules of the NYSE Amex (formerly, the American Stock Exchange). Before his
employment by us in April 2008, Mr. Bagnall was also "independent" under the rules of the NYSE
Amex. Under applicable rules of the NYSE Amex and the Securities and Exchange Commission, or the
SEC, the existence of certain transactions above certain thresholds between a director and our
company are required to be disclosed and preclude a finding by our board of directors that the
director is independent. In addition to transactions required to be disclosed under these NYSE Amex
and SEC rules, in making its independence determination with respect to Dr. Denner, our board of
directors considered Dr. Denner's position with entities affiliated with Mr. Icahn and such
entities' (a) ownership position in our company and (b) rights under the Rights Agreement, pursuant
to which such entities, along with others, are, among other things, entitled to participate in
future sales by us of additional securities and cause our board of directors to nominate to our
board of directors an individual selected by them. After considering these relationships and
transactions, our board of directors concluded that they did not interfere with Dr. Denner's
ability to exercise independent judgment in carrying out his responsibilities as a member of our
board of directors.
Meetings and Meeting Attendance
During 2008, our board of directors met seventeen times, the audit committee of our board of
directors met seven times and
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action was taken by unanimous written consent once, the compensation committee of our board of
directors met seven times, the nominating and governance committee of our board of directors met
three times and action was taken by unanimous written consent once and the research and development
committee of our board of directors met three times. During 2008, each member of our board of
directors nominated for re-election attended 75% or more of the aggregate of (i) the total number
of meetings of our board of directors held during the period of such member's service and (ii) the
total number of meetings of committees on which such member served, during the period of such
member's service, except that Dr. Goldberg attended five, or approximately 71%, of the total number
of audit committee meetings held during 2008. We encourage all directors to attend our annual
stockholder meetings. Messrs. Bagnall, Levine and Lief attended our 2008 annual meeting of
stockholders and Mr. Lief attended our 2009 annual meeting of stockholders.
Committees of the Board
Our board of directors currently has standing audit, compensation and nominating and
governance committees. In February 2008, the Board created a research and development committee.
Audit Committee.
The audit committee currently consists of Mr. Lief (chair), Dr. Goldberg and
Dr. Pykett. During 2008 until his employment by us in April 2008, Mr. Bagnall served as a member
and chair of the audit committee. Our board of directors has determined that all members of the
audit committee are independent directors and meet the eligibility standards for audit committee
service under the rules of the NYSE Amex. Our board of directors has determined that Mr. Lief
qualifies as an "audit committee financial expert" as defined by the rules of the SEC. The purpose
of the audit committee is to oversee our accounting and financial reporting processes and audits of
our financial statements. The responsibilities of the audit committee include appointing and
providing for the compensation of the independent accountants to conduct the annual audit of our
accounts, reviewing the scope and results of the independent audits, reviewing and evaluating
internal accounting policies, and approving all professional services to be provided to us by our
independent accountants. The audit committee is governed by a written charter approved by our board
of directors.
Compensation Committee.
The compensation committee currently consists of Dr. Goldberg (chair),
Dr. Denner and Mr. Lief. During 2008 until May 2008, Dr. Pykett served as a member of the
compensation committee. Our board of directors has determined that all members of the compensation
committee are independent directors under the rules of the NYSE Amex. The compensation committee
administers our benefit plans, reviews, approves and administers all compensation arrangements for
executives, and establishes and reviews general policies relating to the compensation and benefits
of our executives and other personnel. The compensation committee meets several times a year and
consults with independent compensation consultants, as it deems appropriate, to review, analyze and
set compensation packages for our executives. The compensation committee is governed by a written
charter approved by our board of directors.
Under its charter, the compensation committee has authority to determine the amount and form
of compensation paid to our chief executive officer, and to take such action, and to direct us to
take such action, as is necessary and advisable to compensate our chief executive officer in a
manner consistent with its determinations, and shall deliberate and vote on all such actions
outside the presence of our chief executive officer. In accordance with its charter, the
compensation committee will review at least annually the performance of our chief executive
officer, including in light of any goals and objectives established for such performance, and in
light of such review determine his or her compensation.
The compensation committee has authority to determine the amount and form of compensation paid
to our other executives, employees, consultants and advisors and to review the performance of such
persons in order to determine appropriate compensation. The compensation committee has authority to
take such action, and to direct us to take such action, as is necessary and advisable to compensate
such persons and to implement such policies and practices in a manner consistent with its
determinations. The compensation committee may delegate its authority on these matters with regard
to our non-executive employees to our officers and other appropriate supervisory personnel, subject
to applicable law and regulations.
Except with respect to its responsibilities regarding setting compensation for our chief
executive officer and our other executives, the compensation committee may delegate its authority
to individual members of the compensation committee or other members of our board of directors. In
addition, to the extent permitted by applicable law and regulations, the compensation committee may
delegate to one or more of our officers (or other appropriate supervisory personnel) the authority
to grant stock options, stock appreciation rights, restricted stock units and performance units to
employees (who are not officers or members of our board of directors) of ours or of any subsidiary
of ours;
provided
, however that (a) the number of shares of our common stock underlying
such options, stock appreciation rights, restricted stock units and performance units are
consistent with guidelines previously approved by the compensation committee; (b) the per-share
exercise or purchase price of such awards equals the fair market value of our common stock on the
date of grant; and (c) the vesting and other terms that apply to such awards are the same terms as
apply under our standard
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form of agreement under the applicable equity compensation plan, provided that such officer(s)
may, in such officer(s)' discretion, grant awards that are fully vested on the date of grant of the
award or grant awards with more restrictive vesting requirements.
Historically, including in 2008, our chief executive officer reviewed and assessed the
performance of our other executive officers for the preceding year in the first quarter of each
year and subsequently made recommendations to the compensation committee regarding the amount and
form of those officers' compensation packages for the current year. The compensation committee
generally gives substantial deference to our chief executive officer's recommendations because the
members of that committee generally believe the chief executive officer is in the best position to
evaluate the other executive officers' past performance and anticipated contributions. From
September 2004 until the end of his employment relationship with us in October 2008, our chief
executive was Mr. Levine. During the first quarter of 2008, Mr. Levine evaluated the 2007
performance of our other executive officers and, based on those officers' individual performance
and anticipated contributions and our 2007 performance and 2008 goals and projections, made
recommendations as to 2008 compensation for those executive officers to the compensation committee.
The compensation committee took Mr. Levine's recommendations into consideration, according them
substantial deference, in setting the executive officers' 2008 compensation.
In February 2007, the compensation committee retained Frederic W. Cook & Co., Inc., a
nationally-recognized compensation consulting firm, to provide an independent evaluation of our
compensation practices. The compensation committee retained responsibility and authority over the
scope of services provided by F.W. Cook and F.W. Cook reported and was responsible to the
compensation committee. In connection with retaining F.W. Cook, the compensation committee charged
F.W. Cook with, among other things, conducting a competitive assessment of our executive
compensation practices, in particular those applicable to our chief executive officer, which
included assisting the compensation committee in identifying a peer group of companies against
which to evaluate the competitiveness of our executive compensation packages. In February 2007,
F.W. Cook completed its analysis of our chief executive officer's compensation and, in May 2007,
completed its analysis of our other executive officers' compensation. Other than reviewing with the
compensation committee the results of its analysis and providing corresponding written reports, the
compensation committee generally did not involve F.W. Cook in its 2007 compensation determinations.
In connection with determining 2008 executive compensation, the compensation committee reviewed and
evaluated the information previously provided by F.W. Cook and contacted F.W. Cook with certain
specific questions, but otherwise did not involve F.W. Cook in its 2008 compensation
determinations.
Nominating and Governance Committee.
The nominating and governance committee currently
consists of Dr. Pykett (chair) and Dr. Rowinsky, each of whom our board of directors has determined
is an independent director under the rules of the NYSE Amex. During 2008 and until May 2008, Dr.
Goldberg and Mr. Lief served on the nominating and governance committee. The nominating and
governance committee's responsibilities include recommending to our board of directors nominees for
possible election to our board of directors and providing oversight with respect to corporate
governance and succession planning matters. The nominating and governance committee is governed by
a written charter approved by our board of directors.
Research and Development Committee.
Currently, the sole member and chair of the research and
development committee is Dr. Rowinsky. The research and development committee assists our board of
directors in evaluating our basic scientific and manufacturing research, clinical development and
regulatory affairs and the allocation of our resources.
Charters for the audit, compensation and nominating and governance committees of our board of
directors, as well as our corporate governance guidelines, are posted on our corporate website at:
www.adventrx.com.
The information contained in this prospectus with respect to the charters of each of the audit
committee, the compensation committee, and the nominating and governance committee and the
independence of the non-management members of our board of directors shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall the information be incorporated by
reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that we specifically incorporate it by reference in a filing.
Code of Ethics
We have adopted a code of ethics that applies to our principal executive officer, principal
financial officer, principal accounting officer or persons performing similar functions, as well as
all of our other officers, directors and employees. This code of ethics is a part of our code of
business conduct and ethics and available on our corporate website at www.adventrx.com. We intend
to disclose future amendments to, or waivers of, certain provisions of our code of ethics that
apply to our principal executive officer, principal financial officer, principal accounting officer
or persons performing similar functions on the above website within four business days following
such amendment or waiver.
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EXECUTIVE & DIRECTOR COMPENSATION
Summary Compensation Table
The following table sets forth information concerning compensation earned for services
rendered to us during the years ended December 31, 2008 and December 31, 2007 by (i) each
individual serving as principal executive officer during 2008, (ii) the two most highly compensated
executive officers, other than the individuals serving as the principal executive officer, who were
serving as executive officers as of December 31, 2008, and (iii) the individuals who would have
qualified under the foregoing clause (ii) but for the fact that such individuals were not serving
as executive officers as of December 31, 2008. Collectively, these individuals are referred to as
the "Named Executive Officers."
Nonqualified
Non-Equity
Deferred
Name and Principal
Stock
Option
Incentive Plan
Compensation
All Other
Position(1)
Year
Salary
Bonus
Awards
Awards(2)
Compensation
Earnings
Compensation(3)
Total
Brian M. Culley
2008
$
262,500
—
—
$
183,493
—
—
$
13,989
$
459,982
Chief Business Officer
2007
$
250,000
—
—
$
235,852
—
—
$
9,162
$
495,014
Patrick Keran
General Counsel
2008
$
231,000
—
—
$
121,708
—
—
$
13,758
$
366,466
Evan M. Levine
2008
$
381,635
—
—
—
—
—
$
493,685
(4)
$
875,320
Former Chief Executive Officer
2007
$
450,000
$
200,000
—
—
—
—
$
9,180
$
659,180
Mark N.K. Bagnall(5)
Former Chief Financial Officer
2008
$
258,462
—
—
$
37,599
(6)
—
—
$
97,791
(7)
$
393,852
Gregory P. Hanson
2008
$
67,308
—
—
$
38,194
—
—
$
341,498
(8)
$
447,000
Former Chief Financial Officer
2007
$
250,000
—
—
$
149,498
—
—
$
10,188
$
409,686
Joan M. Robbins
2008
$
224,740
—
—
$
181,994
—
$
86,110
(9)
$
492,844
Former Chief Scientific Officer
2007
$
265,000
—
—
$
192,095
—
—
$
9,270
$
466,365
(1)
Mr. Culley and Mr. Keran held the positions listed in the table through December 31, 2008. On April
2, 2008, Mr. Hanson's employment with us ended. On October 14, 2008, Dr. Robbins' employment with us
ended. On October 17, 2008, Mr. Levine's employment with us ended and, on December 22, 2008, Mr.
Levine resigned from our board of directors. On December 26, 2008, Mr. Bagnall's employment with us
ended, though he remains on our board of directors. Compensation information for Mr. Keran and Mr.
Bagnall for 2007 is not included because they were not 2007 named executive officers.
(2)
The value of the option awards has been computed in accordance with the provisions of FAS 123R, which
requires that we recognize as compensation expense the value (excluding the effect of assumed
forfeiture rates) of all share-based awards, including stock options, granted to employees in
exchange for services over the requisite service period, which is typically the vesting period. For
more information, including the assumptions made in calculating the FAS 123R value of the option
awards, see Note 8 of the Notes to Consolidated Financial Statements contained in our Annual Report
on Form 10-K filed with the SEC on March 27, 2009 and Note 9 of the Consolidated Financial Statemetns
contained in our Annual Report on Form 10-K filed with the SEC on March 17, 2008.
(3)
Except as otherwise indicated, consists of (a) matching contributions made pursuant to our
tax-qualified 401(k) plan and (b) premiums paid for term life insurance policies for the benefit of
our executives.
(4)
Consists of (a) matching contributions pursuant to our 401(k) plan of $12,519, (b) life insurance
premiums of $145, (c) severance payments of $365,000, (d) a severance-related health benefit
allowance of $19,870, and (e) accrued vacation benefits paid in connection with termination of
employment of $90,865. See "Narrative Disclosure to Summary Compensation Table" below for additional
information regarding termination-related payments.
(5)
Mr. Bagnall served as our chief financial officer, executive vice president and treasurer from April
3, 2008 to December 26, 2008. From November 3, 2008 to December 26, 2008, Mr. Bagnall additionally
served as our principal executive officer. Both prior to and after his service as an employee, he
served as a member of our board of directors and, after his service as an employee, he served as a
consultant to us.
(6)
Consists of the value of an option award to Mr. Bagnall in 2007 as a member of our board of directors.
(7)
Consists of (a) matching contributions pursuant to our 401(k) plan of $13,800, (b) life insurance
premiums of $345, (c) accrued vacation benefits paid in connection with termination of employment of
$19,683, (d) the value of the partial acceleration of an option award triggered by termination of
employment of $49,863, and (e) non-employee director fees for service on our board of directors
during the periods in 2008 in which Mr. Bagnall was not employed by us of $14,100. Mr. Bagnall
received severance
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and a health benefit allowance in connection with the termination of his
employment, but these payments were not paid or accrued to Mr. Bagnall in 2008 because we did not
enter into a separation agreement with Mr. Bagnall until January 2009. See "Narrative Disclosure to
Summary Compensation Table" below for additional information regarding termination-related payments.
(8)
Consists of (a) matching contributions pursuant to our 401(k) plan of $4,038, (b) life insurance
premiums of $320, (c) severance payments of $125,000, (d) a severance-related health benefit
allowance of $20,997, (e) the value of the partial acceleration of an option award triggered by
termination of employment of $174,272, (f) accrued vacation benefits paid in connection with
termination of employment of $16,496, and (g) consulting fees of $375. See "Narrative Disclosure to
Summary Compensation Table" below for additional information regarding termination-related payments.
(9)
Consists of (a) matching contributions pursuant to our 401(k) plan of $12,519, (b) life insurance
premiums of $218, (c) severance payments of $22,475, (d) a severance-related health benefit allowance
of $1,511, and (e) accrued vacation benefits paid in connection with termination of employment of
$49,387. See "Narrative Disclosure to Summary Compensation Table" below for additional information
regarding termination-related payments.
Narrative Disclosure to Summary Compensation Table
Current Base Salary; Employment and Severance Arrangements with Currently Employed Named Executive
Officers
In July 2009, the compensation committee of our board of directors adjusted the annual base salaries
of Mr. Culley and Mr. Keran to, respectively, $315,000 and $289,000, which adjustments were
retroactive to January 1, 2009.
Each of Mr. Culley's and Mr. Keran's employment with us is at-will and, as of December 31,
2008, we had no obligation to pay such officer any severance or other benefits, other than as may
be required by law, in connection with a termination of employment. In July 2009, we adopted a 2009
mid-year incentive plan and a retention and severance plan. We believe these plans are necessary
to incentivize and retain our remaining officers, who are also our remaining employees, and
reinforce their dedication to us during a period when they would otherwise likely seek alternative
employment. As a part of adopting these plans, we terminated the retention and incentive agreements
we entered into with each of Mr. Culley and Mr. Keran in January 2009 and the awards of restricted
stock units, representing the right to receive 1,200,000 and 850,000 shares, respectively, of our
common stock, that we granted to Mr. Culley and Mr. Keran in January 2009.
Under the incentive plan, each of Mr. Culley and Mr. Keran are eligible for incentive awards
based upon the achievement of corporate performance objectives in effect at the end of 2009.
Awards generally will be paid in cash. The potential award of each of Mr. Culley and Mr. Keran
will be based 100% on our achievement of corporate objectives and the target award amount for each
of them is $150,000. The target amount of each award may be increased or decreased by multiplying
the target amount by a corporate performance multiplier, as will be determined by the compensation
committee of our board of directors in the first quarter of 2010. Award multipliers will range
from zero to 1.5. Payment of awards under the incentive plan will be made after December 31, 2009
and on or before March 14, 2010.
Under the retention plan, if the employment of Mr. Culley or Mr. Keran, as applicable,
terminates at any time as a result of an involuntary termination, and such employee delivers and
does not revoke a general release of claims, which will also confirm any post-termination
obligations and/or restrictions applicable to such employee, such employee will be entitled to an
amount equal to twelve (12) months of such employee's then-current base salary, less applicable
withholdings and an amount equal to the estimated cost of continuing such employee's health care
coverage and the coverage of such employee's dependents who are covered at the time of the
involuntary termination under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, for a period equal to twelve (12) months. These severance benefits will be paid in a
lump-sum on the date the general release of claims becomes effective. Our aggregate contractual
obligation under the retention plan, including applicable payroll and employer taxes, is approximately $650,000.
For purposes of the retention plan, an involuntary termination means (i) without the
employee's express written consent, an action by our board of directors or external events causing
or immediately portending a material reduction or alteration of the employee's duties, position or
responsibilities relative to the employee's duties, position or responsibilities in effect
immediately prior to such reduction or alteration, or the removal of the employee from such
position, duties or responsibilities; provided, however, that an "involuntary termination" shall
not be deemed to occur (a) with respect to Mr. Culley, if Mr. Culley remains the head of and most
senior individual within the Company's (or its successor's) business development function and (B)
with respect to Mr. Keran, if Mr. Keran remains the head of and most senior individual within the
Company's (or its successor's) legal function; (ii) without the
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employee's express written consent, a material reduction by us of the employee's base salary
as in effect immediately prior to such reduction; (iii) without the employee's express written
consent, the relocation of the employee's principal place of employment with us by more than fifty
(50) miles; (iv) any termination of the employee by us without cause (as defined below); or (vi) a
material breach of the retention plan, including, but not limited to our failure to obtain the
assumption of the retention plan by any successors as contemplated in the retention plan. For
purposes of the retention plan, "Cause" means (i) any act of personal dishonesty taken by the
employee in connection with his or her responsibilities as an employee which is intended to result
in substantial personal enrichment of the employee; (ii) the employee's conviction of a felony that
our board of directors reasonably believes has had or will have a material detrimental effect on
our reputation or business; (iii) a willful act by the employee that constitutes misconduct and is
materially injurious to us, or (iv) continued willful violations by the employee of the employee's
obligations to us after there has been delivered to the employee a written demand for performance
from us that describes the basis for our belief that the employee has not substantially performed
his or her duties.
In addition, as of December 31, 2008, we had accrued vacation benefits liability for Mr.
Culley in the amount of $48,461 and for Mr. Keran in the amount of $30,166. If their employment
with us had ended on December 31, 2008, they would have been entitled to payment of those amounts.
It is our policy that, at the beginning of employment, all employees sign our standard
confidential information, non-solicitation and invention assignment agreement for employees. Under
the current version of this agreement, employees agree that, during the period of the employee's
service to us and for one year thereafter, the employee will not (a) solicit any employee or
consultant of ours to leave the employ of or terminate any relationship with us or (b) solicit the
business of any client or customer of ours using our confidential information. Each of Mr. Culley
and Mr. Keran executed such an agreement in connection with the commencement of his employment with
us.
2008 and 2009 Stock Option Grants
On March 31, 2008, the compensation committee granted stock option awards to certain or our
non-CEO executives, including a stock option to purchase 200,000 shares to each of Messrs. Culley
and Keran and Dr. Robbins. The compensation committee did not grant any stock option awards to Mr.
Levine (the reasons for which are described under "Compensation Programs and Process — Elements of
Compensation" in the proxy statement we filed with the SEC on April 16, 2008) or Mr. Bagnall, who
was then one of our non-employee directors (see -"Employment and Separation Arrangements with Mr.
Bagnall" below regarding an option granted to him in April 2008 in connection with commencement of
his employment). The March 2008 stock options were granted under our 2005 Equity Incentive Plan,
have a term of 10 years, and vest and become exercisable as to one-fifth of the shares subject to
the option on each of January 1, 2009, January 1, 2010, January 1, 2011, January 1, 2012 and
January 1, 2013. The vesting schedule was recommended by Mr. Levine, then our chief executive
officer, and, after substantial discussion, approved by the compensation committee. The per share
exercise price of these options is $0.54, which was the closing price of our common stock on March
31, 2008. None of these options currently are in-the-money.
On July 21, 2009, the compensation committee granted to each of Mr. Culley and Mr. Keran a
stock option to purchase up to 1,700,000 shares of our common stock. The per share exercise price
of these options is $0.13, which was the closing price of our common stock on July 21, 2009. The
July 2009 stock options were granted under our 2008 Omnibus Incentive Plan, have a term of 10
years, and vest and become exercisable, subject to the respective employee's continuous service, as
to one-fourth of the shares subject to the option on each of January 1, 2010, January 1, 2011,
January 1, 2012 and January 1, 2013. However, in the event Mr. Culley or Mr. Keran, as applicable,
ceases to provide services to us as an employee by reason of an involuntary termination,
exercisability of the then-vested stock options shall be extended such that the stock options shall
be exercisable for a period of 12 months from the date of such involuntary termination. In
addition, the vesting and exercisability of each option will accelerate or be extended under
certain circumstances, including, (i) in the event of a change in control (as defined in our 2008
Omnibus Incentive Plan), acceleration with respect to fifty percent of the then unvested shares on
the day prior to the date of the change in control and, subject to the respective employee's
continuous service, with respect to the remaining fifty percent of the then unvested shares on the
one year anniversary of the date of the change in control, (ii) subject to the preceding clause
(i), in the event of a change of control, to the extent the successor company (or a subsidiary or
parent thereof) does not assume or substitute for the option, acceleration in full on the day prior
to the date of the change in control if the employee is then providing services or was the subject
an involuntary termination in connection with, related to or in contemplation of the change in
control and exercisability for a period of 36 months from the date of such involuntary termination,
and (iii) subject to the preceding clause (i), in the event of a change of control, to the extent
the successor company (or a subsidiary or parent thereof) assumes or substitutes for the option,
and in the event of an involuntary termination of the employee within 12 months following the date
of the change in control, acceleration in full and exercisability for a period of 36 months from
the date of such involuntary termination. For purposes of the July 2009 stock options, the
definition of "involuntary termination" is the same as under the retention plan described above.
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We structured the number of shares underlying and the vesting schedule of the March 2008 stock
options and the July 2009 stock options primarily to retain and incentivize our executives, and not
primarily as a form of compensation or to recognize individual or corporate performance in 2007 or
2008. In particular, we did not view these awards as typical annual option grants. The compensation
committee's goal in determining the size of these stock option awards was to emphasize unity and
cohesion within our executive ranks. The compensation committee intended for, with respect to the
March 2008 stock options, our non-CEO executives and, with respect to the July 2009 stock options,
our two remaining employees, to share equally in our future success and, accordingly, granted
similarly situated executives comparably sized stock option awards.
The compensation committee granted these awards to retain and properly incentive the
individuals capable of maximizing the potential of our assets. Without a substantial opportunity to
participate in our future success, we were concerned that we would be unable to retain key
executives. In addition, the annual, cliff-based vesting schedule of the March 2008 stock options
and the July 2009 stock options was structured to provide substantial retentive value.
As a condition to the grant of the July 2009 stock options, both Mr. Culley and Mr. Keran
agreed to terminate the awards of restricted stock units, representing the right to receive
1,200,000 and 850,000 shares, respectively, of our common stock, that we granted to Mr. Culley and
Mr. Keran in January 2009.
2007 Bonus to Mr. Levine
In March 2008, we evaluated our executives' 2007 compensation and performance and, consistent
with past practice, no cash bonuses for any of our non-CEO executives were approved by the
compensation committee. However, the compensation committee awarded Mr. Levine a discretionary cash
bonus of $200,000.
Mr. Levine's 2007 bonus was not based on achievement of the corporate objectives previously
established by the compensation committee. Following our announcement in October 2007 regarding the
results of our phase 2b clinical trial of ANX-510, several of the corporate objectives previously
established by the compensation committee became irrelevant or undesirable and the compensation
committee did not subsequently revise those objectives. Mr. Levine's 2007 bonus was awarded in part
in recognition of his 2007 performance, but also to compensate him in lieu of our not granting him
any stock option awards (the reasons for which are more fully described under "Compensation
Programs and Process — Elements of Compensation" in the proxy statement we filed with the SEC on
April 16, 2008). Despite our October 2007 announcement regarding the results of our phase 2b
clinical trial of ANX-510 and the resulting decline in our stock price, 2007 was marked with
several positive achievements. Furthermore, the compensation committee determined that Mr. Levine's
performance in 2007 was exceptional in light of prevailing conditions and that he displayed the
leadership and perseverance in the face of adversity that we seek in our executives and wish to
reward.
In approving Mr. Levine's 2007 bonus, the compensation committee was sensitive to the
perception that it was rewarding Mr. Levine when our stockholders and stock price have suffered. To
rebuild value, however, the compensation committee believed it was critical that we retain and
properly incentivize Mr. Levine because of the unique qualities that he possesses, as well as to
provide continuity to our operations. Based on our successes in 2007 and Mr. Levine's leadership
following our October 2007 clinical trial results announcement, as well as our not granting Mr.
Levine any equity awards since 2003, the compensation committee determined that a cash bonus
reflecting 80% of Mr. Levine's target award was appropriate.
Separation Arrangements with Mr. Levine
In October 2008, Mr. Levine's employment relationship with us ended and, in December 2008, Mr.
Levine resigned from our board of directors. Mr. Levine formerly served as our chief executive
officer and president. In December 2008, we entered into a confidential separation agreement and
general release of all claims regarding terms of separation with Mr. Levine, or the Levine
Separation Agreement.
As set forth in the Levine Separation Agreement, in exchange for a mutual release of claims
and Mr. Levine's agreement and representations (as more fully described below), we agreed to
provide a severance payment of $225,000 to Mr. Levine. In addition, we agreed to provide a health
benefit allowance of $19,870, which Mr. Levine may use, at his discretion, to pay the premiums
required to continue his group health care coverage under COBRA or any other health care related
expenses. The severance payment and the health benefit allowance were paid in one lump sum, less
applicable payroll deductions and required withholdings, in January 2009. In addition, pursuant to
the Levine Separation Agreement, we agreed to issue 1,000,000 fully-vested shares of our common
stock to Mr. Levine, subject to the satisfaction of certain conditions by January 30, 2009, or, if
those conditions were not so satisfied, pay Mr. Levine an additional $100,000 in one lump sum, less
applicable payroll deductions and required withholdings. In February 2009, because the conditions
to our obligation to issue the shares had not been timely satisfied, we paid Mr. Levine an
additional $100,000
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in one lump sum, less applicable payroll deductions and required withholdings. In November
2008, prior to entering into the Levine Separation Agreement, we paid Mr. Levine a total of $40,000
in four weekly installments ending in December 2008 in exchange for Mr. Levine's agreement not to
sign a confidential separation agreement and general release of all claims that was presented to
Mr. Levine on October 19, 2008 to allow time for discussions related to the terms of Mr. Levine's
separation from us and release of claims to continue.
Under the Levine Separation Agreement, Mr. Levine represented that he had returned to us all
property, data and information belonging to us and agreed not to use or disclose to others any
confidential or proprietary information of ours and agreed to comply with his continuing
obligations under various agreements and other documents as previously executed by him. In
addition, we and Mr. Levine each agreed that neither would make any voluntary statements, written
or oral, or cause or encourage others to make any such statements, that defame, disparage or in any
way criticize the personal and/or business reputation, practices or conduct of, respectively, Mr.
Levine, on the one hand, or us or our employees, officers and directors, among others, on the other
hand. Each of we and Mr. Levine also represented that neither had filed any lawsuits, complaints or
other accusatory pleadings against the other. Mr. Levine also certified that all transactions in
our securities prior to his separation date and reportable under Section 16 of the Securities
Exchange Act of 1934 had been reported on Form 4 and agreed to execute and deliver promptly after
December 31, 2008 a document certifying that he is not required to file a Form 5 for the fiscal
year ended December 31, 2008.
Employment and Separation Arrangements with Mr. Bagnall
In connection with Mr. Bagnall's employment as our chief financial officer, executive vice
president and treasurer, effective as of April 3, 2008, we entered into an offer letter agreement
with Mr. Bagnall. Pursuant to the terms of the offer letter, Mr. Bagnall's base salary was $350,000
per year and he was entitled to participate in our health and welfare benefits, 401(k) plan and
other benefits on the same terms as our other executive officers. In addition, Mr. Bagnall was
eligible to participate in our 2008 Incentive Plan, which is discussed under "Executive Officer and
Director Compensation — Compensation Discussion and Analysis" in the proxy statement we filed with
the SEC on April 16, 2008, on the same basis as our other executive officers. In the event of Mr.
Bagnall's involuntary termination, we agreed to (a) continue to pay Mr. Bagnall's base salary in
effect immediately prior to the effective date of such involuntary termination for the number of
months equal to the number of full 30-day periods he was a full-time employee of our, provided that
in no event would such number of months exceed 12 (this period is referred to as the Severance
Period), (b) pay Mr. Bagnall all costs that we would otherwise have incurred to maintain his health
and similar benefits during the Severance Period, and (c) pay Mr. Bagnall the amount of the
matching 401(k) contribution that would have been contributed by us based on the amount contributed
by Mr. Bagnall in the pay-period immediately prior to the effective date of the involuntary
termination. Our obligation to make such payments was conditioned upon Mr. Bagnall's execution and
delivery of a general release of claims and submission of his resignation as a member of our board
of directors. If Mr. Bagnall failed to execute and deliver the release of claims or subsequently
revoked the release, he would not have been entitled to any of the severance payment. If Mr.
Bagnall failed to submit his resignation from our board of directors, he would not have received
any severance payment until after our next annual meeting of stockholders for which he was not
nominated for election to our board of directors in the proxy materials related to such meeting. On
December 11, 2008, the compensation committee of the Board approved amendments to the offer letter
intended to make severance benefits payable to Mr. Bagnall exempt from potential deferred
compensation tax penalties.
In addition, on March 31, 2008, the compensation committee approved a stock option to Mr.
Bagnall under our 2005 Equity Incentive Plan to purchase up to 500,000 shares of our common stock,
contingent upon the commencement of Mr. Bagnall's employment with us. Accordingly, this option was
granted on April 3, 2008 with an exercise price of $0.52 per share, which was the closing price of
our common stock on April 3, 2008. The terms of the option provide that it would vest and become
exercisable with respect to 100,000 of the underlying shares on each of January 1, 2009, January 1,
2010, January 1, 2011, January 1, 2012 and January 1, 2013, subject to Mr. Bagnall's continuous
service (as defined in our 2005 Equity Incentive Plan). However, in the event of Mr. Bagnall's
involuntary termination, the option's vesting schedule would accelerate such that (a) an additional
50,000 shares will vest and become exercisable if the effective date of such involuntary
termination occurs between January 1 and June 30 of a given calendar year and (b) an additional
100,000 shares will vest and become exercisable if the effective date of such involuntary
termination occurs between July 1 and December 31 of a given calendar year, subject to Mr.
Bagnall's execution and delivery to us of a release of claims and his not revoking such release. In
the event of Mr. Bagnall's death, disability or other termination, the option would be exercisable
for 90 days following such event, except that in the event of an involuntary termination, the
option would be exercisable for 180 days following such termination, subject to Mr. Bagnall's
execution and delivery to us of a release of claims and his not revoking such release. In addition,
in the event of a change of control (as defined in our 2005 Equity Incentive Plan) where Mr.
Bagnall was employed by us or one of our affiliates as of the closing date of the change of control
and the option was not assumed or replaced, the option would accelerate in full. In the event of
Mr. Bagnall's involuntary termination before and in connection with a change of control, the option
would accelerate in full upon the change of control. Finally, in the event of a change of control
where the
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option is
assumed or replaced, (i) 50% of any unvested portion of the option would vest immediately
prior to the closing date of the change of control, (ii) the remaining unvested portion of the
option would vest ratably by month over the 12-month period beginning on the closing date of the
change of control, subject to Mr. Bagnall's continuous service, and (iii) 100% of any remaining
unvested portion of the option would vest upon an involuntary termination of Mr. Bagnall that
occurs within 12 months of the change of control. Unless terminated earlier pursuant to its terms,
the option would expire on April 2, 2018.
For purposes of the offer letter and the stock option granted to Mr. Bagnall, an "involuntary
termination" is one that occurs by reason of involuntary dismissal by us for any reason other than
misconduct (as defined below) or Mr. Bagnall's voluntary resignation for "good reason," which means
the occurrence of one of the following events or circumstances without his written consent: (i) a
change in position that materially reduces the level of his responsibility, (ii) a material
reduction in his base salary, or (iii) relocation by more than 50 miles from his then-primary work
location; provided that his resignation shall not be for "good reason" unless (x) he provides us
with written notice within 30 days after he first has knowledge of the occurrence or existence of
such event or circumstance, (y) we fail to correct the circumstance or event so identified within
30 days after receipt of such written notice, and (z) he resigns within 90 days after the date of
delivery of the notice. "Misconduct" means the commission of any act of fraud, embezzlement or
dishonesty by Mr. Bagnall, any unauthorized use or disclosure by him of confidential information or
trade secrets of ours (or any parent or subsidiary), or any other intentional misconduct by him
adversely affecting our business affairs (or those of any parent or subsidiary) in a material
manner.
In December 2008, Mr. Bagnall's employment relationship with us ended. In January 2009, we
entered into a confidential separation agreement and general release of all claims regarding terms
of separation with Mr. Bagnall, or the Bagnall Separation Agreement.
As set forth in the Bagnall Separation Agreement, in exchange for a release of claims and Mr.
Bagnall's agreement and representations (as more fully described below), we agreed to provide a
severance payment of $165,500 to Mr. Bagnall and each of we and Mr. Bagnall agreed to enter into a
consulting relationship. In addition, we agreed to provide a health benefit allowance of $18,352,
which Mr. Bagnall may use, at his discretion, to pay the premiums required to continue his group
health care coverage under COBRA or any other health care related expenses. The severance payment
and the health benefit allowance were paid in one lump sum, less applicable payroll deductions and
required withholdings, in January 2009. The severance provisions set forth in the Bagnall
Separation Agreement supersede and replace the severance provisions set forth in Mr. Bagnall's
offer letter, which was effective as of April 3, 2008 and amended as of December 11, 2008. Pursuant
to the terms of the stock option granted to Mr. Bagnall in April 2008 in connection with the
commencement of his employment (as more fully described above), 100,000 shares underlying this
option vested and became exercisable immediately prior to Mr. Bagnall's involuntary termination in
December 2008. As a result of Mr. Bagnall's remaining on our board of directors, Mr. Bagnall
remained in continuous service and this option will continue to vest until such time as Mr. Bagnall
is no longer in continuous service. Stock options held by Mr. Bagnall granted to him as a member of
our board of directors were unaffected by Mr. Bagnall's involuntary termination.
Under the Bagnall Separation Agreement, Mr. Bagnall represented that he returned to us all
property, data and information belonging to us other than is reasonably required by Mr. Bagnall to
perform services as a member of our board of directors or is reasonably related to such services or
is needed by Mr. Bagnall to provide services as a consultant to us. Mr. Bagnall agreed not to use
or disclose to others any confidential or proprietary information of ours, except, as applicable,
in connection with Mr. Bagnall's position as a member of our board of directors or as a consultant
to us, in which case such use and disclosure will be governed by such documents, agreements and
duties as apply to such positions. Mr. Bagnall further agreed to comply with his continuing
obligations under various agreements and other documents as previously executed by him. In
addition, Mr. Bagnall agreed that he will not make any voluntary statements, written or oral, or
cause or encourage others to make any such statements, that defame, disparage or in any way
criticize the personal and/or business reputation, practices or conduct of us or our employees,
officers and directors, among others. Mr. Bagnall also represented that he had not filed any
lawsuits, complaints or other accusatory pleadings against us and certified that all transactions
in our securities prior to his separation date and reportable under Section 16 of the Securities
Exchange Act of 1934 had been reported on Form 4 and agreed to execute and deliver promptly after
December 31, 2008 a document certifying that he is not required to file a Form 5 for the fiscal
year ended December 31, 2008. Finally, Mr. Bagnall agreed, at the end of the consulting period, to
extend and reaffirm the promises made by Mr. Bagnall in the Bagnall Separation Agreement, including
the release of claims.
In December 2008, the Company and Mr. Bagnall entered into a consulting agreement. Under the
consulting agreement, Mr. Bagnall agreed to provide consulting services on an as-needed basis to
assist us in identifying and evaluating strategic options and to respond to inquiries regarding
finance and other matters, and we agreed to pay Mr. Bagnall $100 per hour. In February 2009, we and
Mr. Bagnall amended the consulting agreement to include services related to Mr. Bagnall acting as
our interim principal financial and accounting officer, and agreed to pay Mr. Bagnall $250 per hour
for services provided after such amendment. Either party may
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terminate the consulting agreement upon written notice. In 2008, we did not pay or accrue any
amount with respect to Mr. Bagnall's consulting services. We do not expect to pay Mr. Bagnall more
than $120,000 under the consulting agreement.
Employment and Separation Arrangements with Mr. Hanson
In connection with the commencement of Mr. Hanson's employment in December 2006 as our chief
financial officer and a senior vice president, we entered into an offer letter agreement with Mr.
Hanson which provided that in the event of Mr. Hanson's involuntary termination, subject to Mr.
Hanson's execution of a mutual release (which included a nondisparagement provision and a covenant
not to sue our company), Mr. Hanson would receive an amount equal to his base salary for the
six-month period immediately prior to the effective date of such involuntary termination, payable
in six substantially equal installments over the six-month period following such effective date,
and we would pay in cash all costs we would otherwise have incurred to maintain Mr. Hanson's
health, welfare and retirement benefits if Mr. Hanson had continued to render services to us for
six months after such effective date. In addition, we granted to Mr. Hanson a stock option to
purchase up to 250,000 shares of our common stock, which option would vest and become exercisable
monthly over 48 months from the vesting start date except that no shares would vest or become
exercisable for the first 12 months and, on the 12-month anniversary of the vesting start date,
which was December 20, 2007, 25% of the shares would vest and become exercisable. Pursuant to the
terms of Mr. Hanson's December 2006 stock option, in the event of Mr. Hanson's involuntary
termination, and subject to Mr. Hanson's execution of a general release of claims (which included a
nondisparagement provision and a covenant not to sue our company), that number of shares underlying
the stock option would vest and become exercisable, effective immediately prior to the effective
date of such involuntary termination, as would have vested and become exercisable had Mr. Hanson
remained in continuous service (i.e., the absence of any interruption or termination of services as
an employee, director or consultant of ours, or any subsidiary) for six months following such
effective date, and Mr. Hanson would have 180 days following the effective date of such involuntary
termination to exercise this stock option. For purposes of this agreement, an "involuntary
termination" meant one that occurred by reason of dismissal for any reason other than misconduct or
of voluntary resignation following: (i) a change in position that materially reduced the level of
Mr. Hanson's responsibility, (ii) a material reduction in Mr. Hanson's base salary, or (iii)
relocation by more than 50 miles; provided that (ii) and (iii) will apply only if Mr. Hanson did
not consented to the change or relocation. "Misconduct" meant the commission of any act of fraud,
embezzlement or dishonesty by Mr. Hanson, any unauthorized use or disclosure by Mr. Hanson of
confidential information or trade secrets of ours (or any parent or subsidiary), or any other
intentional misconduct by Mr. Hanson adversely affecting our business affairs (or those of any
parent or subsidiary) in a material manner.
In April 2008, Mr. Hanson's employment relationship with us ended. In April 2008, we entered
into a letter agreement regarding terms of separation with Mr. Hanson. The terms of Mr. Hanson
employment separation, as provided in the letter agreement, were substantially identical to those
set forth in his offer letter, dated December 13, 2006, and in the stock option agreement relating
to the stock option granted to him in December 2006 in connection with the commencement of his
employment, both of which are described above.
As set forth in the letter agreement regarding terms of separation, in exchange for a mutual
release, beginning in April 2008, we paid Mr. Hanson an aggregate of $125,000, which was equal to
six months of Mr. Hanson base salary in effect at the time of termination, less applicable payroll
deductions and required withholdings, in substantially equal installments in accordance with our
standard payroll practices over 13 pay periods. In addition, we paid Mr. Hanson $20,997, less
applicable payroll deductions and required withholdings, which we and Mr. Hanson agreed satisfied
in full our obligation to pay all costs that we would otherwise have incurred to maintain Mr.
Hanson's health, welfare and retirement benefits if Mr. Hanson had continued for six continuous
months after Mr. Hanson's termination date. We paid the $20,997 amount in substantially equal
installments commencing on and continuing in accordance with the same schedule described above with
respect to payment of Mr. Hanson's base salary. Furthermore, we accelerated the vesting and
extended the time to exercise vested shares under the stock option granted to Mr. Hanson in
December 2006 in connection with the commencement of his employment. Under this option, Mr. Hanson
was granted the right to purchase up to 250,000 shares of our common stock at a price of $2.57 per
share, which right was subject to a vesting schedule. As of Mr. Hanson's termination date, this
option was vested as to 78,125 shares and unvested as to 171,875 shares. Pursuant to the letter
agreement regarding terms of separation, we accelerated vesting as to 31,250 of the unvested
shares, which resulted in this option being vested as to a total of 109,375 shares, and extended
the time for Mr. Hanson to exercise the vested shares under this option through September 29, 2008.
Mr. Hanson did not exercise the option by September 29, 2008 and, accordingly, it terminated on
that date. The closing market price of our common stock on September 29, 2008 was $0.18 per share,
while the exercise price of the option was $2.57 per share.
Under the letter agreement regarding terms of separation, Mr. Hanson represented that he had
returned to us all of our property and data that had been in his possession or control and
acknowledged that he will continue to be bound an agreement with us regarding the use and
confidentiality of our confidential information and, in particular, that he will hold all of our
confidential
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information in confidence and not directly or indirectly use any aspect of such confidential
information. Mr. Hanson also agreed not to make any voluntary statements, written or oral, or cause
or encourage others to make any such statements that defame or disparage us and, among others, our
officers and directors.
In addition, in April 2008, we and Mr. Hanson entered into a consulting agreement and related
confidential information and invention assignment agreement. Under the consulting agreement, Mr.
Hanson agreed to provide consulting services on an as-needed basis and we agreed to pay Mr. Hanson
(a) for the first ten hours in a particular calendar month, $250 per hour and (b) for any time
beyond ten hours in a particular calendar month, $150 per hour. Either party may terminate the
consulting agreement upon written notice, except that Mr. Hanson could not terminate the consulting
agreement, other than for our failure to pay Mr. Hanson as set forth in the consulting agreement,
prior to December 31, 2008. The Company does not expect to require Mr. Hanson's consulting services
during 2009.
Employment and Separation Arrangements with Dr. Robbins
Under the terms of an offer letter, dated March 5, 2003, we agreed to pay Dr. Robbins a bonus,
payable in stock options, equal to 5% of all government grants received by us. In addition, we
agreed to pay Dr. Robbins a bonus, payable in stock options, equal to 5% of capital received by us
that was a direct result of Dr. Robbins' introduction. We never issued any stock options to Dr.
Robbins as a result of these provisions. In October 2008, Dr. Robbins employment relationship with
us ended. Dr. Robbins formerly served as our chief scientific officer and a senior vice president.
In December 2008, we entered into a confidential separation agreement and general release of all
claims regarding terms of separation with Dr. Robbins, or the Robbins Separation Agreement.
As set forth in the Robbins Separation Agreement, in exchange for a release of claims and Dr.
Robbins' agreement to provide certain transition assistance and Dr. Robbins' other agreements and
representations (as more fully described below), we agreed to provide a severance payment of
$123,615 to Dr. Robbins. In addition, we agreed to provide a health benefit allowance of $8,309,
which Dr. Robbins may use, at her discretion, to pay the premiums required to continue her group
health care coverage under COBRA or any other health care related expenses. We agreed to pay the
severance payment and the health benefit allowance in eleven substantially equal installments over
a period of five and one-half months, less applicable payroll deductions and required withholdings,
beginning in December 2008, conditioned upon Dr. Robbins' making herself available as needed during
that period to answer business-related questions by telephone or in person as deemed reasonably
necessary by us. At the time of her separation, Dr. Robbins held vested options to purchase up to
495,312 shares. Pursuant to their terms, these options expired, unexercised, on December 30, 2008
and January 12, 2009. The closing market price of our common stock on December 30, 2008 was $0.07
per share, while the exercise price of the option that expired on December 30, 2008 was $0.50 per
share. The closing market price of our common stock on January 12, 2009 was $0.12 per share, while
the exercise prices of the options that expired on January 12, 2009 were $2.30 per share, $2.75 per
share and $4.75 per share.
Under the Robbins Separation Agreement, Dr. Robbins represented that she had returned to us
all property, data and information belonging to us and agreed not to use or disclose to others any
confidential or proprietary information of ours and agreed to comply with her continuing
obligations under various agreements and other documents as previously executed by her. In
addition, she agreed to make herself available, as needed, without any additional compensation, to
answer business-related questions by telephone or in person as deemed reasonably necessary by us
and that she will not make any voluntary statements, written or oral, or cause or encourage others
to make any such statements, that defame, disparage or in any way criticize the personal and/or
business reputation, practices or conduct of us or our employees, officers and directors, among
others. Dr. Robbins also represented that she had not filed any lawsuits, complaints or other
accusatory pleadings against us and certified that all transactions in our securities prior to her
separation date and reportable under Section 16 of the Securities Exchange Act of 1934 had been
reported on Form 4 and agreed to execute and deliver promptly after December 31, 2008 a document
certifying that she is not required to file a Form 5 for the fiscal year ended December 31, 2008.
Acceleration of Vesting of Outstanding Stock Options
Stock options granted under our 2005 Equity Incentive Plan typically are evidenced by our
standard stock option agreement. We may elect to incorporate into our standard stock option
agreement one or more alternatives regarding the effect of a change in control on the underlying
option, including its vesting and exercisability. We have not granted any stock options to any of
the Named Executive Officers currently employed by us under our 2008 Omnibus Incentive Plan, other
than the July 2009 stock options described above under "Narrative Disclosure to Summary
Compensation Table."
We generally provide in stock option agreements (actually entered into with recipients of
stock option awards) that the option will accelerate in full in the event of an "acquisition"
constituting a "change of control" (as such terms are defined in our standard
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form of stock option agreement) if the recipient remains employed by us as of the closing date
of such acquisition and the option is not assumed or replaced by the successor or acquiring entity
or the entity in control of such successor or acquiring entity. Otherwise, the option will not
accelerate in the event of such an acquisition. All of the stock option agreements governing the
outstanding, unvested options held by the Named Executive Officers currently employed by us contain
this acceleration provision.
In addition, we have incorporated into certain stock option agreements for options granted in
and after August 2006 a provision providing that, if following a change of control in which an
option is assumed as described above, in the event of the recipient's "involuntary termination"
within a period of time, not to exceed 24 months, after the closing date of such change of control,
the vesting of the assumed option will be accelerated such that the option will vest as of the
effective date of such involuntary termination with respect to all shares that would have vested
during such period. For purposes of the stock option agreements, an "involuntary termination" is a
termination of employment that occurs by reason of dismissal for any reason other than "misconduct"
or of voluntary resignation following: (i) a change in position that materially reduces the level
of the employee's responsibility, (ii) a material reduction in the employee's base salary, or (iii)
relocation by more than 50 miles; provided that (ii) and (iii) will apply only if the employee has
not consented to the change or relocation.
"Misconduct" means the commission of any act of fraud, embezzlement or dishonesty by the
employee, any unauthorized use or disclosure by the employee of confidential information or trade
secrets of our company (or any parent or subsidiary), or any other intentional misconduct by the
employee adversely affecting our business affairs (or those of any parent or subsidiary) in a
material manner. All of the stock option agreements governing the options granted to the Named
Executive Officers in January 2007 contain this double trigger acceleration provision. We
anticipate continuing to include this or a similar double trigger acceleration provision in most
stock option awards made in the future.
As of December 31, 2008, none of the Named Executive Officers had any in-the-money unvested
stock options. The value at December 31, 2008 of the acceleration provisions described above is
based on the "spread" between the exercise price of option shares that would accelerate under the
acceleration scenarios described above and the market value of these shares as of December 31,
2008. The market value of these shares is based on the closing market price of our common stock on
December 31, 2008, which was $0.08 per share. None of the outstanding, unvested options held by the
Named Executive Officers has an exercise price of less than $0.08 per share. Accordingly, none of
the Named Executive Officers would have realized any value as a result of the acceleration
provisions described above had any of the acceleration scenarios occurred on December 31, 2008.
Outstanding Equity Awards at Fiscal Year-End 2008
The following table sets forth information regarding outstanding equity awards held by the
Named Executive Officers at the end of fiscal 2008:
Option Awards
Stock Awards
Equity Incentive
Plan Awards:
Market
Equity Incentive
Equity Incentive
or Payout
Plan Awards:
Market Value
Plan Awards:
Value of
Number of
Number of
Number
Number of
of
Number of
Unearned
Securities
Securities
of Securities
Shares or
Shares or
Unearned Shares,
Shares, Units
Underlying
Underlying
Underlying
Units of
Units of
Units or Other
or Other
Unexercised
Unexercised
Unexercised
Stock That
Stock That
Rights That
Rights That
Options
Options
Unearned
Option Exercise
Option
Have Not
Have Not
Have Not
Have Not
(#)
(#)
Options
Price
Expiration
Vested
Vested
Vested
Vested
Name
Exercisable
Unexercisable
(#)
($)
Date
(#)
($)
(#)
($)
Brian M. Culley
100,000
—
—
$
2.30
7/13/2015
—
—
—
—
58,333
(1)
21,667
(1)
—
$
4.75
1/30/2016
—
—
—
—
71,875
(2)
78,125
(2)
—
$
2.75
1/11/2017
—
—
—
—
—
200,000
(3)
—
$
0.54
3/30/2018
—
—
—
—
Patrick L. Keran
58,333
(4)
41,667
(4)
—
$
2.99
8/17/2016
—
—
—
—
23,958
(2)
26,042
(2)
—
$
2.75
1/11/2017
—
—
—
—
—
200,000
(3)
—
$
0.54
3/30/2018
—
—
—
—
Evan M. Levine
—
—
—
—
—
—
—
—
—
Mark N.K. Bagnall
50,000
—
—
$
2.42
7/13/2015
—
—
—
—
50,000
—
—
$
4.62
6/01/2016
—
—
—
—
50,000
—
—
$
2.57
5/22/2017
—
—
—
—
100,000
(5)
400,000
(5)
—
$
0.52
4/02/2018
—
—
—
—
Gregory P. Hanson
—
—
—
—
—
—
—
—
—
Joan M. Robbins
93,750
(6)
6,250
(6)
—
$
2.30
1/12/2009
—
—
—
—
68,750
(6)
31,250
(6)
—
$
4.75
1/12/2009
—
—
—
—
32,812
(6)
42,188
(6)
—
$
2.75
1/12/2009
—
—
—
—
—
200,000
(7)
—
$
0.54
1/12/2009
—
—
—
—
72
Table of Contents
(1)
Subject to accelerated vesting in the event of a change in control, as
described above under "Narrative Disclosure to Summary Compensation
Table — Acceleration of Vesting of Outstanding Stock Options," this
option vested and became exercisable with respect to 1/4 of the total
underlying shares on January 1, 2007 and vests and becomes exercisable
with respect to 1/48 of the total underlying shares at the end of each
successive calendar month thereafter.
(2)
Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 24 months of a change in control, as
described above under "Narrative Disclosure to Summary Compensation
Table — Acceleration of Vesting of Outstanding Stock Options," this
option vested and became exercisable with respect to 1/4 of the total
underlying shares subject to the option on January 1, 2008 and vests
and becomes exercisable with respect to 1/48 of the total underlying
shares at the end of each successive month thereafter.
(3)
Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 24 months of a change in control, as
described above under "Narrative Disclosure to Summary Compensation
Table — Acceleration of Vesting of Outstanding Stock Options," this
option will vest and became exercisable with respect to 1/5 of the
total underlying shares on each of January 1, 2009, January 1, 2010,
January 1, 2011, January 1, 2012 and January 1, 2013.
(4)
Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 24 months of a change in control, as
described above under "Narrative Disclosure to Summary Compensation
Table — Acceleration of Vesting of Outstanding Stock Options," this
option vested and became exercisable with respect to 1/4 of the total
underlying shares subject to the option on August 7, 2007 and vests
and becomes exercisable with respect to 1/48 of the total underlying
shares at the end of each successive month thereafter.
(5)
Subject to accelerated vesting in the event of a change in control or
an involuntary termination within 12 months of a change in control, as
described above under "Narrative Disclosure to Summary Compensation
Table — Employment and Separation Arrangements with Mr. Bagnall,"
this option vested and became exercisable with respect to 100,000
shares immediately prior to Mr. Bagnall's involuntary termination in
December 2008 and will vest and became exercisable with respect to 1/5
of the total underlying shares on each of January 1, 2009, January 1,
2010, January 1, 2011 and January 1, 2012.
(6)
Dr. Robbins' employment with us ended on October 14, 2008 and, as a
result, this option stopped vesting as of such date. Pursuant to the
terms of the option grant, this option expired and was no longer
exercisable as of January 12, 2009.
(7)
Dr. Robbins' employment with us ended on October 14, 2008 and, as a
result, this option stopped vesting as of such date. On October 14,
2008, none of the shares underlying this option were vested or
exercisable.
Tax-Qualified Defined Contribution Plan
We have a defined contribution savings plan pursuant to Section 401(k) of the IRC. The plan is
for the benefit of all full-time employees and permits voluntary contributions by qualifying
employees of up to 100% of eligible compensation, subject to Internal Revenue Service-imposed
maximum limits. Until January 1, 2008, we were required to make matching contributions in the
amount of 100% of employee contributions up to 3% of eligible compensation and 50% of employee
contributions between 3% and 5% of eligible compensation. Effective January 1, 2008, the plan was
amended to require us to make matching contributions equal to 100% of employee contributions up to
6% of eligible compensation, limited by the IRS-imposed maximum. We incurred total expenses of
approximately $218,150 and $118,000 in employer matching contributions in 2008 and 2007,
respectively. In May 2009, a further amendment to the plan to eliminate matching contributions
became effective.
Compensation of Directors
Directors who are also our employees do not receive any additional compensation for their
services as directors. As of the date of this prospectus, none of our directors is also an
employee. Our non-employee directors are compensated as described below.
Retainer and Meeting Fees
During 2008, we paid our non-employee directors quarterly cash retainers and board of director
and committee meeting fees. The amounts of the quarterly retainers vary depending on the
non-employee director's role on our board of directors and its committees, as set forth in the
table below:
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Table of Contents
Quarterly Retainers
Chairperson
Member
Board of Directors
$
6,250
$
2,500
Audit Committee
$
5,000
$
2,500
Compensation Committee
$
2,500
$
1,250
Nominating and Governance Committee
$
2,500
$
1,250
Research and Development Committee
$
2,500
$
1,250
In addition to the quarterly retainers, we pay the following per meeting fees with respect to
each meeting of our board of directors or any committee of our board of directors with a duration
of more than 15 minutes, other than (i) the first four meetings of our board of directors held
during each calendar year, (ii) the first four meetings of the audit committee held during each
calendar year, (iii) the first two meetings of the compensation committee held during each calendar
year and (iv) the first meeting of the nominating and governance committee and the research and
development committee held during each calendar year:
•
$1,000 to each director for each such meeting attended in person; and
•
$500 to each director for each such meeting attended via telephone conference call.
In addition to the quarterly retainer and meeting fees, we reimburse our directors for travel
and other reasonable out-of-pocket expenses related to attendance at our board of directors and
committee meetings.
Equity Compensation
Pursuant to the terms of our 2005 Equity Incentive Plan, each of our non-employee directors
was automatically granted a nonstatutory option to purchase 50,000 shares of our common stock at
the first meeting of our board of directors following each annual meeting of stockholders, provided
that such non-employee director had served on our board of directors for at least the preceding six
months. The exercise price per share of each automatically granted option was equal to 105% of the
per-share fair market value of our common stock on the grant date. Each such option became
exercisable as to 1/12th of the shares underlying the option at the end of each calendar month
after its date of grant, provided that the director remains in continuous service. The options
expire no later than ten years after the date of grant. In May 2008, our stockholders approved our
2008 Omnibus Incentive Plan. Following adoption of our 2008 Omnibus Incentive Plan, no additional
awards (including the automatic options to our non-employee directors described above) have been or
will be made under our 2005 Equity Incentive Plan; however, the 2005 Equity Incentive Plan will
continue to govern any outstanding awards (including the automatic options to our non-employee
directors described above) previously granted under the 2005 Equity Incentive Plan.
Awards under our 2008 Omnibus Incentive Plan are at the discretion of our board of directors
or the compensation committee of our board of directors. Unlike the 2005 Equity Incentive Plan, the
2008 Omnibus Incentive Plan does not provide for automatic awards to our directors. However, we
currently intend to grant annual nonstatutory options to our non-employee directors on terms
substantially similar to the terms of the automatic annual options granted to the non-employee
directors under the 2005 Equity Incentive Plan, except that the exercise price per share of these
options would be equal to 100% of the per-share fair market value of our common stock on the date
of grant.
In February 2008, our board of directors approved an option to purchase up to of 50,000 shares
of our common stock to each of Drs. Rowinsky and Denner. Our board of directors granted an option
to Dr. Rowinsky in connection with his appointment to our board of directors in February 2008 and
granted an option to Dr. Denner in acknowledgment that it had not granted Dr. Denner an option in
connection with his appointment to our board of directors in October 2006. Each option will vest
and become exercisable in 12 equal monthly installments beginning on, for Dr. Rowinsky, February
25, 2008, and, for Dr. Denner, February 28, 2008, and will expire on March 23, 2018. The grants of
these options were contingent upon our receipt of a waiver under the Rights Agreement of
restrictions relating to equity awards to our directors and employees. We received the waiver on
March 24, 2008 and, accordingly, the options were granted with an exercise price of $0.48 per
share, which was the closing price of our common stock on March 24, 2008. If Dr. Rowinsky's or Dr.
Denner's service to us terminates for any reason, the options will be exercisable, to the extent
then vested, during the three-year period after the date of such termination, but in no event after
March 23, 2018.
In May 2008, our board of directors approved an option to purchase up to 50,000 shares of our
common stock to each non-employee member of our board of directors. Each option will vest and
become exercisable in 12 equal monthly installments beginning on May 28, 2008 and will expire on
June 29, 2018. To comply with the requirements of the NYSE Amex regarding the listing of
74
Table of Contents
additional securities and applicable securities laws, our board of directors authorized these
options to be granted as of a date that would give us a reasonable period of time to apply for and
receive approval to list the additional shares with the NYSE Amex and to prepare and file a
registration statement on Form S-8 covering awards under our 2008 Omnibus Incentive Plan.
Accordingly, our board of directors approved a grant date of June 30, 2008 for these options and
the options were granted with an exercise price of $0.37 per share, which was the closing price of
our common stock on June 30, 2008. If any of our non-employee director's service to us terminates
for any reason, the options will be exercisable, to the extent then vested, during the three-year
period after the date of such termination, but in no event after June 29, 2018.
Director Compensation in 2008
The following table shows compensation information for the individuals who served as our
non-employee directors during the year ended December 31, 2008:
Nonqualified
Fees Earned or
Non-Equity
Deferred
Paid in
Stock
Option
Incentive Plan
Compensation
All Other
Name
(1)
Cash
Awards
Awards(2)
Compensation
Earnings
Compensation
Total
Alexander J. Denner
$
44,772
(3)
—
$
65,890
(4)
—
—
—
$
110,662
Michael M. Goldberg
$
42,056
—
$
47,002
(5)
—
—
—
$
89,058
Jack Lief
$
59,944
—
$
47,002
(6)
—
—
—
$
106,947
Mark J. Pykett
$
41,556
—
$
47,002
(7)
—
—
—
$
88,558
Eric K. Rowinsky
$
29,723
—
$
28,291
(8)
—
—
—
$
58,014
(1)
Mark N.K. Bagnall served as a non-employee director for part of 2008, but from April 3, 2008 to December 26, 2008,
he served as our executive vice president, chief financial officer and treasurer. Accordingly, all of Mr. Bagnall's
2008 compensation is set forth above in the Summary Compensation Table and under "Narrative Disclosure to the
Summary Compensation Table."
(2)
Values for option awards have been computed in accordance with FAS 123R, which requires that we recognize as
compensation expense the value (excluding the effect of assumed forfeiture rates) of the options granted to the
directors over the requisite service period, which is typically the vesting period. For the assumptions made in
calculating the FAS 123R value of the option awards, see Note 8 of the Notes to Consolidated Financial Statements
contained in our Annual Report on Form 10-K filed with the SEC on March 27, 2009. The amounts in this column include
the ratable compensation expense recognized in 2008 for options granted in 2007.
(3)
Since October 2006, when Dr. Denner joined our board of directors, through February 2008, based on its past practice
regarding cash compensation with respect to Mr. Meister, the Purchaser Designee under the Rights Agreement prior to
Dr. Denner, we did not pay Dr. Denner any fees associated with his participation on our board of directors or its
committees. For information regarding the Rights Agreement, see "Director Nominations — Board Nominees for the 2009
Annual Meeting," above. In March 2008, after discussions with Dr. Denner, we paid Dr. Denner $18,500 and $2,772,
which represented fees earned by Dr. Denner in 2007 and 2006, respectively, for participation on our board of
directors and its compensation committee.
(4)
The aggregate number of shares underlying Dr. Denner's outstanding options at December 31, 2008 was 150,000 shares.
(5)
The aggregate number of shares underlying Dr. Goldberg's outstanding options at December 31, 2008 was 250,000 shares.
(6)
The aggregate number of shares underlying Mr. Lief's outstanding options at December 31, 2008 was 150,000 shares.
(7)
The aggregate number of shares underlying Dr. Pykett's outstanding options at December 31, 2008 was 250,000 shares.
(8)
The aggregate number of shares underlying Dr. Rowinsky's outstanding options at December 31, 2008 was 100,000 shares.
75
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of our common stock
as of July 22, 2009, or the Evaluation Date, or an earlier date for information based on filings
with the SEC, by (a) each person known to us to beneficially own more than 5% of the outstanding
shares of our common stock, (b) each director and nominee for director, (c) each of the Named
Executive Officers and (d) all of our directors and executive officers as a group. The information
in this table is based solely on statements in filings with the SEC or other reliable information.
As of the Evaluation Date, there were 117,792,960 shares of the Company's common stock outstanding.
Amount and
Nature of
Name and Address of
Beneficial
Percent of
Beneficial Owner(1)
Ownership(2)
Class
Principal Stockholders
Funds
affiliated with Carl C. Icahn(3)
c/o Icahn Associates Corp.
767 Fifth Avenue
New York, NY 10153
8,648,648
7.1
%
Directors and Named Executive Officers
Mark N.K. Bagnall(4)
350,000
*
Alexander J. Denner(5)
8,798,648
7.2
%
Michael M. Goldberg(6)
226,000
*
Jack Lief(7)
150,000
*
Mark J. Pykett(8)
208,000
*
Eric K. Rowinsky(9)
100,000
*
Brian M. Culley(10)
313,333
*
Patrick L. Keran(11)
150,416
*
Evan M. Levine(12)
4,395,000
3.7
%
Greg Hanson
0
*
Joan M. Robbins(13)
156,500
*
All directors and executive officers as a group (8 persons)(14)
10,296,397
8.4
%
*
Less than 1%.
(1)
Unless otherwise indicated, the address of each of the listed persons
is c/o ADVENTRX Pharmaceuticals, Inc., 6725 Mesa Ridge Road, Suite
100, San Diego, CA 92121.
(2)
Beneficial ownership of shares is determined in accordance with the
rules of the SEC and generally includes any shares over which a
person exercises sole or shared voting or investment power, or of
which a person has the right to acquire ownership within 60 days
after the Evaluation Date. Except as otherwise noted, each person or
entity has sole voting and investment power with respect to the
shares shown. Unless otherwise noted, none of the shares shown as
beneficially owned on this table are subject to pledge.
(3)
Consists of (a) 864,865 shares of common stock held by High River
Limited Partnership ("High River"); (b) 1,660,540 shares of common
stock held by Icahn Partners LP ("Icahn Partners"); (c) 1,798,919
shares of common stock held by Icahn Partners Master Fund LP ("Icahn
Master"); (d) 864,865 shares of common stock issuable upon exercise
of warrants held by High River; (e) 1,660,540 shares of common stock
issuable upon exercise of warrants held by Icahn Partners and (f)
1,798,919 shares of common stock issuable upon exercise of warrants
held by Icahn Master. Based on our review of a Schedule 13D filed
with the SEC on August 5, 2005 (the "Icahn 13D") by High River,
Hopper Investments, LLC ("Hopper"), Barberry Corp. ("Barberry"),
Icahn Master, Icahn Offshore LP ("Icahn Offshore"), CCI Offshore
Corp. ("CCI Offshore"), Icahn Partners, Icahn Onshore LP ("Icahn
Onshore"), CCI Onshore Corp. ("CCI Onshore") and Mr. Carl C. Icahn,
we believe that (i) Barberry, Hopper and Mr. Icahn may be deemed to
beneficially own (as that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) the shares (including
warrant shares) held by High River; (ii) CCI Onshore, Icahn Onshore
and Mr. Icahn may be deemed to beneficially own (as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as
amended) the shares (including warrant shares) directly held by Icahn
Partners; and (iii) CCI Offshore, Icahn Offshore and Mr. Icahn may be
deemed to beneficially own (as that term is defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended) the
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Table of Contents
shares (including warrant shares) directly held by Icahn Master because, in
each of the foregoing cases, such referenced persons are in a
position to directly or indirectly determine the investment and
voting decisions of the holder referenced. Barberry, Hopper, CCI
Onshore, Icahn Onshore, CCI Offshore, Icahn Offshore and Mr. Icahn
each disclaim beneficial ownership of such shares they may be deemed
the beneficial owner of for all other purposes.
(4)
Consists of 350,000 shares of common stock subject to options
currently exercisable or exercisable within 60 days of the Evaluation
Date.
(5)
Consists of (a) 150,000 shares of common stock subject to options
currently exercisable or exercisable within 60 days of the Evaluation
Date, (b) 864,865 shares of common stock held by High River, (c)
1,660,540 shares of common stock held by Icahn Partners, (d)
1,798,919 shares of common stock held by Icahn Master, (e) 864,865
shares of common stock issuable upon exercise of warrants held by
High River, (f) 1,660,540 shares of common stock issuable upon
exercise of warrants held by Icahn Partners and (g) 1,798,919 shares
of common stock issuable upon exercise of warrants held by Icahn
Master. Dr. Denner is a Managing Director of entities affiliated with
Mr. Icahn, including Icahn Partners and Icahn Master. Dr. Denner
disclaims beneficial ownership of the shares owned by High River,
Icahn Partners and Icahn Master except to the extent of his pecuniary
interest therein.
(6)
Includes 200,000 shares of common stock subject to options currently
exercisable or exercisable within 60 days of the Evaluation Date.
(7)
Consists of 150,000 shares of common stock subject to an option
currently exercisable or exercisable within 60 days of the Evaluation
Date.
(8)
Consists of (a) 200,000 shares of common stock subject to options
currently exercisable or exercisable within 60 days of the Evaluation
Date and (b) 8,000 shares of common stock held by Dr. Pykett and his
spouse, as joint tenants.
(9)
Consists of 100,000 shares of common stock subject to an option
currently exercisable or exercisable within 60 days of the Evaluation
Date.
(10)
Consists of 313,333 shares of common stock subject to an option
currently exercisable or exercisable within 60 days of the Evaluation
Date.
(11)
Consists of 150,416 shares of common stock subject to an option
currently exercisable or exercisable within 60 days of the Evaluation
Date.
(12)
Consists of (a) 4,320,000 shares of common stock held by Mark Capital
LLC, (b) 60,000 shares of common stock held by Mr. Levine in an
individual retirement account and (c) 15,000 shares of common stock
held by Mr. Levine and his father, as joint tenants with right of
survivorship. Mr. Levine is the managing member of Mark Capital LLC.
(13)
Consists of 146,500 shares of common stock held by Dr. Robbins'
husband and 10,000 shares of common stock held by Dr. Robbins and her
spouse, as joint tenants.
(14)
Includes 5,938,073 shares of common stock subject to options and
warrants currently exercisable or exercisable within 60 days of the
Evaluation Date. Includes shares deemed beneficially owned by Dr.
Denner but as to which he disclaims beneficial ownership.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We have incorporated into our written review and approval policies certain procedures designed
to ensure that any proposed transaction in which we would be a participant and in which any of our
directors, executive officers, holders of more than 5% of our common stock, or any member of the
immediate family of any of the foregoing would have a direct or indirect material interest is
reviewed by individuals within our company (including our general counsel) familiar with the
requirements of Item 404 of Regulation S-K promulgated by the SEC. If any such proposed transaction
would require disclosure pursuant to Item 404(a), it will be presented to the audit committee for
review and, if appropriate, approval.
Since January 1, 2007, there has not been, nor currently are there proposed, any transactions
or series of similar transactions in which we were or are to be a participant and the amount
involved exceeds or will exceed the lesser of $120,000 or 1% of the average of our total assets at
December 31, 2007 and 2008, and in which any director, executive officer, holder of more than 5% of
our common stock or any member of the immediate family of any of the foregoing persons had or will
have a direct or indirect material interest, other than the transactions described below and the
employment arrangements described above under "Executive & Director Compensation."
Separation Arrangements with Former President and Chief Medical Officer
Dr. James Merritt was employed by us from September 2006 to January 2008 as our president and
chief medical officer. Dr. Merritt was a named executive officer of ours for fiscal year 2007. In
February 2008, we entered into a letter agreement regarding terms of separation with Dr. Merritt.
The terms of Dr. Merritt's employment separation, as provided in the letter agreement, are
substantially identical to those set forth in his offer letter, dated September 7, 2006, and in the
stock option agreement relating to the stock option to purchase up to 300,000 shares of our common
stock granted to him in September 2006 in connection with the commencement of his employment,
except that we agreed to extend the exercise period of that option from June 29, 2008 to December
31, 2008.
As set forth in the letter agreement regarding terms of separation, in exchange for a mutual
release, beginning in February 2008, we paid Dr. Merritt an aggregate of $181,250, which was equal
to six months of Dr. Merritt's base salary in effect at the time of termination, less applicable
state and federal payroll deductions, in substantially equal installments in accordance with our
standard payroll practices over 13 pay periods. In addition, we paid Dr. Merritt $16,038, less
applicable state and federal payroll deductions, which we and Dr. Merritt agreed satisfied in full
our obligation to pay all costs that we would otherwise have incurred to maintain Dr. Merritt's
health, welfare and retirement benefits if Dr. Merritt had continued for six continuous months
after Dr. Merritt's termination date. We paid the $16,038 amount in substantially equal
installments commencing on and continuing in accordance with the same schedule described above with
respect to payment of Dr. Merritt's base salary. Furthermore, we accelerated the vesting and
extended the time to exercise vested shares under the stock option granted to Dr. Merritt in
September 2006 in connection with the commencement of his employment. Under this option, Dr.
Merritt was granted the right to purchase up to 300,000 shares of our common stock at a price of
$2.86 per share, which right was subject to a vesting schedule. As of Dr. Merritt's termination
date, this option was vested as to 100,000 shares and unvested as to 200,000 shares. Pursuant to
the letter agreement regarding terms of separation, we accelerated vesting as to 31,249 of the
unvested shares, which resulted in this option being vested as to a total of 131,249 shares, and
extended the time for Dr. Merritt to exercise the vested shares under this option to Noon (Pacific
time) on December 31, 2008. Dr. Merritt did not exercise the option by December 31, 2008 and,
accordingly, it terminated. The closing market price of our common stock on December 31, 2008 was
$0.08 per share, while the exercise price of the option was $2.86 per share. In addition, at the
time of his separation, Dr. Merritt held another option that was vested as to 8,334 shares.
Pursuant to its terms, this option expired, unexercised, on April 28, 2008. The closing market
price of our common stock on April 28, 2008 was $0.52 per share, while the exercise price of this
option was $2.75 per share.
Under the letter agreement regarding terms of separation, Dr. Merritt represented that he had
returned to us all of our property and data that had been in his possession or control and
acknowledged that he is bound by an agreement with us regarding the use and confidentiality of our
confidential information.
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DESCRIPTION OF CAPITAL STOCK
Common Stock
We are authorized to issue 200,000,000 shares of common stock, par value $0.001 per share.
Additional shares of authorized common stock may be issued, as authorized by our board of directors
from time to time, without stockholder approval, except as may be required by applicable securities
exchange requirements. The holders of common stock possess exclusive voting rights in us, except to
the extent specified in the certificate of designation relating to our [
•
]% Series C Convertible
Preferred Stock and to the extent our board of directors specifies voting power with respect to any
other class of securities issued in the future. Each holder of our common stock is entitled to one
vote for each share held of record on each matter submitted to a vote of stockholders, including
the election of directors. Stockholders do not have any right to cumulate votes in the election of
directors.
Subject to preferences that may be granted to the holders of preferred stock, each holder of
our common stock is entitled to share ratably in distributions to stockholders and to receive
ratably such dividends as may be declared by our board of directors out of funds legally available
therefor. In the event of our liquidation, dissolution or winding up, the holders of our common
stock will be entitled to receive, after payment of all of our debts and liabilities and of all
sums to which holders of any preferred stock may be entitled, the distribution of any of our
remaining assets. Holders of our common stock have no conversion, exchange, sinking fund,
redemption or appraisal rights (other than such as may be determined by our board of directors in
its sole discretion) and have no preemptive rights to subscribe for any of our securities.
All of the outstanding shares of our common stock are, and the shares of common stock issued
upon the conversion of any securities convertible into our common stock will be, fully paid and
non-assessable. The shares of common stock offered by this prospectus or upon the conversion of any
preferred stock or exercise of any warrants offered pursuant to this prospectus, when issued and
paid for, will also be, fully paid and non-assessable.
Securities Exchange Listing
Our common stock is listed on the NYSE Amex under the symbol "ANX."
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is American Stock Transfer & Trust
Company.
Preferred Stock
We are authorized to issue 1,000,000 shares of preferred stock, par value $0.001 per share.
Our board of directors is authorized to classify or reclassify any unissued portion of our
authorized shares of preferred stock to provide for the issuance of shares of other classes or
series, including preferred stock in one or more series. We may issue preferred stock from time to
time in one or more class or series, with the exact terms of each class or series established by
our board of directors. Our board of directors may issue preferred stock with voting and other
rights that could adversely affect the voting power of the holders of our common stock without
seeking stockholder approval. Additionally, the issuance of preferred stock may have the effect of
decreasing the market price of the common stock and may adversely affect the voting power of
holders of common stock and reduce the likelihood that common stockholders will receive dividend
payments and payments upon liquidation. The issuance of preferred stock may delay, deter or prevent
a change in control.
The DGCL provides that the holders of preferred stock will have the right to vote separately
as a class on any proposal involving fundamental changes in the rights of holders of that preferred
stock. This right is in addition to any voting rights that may be provided for in any applicable
certificate of designation.
0% Series A Convertible Preferred Stock
A special pricing committee of our board of directors, pursuant to authority delegated to it
by our board of directors, previously designated 1,993 shares of our preferred stock "0% Series A
Convertible Preferred Stock," and authorized the issuance and sale of these shares in connection
with our June 2009 equity financing. The rights, preferences, privileges and restrictions of the 0%
Series A Convertible Preferred Stock are set forth in the certificate of designation related to
that series of preferred stock, which was filed as an exhibit to the registration statement of
which this prospectus is a part. As of the date of this prospectus, all of the shares of this
preferred stock have been converted into shares of our common stock pursuant to the certificate of
designation and, in accordance with Section 11(i) of the certificate of designation, such shares
have resumed the status of authorized but unissued shares of preferred stock
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and are no longer designated as 0% Series A Convertible Preferred Stock.
5% Series B Convertible Preferred Stock
A special pricing committee of our board of directors, pursuant to authority delegated to it
by our board of directors, previously designated 1,361 shares of our preferred stock "5% Series B
Convertible Preferred Stock," and authorized the issuance and sale of these shares in connection
with our July 2009 equity financing. The rights, preferences, privileges and restrictions of the 5%
Series B Convertible Preferred Stock are set forth in the certificate of designation related to
that series of preferred stock, which was filed as an exhibit to the registration statement of
which this prospectus is a part. As of the date of this prospectus, all of the shares of this
preferred stock have been converted into shares of our common stock pursuant to the certificate of
designation and, in accordance with Section 11(i) of the certificate of designation, such shares
have resumed the status of authorized but unissued shares of preferred stock and are no longer
designated as 5% Series B Convertible Preferred Stock.
[
•
]% Series C Convertible Preferred Stock
The convertible preferred stock we are offering will be issued pursuant to a securities
purchase agreement between each of the investors and us. We urge you to review the securities
purchase agreement and the certificate of designation authorizing the convertible preferred stock,
which is filed as an exhibit to the registration statement of which this prospectus forms a part,
for a complete description of the terms and conditions applicable to the convertible preferred
stock. The following brief summary of the material terms and provisions of the convertible
preferred stock is subject to, and qualified in its entirety by, the certificate of designation
authorizing the convertible preferred stock. This prospectus also relates to the offering of the
shares of our common stock upon the conversion of the convertible preferred stock issued to the
investors in this offering.
We are authorized to issue [
•
] shares of [
•
]% Series C Convertible Preferred Stock, par value
$0.001 per share, pursuant to the Certificate of Designation of Preferences, Rights and Limitations
of [
•
]% Series C Convertible Preferred Stock we have filed with the Secretary of State of the State
of Delaware. This certificate of designation was authorized by our board of directors without
approval by our stockholders pursuant to the authority vested in the board of directors under our
certificate of incorporation.
The [
•
]% Series C Convertible Preferred Stock will be convertible at the option of the holder
at any time into shares of our common stock at a conversion price of $[
•
] per share. The conversion
price is subject to adjustment in the case of stock splits, stock dividends, combinations of shares
and similar recapitalization transactions. The conversion price may also subject to adjustment if
we issue rights, options or warrants to all holders of our common stock entitling them to subscribe
for or purchase shares of our common stock at a price per share less than the daily weighted volume
weighted average price of our common stock, if we distribute evidences of our indebtedness or
assets or rights or warrants to subscribe for or purchase any security to all holders of our common
stock, or if we consummate a fundamental corporate transaction such as a merger or consolidation,
sale or other disposition of all or substantially all of our assets, or an exchange or tender offer
accepted by the holders of 50% or more of our outstanding common stock. Subject to limited
exceptions, a holder of shares of [
•
]% Series C Convertible Preferred Stock will not have the right
to convert any portion of its [
•
]% Series C Convertible Preferred Stock if the holder, together
with its affiliates, would beneficially own in excess of 4.99% of the number of shares of our
common stock outstanding immediately after giving effect to its conversion.
The [
•
]% Series C Convertible Preferred Stock will be subject to automatic conversion into
shares of our common stock upon the occurrence of a change in control of our company and we may
become obligated to redeem the [
•
]% Series C Convertible Preferred Stock upon the occurrence of
certain triggering events, including the material breach by us of certain contractual obligations
to the holders of the [
•
]% Series C Convertible Preferred Stock, our inability to effect a
registered issuance of shares of our common stock upon conversion of the [
•
]% Series C Convertible
Preferred Stock pursuant to the registration statement of which this prospectus is a part, our
failure to have available a sufficient number of authorized and unreserved shares of common stock
to issue upon conversion of the [
•
]% Series C Convertible Preferred Stock, a redemption by us of
more than a de minimis number of shares of common stock or other junior securities, the occurrence
of a change in control of our company, the occurrence of certain insolvency events relating to our
company, the failure of our common stock to continue to be listed or quoted for trading one of a
few specified U.S. securities exchanges, and any judgment against us for more than $150,000 that
remains unvacated, unbonded or unstayed for 60 days.
The [
•
]% Series C Convertible Preferred Stock is entitled to receive cumulative dividends at
the rate per share (as a percentage of the stated value of $1,000 per share) of [
•
]% per annum
until [
•
], payable quarterly. If the [
•
]% Series C Convertible Preferred Stock is converted any
time prior to [
•
], we will pay the holder of the converted shares an amount equal to $250 per
$1,000 in stated value (subject to adjustment) of the shares of [
•
]% Series C Convertible Preferred
Stock converted, less dividends paid with respect to such converted preferred shares before the
relevant conversion date.
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Except as required by law, holders of the convertible preferred stock are not entitled to
voting rights, except that the affirmative vote of the holders of a majority of the outstanding
shares of convertible preferred stock is required to take certain actions that may adversely affect
the rights or preferences of the holders of convertible preferred stock, including authorizing any
class of stock ranking as to dividends, redemption or distribution of assets upon a liquidation,
dissolution or winding up of our company senior to, or otherwise pari passu with, the [
•
]% Series C
Convertible Preferred Stock and increasing the number of authorized shares of [
•
]% Series C
Convertible Preferred Stock. In addition, without the prior written consent of the holders of at
least 80% in stated value (initially $1,000 per share, subject to adjustment) of the [
•
]% Series C
Convertible Preferred Stock, we may not amend our certificate of incorporation or bylaws in any
manner that materially and adversely affects any rights of the holders of the [
•
]% Series C
Convertible Preferred Stock, repay or reacquire more than a de minimis number of shares of our
common stock or securities convertible into or exercisable for our common stock, pay cash dividends
or make distributions on our common stock or other securities, or enter into certain transactions
with any affiliate of ours.
The securities purchase agreement pursuant to which the [
•
]% Series C Convertible Preferred
Stock will be issued prohibits us from issuing any shares of our common stock or any equity or debt
securities convertible into our common stock for a period of 60-days after the closing of this
offering.
We do not intend to list the [
•
]% Series C Convertible Preferred Stock on any securities
exchange or automated quotation system.
Anti-Takeover Provisions
The following is a summary of certain provisions of Delaware law, our certificate of
incorporation and our bylaws. This summary does not purport to be complete and is qualified in its
entirety by reference to the corporate law of Delaware and our certificate of incorporation and
bylaws.
Certificate of Incorporation and Bylaws
Preferred Stock.
Under our amended and restated certificate of incorporation, our board of
directors has the power to authorize the issuance of up to 1,000,000 shares of preferred stock and
to determine the price, rights, preferences, privileges and restrictions, including voting rights,
of those shares without further vote or action by our stockholders. The issuance of preferred stock
may:
•
delay, defer or prevent a change in control;
•
discourage bids for our common stock at a premium over the market price of our common
stock;
•
adversely affect the voting and other rights of the holders of our common stock; and
•
discourage acquisition proposals or tender offers for our shares and, as a
consequence, inhibit fluctuations in the market price of our shares that could result
from actual or rumored takeover attempts.
Advance Notice Requirement.
Stockholder nominations of individuals for election to our board
of directors and stockholder proposals of other matters to be brought before an annual meeting of
our stockholders must comply with the advance notice procedures set forth in our bylaws. Generally,
to be timely, such notice must be received at our principal executive offices no later than the
date specified in our proxy statement released to stockholders in connection with the preceding
year's annual meeting of stockholders, which date shall be not earlier than the 120th day, nor
later than the close of business on the 90th day, prior to the first anniversary of the date of the
preceding year's annual meeting of stockholders.
Special Meeting Requirements.
Our bylaws provide that special meetings of our stockholders may
only be called at the request of our board of directors, president (unless there is a chief
executive officer who is not the president, in which case a special meeting may be called at any
time by the chief executive officer and not the president) or chair of the board of directors. Only
such business shall be considered at a special meeting as shall have been stated in the notice for
such meeting.
No Cumulative Voting.
Our certificate of incorporation does not include a provision for
cumulative voting for directors.
Indemnification.
Our certificate of incorporation and our bylaws provide that we will
indemnify our officers and directors against losses as they are incurred in investigations and
legal proceedings resulting from their services to us, which may include service in connection with
takeover defense measures.
Delaware Anti-Takeover Statute
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We are subject to Section 203 of the DGCL, an anti-takeover law. In general, Section 203
prohibits, with some exceptions, a publicly held Delaware corporation from engaging in a "business
combination" with any "interested stockholder" for a period of three years following the date on
which that stockholder became an interested stockholder, unless:
•
prior to that date, the board of directors of the corporation approved either the
business combination or the transaction that resulted in the stockholder becoming an
interested stockholder;
•
upon consummation of the transaction that resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares of voting stock outstanding (but not
the voting stock owned by the interested stockholder) those shares owned by persons who
are directors and officers and by excluding employee stock plans in which employee
participants do not have the right to determine whether shares held subject to the plan
will be tendered in a tender or exchange offer; or
•
on or subsequent to that date, the business combination is approved by the board of
directors of the corporation and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least 66-2/3% of
the outstanding voting stock that is not owned by the interested stockholder.
Section 203 defines "business combination" to include any of the following:
•
any merger or consolidation involving the corporation and the interested stockholder;
•
any sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder;
•
subject to certain exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder;
•
any transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the corporation beneficially
owned by the interested stockholder; or
•
the receipt by the interested stockholder of the benefit of any loans, advances,
guarantees, pledges or other financial benefits provided by or through the corporation.
In general, Section 203 defines an "interested stockholder" as any person who, together with
the person's affiliates and associates, beneficially owns, or within three years prior to the
determination of interested stockholder status did beneficially own, 15% or more of the outstanding
voting stock of the corporation.
The above provisions may deter a hostile takeover or delay a change in control of our management or
us.
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DESCRIPTION OF WARRANTS
The warrants we are offering will be issued pursuant to a securities purchase agreement
between each of the investors and us. We urge you to review the securities purchase agreement and
the form of warrant, which are filed as exhibits to the registration statement of which this
prospectus forms a part, for a complete description of the terms and conditions applicable to the
warrants. The following brief summary of the material terms and provisions of the warrants is
subject to, and qualified in its entirety by, the form of warrant we have filed. This prospectus
also relates to the offering of the shares of our common stock upon the exercise, if any, of the
warrants issued to the investors in this offering. The warrants we are issuing to the placement
agent in this offering to purchase up to an aggregate of [
•
] shares of our common stock are not
covered by this prospectus.
The warrants will have an exercise price of $[
•
] per share of our common stock and will be
exercisable at the option of the holder at any time after the date that is six months from the date
of issuance, which will be the closing date of this offering, through and including the date that
is the fifth anniversary of the initial exercise date. Subject to limited exceptions, a warrant
holder will not have the right to exercise any portion of the warrant if the holder, together with
its affiliates, would beneficially own in excess of 4.99% of the number of shares of our common
stock outstanding immediately after the exercise.
The exercise price of the warrants, and in some cases the number of shares issuable upon
exercise of the warrants, will be subject to adjustment in the event of stock splits, stock
dividends, combinations and similar events affecting our common stock. The conversion price may
also be subject to adjustment if we issue rights, options or warrants to all holders of our common
stock entitling them to subscribe for or purchase shares of our common stock at a price per share
less than the daily weighted volume weighted average price of our common stock or if we distribute
evidences of our indebtedness or assets or rights or warrants to subscribe for or purchase any
security to all holders of our common stock. In addition, in the event we consummate a fundamental
corporate transaction such as a merger or consolidation with or into another person or other
reorganization event in which our common stock is converted or exchanged for securities, cash or
other property, or we sell, lease, license or otherwise dispose of all or substantially all of our
assets or we or another person acquires 50% or more of our outstanding common stock, then following
such event, the holders of the warrants will be entitled to receive upon exercise of the warrants
the same kind and amount of securities, cash or property which the holders would have received had
they exercised the warrants immediately prior to such fundamental transaction. Any successor to us
or surviving entity shall assume our obligations under the warrants.
The warrant holders must surrender payment in cash of the aggregate exercise price of the
shares being acquired upon exercise of the warrants. If, however, we are unable to offer and sell
the shares underlying these warrants pursuant to this prospectus due to the ineffectiveness of the
registration statement of which this prospectus is a part, then the warrants may only be exercised
on a "net" or "cashless" basis. No fractional shares of common stock will be issued in connection
with the exercise of a warrant. In lieu of fractional shares, we will pay the holder an amount in
cash equal to the fractional amount multiplied by the exercise price.
The warrants do not entitle the holders thereof to any voting rights, dividends or other
rights as a stockholder of ours prior to the exercise of the warrants.
We do not intend to list the warrants on any securities exchange or automated quotation
system.
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PLAN OF DISTRIBUTION
We have entered into an engagement letter agreement, dated [
•
], 2009, with Rodman & Renshaw,
LLC. Subject to the terms and conditions set forth in the agreement, Rodman & Renshaw has agreed to
act as our placement agent in connection with this offering. The placement agent is not purchasing
or selling any securities being offered by this prospectus, nor is it required to arrange for the
purchase or sale of any specific number or dollar amount of the securities, but has agreed to use
its reasonable best efforts to arrange for the sale of all of the securities in this offering. We
will enter into a securities purchase agreement directly with investors in this offering.
There is no requirement that any minimum number of units or dollar amount of units be sold in
this offering and there can be no assurance that we will sell all or any of the convertible
preferred stock being offered.
Our agreement with the placement agent and the securities purchase agreement among us and the
investors in this offering provide that the obligations of the placement agent and the investors
are subject to certain conditions precedent, including, among other things, the absence of any
material change in our business and our receipt of a customary written legal opinion.
We currently anticipate that the closing of this offering will take place on or about [
•
],
2009. On the scheduled closing date, the following will occur:
•
we will receive funds in the amount of the aggregate purchase price of the securities
being sold by us, less the amount of the fees we are paying to the placement agent and
less the amount to be placed in escrow for the dividend and other payments due upon the
convertible preferred stock;
•
the placement agent will receive the placement agent fees and compensation warrants
to purchase shares of our common stock in accordance with the terms of the engagement
letter agreement;
•
the escrow agent will receive the aggregate escrow amount to be released to make the
dividend and other payments due upon the convertible preferred stock; and
•
we will deliver, or cause to be delivered, the shares of convertible preferred stock
and the warrants being sold.
We have agreed to pay the placement agent a cash fee equal to 7.0% of the gross proceeds of
the sale of the units in this offering. We have also agreed to grant compensation warrants to the
placement agent to purchase that number of our shares of common stock equal to [
•
] % of the number
of shares of common stock underlying the convertible preferred stock sold by us in this offering,
or up to an aggregate of [
•
] shares, at an exercise price of $[
•
] per share. In compliance with the
guidelines of the Financial Industry Regulatory Authority, or FINRA, under no circumstances will
the fee, commission or discount received by the placement agent or any other FINRA member or
independent broker-dealer exceed 8.0% of the gross proceeds to us in this offering or any other
offering in the U.S. pursuant this prospectus.
The compensation warrants will be substantially on the same terms as the warrants offered
hereby, except that they will have an exercise price of $[
•
] per share and will be exercisable at
the option of the holder at any time after the date that is six months from the date of issuance,
which will be the closing date of this offering, through and including the date that is the fifth
anniversary of the date of issuance, and they will comply with FINRA Rule 5110(g) in that for a
period of six months after their date of issuance (which shall not be earlier than the closing date
of this offering), neither the compensation warrants nor any shares issued upon exercise of the
compensation warrants shall be sold, transferred, assigned, pledged, or hypothecated, or be the
subject of any hedging, short sale, derivative, put, or call transaction that would result in the
effective economic disposition of the securities by any person, except the transfer of any
security:
•
by operation of law or by reason of reorganization of us;
•
to any FINRA member firm participating in this offering and the officers or partners
thereof, if all securities so transferred remain subject to the lock-up restriction
described above for the remainder of the time period;
•
if the aggregate amount of our securities held by Rodman & Renshaw, LLC or related
persons do not exceed 1% of the securities being offered;
•
that is beneficially owned on a pro-rata basis by all equity owners of an investment
fund, provided that no participating
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member manages or otherwise directs investments by the fund, and participating members in
the aggregate do not own more than 10% of the equity in the fund; or
•
the exercise or conversion of any security, if all securities received remain
subject to the lock-up restriction set forth above for the remainder of the time
period.
The following table shows the per unit and total fees we will pay to the placement agent in
connection with the sale of the units offered pursuant to this prospectus, assuming the purchase of
all of the units being offered hereby. Because there is no minimum offering amount required as a
condition to closing in this offering, the actual total offering fees, if any, are not presently
determinable and may be substantially less than the maximum amount set forth below.
Per unit placement agent fees
$[
•
]
Maximum offering total
$[
•
]
We estimate that the total expenses of the offering by us, excluding the placement agent's
fees, will be approximately $[
•
].
The purchase price per unit and the exercise price of the warrants were determined based on
negotiations with the purchasers and discussions with the placement agent.
We have agreed to indemnify the placement agent and its affiliates against certain
liabilities, including liabilities relating to and arising out of its activities under the
engagement letter agreement. We have also agreed to contribute to payments the placement agent may
be required to make in respect of such liabilities.
We have agreed that we will not issue, enter into any agreement to issue or announce the
issuance or proposed issuance of any shares of our common stock, or securities that would entitle
the holder thereof to acquire shares of our common stock, for a period of 60 days from the closing
date of the offering without the prior written consent of purchasers holding at least two-thirds in
interest of the convertible preferred stock and warrants (on an as converted basis) then
outstanding.
A copy of the engagement letter agreement with the placement agent and the form of securities
purchase agreement to be entered into with the investors in this offering have been filed as
exhibits to the registration statement of which this prospectus is a part.
The placement agent has informed us that it will not engage in over-allotment, stabilizing
transactions or syndicate covering transactions in connection with this offering. Notwithstanding
anything to the contrary contained herein, we shall not be responsible for paying any fees or
compensation to any persons pursuant to such arrangements.
The transfer agent for our common stock is American Stock Transfer & Trust Company. We will
act as transfer agent for the convertible preferred stock and the warrants being offered hereby.
Our common stock is traded on the NYSE Amex under the symbol "ANX." The convertible preferred
stock and the warrants being offered hereby are not expected to be eligible for trading on any
market.
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LEGAL MATTERS
The validity of the issuance of securities offered by this prospectus will be passed upon for
us by DLA Piper LLP (US), San Diego, California.
EXPERTS
Our consolidated financial statements as of December 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders' equity (deficit) and comprehensive loss and
cash flows for the years then ended and for the period from January 1, 2002 through December 31,
2008 have been incorporated by reference herein and in the registration statement of which this
prospectus forms a part in reliance upon the report of J.H. Cohn LLP, independent registered public
accounting firm, incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other information with the SEC. Copies of our reports,
proxy statements and other information may be inspected and copied at the SEC's Public Reference
Room at 100 F Street, N.E., Washington, D.C. 20549. Copies of these materials can also be obtained
by mail at prescribed rates from the Public Reference Room of the SEC, 100 F. Street, N.E.,
Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by
calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy
and information statements and other information regarding us and other issuers that file
electronically with the SEC. The address of the SEC Internet site is www.sec.gov. In addition, we
make available on or through our Internet site copies of these reports, proxy statements and other
information as soon as reasonably practicable after we electronically file or furnish them to the
SEC. Our Internet site can be found at http://www.adventrx.com.
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with
respect to the securities offered by this prospectus. This prospectus, which forms a part of that
registration statement, does not contain all of the information set forth in the registration
statement because certain parts of the registration statement are omitted in accordance with the
rules and regulations of the SEC. The registration statement is available for inspection and
copying as set forth above. Statements contained in this prospectus as to the contents of any
contract or other document that we have filed as an exhibit to the registration statement of which
this prospectus forms a part are qualified in their entirety by reference to such exhibits for a
complete statement of their terms and conditions.
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ADVENTRX PHARMACEUTICALS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of March 31, 2009 and December 31, 2008 (Unaudited)
F-2
Condensed Consolidated Statements of Operations for the three months ended March 31, 2009
and 2008 and for the period from inception (June 12, 1996) through March 31, 2009
(Unaudited)
F-3
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2009
and 2008 and for the period from inception (June 12, 1996) through March 31, 2009 (Unaudited)
F-4
Notes to Condensed Consolidated Financial Statements (Unaudited)
F-5
Report of Independent Registered Public Accounting Firm
F-11
Consolidated Balance Sheets as of December 31, 2008 and 2007
F-12
Consolidated Statements of Operations for the years ended December 31, 2008 and 2007 and
for the period from inception (June 12, 1996) through December 31, 2008
F-13
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Loss for the
period from inception (June 12, 1996) through December 31, 2008
F-14
Consolidated Statements of Cash Flows for the years ended December 31, 2008 and 2007 and
for the period from inception (June 12, 1996) through December 31, 2008
F-18
Notes to Consolidated Financial Statements
F-20
F-1
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Part I. Financial Information
Item 1.
Financial Statements.
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Condensed Consolidated Balance Sheets
March 31,
December 31,
2009
2008
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
5,306,646
$
9,849,904
Interest and other receivables
304,594
121,736
Prepaid expenses
353,340
477,902
Total current assets
5,964,580
10,449,542
Property and equipment, net
166,527
199,052
Other assets
60,247
60,664
Total assets
$
6,191,354
$
10,709,258
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
1,054,680
1,721,376
Accrued liabilities
1,342,945
2,077,188
Accrued compensation and payroll taxes
781,546
915,459
Total current liabilities
3,179,171
4,714,023
Stockholders' equity:
Common stock, $0.001 par value; 200,000,000 shares
authorized; 90,252,572 shares issued and outstanding at
March 31, 2009 and December 31, 2008
90,254
90,254
Additional paid-in capital
131,925,397
131,751,439
Deficit accumulated during the development stage
( 129,003,468
)
(125,846,458
)
Total stockholders' equity
3,012,183
5,995,235
Total liabilities and stockholders' equity
$
6,191,354
$
10,709,258
Note: The balance sheet at December 31, 2008 has been derived from audited financial statements at
that date. It does not include, however, all of the information and notes required by accounting
principles generally accepted in the United States of America for complete financial statements.
See accompanying notes to unaudited condensed consolidated financial statements.
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ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Condensed Consolidated Statements of Operations
(Unaudited)
Inception
(June 12, 1996)
Three months ended March 31,
through
2009
2008
March 31, 2009
Revenues:
Net
sales
$
—
$
—
$
174,830
Grant revenue
—
—
129,733
Licensing revenue
300,000
—
1,300,000
Total net revenues
300,000
—
1,604,563
Cost of goods sold
—
—
51,094
Gross margin
300,000
—
1,553,469
Operating expenses:
Research and development
1,647,300
3,820,307
63,661,856
Selling, general and administrative
1,779,240
2,365,194
44,748,442
Depreciation and amortization
32,246
46,779
10,830,317
In-process research and development
—
—
10,422,130
Impairment loss — write off of goodwill
—
—
5,702,130
Equity in loss of investee
—
—
178,936
Total operating expenses
3,458,786
6,232,280
135,543,811
Loss from operations
(3,158,786
)
(6,232,280
)
(133,990,342
)
Loss on fair value of warrants
—
—
(12,239,688
)
Interest income
—
—
4,582,028
Other income
1,776
299,208
114,154
Interest expense
—
—
(179,090
)
Loss before cumulative effect of change in accounting principle
(3,157,010
)
(5,933,072
)
(141,712,938
)
Cumulative effect of change in accounting principle
—
—
(25,821
)
Net loss
(3,157,010
)
(5,933,072
)
(141,738,759
)
Preferred stock dividends
—
—
(621,240
)
Net loss applicable to common stock
$
(3,157,010
)
$
(5,933,072
)
$
(142,359,999
)
Net loss per common share — basic and diluted
$
(0.03
)
$
(0.07
)
Weighted average shares — basic and diluted
90,252,572
90,252,572
See accompanying notes to unaudited condensed consolidated financial statements.
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Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Inception
(June 12, 1996)
through
Three months ended March 31,
March 31,
2009
2008
2009
Cash flows from operating activities:
Net loss
$
(3,157,010
)
$
(5,933,072
)
$
(141,738,759
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
32,246
46,779
10,380,317
Loss (gain) on disposal of fixed assets
279
188
(3,319
)
Fair value of warrant liability
—
—
12,239,688
Expenses related to employee stock options
173,958
638,416
8,026,520
Expense related to stock options issued to non-employees
—
5,680
204,664
Expenses paid by issuance of common stock
—
—
1,341,372
Expenses paid by warrants
—
—
573,357
Expenses paid by preferred stock
—
—
142,501
Expenses related to stock warrants issued
—
—
612,000
Accretion of discount
—
(131,929
)
(1,249,853
)
Amortization of debt discount
—
—
450,000
Gain /loss on disposals of property and equipment
—
—
—
Accretion of discount on investments in securities
—
—
(354,640
)
Forgiveness of employee receivable
—
—
30,036
Impairment loss — write-off of goodwill
—
—
5,702,130
Equity in loss of investee
—
—
178,936
In-process research and development
—
—
10,422,130
Write-off of license agreement
—
—
152,866
Write-off of assets available-for-sale
—
—
108,000
Cumulative effect of change in accounting principle
—
—
25,821
Changes in assets and liabilities, net of effect of acquisitions:
—
—
—
Increase (decrease) in prepaid expenses and other assets
(57,879
)
17,648
(965,550
)
Increase (decrease) in accounts payable and accrued liabilities
(1,534,852
)
588,129
3,355,878
Decrease in other long-term liabilities
—
(5,352
)
—
Net cash used in operating activities
(4,543,258
)
(4,773,513
)
(90,365,905
)
Cash flows from investing activities:
Purchases of short-term investments
—
(6,437,340
)
(111,183,884
)
Proceeds from sales and maturities of short-term investments
—
16,750,000
112,788,378
Purchases of property and equipment
—
(20,522
)
(1,030,354
)
Proceeds from sale of property and equipment
—
—
33,906
Purchase of certificate of deposit
—
—
(1,016,330
)
Maturity of certificate of deposit
—
—
1,016,330
Payment on obligation under license agreement
—
—
(106,250
)
Cash acquired from acquisitions, net of cash paid
—
—
32,395
Issuance of note receivable — related party
—
—
(35,000
)
Payments on note receivable
—
—
405,993
Advance to investee
—
—
(90,475
)
Cash transferred in rescission of acquisition
—
—
(19,475
)
Cash received in rescission of acquisition
—
—
230,000
Net cash provided by (used in) investing activities
—
10,292,138
1,025,234
Cash flows from financing activities:
Proceeds from sale of preferred stock
—
—
4,200,993
Proceeds from sale of common stock
—
—
84,151,342
Proceeds from exercise of stock options
—
—
712,367
Proceeds from sale or exercise of warrants
—
—
11,382,894
Repurchase of warrants
—
—
(55,279
)
Payment of financing and offering costs
—
—
(6,483,809
)
Payments of notes payable and long-term debt
—
—
(605,909
)
Proceeds from issuance of notes payable and detachable warrants
—
—
1,344,718
Net cash provided by financing activities
—
—
94,647,317
Net increase (decrease) in cash and cash equivalents
(4,543,258
)
5,518,625
5,306,646
Cash and cash equivalents at beginning of period
9,849,904
14,780,739
—
Cash and cash equivalents at end of period
$
5,306,646
$
20,299,364
$
5,306,646
See accompanying notes to unaudited condensed consolidated financial statements.
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ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Condensed Consolidated Financial Statements (Unaudited)
1.
Basis of Presentation
ADVENTRX Pharmaceuticals, Inc., a Delaware corporation ("ADVENTRX," "we" or the "Company"),
prepared the unaudited interim condensed consolidated financial statements in accordance with
accounting principles generally accepted in the United States of America ("U.S. GAAP") for
interim financial information and with the instructions of the Securities and Exchange Commission
("SEC"). Accordingly, they do not include all of the information and disclosures required by U.S.
GAAP for annual audited financial statements and should be read in conjunction with our audited
consolidated financial statements and related notes for the year ended December 31, 2008 included
in our Annual Report on Form 10-K filed with the SEC on March 27, 2009 ("2008 Annual Report").
The condensed consolidated balance sheet as of December 31, 2008 has been derived from the
audited consolidated financial statements included in the 2008 Annual Report. In the opinion of
management, these interim condensed consolidated financial statements include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation of the financial
position, results of operations, and cash flows for the periods presented. The results of
operations for the interim periods shown in this report are not necessarily indicative of results
expected for the full year.
Since our inception, we have an accumulated net loss of approximately $141.7 million and
recurring negative cash flows from operations. Currently, we are focused primarily on evaluating
strategic options, including the sale or exclusive license of one or more of our product
candidate programs, a strategic business merger and other similar transactions. We implemented
restructuring and cost-cutting measures in October 2008, January 2009 and March 2009 and
eliminated all but a select, small number of full-time employees and discontinued substantially
all of our development activities and fundamental business operations to provide additional time
to consummate a strategic transaction or otherwise obtain financing.
The condensed consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, SD Pharmaceuticals, Inc. and ADVENTRX (Europe) Ltd. All intercompany
accounts and transactions have been eliminated in consolidation.
2.
Going Concern
The accompanying unaudited interim condensed consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. Going concern contemplates the
realization of assets and the satisfaction of liabilities in the normal course of business over a
reasonable length of time. However, as a result of the Company's continued losses and current
cash and financing position, such realization of assets or satisfaction of liabilities, without
substantial adjustments, is uncertain. The future of the Company is dependent upon its ability to
obtain additional funding.
In December 2008, the Company announced that it was evaluating various strategic options,
including the sale or exclusive license of one or more of the Company's product candidate
programs, a strategic business merger and other similar transactions, certain of which would
result in a change of control of the Company. However, progress with potential strategic
transaction partners has not been as rapid or on terms as attractive as the Company would have
desired. The Company previously has taken steps designed to provide additional time to consummate
a strategic transaction or otherwise obtain financing, including eliminating all but a select,
small number of full-time employees and discontinuing substantially all of its development
activities and fundamental business operations. As a result, its ability to further curtail
expenses to provide further time is limited, and the restructuring and cost-cutting measures it
has taken may not provide it with sufficient additional time to consummate a strategic
transaction or otherwise obtain financing. Further, in May 2009, the Company announced that the
primary endpoint in its bioequivalence study of ANX-514 was not met, that the resulting
uncertainty around the cost and timeline to approval by the U.S. Food and Drug Administration, or
FDA, of ANX-514 may adversely impact the Company's on-going strategic transaction discussions,
and that, in light of its working capital, the Company is evaluating both its strategic and
non-strategic options. Accordingly, in May 2009, the Company began to evaluate the process of
winding-down its operations, including engaging a third-party firm to assist it with its
evaluation. There can be no assurances that we will continue to pursue our strategic transaction
alternatives or, if we do, that we will be able to consummate a strategic transaction on a timely
basis, or at all. The Company likely will not be able to continue as a going concern, unless, as
part of a strategic transaction or otherwise, it raises adequate capital. Given this uncertainty,
there is significant doubt as to the Company's ability to continue as a going concern.
The accompanying financial statements for the quarter ended March 31, 2009 do not include any
adjustments related to the recovery and classification of recorded assets, or the amounts and
classification of liabilities, that might be necessary in the event the Company cannot continue
as a going concern.
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3.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those estimates.
4.
Fair Value Measurements
Effective January 1, 2008, we adopted Statement of Financial Accounting Standards ("FAS") No.
157, "Fair Value Measurements" ("FAS 157"). In February 2008, the Financial Accounting Standards
Board ("FASB") issued FASB Staff Position ("FSP") No. FAS 157-2, "Effective Date of FASB
Statement No. 157," which provides a one year deferral of the effective date of FAS 157 for
non-financial assets and non-financial liabilities, except those that are recognized or disclosed
in the financial statements at fair value at least annually. As a result, we only partially
adopted FAS 157 as it relates to our financial assets and liabilities until we are required to
apply this pronouncement to our non-financial assets and liabilities beginning with fiscal year
2009. The adoption of FAS 157 did not have a material impact on our consolidated results of
operations or financial condition.
In October 2008, the FASB issued FSP No. FAS 157-3 "Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active" ("FSP FAS 157-3"). FSP FAS 157-3 clarifies
the application of FAS No. 157, in a market that is not active and provides an example to
illustrate key considerations in determining the fair value of a financial asset when the market
for that financial asset is not active. FSP FAS 157-3 is effective upon issuance, including prior
periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 had
no impact on our consolidated results of operations, financial position or cash flows.
FAS 157 defines fair value, establishes a framework for measuring fair value under U.S. GAAP and
enhances disclosures about fair value measurements. Fair value is defined under FAS 157 as the
exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or most advantageous market for the asset or liability in an orderly
transaction between market participants on the measurement date. Valuation techniques used to
measure fair value under FAS 157 must maximize the use of observable inputs and minimize the use
of unobservable inputs. FAS 157 describes a fair value hierarchy based on three levels of inputs,
of which the first two are considered observable and the last unobservable, that may be used to
measure fair value which are the following:
•
Level 1 —
Quoted prices in active markets for identical assets or liabilities.
•
Level 2 —
Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or
liabilities.
•
Level 3 —
Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities.
The following table represents our fair value hierarchy for our financial assets (which consisted
solely of cash equivalents) measured at fair value on a recurring basis as of March 31, 2009:
Level 1
Level 2
Level 3
Total
Money Market funds
$
5,306,646
$
—
$
—
$
5,306,646
Total
$
5,306,646
$
—
$
—
$
5,306,646
Effective January 1, 2008, we adopted FAS No. 159, "The Fair Value Option for Financial Assets
and Financial Liabilities" ("FAS 159"). FAS 159 allows an entity the irrevocable option to elect
to measure specified financial assets and liabilities in their entirety at fair value on a
contract-by-contract basis. If an entity elects the fair value option for an eligible item,
changes in the item's fair value must be reported as unrealized gains and losses in earnings at
each subsequent reporting date. In adopting FAS 159, we did not elect the fair value option for
any of our financial assets or financial liabilities.
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5.
Share-Based Payments
Estimated share-based compensation expense related to equity awards granted to employees for the
three months ended March 31, 2009 and 2008 was as follows:
Three Months Ended March 31,
2009
2008
Selling, general and administrative expense
$
199,334
$
332,720
Research and development expense
(25,376
)
305,696
Share-based compensation expense before taxes
173,958
638,416
Related income tax benefits
—
—
Share-based compensation expense
$
173,958
$
638,416
Net share-based compensation expense per common share — basic and diluted
$
0.002
$
0.001
In January 2009, we granted under our 2008 Omnibus Incentive Plan restricted stock units to seven
employees that represented the right to receive in the aggregate 3,700,000 shares of our common
stock. These units will vest immediately prior to a strategic transaction (as defined in the
documentation evidencing the grant of the units). We will record share-based compensation
expense in connection with these restricted stock units, if at all, only if a strategic
transaction is consummated.
Since we have a net operating loss carryforward as of March 31, 2009, no excess tax benefits for
the tax deductions related to share-based awards were recognized in the condensed consolidated
statement of operations. There were no employee stock options exercised in the three months ended
March 31, 2009 and 2008.
At March 31, 2009, total employee stock compensation expense included forfeitures for terminated
employees resulting in a credit to research and development stock compensation expense for the
three month period ended March 31, 2009.
At March 31, 2009, total unrecognized estimated compensation cost related to non-vested employee
and non-employee director share-based awards granted prior to that date was $1.7 million, which
is expected to be recognized over a weighted-average period of 3.0 years. During the three months
ended March 31, 2009 and 2008, we granted 0 and 1,802,500 stock options, respectively, to our
employees and non-employee directors with an estimated weighted-average grant-date fair value of
$0 and $0.51.
Estimated share-based compensation expense related to equity awards granted to non-employee
consultants was $0 and $6,000 for the three months ended March 31, 2009 and 2008, respectively.
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6.
Net Loss Per Common Share
We calculate basic and diluted net loss per common share in accordance with the FAS No. 128,
"Earnings Per Share". Basic net loss per common share was calculated by dividing the net loss for
the period by the weighted-average number of common shares outstanding during the period, without
consideration for common stock equivalents. Options, warrants and restricted stock units are
considered to be common stock equivalents and are only included in the calculation of diluted
earnings per common share when their effect is dilutive. Because of the net loss, all of the
options, warrants and restricted stock units were excluded from the calculation.
We have excluded the following options, warrants and restricted stock units from the calculation
of diluted net loss per common share for the three months ended March 31, 2009 and 2008 because
they are anti-dilutive, due to the net loss:
2009
2008
Warrants
13,373,549
13,373,549
Options
3,509,897
5,589,483
Restricted Stock Units
3,700,000
—
20,583,446
18,963,032
7.
Comprehensive Loss
Comprehensive loss is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner sources, including
foreign currency translation adjustments and unrealized gains and losses on short-term
investments. Our components of comprehensive loss consist of net loss and unrealized gains or
losses on short-term investments in securities. For the three months ended March 31, 2009 and
2008, comprehensive loss was $3.2 million and $5.9 million, respectively. For the three months
ended March 31, 2008 and 2007 and the period from inception (June 12, 1996) through March 31,
2009, comprehensive loss was $5.9 million, $5.1 million and $141.7 million, respectively.
8.
Recent Accounting Pronouncements
In April 2009, the FASB issued three new FASB Staff Positions ("FSP") relating to fair value
accounting; FSP FAS 157-4, "Determining Fair Value When the Volume and Level of Activity of the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly," FSP FAS 115-2 and FSP FAS 124-2, "Recognition and Presentation of Other-Than-Temporary
Impairments" and FSP FAS 107-1/APB 28-1, "Interim Disclosures about Fair Value of Financial
Instruments." These FSPs impact certain aspects of fair value measurements, impairments of
securities and related disclosures. The provisions of these FSPs are effective for interim and
annual periods ending after June 15, 2009. The Company does not expect the impact of adopting
these FSPs to have a material effect on its consolidated results of operations or financial
position.
In April 2009, the FASB issued FSP FAS 141(R) -1, "Accounting for Assets Acquired and Liabilities
Assumed in a Business Combination That Arises from Contingencies". The FSP amends and clarifies
FASB Statement No. 141 (revised 2007), "Business Combinations" to address application issues on
initial recognition and measurement, subsequent measurement and accounting, and disclosure of
assets and liabilities arising from contingencies in a business combination. This FSP is
effective for assets or liabilities arising from contingencies in business combinations for which
the acquisition date is on or after the beginning of the first annual reporting beginning on or
after December 15, 2008.
9.
Licensing Revenue
In March 2009, we announced that we and our wholly-owned subsidiary, SD Pharmaceuticals, Inc.,
had entered into a license agreement with respect to our product candidate ANX-514 (docetaxel
emulsion) (the "License Agreement") with Shin Poong Pharmaceutical Co., Ltd., a company organized
under the laws of the Republic of Korea ("Shin Poong"), pursuant to which we granted to Shin
Poong an exclusive license, including the right to sublicense, to research, develop, make, have
made, use, offer for sale, sell and import licensed products, in each case solely for the
treatment of cancer by intravenous administration of formulations of docetaxel as emulsified
products and solely in South Korea. Under the terms of the License Agreement, we will receive an
upfront licensing fee of $0.3 million, a regulatory milestone payment of either $0.2 million or
$0.4 million (depending on whether Shin Poong is required by the Korea Food and Drug
Administration to conduct a bioequivalence or clinical study in human subjects prior to receipt
of regulatory approval) upon receipt of regulatory approval for marketing a licensed product in
South Korea, one-time commercial milestone payments tied to annual net sales of licensed products
in an aggregate amount of up
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to $1.5 million and royalty payments on net sales of licensed products. Shin Poong is responsible
for all development and commercial activities related to ANX-514 in South Korea. If Shin Poong is
required by the Korea Food and Drug Administration to conduct a bioequivalence or clinical trial
in human subjects prior to receipt of regulatory approval and we elect not to supply product to
conduct such trial, which supply obligation is subject to limitations, we will pay Shin Poong
$0.1 million.
We received the $0.3 million upfront licensing fee in April 2009. We recognized $0.3 million in
licensing revenue in the three-month period ended March 31, 2009 because we met the criteria
under our revenue recognition policy in that period.
10.
Supplementary Cash Flow Information
Noncash investing and financing transactions not presented on the condensed consolidated
statements of cash flows for the three months ended March 31, 2009 and 2008 and for the period
from inception (June 12, 1996) through March 31, 2009 are as follows:
Inception
(June 12, 1996)
Three months ended March 31,
through
2009
2008
March 31, 2009
Supplemental disclosures of cash flow information:
Interest paid
$
—
$
—
$
179,090
Income taxes paid
—
—
—
Issuance of warrants, common stock and preferred stock for:
Conversion of notes payable and accrued interest
$
—
$
—
1,213,988
Prepaid services to consultants
—
—
1,482,781
Conversion of preferred stock
—
—
2,705
Acquisitions
—
—
24,781,555
Payment of dividends
—
—
213,000
Financial advisor services in connection with private placement
—
—
1,137,456
Acquisition of treasury stock in settlement of a claim
—
—
34,747
Cancellation of treasury stock
—
—
(34,737
)
Assumptions of liabilities in acquisitions
—
—
1,235,907
Acquisition of license agreement for long-term debt
—
—
161,180
Cashless exercise of warrants
—
—
4,312
Dividends accrued
—
—
621,040
Trade asset converted to available-for-sale asset
—
—
108,000
Dividends extinguished
—
—
408,240
Trade payable converted to note payable
—
—
83,948
Issuance of warrants for return of common stock
—
—
50,852
Detachable warrants issued with notes payable
—
—
450,000
Purchases of equipment, which are included in accounts payable
—
12,382
3,825
Unrealized (gain) loss on short-term investments
—
(6,101
)
—
11. Severance Related Expenses
In January 2009, as part of a restructuring to reduce operating costs, we completed a work force
reduction of six employees. As a result of the work force reduction, in accordance with SFAS No.
146, "Accounting for Costs Associated with Exit or Disposal Activities," we recorded
severance-related charges of $174,000, of which $86,000 was recorded in research and development
and the remainder in selling, general, and administrative expenses. Severance-related charges
of $144,000 were recorded in the first quarter of 2009 and the remainder will be recorded in the
second quarter of 2009.
On April 3, 2009, we effected the reduction in our full-time workforce to small, select number of
full-time employees that we announced on March 20, 2009. In addition, we have discontinued
substantially all of our development activities and fundamental business operations. Our
remaining employees will focus their efforts primarily on continuing to evaluate and execute
strategic options. As a result of this reduction in force, we recorded severance-related charges
of $163,000, of which $114,000 was recorded in the first quarter of 2009 and $49,000 is expected
to be recorded in the second quarter of 2009. The severance-related charges that we expect to
incur in the second quarter of 2009 are subject to a number of assumptions, and actual results
may differ. We may also incur other charges not currently contemplated due to events that may
occur as a result of, or associated with, this and
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other reductions in our workforce.
12. Subsequent Event
In May 2009, we announced that we did not meet the primary endpoint in our bioequivalence study
of ANX-514, that the resulting uncertainty around the cost and timeline to FDA approval of
ANX-514 may adversely impact our on-going strategic transaction discussions, and that, in light
of our working capital, we are evaluating both our strategic and non-strategic options.
Accordingly, in May 2009, the Company began to evaluate the process of winding-down its
operations, including engaging a third-party firm to assist it with its evaluation.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
ADVENTRX Pharmaceuticals, Inc.
We have audited the accompanying consolidated balance sheets of ADVENTRX Pharmaceuticals, Inc. and
Subsidiaries (a development stage enterprise) as of December 31, 2008 and 2007, and the related
consolidated statements of operations, stockholders' equity (deficit) and comprehensive loss and
cash flows for the years then ended and for the period from January 1, 2002 through December 31,
2008. These consolidated financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated 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. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes 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 ADVENTRX Pharmaceuticals, Inc. and Subsidiaries (a development stage
enterprise) as of December 31, 2008 and 2007, and the results of operations and their cash flows
for years then ended and for the period from January 1, 2002 through December 31, 2008, in
conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 3 to the consolidated financial statements, effective January 1, 2007,
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries adopted the Financial Accounting Standards Board
Staff Position on No. EITF 00-19-2, Accounting for Registration Payment Arrangements.
As discussed in Note 3 to the consolidated financial statements, certain prior year amounts have
been restated.
The accompanying consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 2 to the consolidated financial statements,
the Company has suffered recurring losses from operations and negative cash flows from operations
that raise substantial doubt about its ability to continue as a going concern. Management's plans
in regards to these matters are also described in Note 2. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
/s/ J.H. COHN LLP
San Diego, California
March 25, 2009
F-11
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Balance Sheets
December 31,
2008
2007
Assets
Current assets:
Cash and cash equivalents
$
9,849,904
$
14,780,739
Short-term investments
—
18,682,417
Interest and other receivables
121,736
72,029
Prepaid expenses
477,902
615,691
Total current assets
10,449,542
34,150,876
Property and equipment, net
199,052
332,444
Other assets
60,664
58,305
Total assets
$
10,709,258
$
34,541,625
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
1,721,376
$
552,143
Accrued liabilities
2,077,188
2,317,910
Accrued compensation and payroll taxes
915,459
622,762
Total current liabilities
4,714,023
3,492,815
Long-term liabilities
—
14,270
Total liabilities
4,714,023
3,507,085
Commitments and contingencies
Stockholders' equity:
Common stock, $0.001 par value; 200,000,000 shares
authorized; 90,252,572 shares issued and
outstanding at December 31, 2008 and 2007
90,254
90,254
Additional paid-in capital
131,751,439
130,140,549
Deficit accumulated during the development stage
(125,846,458
)
(99,198,965
)
Accumulated other comprehensive income
—
2,702
Total stockholders' equity
5,995,235
31,034,540
Total liabilities and stockholders' equity
$
10,709,258
$
34,541,625
See accompanying notes to consolidated financial statements.
F-12
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Operations
Inception
(June 12, 1996)
Through
Years Ended December 31,
December 31,
2008
2007
2008
(as restated)
Licensing revenue
$
500,000
$
500,000
$
1,000,000
Net sales
—
—
174,830
Grant revenue
—
—
129,733
Total net revenue
500,000
500,000
1,304,563
Cost of sales
—
—
51,094
Gross margin
500,000
500,000
1,253,469
Operating expenses:
Research and development
17,922,183
15,934,409
62,014,556
Selling, general and administrative
9,719,613
8,678,853
42,969,202
Depreciation and amortization
168,039
197,783
10,798,071
In-process research and development
—
—
10,422,130
Impairment loss — write-off of goodwill
—
—
5,702,130
Equity in loss of investee
—
—
178,936
Total operating expenses
27,809,835
24,811,045
132,085,025
Loss from operations
(27,309,835
)
(24,311,045
)
(130,831,556
)
Loss on fair value of warrants
—
—
(12,239,688
)
Interest income
549,964
2,169,005
4,582,028
Interest expense
—
—
(179,090
)
Other income
112,378
—
112,378
Loss before income taxes
(26,647,493
)
(22,142,040
)
(138,555,928
)
Provision for income taxes
—
—
—
Loss before cumulative effect of change in
accounting principle
(26,647,493
)
(22,142,040
)
(138,555,928
)
Cumulative effect of change in
accounting principle
—
—
(25,821
)
Net loss
(26,647,493
)
(22,142,040
)
(138,581,749
)
Preferred stock dividends
—
—
(621,240
)
Net loss applicable to common stock
$
(26,647,493
)
$
(22,142,040
)
$
(139,202,989
)
Loss per common share — basic and diluted
$
(0.30
)
$
(0.25
)
Weighted average shares outstanding —basic
and diluted
90,252,572
89,912,732
See accompanying notes to consolidated financial statements.
F-13
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Loss
Inception (June 12, 1996) Through December 31, 2008
Deficit
Accumulated
accumulated
Total
Cumulative convertible
Cumulative convertible
Cumulative convertible
Additional
other
during the
Treasury
stockholders'
preferred stock, series A
preferred stock, series B
preferred stock, series C
Common stock
paid-in
comprehensive
development
stock,
equity
Comprehensive
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
capital
income (loss)
stage
at cost
(deficit)
loss
Balances at June
12, 1996 (date of
incorporation)
—
$
—
—
$
—
—
$
—
—
$
—
$
—
$
—
$
—
$
—
$
—
Sale of common
stock without par
value
—
—
—
—
—
—
503
5
5
—
—
—
10
Change in par
value of common
stock
—
—
—
—
—
—
—
(4
)
4
—
—
—
—
Issuance of common
stock and net
liabilities
assumed in
acquisition
—
—
—
—
—
—
1,716,132
1,716
3,224
—
(18,094
)
—
(13,154
)
Issuance of common
stock
—
—
—
—
—
—
2,010,111
2,010
456
—
(2,466
)
—
—
Net loss
—
—
—
—
—
—
—
—
—
—
(259,476
)
—
(259,476
)
$
(259,476
)
Balances at
December 31, 1996
—
—
—
—
—
—
3,726,746
3,727
3,689
—
(280,036
)
—
(272,620
)
$
(259,476
)
Sale of common
stock, net of
offering costs of $9,976
—
—
—
—
—
—
1,004,554
1,004
1,789,975
—
—
—
1,790,979
Issuance of common
stock in
acquisition
—
—
—
—
—
—
375,891
376
887,874
—
—
—
888,250
Minority interest
deficiency at
acquisition
charged to the
Company
—
—
—
—
—
—
—
—
—
—
(45,003
)
—
(45,003
)
Net loss
—
—
—
—
—
—
—
—
—
—
(1,979,400
)
—
(1,979,400
)
$
(1,979,400
)
Balances at
December 31, 1997
—
—
—
—
—
—
5,107,191
5,107
2,681,538
—
(2,304,439
)
—
382,206
$
(1,979,400
)
Rescission of
acquisition
—
—
—
—
—
—
(375,891
)
(376
)
(887,874
)
—
561,166
—
(327,084
)
Issuance of common
stock at
conversion of
notes payable
—
—
—
—
—
—
450,264
451
363,549
—
—
—
364,000
Expense related to
stock warrants
issued
—
—
—
—
—
—
—
—
260,000
—
—
—
260,000
Net loss
—
—
—
—
—
—
—
—
—
—
(1,204,380
)
—
(1,204,380
)
$
(1,204,380
)
Balances at
December 31, 1998
—
—
—
—
—
—
5,181,564
5,182
2,417,213
—
(2,947,653
)
—
(525,258
)
$
(1,204,380
)
Sale of common
stock
—
—
—
—
—
—
678,412
678
134,322
—
—
—
135,000
Expense related to
stock warrants
issued
—
—
—
—
—
—
—
—
212,000
—
—
—
212,000
Net loss
—
—
—
—
—
—
—
—
—
—
(1,055,485
)
—
(1,055,485
)
$
(1,055,485
)
Balances at
December 31, 1999
—
—
—
—
—
—
5,859,976
5,860
2,763,535
—
(4,003,138
)
—
(1,233,743
)
$
(1,055,485
)
Sale of preferred
stock, net of
offering costs of $76,500
3,200
32
—
—
—
—
—
—
3,123,468
—
—
—
3,123,500
Issuance of common
stock at
conversion of
notes and interest
payable
—
—
—
—
—
—
412,487
412
492,085
—
—
—
492,497
Issuance of common
stock at
conversion of
notes payable
—
—
—
—
—
—
70,354
70
83,930
—
—
—
84,000
Issuance of common
stock to settle
obligations
—
—
—
—
—
—
495,111
496
1,201,664
—
—
—
1,202,160
Issuance of common
stock for
acquisition
—
—
—
—
—
—
6,999,990
7,000
9,325,769
—
—
—
9,332,769
Issuance of
warrants for
acquisition
—
—
—
—
—
—
—
—
4,767,664
—
—
—
4,767,664
Stock issued for
acquisition costs
—
—
—
—
—
—
150,000
150
487,350
—
—
—
487,500
Expense related to
stock warrants
issued
—
—
—
—
—
—
—
—
140,000
—
—
—
140,000
Dividends payable
on preferred stock
—
—
—
—
—
—
—
—
(85,000
)
—
—
—
(85,000
)
Cashless exercise
of warrants
—
—
—
—
—
—
599,066
599
(599
)
—
—
—
—
Net loss
—
—
—
—
—
—
—
—
—
—
(3,701,084
)
—
(3,701,084
)
$
(3,701,084
)
Balances at
December 31, 2000
3,200
32
—
—
—
—
14,586,984
14,587
22,299,866
—
(7,704,222
)
—
14,610,263
$
(3,701,084
)
See accompanying notes to consolidated financial statements.
F-14
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Loss
Inception (June 12, 1996) Through December 31, 2008
Deficit
Accumulated
accumulated
Total
Cumulative convertible
Cumulative convertible
Cumulative convertible
Additional
other
during the
Treasury
stockholders'
preferred stock, series A
preferred stock, series B
preferred stock, series C
Common stock
paid-in
comprehensive
development
stock,
equity
Comprehensive
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
capital
income (loss)
stage
at cost
(deficit)
loss
Dividends payable
on preferred stock
—
—
—
—
—
—
—
—
(256,000
)
—
—
—
(256,000
)
Repurchase of
warrants
—
—
—
—
—
—
—
—
(55,279
)
—
—
—
(55,279
)
Sale of warrants
—
—
—
—
—
—
—
—
47,741
—
—
—
47,741
Cashless exercise
of warrants
—
—
—
—
—
—
218,493
219
(219
)
—
—
—
—
Issuance of common
stock to pay
preferred
dividends
—
—
—
—
—
—
93,421
93
212,907
—
—
—
213,000
Detachable
warrants issued
with notes payable
—
—
—
—
—
—
—
—
450,000
—
—
—
450,000
Issuance of
warrants to pay
operating expenses
—
—
—
—
—
—
—
—
167,138
—
—
—
167,138
Issuance of common
stock to pay
operating expenses
—
—
—
—
—
—
106,293
106
387,165
—
—
—
387,271
Issuance of
preferred stock to
pay operating
expenses
137
1
—
—
—
—
—
—
136,499
—
—
—
136,500
Net loss
—
—
—
—
—
—
—
—
—
—
(16,339,120
)
—
(16,339,120
)
$
(16,339,120
)
Balances at
December 31, 2001
3,337
33
—
—
—
—
15,005,191
15,005
23,389,818
—
(24,043,342
)
—
(638,486
)
$
(16,339,120
)
Dividends payable
on preferred stock
—
—
—
—
—
—
—
—
(242,400
)
—
—
—
(242,400
)
Repurchase of
warrants
—
—
—
—
—
—
—
—
—
—
—
—
—
Sale of warrants
—
—
—
—
—
—
240,000
240
117,613
—
—
—
117,853
Cashless exercise
of warrants
—
—
—
—
—
—
100,201
100
(100
)
—
—
—
—
Exercise of
warrants
—
—
—
—
—
—
344,573
345
168,477
—
—
—
168,822
Sale of preferred
stock at $1.50 per
share
—
—
200,000
2,000
—
—
—
—
298,000
—
—
—
300,000
Sale of preferred
stock at $10.00
per share
—
—
—
—
70,109
701
—
—
700,392
—
—
—
701,093
Conversion of
preferred stock
into common stock
(3,000
)
(30
)
—
—
—
—
1,800,000
1,800
(1,770
)
—
—
—
—
Preferred stock
dividends forgiven
—
—
—
—
—
—
—
—
335,440
—
—
—
335,440
Issuance of
warrants to pay
operating expenses
—
—
—
—
—
—
—
—
163,109
—
—
—
163,109
Issuance of common
stock to pay
operating expenses
—
—
—
—
—
—
6,292
6
12,263
—
—
—
12,269
Issuance of
preferred stock to
pay operating
expenses
136
1
—
—
—
—
—
—
6,000
—
—
—
6,001
Issuance of stock
options to
employees
—
—
—
—
—
—
—
—
329,296
—
—
—
329,296
Net loss
—
—
—
—
—
—
—
—
—
—
(2,105,727
)
—
(2,105,727
)
$
(2,105,727
)
Balances at
December 31, 2002
473
4
200,000
2,000
70,109
701
17,496,257
17,496
25,276,138
—
(26,149,069
)
—
(852,730
)
$
(2,105,727
)
See accompanying notes to consolidated financial statements.
F-15
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Loss
Inception (June 12, 1996) Through December 31, 2008
Deficit
Accumulated
accumulated
Total
Cumulative convertible
Cumulative convertible
Cumulative convertible
Additional
other
during the
Treasury
stockholders'
preferred stock, series A
preferred stock, series B
preferred stock, series C
Common stock
paid-in
comprehensive
development
stock,
equity
Comprehensive
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
capital
income (loss)
stage
at cost
(deficit)
loss
Dividends payable
on preferred stock
—
—
—
—
—
—
—
—
(37,840
)
—
—
—
(37,840
)
Conversion of
Series C preferred
stock into common
stock
—
—
—
—
(70,109
)
(701
)
14,021,860
14,022
(13,321
)
—
—
—
—
Issuance of common
stock to pay
interest on Bridge
Notes
—
—
—
—
—
—
165,830
165
53,326
—
—
—
53,491
Sale of common
stock at $0.40 per
share, net of
issuance costs
—
—
—
—
—
—
6,640,737
6,676
2,590,656
—
—
—
2,597,332
Sale of common
stock at $1.00 per
share, net of
issuance costs
—
—
—
—
—
—
3,701,733
3,668
3,989,181
—
—
—
3,992,849
Exchange of
warrants
—
—
—
—
—
—
235,291
235
49,486
—
—
—
49,721
Issuance of common
stock to pay
operating expenses
—
—
—
—
—
—
230,000
230
206,569
—
—
—
206,799
Issuance of
warrants to pay
operating expenses
—
—
—
—
—
—
—
—
156,735
—
—
—
156,735
Issuance of stock
options to
employees
—
—
—
—
—
—
—
—
286,033
—
—
—
286,033
Net loss
—
—
—
—
—
—
—
—
—
—
(2,332,077
)
—
(2,332,077
)
$
(2,332,077
)
Balances at
December 31, 2003
473
4
200,000
2,000
—
—
42,491,708
42,492
32,556,963
—
(28,481,146
)
—
4,120,313
$
(2,332,077
)
Extinguishment of
dividends payable
on preferred stock
—
—
—
—
—
—
—
—
72,800
—
—
—
72,800
Conversion of
Series A
cumulative
preferred stock
(473
)
(4
)
—
—
—
—
236,500
236
(232
)
—
—
—
—
Conversion of
Series B preferred
stock
—
—
(200,000
)
(2,000
)
—
—
200,000
200
1,800
—
—
—
—
Cashless exercise
of warrants
—
—
—
—
—
—
464,573
465
(465
)
—
—
—
—
Exercise of
warrants
—
—
—
—
—
—
23,832
23
27,330
—
—
—
27,353
Issuance of
warrants in
settlement of a
claim
—
—
—
—
—
—
—
—
86,375
—
—
—
86,375
Sale of common
stock at $1.50 per
share
—
—
—
—
—
—
10,417,624
10,419
15,616,031
—
—
—
15,626,450
Payment of
financing and
offering costs
—
—
—
—
—
—
—
—
(1,366,774
)
—
—
—
(1,366,774
)
Issuance of stock
options to
employees
—
—
—
—
—
—
—
—
524,922
—
—
—
524,922
Acquisition of
treasury stock
—
—
—
—
—
—
—
—
34,747
—
—
(34,747
)
—
Net loss
—
—
—
—
—
—
—
—
—
—
(6,701,048
)
—
(6,701,048
)
$
(6,701,048
)
Balances at
December 31, 2004
—
—
—
—
—
—
53,834,237
53,835
47,553,497
—
(35,182,194
)
(34,747
)
12,390,391
$
(6,701,048
)
See accompanying notes to consolidated financial statements.
F-16
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Stockholders' Equity (Deficit) and Comprehensive Loss
Inception (June 12, 1996) Through December 31, 2008
Deficit
Accumulated
accumulated
Total
Cumulative convertible
Cumulative convertible
Cumulative convertible
Additional
other
during the
Treasury
stockholders'
preferred stock, series A
preferred stock, series B
preferred stock, series C
Common stock
paid-in
comprehensive
development
stock,
equity
Comprehensive
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
capital
income (loss)
stage
at cost
(deficit)
loss
Net loss
—
—
—
—
—
—
—
—
—
—
(24,782,646
)
—
(24,782,646
)
$
(24,782,646
)
Effect of change in
fair value of
available- for-
sale securities
—
—
—
—
—
—
—
—
—
(1,722
)
—
—
(1,722
)
(1,722
)
Par value of shares
issued in
conjunction with
mezzanine financing
—
—
—
—
—
—
10,810,809
10,811
(10,811
)
—
—
—
Cashless exercise
of warrants
—
—
—
—
—
—
149,613
149
(149
)
—
—
—
—
Exercise of warrants
—
—
—
—
—
—
2,258,703
2,259
3,071,179
—
—
—
3,073,438
Exercise of stock
options
—
—
—
—
—
—
185,000
185
144,815
—
—
—
145,000
Issuance of stock
options to
employees
—
—
—
—
—
—
—
—
994,874
—
—
—
994,874
Issuance of stock
options to
non-employee
—
—
—
—
—
—
—
93,549
—
—
—
93,549
Issuance of common
stock to vendor
—
—
—
—
—
—
125,000
125
258,375
—
—
—
258,500
Balances at
December 31, 2005,
as restated
—
—
—
—
—
—
67,363,362
67,364
52,105,329
(1,722
)
(59,964,840
)
(34,747
)
(7,828,616
)
$
(24,784,368
)
Net loss
—
—
—
—
—
—
—
—
—
—
(29,331,773
)
—
(29,331,773
)
$
(29,331,773
)
Effect of change in
fair value of
available- for-
sale securities
—
—
—
—
—
—
—
—
—
(368
)
—
—
(368
)
(368
)
Cashless exercise
of warrants
—
—
—
—
—
—
420,161
420
(420
)
—
—
—
—
Exercise of
warrants, net of
financing costs
—
—
—
—
—
—
5,103,746
5,104
7,686,486
—
—
—
7,691,590
Acquisition of SD
Pharmaceuticals.
Inc.
—
—
—
—
—
—
2,099,990
2,100
10,161,852
—
—
—
10,163,952
Sale of common
stock at $2.75 per
share, net of
offering costs
—
—
—
—
—
—
14,545,000
14,545
37,055,666
—
—
—
37,070,211
Issuance of stock
for severance
agreement
—
—
—
—
—
—
60,145
60
196,614
—
—
—
196,674
Exercise of stock
options
—
—
—
—
—
—
92,500
93
125,658
—
—
—
125,751
Issuance of
restricted stock to
non-employees
—
—
—
—
—
—
15,000
15
68,635
—
—
—
68,650
Issuance of stock
options to
employees
—
—
—
—
—
—
—
—
1,697,452
—
—
—
1,697,452
Issuance of stock
options to
non-employee
—
—
—
—
—
—
—
—
104,225
—
—
—
104,225
Cancellation of
treasury stock
shares
—
—
—
—
—
—
(23,165
)
(23
)
(34,724
)
—
—
34,747
—
Balances at
December 31, 2006,
as restated
—
—
—
—
—
—
89,676,739
89,678
109,166,773
(2,090
)
(89,296,613
)
—
19,957,748
$
(29,332,141
)
Cumulative-effect
adjustment of
adopting FASB Staff
Position No. EITF
00-19-2 (see Note
3)
—
—
—
—
—
—
—
—
18,116,751
—
12,239,688
—
30,356,439
Net loss
—
—
—
—
—
—
—
—
—
—
(22,142,040
)
—
(22,142,040
)
$
(22,142,040
)
Effect of change in
fair value of
available- for
-sale securities
—
—
—
—
—
—
—
—
—
4,792
—
—
4,792
4,792
Exercise of stock
options
—
—
—
—
—
—
575,833
576
441,040
—
—
—
441,616
Issuance of stock
options to
employees
—
—
—
—
—
—
—
—
2,414,077
—
—
—
2,414,077
Issuance of stock
options to
non-employee
—
—
—
—
—
—
—
—
1,908
—
—
—
1,908
Balances at
December 31, 2007
—
—
—
—
—
—
90,252,572
90,254
130,140,549
2,702
(99,198,965
)
—
31,034,540
$
(22,137,248
)
Net loss
—
—
—
—
—
—
—
—
—
—
(26,647,493
)
—
(26,647,493
)
$
(26,647,493
)
Effect of change in
fair value of
available-for -sale
securities
—
—
—
—
—
—
—
—
—
(2,702
)
—
—
(2,702
)
(2,702
)
Exercise of stock
options
—
—
—
—
—
—
—
—
—
—
—
—
Issuance of stock
options to
employees
—
—
—
—
—
—
—
—
1,605,908
—
—
—
1,605,908
Issuance of stock
options to
non-employee
—
—
—
—
—
—
—
—
4,982
—
—
—
4,982
Balances at
December 31, 2008
—
$
—
—
$
—
—
$
—
90,252,572
$
90,254
131,751,439
$
—
$
(125,846,458
)
$
—
$
5,995,235
$
(26,650,195
)
See accompanying notes to consolidated financial statements.
F-17
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
Inception
(June 12, 1996)
Through
Years Ended December 31,
December 31,
2008
2007
2008
(as restated)
Cash flows from operating activities:
Net loss
$
(26,647,493
)
$
(22,142,040
)
$
(138,581,749
)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization
168,039
197,783
10,348,071
Gain on disposal of fixed assets
(3,598
)
—
(3,598
)
Loss on fair value of warrants
—
—
12,239,688
Amortization of debt discount
—
—
450,000
Forgiveness of employee receivable
—
—
30,036
Impairment loss — write-off of goodwill
—
—
5,702,130
Expenses related to employee stock options
and restricted stock issued
1,605,907
2,414,077
7,852,562
Expenses related to options issued to
non-employees
4,983
1,908
204,664
Expenses paid by issuance of common stock
78,333
1,341,372
Expenses paid by issuance of warrants
—
—
573,357
Expenses paid by issuance of preferred stock
—
—
142,501
Expenses related to stock warrants issued
—
—
612,000
Equity in loss of investee
—
—
178,936
In-process research and development
—
—
10,422,130
Write-off of license agreement
—
—
152,866
Write-off assets available-for-sale
—
—
108,000
Cumulative effect of change in accounting
principle
—
—
25,821
Accretion of discount
(208,103
)
(1,041,750
)
(1,249,853
)
Accretion of discount on investments in
securities
—
—
(354,641
)
Changes in assets and liabilities, net of
effect of acquisitions:
Increase in prepaid and other assets
85,723
(174,388
)
(907,671
)
Increase in accounts payable and
accrued liabilities
1,221,208
1,044,291
4,890,731
Decrease in long-term liabilities
(14,270
)
(21,404
)
—
Net cash used in operating activities
(23,787,604
)
(19,643,190
)
(85,822,647
)
Cash flows from investing activities:
Proceeds from sales and maturities of
short-term investments
33,243,602
59,240,000
112,788,378
Purchases of short-term investments
(14,355,784
)
(51,104,469
)
(111,183,884
)
Purchases of property and equipment
(64,955
)
(127,259
)
(1,030,354
)
Proceeds from sale of property and
equipment
33,906
—
33,906
Purchase of certificate of deposit
—
—
(1,016,330
)
F-18
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Consolidated Statements of Cash Flows
Inception
(June 12, 1996)
Through
Years Ended December 31,
December 31,
2008
2007
2008
(as restated)
Maturity of certificate of deposit
—
—
1,016,330
Cash paid for acquisitions, net of cash
acquired
—
—
32,395
Payment on obligation under license
agreement
—
—
(106,250
)
Issuance of note receivable — related party
—
—
(35,000
)
Payments on note receivable
—
—
405,993
Advance to investee
—
—
(90,475
)
Cash transferred in rescission of acquisition
—
—
(19,475
)
Cash received in rescission of acquisition
—
—
230,000
Net cash provided by investing activities
18,856,769
8,008,272
1,025,234
Cash flows from financing activities:
Proceeds from sale of common stock
—
—
84,151,342
Proceeds from exercise of stock options
—
441,616
712,367
Proceeds from sale or exercise of warrants
—
—
11,382,894
Proceeds from sale of preferred stock
—
—
4,200,993
Repurchase of warrants
—
—
(55,279
)
Payments for financing and offering costs
—
—
(6,483,809
)
Payments on
notes payable and long –term
debt
—
—
(605,909
)
Proceeds from issuance of notes payable and
detachable warrants
—
—
1,344,718
Net cash provided by financing activities
—
441,616
94,647,317
Net (decrease) increase in cash and cash
equivalents
(4,930,835
)
(11,193,302
)
9,849,904
Cash and cash equivalents at beginning of period
14,780,739
25,974,041
—
Cash and cash equivalents at end of period
$
9,849,904
$
14,780,739
$
9,849,904
See accompanying notes to consolidated financial statements.
F-19
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2008
(1) Description of Business
ADVENTRX Pharmaceuticals, Inc., a Delaware corporation ("ADVENTRX," "we" or the "Company"), is
a development-stage biopharmaceutical company whose fundamental business is focused on
in-licensing, developing and commercializing proprietary product candidates for the treatment of
cancer. Through our acquisition of SD Pharmaceuticals, Inc. ("SDP") in 2006 and our license
agreements with the University of Southern California, we have rights to product candidates in
varying stages of development. We have not yet marketed or sold any products or generated any
significant revenue.
In October 2000, we merged our wholly-owned subsidiary, Biokeys Acquisition Corp., with and into
Biokeys, Inc. and changed our name to Biokeys Pharmaceuticals, Inc. In May 2003, we merged Biokeys
Inc., our wholly-owned subsidiary, with and into us and changed our name to ADVENTRX
Pharmaceuticals, Inc. The merger had no effect on our financial statements. In July 2004, we formed
a wholly-owned subsidiary, ADVENTRX (Europe) Ltd., in the United Kingdom primarily to facilitate
conducting clinical trials in the European Union. In April 2006, we acquired all of the outstanding
capital stock of SDP through a merger with our newly created wholly-owned subsidiary, Speed
Acquisition, Inc. (the "Merger Sub") and changed the name of the Merger Sub to SD Pharmaceuticals,
Inc.
Currently, we are focused primarily on evaluating strategic options, including the sale or
exclusive license of one or more of our product candidate programs, a strategic business merger and
other similar transactions. We implemented restructuring and cost-cutting measures in October 2008,
January 2009 and March 2009 and will eliminate all but a select, small number of personnel and
discontinue substantially all of our development activities and fundamental business operations to
provide additional time to consummate a strategic transaction or otherwise obtain financing.
(2) Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. Going concern contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business over a reasonable length of time.
However, as a result of the Company's continued losses and current cash and financing position,
such realization of assets or satisfaction of liabilities, without substantial adjustments is
uncertain. The future of the Company is dependent upon its ability to obtain additional funding.
Management is evaluating various strategic options, including the sale or exclusive license of one
or more of the Company's product candidate programs, a strategic business merger and other similar
transactions, certain of which may result in a change of control of the Company. There can be no
assurances that the Company will be successful in consummating a strategic transaction on a timely
basis or at all. The Company likely will not be able to continue as a going concern, unless, as
part of a strategic transaction or otherwise, it raises adequate capital. The Company will
eliminate all but a select, small number of personnel and discontinue substantially all of its
development activities and fundamental business operations and its ability to further curtail
expenses to provide additional time to consummate a strategic transaction or otherwise obtain
financing is limited. Given this uncertainty, there is significant doubt as to the Company's
ability to continue as a going concern.
The Company's consolidated financial statements for the year ended December 31, 2008 do not include
any adjustments related to the recovery and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company cannot continue as a
going concern.
F-20
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
(3) Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its wholly-owned
subsidiaries, SDP and ADVENTRX (Europe) Ltd. All intercompany accounts and transactions have been
eliminated in consolidation.
Use of
Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America ("U.S.") requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and accompanying notes. Actual
results could differ from those estimates.
Change in Accounting Principle for Registration Payment Arrangements and Correction of Error
On January 1, 2007, we adopted the provisions of the Financial Accounting Standards Board ("FASB")
Staff Position on No. EITF 00-19-2, "Accounting for Registration Payment Arrangements"("FSP EITF
00-19-2"). In December 2007, management determined that it was not probable that we would have any
payment obligation under the July 2005 Registration Payment Arrangement; therefore, no accrual for
contingent obligation was required under the provisions of FSP EITF 00-19-2. Accordingly, the
warrant liability account was eliminated and the comparative condensed consolidated financial
statements of the prior periods and as of December 31, 2006 were adjusted to apply the new method
retrospectively.
The Company accounted for FSP EITF 00-19-2 appropriately by eliminating the warrant liability as of
December 31, 2007, but upon further review in 2008, management determined that it was not correct
to adjust the prior period comparative financial statements. Accordingly, the Company has made the
appropriate adjustments to reinstate the warrant liability accounting as originally recorded.
F-21
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2008
The following consolidated financial statement line items were affected by the correction of the
error:
Consolidated Statement of Operations
Inception (June 12, 1996) through December 31, 2008
As previously
reported
As restated
Effect of change
Loss on fair value of warrants
$
—
$
(12,239,688
)
$
(12,239,688
)
Condensed Consolidated Statements of Operations (Unaudited)
Inception (June 12, 1996) through:
March 31, 2007
June 30, 2007
September 30, 2007
As previously
As previously
As previously
reported
As restated
Effect of change
reported
As restated
Effect of change
reported
As restated
Effect of change
Loss on fair value of warrants
$
—
$
(12,239,688
)
$
(12,239,688
)
$
—
$
(12,239,688
)
$
(12,239,688
)
$
—
$
(12,239,688
)
$
(12,239,688
)
Loss before cumulative effect of change in
accounting principle
(82,650,521
)
(94,890,209
)
(12,239,688
)
(88,373,349
)
(100,613,037
)
(12,239,688
)
(94,287,473
)
(106,527,161
)
(12,239,688
)
Net loss
(82,676,342
)
(94,916,030
)
(12,239,688
)
(88,399,170
)
(100,638,858
)
(12,239,688
)
(94,313,294
)
(106,552,982
)
(12,239,688
)
Net loss applicable to common stock
(83,297,582
)
(95,537,270
)
(12,239,688
)
(89,020,410
)
(101,260,098
)
(12,239,688
)
(94,934,534
)
(107,174,222
)
(12,239,688
)
Inception (June 12, 1996) through:
March 31, 2008
June 30, 2008
September 30, 2008
As previously
As previously
As previously
reported
As restated
Effect of change
reported
As restated
Effect of change
reported
As restated
Effect of change
Loss on fair value of warrants
$
—
$
(12,239,688
)
$
(12,239,688
)
$
—
$
(12,239,688
)
$
(12,239,688
)
$
—
$
(12,239,688
)
$
(12,239,688
)
Loss before cumulative effect of change in
accounting principle
(105,601,819
)
(117,841,507
)
(12,239,688
)
(112,027,349
)
(124,267,037
)
(12,239,688
)
(118,804,212
)
(131,043,900
)
(12,239,688
)
Net loss
(105,627,640
)
(117,867,328
)
(12,239,688
)
(112,053,170
)
(124,292,858
)
(12,239,688
)
(118,830,033
)
(131,069,721
)
(12,239,688
)
Net loss applicable to common stock
(106,248,880
)
(118,488,568
)
(12,239,688
)
(112,674,410
)
(124,914,098
)
(12,239,688
)
(119,451,273
)
(131,690,961
)
(12,239,688
)
Consolidated Statements of Stockholders' Equity (Deficit)
As previously
reported
As restated
Effect of change
For the year ended December 31, 2005:
Net loss
$
(13,202,986
)
$
(24,782,646
)
$
(11,579,660
)
Additional paid-in-capital
70,222,080
52,105,329
(18,116,751
)
Deficit accumulated during the development stage
(48,385,180
)
(59,964,840
)
(11,579,660
)
Total stockholders' equity
21,867,795
(7,828,616
)
(29,696,411
)
For the year ended December 31, 2006:
Net loss
(28,671,745
)
(29,331,773
)
(660,028
)
Additional paid-in-capital
127,283,254
109,166,773
(18,116,751
)
Deficit accumulated during the development stage
(77,056,925
)
(89,296,613
)
(12,239,688
)
Total stockholders' equity
50,314,187
19,957,748
(30,356,439
)
At December 31, 2007:
Cumulative-effect of adopting FASB Staff
Position No. EITF 00-19-2:
Additional paid-in-capital
—
18,116,751
18,116,751
Deficit accumulated during the development stage
—
12,239,688
12,239,688
Total stockholders' equity
—
30,356,439
30,356,439
Consolidated Statement of Cash Flows
Inception (June 12, 1996) through December 31,
2008
Loss on fair value of warrants
$
—
$
12,239,688
$
12,239,688
F-22
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2008
Condensed Consolidated Statements of Cash Flow (Unaudited)
Inception (June 12, 1996) through:
March 31, 2007
June 30, 2007
September 30, 2007
As previously
As previously
As previously
reported
As restated
Effect of change
reported
As restated
Effect of change
reported
As restated
Effect of change
Net loss
$
(82,676,342
)
$
(94,916,030
)
$
(12,239,688
)
$
(88,399,170
)
$
(100,638,858
)
$
(12,239,688
)
$
(94,313,294
)
$
(106,552,982
)
$
(12,239,688
)
Loss on fair value
of warrants
—
12,239,688
12,239,688
—
12,239,688
12,239,688
—
12,239,688
12,239,688
Inception (June 12, 1996) through:
March 31, 2008
June 30, 2008
September 30, 2008
As previously
As previously
As previously
reported
As restated
Effect of change
reported
As restated
Effect of change
reported
As restated
Effect of change
Net loss
$
(105,627,640
)
$
(117,867,328
)
$
(12,239,688
)
$
(112,053,170
)
$
(124,292,858
)
$
(12,239,688
)
$
(118,830,033
)
$
(131,069,721
)
$
(12,239,688
)
Loss on fair value
of warrants
—
12,239,688
12,239,688
—
12,239,688
12,239,688
—
12,239,688
12,239,688
F-23
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
Cash Equivalents
Cash equivalents consist of highly liquid investments with original maturities of three months or
less at the date of purchase.
Short-term Investments
We account for and report our investments in accordance with SFAS No. 115,
Accounting for Certain
Investments in Debt and Equity Securities.
Investments are comprised of marketable securities
consisting primarily of certificates of deposit, federal, state and municipal government
obligations and corporate bonds. Short-term investments are marketable securities with maturities
of less than one year from the balance sheet date. All marketable securities are held in our name
and primarily under the custodianship of two major financial institutions. Our policy is to protect
the principal value of our investment portfolio and minimize principal risk.
Our marketable securities are classified as "available-for-sale" and stated at fair value, with net
unrealized gains or losses recorded as a component of accumulated other comprehensive income
(loss). The amortized cost of debt securities is adjusted for amortization of premiums and
accretion of discounts to maturity with all amortization and accretion included in interest income.
Realized gains and losses on available-for-sale securities are included in other income (loss). The
cost of securities sold is based on the specific identification method. Interest on securities
classified as available-for-sale is included in interest income. Marketable securities are
evaluated periodically for impairment. If it is determined that a decline of any investment is
other than temporary, then the investment basis would be written down to fair value and the
write-down would be included in earnings as a loss.
Concentrations
Financial instruments that potentially subject us to concentrations of credit risk consist
principally of cash and cash equivalents and investment securities. We maintain our cash and cash
equivalents in high-credit quality financial institutions. At times, such balances may exceed
Federally insured limits. At December 31, 2008, our cash and cash equivalents were in excess of the
Federal Deposit Insurance Corporation limit.
During 2008, approximately 12% or $2.3 million of our total vendor payments were made to a
manufacturer that provided process development and scale-up manufacturing services. If we were to
lose this vendor, our progress in completing a New Drug Application ("NDA") would be severely
impeded. During 2007, approximately 14% or $2.3 million of our total vendor payments were made to a
contract research organization ("CRO") that was assisting us in our clinical trial administration
and data management.
Fair Value of Financial Instruments
At December 31, 2008, our financial instruments included cash and cash equivalents, accounts
payable, accrued expenses and accrued compensation and payroll taxes. At December 31, 2007, our
financial instruments also included short-term investments. The carrying amounts of cash and cash
equivalents, accounts payable, accrued expenses and accrued compensation and payroll taxes
approximate fair value due to the short-term maturities of these instruments. Our short-term
investments in securities are carried at fair value based on quoted market prices.
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization are calculated using the
straight-line method over the estimated useful lives of the assets. The costs of improvements that
extend the lives of the assets are capitalized. Repairs and maintenance are expensed as incurred.
F-24
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
Impairment of Long-Lived Assets
Long-lived assets with finite lives are evaluated for impairment whenever events or changes in
circumstances indicate that their carrying value may not be recoverable. If the evaluation
indicates that intangibles or long-lived assets are not recoverable (i.e., carrying amount is less
than the future projected undiscounted cash flows), their carrying amount would be reduced to fair
value. Since inception through December 31, 2008, we recognized an impairment loss of the value of
goodwill in the amount of $5.7 million, which was recorded in the year ended December 31, 2001.
Revenue Recognition
We recognize revenue in accordance with the Securities and Exchange Commission's ("SEC") Staff
Accounting Bulletin Topic 13,
Revenue Recognition
("Topic 13"), and Emerging Issues Task Force
Issue ("EITF") No. 00-21,
Revenue Arrangements with Multiple Deliverables
, or EITF 00-21. Revenue
is recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement
exists; (2) delivery has occurred or services have been rendered; (3) the seller's price to the
buyer is fixed and determinable; and (4) collectibility is reasonably assured.
Revenue from licensing agreements is recognized based on the performance requirements of the
agreement. Revenue is deferred for fees received before earned. Nonrefundable upfront fees that are
not contingent on any future performance by us are recognized as revenue when revenue recognition
criteria under Topic 13 and EITF 00-21 are met and the license term commences. Nonrefundable
upfront fees, where we have ongoing involvement or performance obligations, are recorded as
deferred revenue and recognized as revenue over the life of the contract, the period of the
performance obligation or the development period, whichever is appropriate in light of the
circumstances.
Payments related to substantive, performance-based milestones in an agreement are recognized as
revenue upon the achievement of the milestones as specified in the underlying agreement when they
represent the culmination of the earnings process. Royalty revenue from licensed products will be
recognized when earned in accordance with the terms of the applicable license agreements.
Research and Development Expenses
Research and development ("R&D") expenses consist of expenses incurred in performing R&D
activities, including salaries and benefits, facilities and other overhead expenses, bioequivalence
and clinical trials, research-related manufacturing services, contract services and other outside
expenses. R&D expenses are charged to operations as they are incurred. Advance payments, including
nonrefundable amounts, for goods or services that will be used or rendered for future R&D
activities are deferred and capitalized. Such amounts will be recognized as an expense as the
related goods are delivered or the related services are performed. If the goods will not be
delivered, or services will not be rendered, then the capitalized advance payment is charged to
expense.
Milestone payments that we make in connection with in-licensed technology or product candidates are
expensed as incurred when there is uncertainty in receiving future economic benefits from the
licensed technology or product candidates. We consider the future economic benefits from the
licensed technology or product candidates to be uncertain until such licensed technology or product
candidates are approved for marketing by the U.S. Food and Drug Administration ("FDA") or when
other significant risk factors are abated. For expense accounting purposes, management has viewed
future economic benefits for all of our licensed technology or product candidates to be uncertain.
F-25
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
Payments in connection with our bioequivalence and clinical trials are often made under contracts
with multiple CROs that conduct and manage these trials on our behalf. The financial terms of these
agreements are subject to negotiation and vary from contract to contract and may result in uneven
payment flows. Generally, these agreements set forth the scope of work to be performed at a fixed
fee or unit price or on a time-and-material basis. Payments under these contracts depend on factors
such as the successful enrollment or treatment of patients or the completion of other milestones.
Expenses related to bioequivalence and clinical trials are accrued based on our estimates and/or
representations from service providers regarding work performed, including actual level of patient
enrollment, completion of patient studies, and trials progress. Other incidental costs related to
patient enrollment and treatment are accrued when reasonably certain. If the contracted amounts are
modified (for instance, as a result of changes in the bioequivalence or clinical trial protocol or
scope of work to be performed), we modify our accruals accordingly on a prospective basis.
Revisions in scope of contract are charged to expense in the period in which the facts that give
rise to the revision become reasonably certain. Because of the uncertainty of possible future
changes to the scope of work in bioequivalence and clinical trials contracts, we are unable to
quantify an estimate of the reasonably likely effect of any such changes on our consolidated
results of operations or financial position. Historically, we have had no material changes in our
bioequivalence or clinical trial expense accruals that would have had a material impact on our
consolidated results of operations or financial position.
Purchased In-Process Research and Development
In accordance with SFAS No. 141,
Business Combinations
, we immediately charge the costs associated
with purchased IPR&D to statement of operations upon acquisition. These amounts represent an
estimate of the fair value of purchased IPR&D for projects that, as of the acquisition date, had
not yet reached technological feasibility, had no alternative future use, and had uncertainty in
receiving future economic benefits from the purchased IPR&D. We determine the future economic
benefits from the purchased IPR&D to be uncertain until such technology is approved by the FDA or
when other significant risk factors are abated. In the year ended December 31, 2006, we recorded
approximately $10.4 million of IPR&D expense related to our acquisition of SD Pharmaceuticals, Inc.
in April 2006.
Accounting for Stock-Based Compensation
Effective January 1, 2006, we adopted the provisions of revised SFAS No. 123, "Share-Based Payment
"
("SFAS 123(R)"), including the provisions of Staff Accounting Bulletins No. 107 ("SAB 107") and
No. 110 ("SAB 110"). Under SFAS 123(R), stock-based compensation cost is measured at the grant
date, based on the estimated fair value of the award, and is recognized as expense over the
employee's requisite service period. We have no awards with market or performance conditions. We
adopted the provisions of SFAS 123(R) using the modified prospective transition method.
Accordingly, prior periods were not revised for comparative purposes.
On November 10, 2005, the FASB issued FASB Staff Position No. SFAS 123(R)-3, "Transition Election
Related to Accounting for Tax Effects of Share-Based Payment Awards". We elected to adopt the
alternative transition method provided in SFAS 123(R). The alternative transition method included a
simplified method to establish the beginning balance of the additional paid-in capital pool ("APIC
pool") related to the tax effects of employee stock-based compensation, which is available to
absorb tax deficiencies recognized subsequent to the adoption of SFAS 123(R).
The valuation provisions of SFAS 123(R) apply to new awards and to awards that are outstanding on
the effective date, January 1, 2006, which are subsequently modified or cancelled. Prior to 2006,
we accounted for stock-based compensation under the recognition and measurement principles of SFAS
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123")
.
Estimated compensation expense
for awards outstanding at January 1, 2006 is recognized over the remaining service period using the
compensation cost calculated for recognition purposes under SFAS 123.
Stock-based compensation expense recognized in our consolidated statement of operations for the
years ended December 31, 2008 and 2007 included compensation expense for stock-based payment awards
granted prior to, but not yet vested as of, December 31, 2005 based on the grant date fair value
estimated in accordance with the recognition provisions of SFAS 123 and stock-based payment awards
granted subsequent to December 31, 2005 based on the grant date fair value estimated in accordance
with SFAS 123(R). For share awards granted during the year ended December 31, 2008 and 2007,
expenses are amortized under the straight-line method. For share awards granted prior to 2006,
expenses are amortized under the straight-line method prescribed by SFAS 123. As stock-based
compensation expense recognized in the consolidated statement of operations for the years ended
December 31, 2008 and 2007 is based on awards ultimately expected to vest, it has been reduced for
estimated forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time of grant and
revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. In
the year ended December 31, 2005, we accounted for forfeitures as they occurred in accordance with
the recognition provisions of SFAS
F-26
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
123.
We account for stock-based compensation awards granted to non-employees in accordance with EITF No.
96-18, "Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services
"
("EITF 96-18"). Under EITF 96-18, we determine
the fair value of the stock-based compensation awards granted as either the fair value of the
consideration received or the fair value of the equity instruments issued, whichever is more
reliably measurable. If the fair value of the equity instruments issued is used, it is measured
using the stock price and other measurement assumptions as of the earlier of either of (1) the date
at which a commitment for performance by the counterparty to earn the equity instruments is reached
or (2) the date at which the counterparty's performance is complete.
Patent Costs
Legal costs in connection with approved patents and patent applications are expensed as incurred
and classified as selling, general and administrative expense in our consolidated statement of
operations.
Income Taxes
We account for income taxes and the related accounts under the liability method. Deferred tax
assets and liabilities are determined based on the differences between the financial statement
carrying amounts and the income tax bases of assets and liabilities. A valuation allowance is
applied against any net deferred tax asset if, based on available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized. In July 2006, FASB issued
Financial Interpretation No. 48,
Accounting for Uncertainty in Income Taxes-an Interpretation of
FASB Statement 109
("FIN 48"), which clarifies the accounting for uncertainty in tax positions.
FIN 48 provides that the tax effects from an uncertain tax position can be recognized in our
consolidated financial statements only if the position is more likely than not of being sustained
upon an examination by tax authorities. An uncertain income tax position will not be recognized if
it has less than a 50% likelihood of being sustained. Additionally, FIN 48 provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods, disclosure
and transition. The provisions of FIN 48 were effective for us as of January 1, 2007, with the
cumulative effect of the change in accounting principle recorded as an adjustment to opening
retained earnings in the year of adoption. We adopted FIN 48 on January 1, 2007, which did not have
a material impact on our consolidated results of operations or financial position. See Note 13,
Income Taxes
.
Comprehensive Loss
Comprehensive income or loss is defined as the change in equity of a business enterprise during a
period from transactions and other events and circumstances from non-owner sources, including
foreign currency translation adjustments and unrealized gains and losses on marketable securities.
We present comprehensive loss in our consolidated statements of stockholders' equity (deficit) and
comprehensive loss.
Computation of Net Loss per Common Share
We calculate basic and diluted net loss per share in accordance with the SFAS No. 128, "Earnings
Per Share". Basic net loss per share was calculated by dividing the net loss by the
weighted-average number of common shares outstanding during the period. Diluted net loss per share
was calculated by dividing the net loss by the weighted-average number of common stock equivalents
outstanding during the period. For purposes of this calculation, options and warrants are
considered to be common stock equivalents and are only included in the calculation of diluted
earnings per share when their effect is dilutive.
We have excluded the following options and warrants from the calculation of diluted net loss per
common share for 2008 and 2007 because their effect is anti-dilutive:
2008
2007
Warrants
13,373,549
13,373,549
Options
4,364,833
4,020,940
17,738,382
17,394,489
Supplemental Cash Flow Information
F-27
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
Inception
(June 12, 1996)
Through
Years Ended December 31,
December 31,
2008
2007
2008
Supplemental disclosures of cash flow information:
Interest paid
$
—
$
—
$
179,090
Income taxes paid
—
—
—
Supplemental disclosures of non-cash investing and
financing activities:
Issuance of warrants, common stock and preferred
stock for:
Conversion of notes payable and accrued
interest
—
—
1,213,988
Prepaid services to consultants
—
—
1,482,781
Conversion of preferred stock
—
—
2,705
Acquisitions
—
—
24,781,555
Payment of dividends
—
—
213,000
Financial advisor services in conjunction
with private placement
—
—
1,137,456
Acquisition of treasury stock in settlement of a
claim
—
—
34,737
Cancellation of treasury stock
—
—
(34,737
)
Assumptions of liabilities in acquisitions
—
—
1,235,907
Acquisition of license agreement for long-term
debt
—
—
161,180
Cashless exercise of warrants
—
—
4,312
Dividends accrued
—
—
621,040
Trade asset converted to available for sale asset
—
—
108,000
Dividends extinguished
—
—
408,240
Trade payable converted to note payable
—
—
83,948
Issuance of warrants for return of common stock
—
—
50,852
Detachable warrants issued with notes payable
—
—
450,000
Unrealized (gain) loss on short-term investments
2,702
(4,792
)
—
New Accounting Pronouncements
In December 2007, the FASB issued SFAS No. 141 (revised 2007) ("SFAS 141(R)"), "Business
Combinations," which replaces SFAS No. 141. SFAS 141(R) retains the purchase method of accounting
for acquisitions, but requires a number of changes, including changes in the way assets and
liabilities are recognized in purchase accounting. It also changes the recognition of assets
acquired and liabilities assumed arising from contingencies, requires the capitalization of
in-process research and development at fair value, and requires the expensing of
acquisition-related costs as incurred. SFAS 141(R) is effective for financial statements issued for
fiscal year 2009 and will apply prospectively to business combinations completed on or after
January 1, 2009. We do not expect the adoption of SFAS 141(R) to have a material effect on our
consolidated financial statements.
Effective January 1, 2008, we adopted SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). In
February 2008, the FASB issued FASB Staff Position ("FSP") No. SFAS 157-2, "Effective Date of FASB
Statement No. 157," which provides a one year deferral of the effective date of SFAS 157 for
non-financial assets and non-financial liabilities, except those that are recognized or disclosed
in the financial statements at fair value at least annually. As a result, we only partially adopted
SFAS 157 as it relates to our financial assets and liabilities until we are required to apply this
pronouncement to our non-financial assets and liabilities beginning with fiscal year 2009. The
adoption of SFAS 157 did not have a material impact on our consolidated results of operations or
financial condition.
F-28
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
In February 2008, the FASB issued FSP. No. 157-2, "Effective Date of FASB Statement No. 157" ("FSP
157-2"). FSP 157-2 delays, for one year, the effective date of SFAS 157 for all nonfinancial assets
and liabilities, except those that are recognized or disclosed in the consolidated financial
statements on at least an annual basis.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting
Principles." SFAS No. 162 is intended to improve financial reporting by identifying a consistent
hierarchy for selecting accounting principles to be used in preparing financial statements that are
prepared in conformance with accounting principles generally accepted in the United States of
America. Unlike Statement on Auditing Standards (SAS) No. 69, "The Meaning of Present Fairly in
Conformity With GAAP," SFAS No. 162 is directed to the entity rather than the auditor. SFAS No. 162
is effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board
("PCAOB") amendments to AU Section 411, "The Meaning of Present Fairly in Conformity with GAAP,"
and is not expected to have any impact on the Company's consolidated results of operations,
financial condition or liquidity.
In October 2008, the FASB issued FSP No. SFAS 157-3 "Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active" ("FSP SFAS 157-3"). FSP SFAS 157-3 clarifies
the application of SFAS No. 157, in a market that is not active and provides an example to
illustrate key considerations in determining the fair value of a financial asset when the market
for that financial asset is not active. FSP SFAS 157-3 is effective upon issuance, including prior
periods for which financial statements have not been issued. The adoption of FSP SFAS 157-3 had no
impact on our consolidated results of operations, financial position or cash flows.
SFAS 157 was effective for the Company beginning January 1, 2008 for financial assets and
liabilities recognized or disclosed in the Company's consolidated financial statements. SFAS 157
defines fair value, establishes a framework for measuring fair value under U.S. GAAP and enhances
disclosures about fair value measurements. Fair value is defined under SFAS 157 as the exchange
price that would be received for an asset or paid to transfer a liability (an exit price) in the
principal or most advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. Valuation techniques used to measure fair value under
SFAS 157 must maximize the use of observable inputs and minimize the use of unobservable inputs.
SFAS 157 describes a fair value hierarchy based on three levels of inputs, of which the first two
are considered observable and the last unobservable, that may be used to measure fair value which
are the following:
Level 1 —
Quoted prices in active markets for identical assets or liabilities.
Level 2 —
Inputs other than Level 1 that are observable, either directly or
indirectly, such as quoted prices for similar assets or
liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable
market data for substantially the full term of the assets or
liabilities.
Level 3 —
Unobservable inputs that are supported by little or no market
activity and that are significant to the fair value of the assets
or liabilities.
F-29
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
The following table represents our fair value hierarchy for our financial assets (which consisted
solely of cash equivalents) measured at fair value based on quoted market prices on a recurring
basis as of December 31, 2008:
Level 1
Level 2
Level 3
Total
Money market funds
$
9,849,904
$
—
$
—
$
9,849,904
Total
$
9,849,904
$
—
$
—
$
9,849,904
Effective January 1, 2008, we adopted SFAS No. 159, "The Fair Value Option for Financial Assets and
Financial Liabilities" ("SFAS 159"). SFAS 159 allows an entity the irrevocable option to elect to
measure specified financial assets and liabilities in their entirety at fair value on a
contract-by-contract basis. If an entity elects the fair value option for an eligible item, changes
in the item's fair value must be reported as unrealized gains and losses in earnings at each
subsequent reporting date. In adopting SFAS 159, we did not elect the fair value option for any of
our financial assets or financial liabilities.
(4) Investments in Securities
The following table summarizes our investments in securities, all of which are classified as
available- for- sale:
2008
Gross Unrealized
Cost
Gains (Losses)
Fair Value
Cash and cash equivalents:
Cash
$
9,849,904
$
—
$
9,849,904
Total cash and cash equivalents
$
9,849,904
$
—
$
9,849,904
2007
Gross Unrealized
Cost
Gains (Losses)
Fair Value
Short-term investments:
Commercial paper
$
9,494,050
$
2,420
$
9,496,470
Government debt securities
7,438,669
(1,617
)
7,437,052
Corporate bonds
1,748,504
391
1,748,895
Total short-term investments
$
18,681,223
$
1,194
$
18,682,417
(5) Property and Equipment
Property and equipment at December 31, 2008 and 2007 were as follows:
Useful Lives
2008
2007
Office furniture, computer and lab equipment
3 - 5 years
$
720,257
$
754,990
Computer software
3 years
103,306
122,162
823,563
877,152
Less accumulated depreciation and amortization
(624,511
)
(544,708
)
Property and equipment, net
$
199,052
$
332,444
Depreciation and amortization expense was $168,039 and $197,783 for the years ended December 31,
2008 and 2007, respectively.
F-30
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
(6) Accrued Liabilities
Accrued liabilities at December 31, 2008 and 2007 were as follows:
2008
2007
Accrued contracts and study expenses
$
1,620,988
$
1,953,472
Other accrued liabilities
434,172
326,428
Deferred rent
22,028
38,010
Accrued liabilities
$
2,077,188
$
2,317,910
(7) Capital Stock and Warrants
Common Stock
During 2008, we issued no new additional common stock.
During 2007, we issued an aggregate of 575,833 shares of our common stock in connection with the
exercises of employee stock options at a weighted average price of $0.77 per share for cash in the
aggregate amount of approximately $442,000.
Warrants
In July 2005, we issued warrants to purchase 10,810,809 shares of common stock at an exercise price
of $2.26 per share in connection with the sale of 10,810,809 shares of common stock in July 2005.
See Note 11,
Registration Payment Arrangement
, for a detailed discussion.
At December 31, 2008, outstanding warrants to purchase shares of common stock are as follows:
Warrants
Exercise Price
Expiration Date
1,872,693
*
$
1.98
Apr-09
117,000
*
$
2.38
Apr-09
573,047
*
$
1.98
Jun-09
10,810,809
$
2.26
Jul-12
13,373,549
*
These warrants contain price-based anti-dilution protection. Among other things, this protection
lowers the exercise price of these warrants in the event we issue common stock at a price per share
that is less than the warrants' then-effective exercise price, thereby allowing the warrant holders
to receive the same number of shares of our common stock for less consideration.
(8) Equity Incentive Plans
At December 31, 2008, we had the 2005 Equity Incentive Plan (the "2005 Plan"), the 2005 Employee
Stock Purchase Plan (the "Purchase Plan"), and the 2008 Omnibus Incentive Plan (the "2008 Plan")
which are described below. The stock-based compensation expense from all stock-based awards that
has been charged to our consolidated statements of operations in the years ended December 31, 2008
and 2007 was comprised of the following:
F-31
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
Years Ended December 31.
2008
2007
Selling, general and administrative expense
$
885,427
$
1,440,081
Research and development expense
725,464
1,054,237
Stock-based compensation expense before taxes
1,610,891
2,494,318
Related income tax benefits
—
—
Stock-based compensation expense
$
1,610,891
$
2,494,318
Net stock-based compensation expense per common
share — basic and diluted
$
0.02
$
0.03
Stock-based compensation expense from:
Stock options
$
1,610,890
$
2,415,985
Share grant
—
78,333
Restricted stock awards
—
—
$
1,610,890
$
2,494,318
Since we accounted for employee stock-based awards using the recognition method under the
provisions of SFAS 123 prior to 2006, the adoption of SFAS 123(R) did not have a material impact on
our consolidated results of operations. Since we have net operating losses carry forward as of
December 31, 2008, no excess tax benefits for the tax deductions related to stock-based awards were
recognized in the consolidated statement of operations. Additionally, no incremental tax benefits
were recognized from stock options exercised in the years ended December 31, 2008 and 2007 that
would have resulted in a reclassification to reduce net cash provided by operating activities with
an offsetting increase in net cash provided by financing activities.
2005 Equity Incentive Plan and 2008 Omnibus Incentive Plan
The 2005 and the 2008 Plans, which are stockholder-approved, are intended to encourage ownership of
shares of common stock by our directors, officers, employees, consultants and advisors and to
provide additional incentive for them to promote the success of our business through the grant of
stock-based awards. Both plans provide for the grant of incentive and non-statutory stock options
as well as share appreciation rights, restricted shares, restricted share units, performance units,
shares and other stock-based awards. Stock-based awards are subject to terms and conditions
established by the Board of Directors or the Compensation Committee of our Board of Directors. Our
policy is to issue new common shares upon the exercise of stock options, conversion of share units
or issuance of shares or restricted stock.
Since the 2008 Plan was approved by the Company's stockholders in May 2008, no awards have been or
will be granted under the 2005 Plan. As of December 31, 2008, the maximum aggregate number of
shares of common stock which may be issued pursuant to or subject to the foregoing types of awards
granted under the 2008 Plan is 13,097,500 shares. Any shares of common stock that are subject to
options or stock appreciation rights granted under the 2008 Plan shall be counted against this
limit as one (1) share of common stock for every one (1) share of common stock granted. Any shares
of common stock that are subject to awards other than options or stock appreciation rights granted
under the 2008 Plan shall be counted against this limit as 1.2 shares of common stock for every one
(1) share of common stock granted. If any shares of common stock subject to an award under the 2008
Plan or the 2005 Plan are forfeited, expire or are settled for cash pursuant to the terms of an
award, the shares subject to the award may be used again for awards under the 2008 Plan to the
extent of the forfeiture, expiration or settlement. The shares of common stock will be added back
as one (1) share for every share of common stock if the shares were subject to options or stock
appreciation rights granted under the 2008 Plan or under the 2005 Plan, and as 1.2 shares for every
share of common stock if the shares were subject to awards other than options or stock appreciation
rights granted under the 2008 Plan or the 2005 Plan. The following shares of common stock will not
be added to the shares issuable under the 2008 Plan: (i) shares tendered by the participant or
withheld by the Company in payment of the purchase price of an option, (ii) shares tendered by the
participant or withheld by the Company to satisfy tax withholding with respect to an award, and
(iii) shares subject to a stock appreciation right that are not issued in connection with the stock
settlement of the stock appreciation right on exercise. Shares of common stock under awards made in
substitution or exchange for awards granted by a company acquired by the Company, or with which the
Company combines, do not reduce the maximum number of shares that may be issued under the 2008
Plan. In addition, if a company acquired by the Company, or with which the Company combines, has
shares remaining available under a plan approved by its stockholders, the available shares
(adjusted to reflect the exchange or valuation ratio in the acquisition or combination) may be used
for awards under the 2008 Plan and will not reduce the maximum
F-32
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
number of shares of common stock that may be issued under the 2008 Plan; provided, however that
awards using such available shares shall not be made after the date awards or grants could have
been made under the pre-existing plan, absent the acquisition or combination, and shall only be
made to individuals who were not our employees or directors prior to the acquisition or
combination.
Under the 2008 Plan, the purchase price of shares of common stock covered by a stock option cannot
be less than 100% of the fair market value of the common stock on the date the option is granted.
Fair market value of the common stock is generally equal to the closing price for the common stock
on the principal securities exchange on which the common stock is traded on the date the option is
granted (or if there was no closing price on that date, on the last preceding date on which a
closing price is reported). Option awards generally have ten-year contractual terms and vest over
four years based on continuous service; however, the 2005 Plan and the 2008 Plan allow for other
vesting periods and we have granted employees options where the requisite service period is three
years and we grant our directors options where the requisite service period is one year.
We cancelled 2,536,607 and 341,063 options in the years ended December 31, 2008 and 2007,
respectively, related to terminated employees and board directors. The shares underlying such
options were returned to and are available for re-issuance under the 2008 Plan pursuant to the
terms described above.
The only types of awards granted under the 2005 Plan and the 2008 Plan in the years ended December
31, 2008 and 2007 were stock options. A summary of all of our option activity as of December 31,
2008 and 2007 and of changes in options outstanding under the plans during the years then ended are
as follows:
Weighted-
Average
Weighted-
Remaining
Aggregate
Average
Contractual
Intrinsic
Shares
Exercise Price
Years
Value
Options outstanding at December 31, 2006
3,767,103
$
2.39
Granted
1,170,733
$
2.63
Exercised
(575,833
)
$
0.77
Canceled/forfeited/expired
(341,063
)
$
3.52
Options outstanding at December 31, 2007
4,020,940
$
2.60
6.90
—
Granted
2,880,500
$
0.49
Exercised
—
—
Cancelled/forfeited/expired
(2,536,607
)
$
1.62
Options outstanding at December 31, 2008
4,364,833
$
1.77
7.09
—
Options exercisable at December 31, 2008
2,126,952
$
2.67
5.82
—
Options exercisable at December 31, 2007
2,153,968
$
2.29
5.30
—
F-33
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
The weighted-average grant-date fair value of options granted during the years ended December 31,
2008 and 2007 was $0.49 and $2.63, respectively. As of December 31, 2008, there was approximately
$2.0 million of unamortized compensation cost related to unvested stock option awards, which is
expected to be recognized over a weighted-average remaining period of approximately 3.0 years.
There were no options exercised during the year ended December 31, 2008. The total intrinsic value
of options exercised during the year ended December 31, 2007 was approximately $865,000, based on
the difference in the market price on the dates of exercise and the applicable option exercise
price. During the year ended December 31, 2007, we received $442,000 in cash from exercised options
under all stock-based payment arrangements. No tax benefit was realized for the tax deductions from
option exercises of the stock-based payment arrangements in the years ended December 31, 2008 and
2007.
Our determination of fair value is affected by our stock price as well as a number of assumptions
that require judgment. The fair value of each option award is estimated on the date of grant using
the Black-Scholes option-valuation model. The assumptions used in the Black-Scholes
option-valuation model for option grants during the years ended December 31, 2008 and 2007 are as
follows:
Years Ended December 31,
2008
2007
Risk-free interest rate
2.75 – 3.3
%
4.6 – 4.8
%
Dividend yield
0.0
%
0.0
%
Expected volatility
125 – 149
%
137%  – 138
%
Weighted-average volatility
146
%
138
%
Expected term (in years)
6.2 years
6.1 years
The risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent
with the expected term of the option in effect at the time of the grant. We have not paid any
dividends on common stock since our inception and do not anticipate paying dividends on our common
stock in the foreseeable future. The expected option term is computed using the "simplified" method
as permitted under the provisions of SAB 107 and SAB 110. The expected volatility is based on the
historical volatility of our common stock and other factors. In 2006, we began using an alternative
historical volatility based on the daily close price of our common stock, which we determined was a
better indicator of volatility than the method used in the prior years. The effect of this change
on stock-based compensation was immaterial.
In 2007, we granted 15,000 options to consultants. No options were granted to consultants in 2008.
These option grants were valued as of the date at which the consultants' performance is complete
using the Black-Scholes pricing model. The assumptions used in the Black-Scholes model for
non-employee option grants for the years ended December 31, 2008 and 2007 are as follows:
2008
2007
Risk-free interest rate
3.3 – 3.7
%
4.0 – 4.8
%
Dividend yield
0.0
%
0.0
%
Expected volatility
147
%
125% – 147
%
Contractual term (in years)
6.5 – 7.3 years
2.5 – 8.3 years
We recognized approximately $5,000 and $2,000 in stock-based compensation expense associated with
non-employee options in the years ended December 31, 2008 and 2007, respectively.
F-34
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements  (continued)
December 31, 2008
The following table summarizes information concerning our outstanding and exercisable stock options
as of December 31, 2008:
Options Outstanding
Options Exercisable
Weighted-
Average
Weighted-
Weighted-
Number
Remaining
Average
Number
Average
Outstanding
Contractual
Exercise
Exercisable
Exercise
Range of Exercise Price
in 000's
Life
Price
in 000's
Price
$0.19 to $0.54
2,196
8.63
0.46
338
0.44
$2.28 to $2.75
1,442
5.65
2.52
1,171
2.50
$2.86 to $4.89
727
5.29
4.20
618
4.23
4,365
7.09
1.77
2,127
2.67
Employee Stock Purchase Plan
The Purchase Plan was approved by our stockholders in 2005; however, we have not implemented the
Purchase Plan. The Purchase Plan allows all eligible employees to purchase shares of common stock
at 85% of the lower of the fair market value on the first or the last day of each offering period.
Employees may authorize us to withhold up to 15% of their compensation during any offering period,
subject to certain limitations. The maximum aggregate number of shares of common stock which may be
issued under the Purchase Plan is 3,173,634 as of December 31, 2008. This maximum number is subject
to an annual automatic increase beginning on January 1, 2006 equal to the lesser of (i) 1% of the
number of outstanding shares of common stock on such day, (ii) 750,000 or (iii) such other amount
as our board of directors may specify. At December 31, 2008, no shares of common stock have been
issued under the Purchase Plan. On January 1, 2009, the number of shares of common stock available
for issuance under the Purchase Plan increased by 750,000 in accordance with the provisions for
annual increases under the Purchase Plan.
(9) Commitments
Operating Leases
We are obligated under operating leases for office space and equipment. In July 2004, we entered
into a lease for our current office space in San Diego, California. In June 2005, we leased
additional space in the same facility. At December 31, 2008, the office lease requires a monthly
payment of approximately $21,000, excluding common area maintenance charges. The lease expires in
August 2009. We lease copiers and an automobile, which leases expire in 2010 and 2011,
respectively.
Rent expense was approximately $258,000 and $246,000 during the years ended December 31, 2008 and
2007, respectively. Future rental commitments under all operating leases are as follows:
Year Ending December 31,
2009
$
192,731
2010
10,375
2011
2,452
Total
$
205,558
F-35
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements  (continued)
December 31, 2008
(10) Material License AgreementsTheragenex Agreement
In October 2006, we entered into a license agreement with Theragenex, LLC. Under the agreement, we
granted Theragenex exclusive rights to develop and commercialize ANX-211 in the U.S. in exchange
for a licensing fee of $1.0 million ($0.5 million of which we received in January 2007 and $0.5
million of which was due in June 2007), milestone payments and royalties. In May 2007, we received
a letter from TRx Pharma, a subsidiary of Theragenex, that we believed was intended to constitute
notice of termination of the agreement with Theragenex, though the letter did not explicitly state
that it constituted notice of termination. In its letter, TRx Pharma requested a refund of the
initial $0.5 million payment and, in subsequent discussions, indicated that it did not intend to
pay the remaining $0.5 million. On July 3, 2007, we notified Theragenex that, among other things,
its failure to make the final $0.5 million payment constituted a material breach of the agreement.
On August 9, 2007, we delivered a letter to Theragenex confirming our termination of the agreement
as a result of Theragenex's breach, pursuant to the terms of the agreement. On October 11, 2007, we
filed a demand for arbitration against Theragenex (doing business as TRx Pharma, LLC and/or TRx
Pharmaceuticals, LLC) and David M. Preston, founder, Chairman, President and Chief Executive
Officer of Theragenex in his individual capacity as the alter ego of Theragenex, seeking damages of
up to $10 million with respect to breach of the agreement. On November 8, 2007, Theragenex
responded to our demand, asserting numerous affirmative defenses counterclaiming intentional
misrepresentation, negligent misrepresentation and rescission and seeking a refund of its $0.5
million payment, plus interest, rescission of the agreement and that we pay its reasonable
attorneys fees and costs associated with the action. Also on November 8, 2007, Mr. Preston objected
to his participation and being named as a respondent in the arbitration. In May 2008, we settled
our dispute with Theragenex. In consideration of and conditioned upon Theragenex paying us $0.6
million, we and Theragenex agreed to jointly move to dismiss the underlying arbitration action, and
in connection with dismissing the arbitration, we and Theragenex agreed to release each other from
any and all claims related to our past relationship, including Theragenex's license rights to the
product.
We recognized revenue of $0.5 million for each of the years ended December 31, 2008 and 2007.
Revenue in 2007 represents nonrefundable licensing fees paid under the agreement with Theragenex.
Revenue in 2008 represents a portion of a settlement payment from Theragenex. We recognized $0.5
million as revenue in 2008, which represents a portion of the $0.6 million settlement payment,
because under the agreement Theragenex was required to pay a total nonrefundable, up front
licensing fee of $1.0 million ($0.5 million of which we received in January 2007 and $0.5 million
of which was due in June 2007) and because we met the criteria for revenue recognition. The
remainder of the settlement payment, $0.1 million, was recorded as other income.
(11) Registration Payment Arrangement
On July 21, 2005, we entered into a securities purchase agreement (the "Agreement") with certain
accredited institutional investors (the "Purchasers") for the sale of 10,810,809 shares of our
common stock (the "Shares") at a purchase price of $1.85 per share for aggregate gross proceeds of
$19,999,997. In connection with this financing, we issued the Purchasers seven-year warrants to
purchase 10,810,809 shares of our common stock (the "Warrant Shares") at an exercise price of $2.26
per share. We received net proceeds of $18,116,751, after deducting commissions and offering fees
and expenses, which included cash payments of $1,403,000 to placement agents and $283,246 in legal
and accounting fees.
Pursuant to the terms of the Agreement, if (i) a registration statement covering (A) all of the
Shares and the Warrant Shares and (B) any other shares of common stock issued or issuable in
respect to the Shares and the Warrant Shares because of stock splits, stock dividends,
reclassifications, recapitalizations or similar events (together, the "Registrable Shares")
required to be covered thereby and required to be filed by us is (A) not filed with the SEC on or
before 45 days after the closing of such financing (a "Filing Failure") or (B) if such registration
statement is not declared effective by the SEC on or before 90 days after the closing of such
financing (an "Effectiveness Failure") or (ii) on any day after the effective date of the
registration statement sales of all the Registrable Shares required to be included on such
registration statement cannot be made (other than as permitted during a suspension pursuant to the
Agreement) pursuant to such registration statement (including, without limitation, because of a
failure to keep the registration statement effective, to disclose such information as is necessary
for sales to be made pursuant to such registration statement or to register sufficient number of
Shares) (a "Maintenance Failure"), then, we will be obligated, without limiting any other remedies
of any Purchaser, to pay as liquidated damages (the "Liquidated Damages") for such failure and not
as a penalty to any Purchaser an amount in cash determined in accordance with the formula set forth
below:
•
For each 30-day period that a Filing Failure, Effectiveness Failure or Maintenance
Failure remains uncured, we will pay an amount equal to the purchase price paid to us
for all Shares then held by such Purchaser multiplied by 1% for the first 30-day period
or any portion thereof and increasing by an additional 1% with regard to each additional
30-day period until such Filing Failure, Effectiveness Failure or Maintenance Failure is
cured.
F-36
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements  (continued)
December 31, 2008
•
For any partial 30-day period in which a Filing Failure, Effectiveness Failure or
Maintenance Failure exists but is cured prior to the end of the 30-day period, we will
pay the Purchasers a pro rata portion of the amount which would be due if the failure
continued for the entire 30-day period. For example, if the purchase price paid for all
Shares then held by a Purchaser is $5,000,000, then, (a) at the end of the 30th day, the
Liquidated Damages would be 1% or $50,000, (b) at the end of the 60th day, the
Liquidated Damages for the first 30-day period would have been 1% or $50,000 and for the
second 30-day period would be 2% or $100,000, and (c) at the end of the 105th day, the
Liquidated Damages for the first 30-day period would have been 1% or $50,000, for the
second 30-day period 2% or $100,000, for the third 30-day period 3% or $150,000, and for
the final 15-day period, 4% applied pro rata to such 15 days, or $100,000.
There is no cap to the amount of Liquidated Damages that we may be obligated to pay. Payments to be
made pursuant to the July 2005 Registration Payment Arrangement will be due and payable to the
Purchasers at the end of each calendar month during which Liquidated Damages will have accrued. No
Liquidated Damages will be due or payable to a Purchaser in any event if as of the date of the
Filing Failure, Effectiveness Failure or Maintenance Failure such Purchaser could sell all of the
Registrable Shares such Purchaser then holds without registration by reason of subsection (k) of
Rule 144 under the Securities Act of 1933, as amended. Recent changes to Rule 144 eliminated
subsection (k) of Rule 144. These changes liberalized the rules governing the resale of securities
issued in private transactions; however, resales of securities held by affiliates are still subject
to the current public information, volume, manner of sale and notice requirements contained in Rule
144 and, as a result, we do not expect such changes to Rule 144 to necessarily reduce the potential
length of our payment obligations in the event of a Maintenance Failure.
The registration statement was filed and declared effective by the SEC on September 2, 2005, which
was within the allowed time. We have not incurred nor paid any Liquidated Damages in connection
with the July 2005 Registration Payment Arrangement.
On January 1, 2007, we adopted the provisions of FSP EITF 00-19-2. In December 2007, management
determined that it was not probable that we would have any payment obligation under the July 2005
Registration Payment Arrangement; therefore, no accrual for contingent obligation was required
under the provisions of FSP EITF 00-19-2. Accordingly, the warrant liability account was eliminated
and the comparative condensed consolidated financial statements of the prior periods and as of
December 31, 2006 were adjusted to apply the new method retrospectively.
The Company accounted for FSP EITF 00-19-2 appropriately by eliminating the warrant liability as of
December 31, 2007, but upon further review in 2008, management determined that it was not correct
to adjust the prior period comparative financial statements. Accordingly, the Company has made the
appropriate adjustments to reinstate the warrant liability accounting as originally recorded.
(12) Income Taxes
Due to our net loss for the years ended December 31, 2008 and 2007, and as we have recorded a full
valuation allowance against deferred tax assets, there was no provision or benefit for income taxes
recorded. There were no components of current or deferred federal, state or foreign tax provisions
for the years ended December 31, 2008 and 2007.
F-37
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
The income tax provision is different from that which would be obtained by applying the statutory
Federal income tax rate (34%) to income before income tax expense. The items causing this
difference for the periods are as follows:
2008
2007
Income tax expense at federal statutory rate
$
9,060,000
$
7,503,000
State taxes
(2,000
)
(2,000
)
R & D Credit
310,000
628,000
Stock options
(542,000
)
(432,000
)
Net operating true-ups
1,600,000
—
Other
49,000
(152,000
)
Change in federal valuation allowance
(10,475,000
)
(7,545,000
)
Total Tax Expense/(Benefit) on Continuing Operations
$
—
$
—
On July 13, 2006, the FASB issued FIN 48. Under FIN 48, the impact of an uncertain income tax
position on the income tax return must be recognized at the largest amount that is
more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain
income tax position will not be recognized if it has less than a 50% likelihood of being sustained.
Additionally, FIN 48 provides guidance on de-recognition, classification, interest and penalties,
accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years
beginning after December 15, 2006. We adopted the provisions of FIN 48 on January 1, 2007. There
were no unrecognized tax benefits as of the date of adoption. As of December 31, 2008 we continue
to have no unrecognized tax benefits. As a result of the implementation of FIN 48, we did not
recognize an increase in the liability for unrecognized tax benefits. There are no unrecognized tax
benefits included in the balance sheet that would, if recognized, affect the effective tax rate.
Our policy is to recognize interest and/or penalties related to income tax matters in income tax
expense. We had no accrual for interest or penalties on our balance sheets at December 31, 2008 and
2007, and has not recognized interest and/or penalties in the statement of operations for the year
ended December 31, 2008.
We are subject to taxation in the United States and the state of California. All of our tax years
are subject to examination by the United States and California tax authorities due to the carry
forward of unutilized net operating losses and R&D credits.
The adoption of FIN 48 did not impact our consolidated financial condition, results of operations
or cash flows. At December 31, 2008, we had net deferred tax assets of approximately $39.6 million.
Due to uncertainties surrounding our ability to generate future taxable income to realize these
assets, a full valuation has been established to offset the net deferred tax asset.
Subsequent to the filing of our 2007 Form 10K, we completed an Internal Revenue Code Section 382
study. As a result of this study, we determined that based upon ownership changes, only $158,000 of
the $4.5 million net operating losses we had previously removed from the deferred tax assets in
2007 would expire unused. Accordingly, we have re-established approximately $1.6 million of the
deferred tax assets related to these net operating losses with a corresponding increase to the
valuation allowance.
F-38
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
Deferred income taxes reflect the net tax effect of temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes and the amounts used for income
tax purposes. Significant components of deferred tax assets and liabilities at December 31, 2008
and 2007 are as follows:
December 31,
2008
2007
Deferred tax assets:
Accrued expenses
$
248,776
$
150,210
Stock options expense under SFAS No. 123
1,677,809
1,675,824
Net operating loss carryforwards
33,102,741
22,338,915
Income tax credit carryforwards
2,262,374
1,729,194
Property, plant and equipment
41,056
38,065
Intangibles
2,285,263
1,535,487
Other
6,553
577
Total deferred tax assets
39,624,572
27,468,272
Less: valuation allowance
(39,624,572
)
(27,468,272
)
Total deferred tax assets, net of valuation allowance
$
—
$
—
We have established a valuation allowance against our deferred tax asset due to the uncertainty
surrounding the realization of such assets. Management periodically evaluates the recoverability of
the deferred tax asset. At such time as it is determined that it is more likely than not that the
deferred tax assets are realizable, the valuation allowance will be reduced. We have recorded a
valuation allowance of approximately $39.6 million as of December 31, 2008 to reflect the estimated
amount of deferred taxes that may not be realized. We increased the valuation allowance by
approximately $12.1 million for the year ended December 31, 2008. The deferred tax asset for the
net operating losses and the related valuation allowance includes approximately $47,000 related to
stock option deductions, the benefit of which may eventually be credited to equity. As a result of
our subsequent adoption of SFAS 123(R), we recognize windfall tax benefits associated with the
exercise of stock options directly to stockholders' equity only when realized. Accordingly, as we
are in a cumulative loss position, deferred tax assets have not been recognized for net operating
loss carryforwards resulting from windfall tax benefits generated under SFAS 123(R). At December
31, 2008, we do not have any windfall tax benefits under SFAS 123(R).
At December 31, 2008, we had Federal and California tax loss carryforwards of approximately $90.4
million and $41.4 million, respectively. The Federal and California net operating loss
carryforwards begin to expire in 2020 and 2012 respectively, if unused. At December 31, 2008, we
had Federal and state tax credit carryforwards of approximately $1.6 million and $973,000,
respectively. The federal credits will begin to expire in 2024. The California research and
experimentation credit does not expire.
(13) Litigation
In the normal course of business, we may become subject to lawsuits and other claims and
proceedings. Such matters are subject to uncertainty and outcomes are often not predictable with
assurance.
(14) 401(k) Plan
We have a defined contribution savings plan pursuant to Section 401(k) of the IRC. The plan is for
the benefit of all qualifying employees and permits voluntary contributions by employees up to 100%
of eligible compensation, subject to the Internal Revenue Service ("IRS")-imposed maximum limits.
Up until January 1, 2008, we were required to make matching contributions in the amount
of 100% of employee contributions to 3% of eligible compensation and 50% of employee contributions
between 3% and 5% of eligible compensation. Effective January 1, 2008, our 401(k) Plan was amended,
which required us to make matching contributions equal to 100% of employee contributions up to 6%
of eligible compensation, limited by the IRS-imposed maximum. We incurred total expenses of
approximately $218,150 and $118,000 in employer matching contributions in 2008 and 2007,
respectively.
F-39
Table of Contents
ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
(15) Segment Information
We operate our business on the basis of a single reportable segment, which, fundamentally, is the
business of in-licensing, developing and commercializing proprietary product candidates for the
treatment of cancer. We evaluate our company as a single operating segment. The majority of our
operating activities and work performed by our employees are currently conducted from a single
location in the U.S. We recognized revenues of $0.5 million in each of 2008 and 2007, which
revenues were derived solely from license fees under a license agreement with Theragenex, LLC,
which we terminated in August 2007.
(16) Summary of Quarterly Financial Data (unaudited)
The following is a summary of the unaudited quarterly results of operations for the years ended
December 31, 2008 and 2007:
Quarters Ended
Quarterly statement of operations data
for 2008 (unaudited):
March 31
June 30
September 30
December 31
Licensing revenue
$
—
$
500,000
$
—
$
—
Gross margin
—
500,000
—
—
Loss from operations
(6,232,280
)
(6,691,199
)
(6,856,013
)
(7,530,343
)
Net loss
(5,933,072
)
(6,425,530
)
(6,776,863
)
(7,512,028
)
Basic and diluted net loss per share
$
(0.07
)
$
(0.07
)
$
(0.08
)
$
(0.08
)
Basic and diluted weighted average
number of shares of common stock
outstanding
90,252,572
90,252,572
90,252,572
90,252,572
Quarters Ended
Quarterly statement of operations data for 2007 (unaudited):
March 31
June 30
September 30
December 31
Licensing revenue
$
500,000
$
—
$
—
$
—
Gross margin
500,000
—
—
—
Loss from operations
(5,745,998
)
(6,299,042
)
(6,446,415
)
(5,819,590
)
Net loss
(5,123,814
)
(5,722,828
)
(5,914,124
)
(5,381,274
)
Basic and diluted net income (loss) per share
$
(0.06
)
$
(0.06
)
$
(0.07
)
$
(0.06
)
Basic and diluted weighted average number of
shares of common stock outstanding
89,676,739
89,706,739
90,007,509
90,252,572
(17) Severance Related Expenses
In February 2008, a letter agreement regarding terms of separation of employment with James A.
Merritt, our former president and chief medical officer, became effective. Dr. Merritt's employment
relationship with us ended in January 2008. As a result of his separation, we recorded $185,916 in
severance payments and related employer taxes and $16,038 for payments to cover the health, welfare
and retirement benefits that we would have incurred had Dr. Merritt remained employed by us for 6
months after the end of our employment relationship. Severance-related charges were recorded in the
first, second and third quarters of 2008.
In April 2008, a letter agreement regarding terms of separation of employment with Gregory P.
Hanson, our former chief financial officer, treasurer and senior vice president, became effective.
Mr. Hanson's employment relationship with us ended in April 2008. As a result of his separation, we
recorded $128,157 in severance payments and related employer taxes and $20,997 for payments to
cover the health, welfare and retirement benefits that we would have incurred had Mr. Hanson
remained employed by us for 6 months after the end of our employment relationship. Total
severance-related charges were recorded in the second, third and fourth quarters of 2008.
In October 2008, as part of a restructuring to reduce operating costs, we completed a work force
reduction of nine employees in October 2008. As a result of the reduction in force, in accordance
with FAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities," we recorded severance-related charges of $403,000, of which $384,000 was
recorded as research and development expenses and the remainder as selling, general and
administrative expenses. Of the severance-related charges, $372,000 relates to severance payments
and related employer taxes, and $31,000 relates to health benefit allowance payments that eligible
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ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
former employees may use, at their discretion, to pay the premiums required to continue their group
health care coverage under COBRA or any other health care related expenses. Severance-related
charges of $244,000 were recorded in the fourth quarter of 2008 and the remainder will be recorded
in the first and second quarters of 2009.
In December 2008, the Confidential Separation Agreement and General Release of All Claims governing
the terms of separation of employment with Evan M. Levine, our former chief executive officer and
president and member of our Board of Directors, became effective. Mr. Levine's employment
relationship with us ended in October 2008 and he resigned from our Board of Directors in December
2008. As a result of his separation, we recorded $275,752 in severance payments and related
employer taxes, $19,870 in health benefit allowance payments that Mr. Levine may use, at his
discretion, to pay the premiums required to continue his group health care coverage under COBRA or
any other health care related expenses and an additional payment of $110,650 in lieu of issuing
shares of stock. Severance-related charges were recorded in the fourth quarter of 2008.
(18) Subsequent Events
In January 2009, the Confidential Separation Agreement and General Release of All Claims governing
the terms of separation of employment with Mark N.K. Bagnall, our former executive vice president
and chief financial officer, which was agreed to by Mr. Bagnall in December 2008, became effective.
Mr. Bagnall's employment relationship with us ended in December 2008. As a result of his
separation, we recorded $174,787 in severance payments and related employer taxes and $18,352 in
health benefit allowance payments that Mr. Bagnall may use, at his discretion, to pay the premiums
required to continue his group health care coverage under COBRA or any other health care related
expenses. Severance-related charges were recorded in the fourth quarter of 2008.
In January 2009, in order to further reduce operating costs, we completed a work force reduction of
six employees. As a result of the reduction in force, we estimate recording severance-related
charges of approximately $192,000, of which we estimate approximately $95,000 will be recorded as
research and development and the remainder as selling, general and administrative expenses. Of the
severance-related charges, we estimate that approximately $173,000 will relate to severance
payments and related employer taxes and approximately $19,000 will relate to health benefit
allowance payments that eligible former employees may use, at their discretion, to pay the premiums
required to continue their group health care coverage under COBRA or any other health care related
expenses. We estimate that severance-related charges of approximately $132,000 will be recorded in
the first quarter of 2009 and the remainder will be recorded in the second quarter of 2009. The
severance-related charges that we expect to incur in connection with the reduction in force are
subject to a number of assumptions and actual results may differ. We may also incur other charges
not currently contemplated due to events that may occur as a result of, or associated with, the
restructuring.
In January 2009, we entered into retention and incentive agreements with seven employees, including
our executive officers, and granted under the 2008 Plan restricted stock units to these employees
that represented the right to receive in the aggregate 3,700,000 shares of our common stock,
including 1,200,000 units to our chief business officer and senior vice president, 850,000 units to
our general counsel, 650,000 units to our senior vice president of operations and 450,000 units to
our vice president of regulatory and quality. These units will vest immediately prior to a
strategic transaction (as defined in the documentation evidencing the grant of the units). The
retention and incentive agreements and associated restricted stock units awards are primarily
intended to reinforce and encourage these employees' continued employment with and dedication to
our company without distraction from the possibility of involuntary termination or a change in
control and related events and circumstances.
In February 2009, our Board of Directors appointed Brian M. Culley, our chief business officer and
senior vice president, to additionally serve as our principal executive officer and appointed Mr.
Bagnall to additionally serve as our principal financial officer and principal accounting officer.
In February 2009, we announced that we have received written indications of interest from numerous
companies representing a range of strategic transactions and currently are evaluating all proposals
and options. We also indicated that continued cost-containment measures may impact the timeline of
our regulatory filings.
In March 2009, we announced that, effective April 3, 2009, we will reduce our full-time workforce
to five employees and will discontinue substantially all of our development activities and
fundamental business operations to provide additional time to consummate a strategic transaction or
otherwise obtain financing. Our remaining employees, which consist of our chief business officer
and senior vice president, our general counsel, our senior vice president of operations, our vice
president of regulatory affairs and quality and our manager of accounting, will focus their efforts
primarily on continuing to evaluate and execute strategic options.
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ADVENTRX Pharmaceuticals, Inc. and Subsidiaries
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements (continued)
December 31, 2008
We stated that, along with the reductions we implemented in October 2008 and January 2009, and our
prior cost-containment measures, the reduction and other efforts will extend our cash cliff and
increase the opportunity for us to close a strategic transaction with one of the parties with whom
we currently are in discussions or another company that we identify in the future.
In March 2009, we announced that we and SDP had entered into a license agreement (the "License
Agreement") with Shin Poong Pharmaceutical Co., Ltd., a company organized under the laws of the
Republic of Korea ("Shin Poong"), pursuant to which we granted to Shin Poong an exclusive license,
including the right to sublicense, to research, develop, make, have made, use, offer for sale, sell
and import licensed products, in each case solely for the treatment of cancer by intravenous
administration of formulations of docetaxel as emulsified products and solely in South Korea. Under
the terms of the License Agreement, we will receive an upfront licensing fee of $300,000, a
regulatory milestone payment of either $200,000 or $400,000 (depending on whether Shin Poong is
required by the Korea Food and Drug Administration to conduct a bioequivalence or clinical study in
human subjects prior to receipt of regulatory approval) upon receipt of regulatory approval for
marketing a licensed product in South Korea, one-time commercial milestone payments tied to annual
net sales of licensed products in an aggregate amount of up to $1,500,000 and royalty payments on
net sales of licensed products. Shin Poong is responsible for all development and commercial
activities related to ANX-514 in South Korea. If Shin Poong is required by the Korea Food and Drug
Administration to conduct a bioequivalence or clinical trial in human subjects prior to receipt of
regulatory approval and we elect not to supply product to conduct such trial, which supply
obligation is subject to limitations, we will pay Shin Poong $100,000.
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ADVENTRX PHARMACEUTICALS, INC.
[
•
] Shares of [
•
]% Series C Convertible Preferred Stock
Warrants to Purchase up to [
•
] Shares of Common Stock
[
•
] Shares of Common Stock Underlying the Convertible Preferred Stock and the Warrants
Prospectus
, 2009
Table of Contents
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses incurred or expected to be incurred by us
in connection with the issuance and distribution of the securities being registered hereby, other
than placement agent fees. All of the amounts shown are estimated except the SEC registration fee.
Estimated fees and expenses can only reflect information that is known at the time of filing this
registration statement and are subject to future contingencies, including additional expenses for
future offerings.
Securities and Exchange Commission registration fee
$
558
Transfer agent fees and expenses
15,000
Escrow agent fees and expenses
5,000
Printing and engraving expenses
25,000
Legal fees and expenses
150,000
Accounting fees and expenses
50,000
Miscellaneous expenses
5,000
Total
$
250,558
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law, or the DGCL, authorizes a corporation to
indemnify its directors and officers against liabilities arising out of actions, suits and
proceedings to which they are made or threatened to be made a party by reason of the fact of their
prior or current service to a corporation as a director or officer, in accordance with the
provisions of Section 145, which are sufficiently broad to permit indemnification under certain
circumstances for liabilities arising under the Securities Act of 1933, as amended, or the
Securities Act. The indemnity may cover expenses (including attorneys' fees) judgments, fines and
amounts paid in settlement actually and reasonably incurred by the director or officer in
connection with any such action, suit or proceeding. Section 145 permits corporations to pay
expenses (including attorneys' fees) incurred by directors and officers in advance of the final
disposition of such action, suit or proceeding. In addition, Section 145 provides that a
corporation has the power to purchase and maintain insurance on behalf of its directors and
officers against any liability asserted against them and incurred by them in their capacity as a
director or officer, or arising out of their status as such, whether or not the corporation would
have the power to indemnify the director or officer against such liability under Section 145.
Our certificate of incorporation provides that, to the fullest extent permitted by the DGCL,
(a) a director shall not be personally liable to us or our stockholders for monetary damages for
breach of fiduciary duty as a director, and (b) we shall indemnify any director or officer made a
party to an action or proceeding, whether criminal, civil, administrative or investigative, by
reason of the fact of such person's current or prior service as a director or officer of ours, any
predecessor of ours or any other enterprise per our or any predecessor of ours request.
Our bylaws provide that (a) we shall indemnify our directors and officers to the maximum
extent and in the manner permitted by the DGCL against expenses (including attorneys' fees),
judgments, fines, ERISA excise taxes, settlements and other amounts actually and reasonably
incurred in connection with any proceeding, whether civil, criminal, administrative or
investigative, arising by reason of the fact that such person is or was an agent of ours, subject
to certain limited exceptions, (b) we shall advance expenses incurred by any director or officer
prior to the final disposition of any proceeding to which the director or officer was or is or is
threatened to be made a party promptly following a request therefore, subject to certain limited
exceptions, and (c) the rights conferred in our bylaws are not exclusive.
We have entered into indemnification agreements with each of our directors and officers to
give such directors and officers additional contractual assurances regarding the scope of the
indemnification set forth in our certificate of incorporation and bylaws and to provide additional
procedural protections. These agreements, among other things, provide that we will indemnify our
directors and officers for expenses (including attorneys' fees), judgments, fines, penalties and
amounts paid in settlement (including all interest, assessments and other charges paid or payable
in connection therewith) actually and reasonably incurred by a director or officer in connection
with any action or proceeding to which such person was, is or is threatened to be made a party, a
witness or other participant by reason of such person's services as a director or officer of ours,
any of our subsidiaries or any other company or
II-1
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enterprise to which the person provides services at our request, and any federal, state, local
or foreign taxes imposed on the director or officer as a result of the actual or deemed receipt of
any payments under the indemnification agreements.
In addition, the indemnification agreements provide that, upon the request of a director or
officer, we shall advance expenses (including attorneys' fees) to the director or officer. We
intend to enter into indemnification agreements with any new directors and officers in the future.
In addition, Alexander J. Denner, a director of ours, is further indemnified against
liabilities arising in connection with his services as a director of ours through his employment
arrangement with entities controlled by Mr. Carl C. Icahn. Such indemnification may be broader than
the indemnification provided by the DGCL and includes indemnification for expenses (including
attorneys' fees), judgments and fines incurred and amounts paid in settlement by Dr. Denner in
connection with any action or proceeding to which Dr. Denner was, is or is threatened to be made a
party or participant by reason of his services as a director of ours.
We have also obtained an insurance policy covering our directors and officers with respect to
certain liabilities, including liabilities arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
During the three-year period preceding the date of the filing of this registration statement,
we have issued securities in the transactions described below without registration under the
Securities Act. These securities were offered and sold by us in reliance upon exemptions from the
registration statement requirements provided by Section 4(2) of the Securities Act or Regulation D
under the Securities Act as transactions by an issuer not involving a public offering.
On June 12, 2009, in connection with the closing of our registered direct offering of
convertible preferred stock and warrants to purchase common stock, we issued to Rodman & Renshaw,
LLC, as additional consideration for its services as placement agent, warrants to purchase up to
901,810 shares of the Company's common stock at an exercise price of $0.15 per share. The warrants
are exercisable at the option of the holder at any time beginning on December 13, 2009 through and
including June 12, 2014.
On July 6, 2009, in connection with the closing of the Company's registered direct offering of
its convertible preferred stock, the Company issued to Rodman & Renshaw, LLC, as additional
consideration for its services as placement agent, warrants to purchase up to 475,209 shares of the
Company's common stock at an exercise price of $0.179 per share. The warrants are exercisable at
the option of the holder at any time beginning on January 7, 2010 through and including July 6,
2014.
Since July 16, 2006, we issued an aggregate of 2,770,871 shares of common stock to 68 of our
warrant holders and received gross proceeds of approximately $4.5 million upon the exercise of
certain outstanding warrants at a weighted average exercise price of $1.64. Pursuant to the terms
of an agreement we entered into with Burnham Hill Partners, a division of Pali Capital, Inc., in
March 2004, we have an obligation to pay a 4% cash commission to Burnham Hill Partners with respect
to the cash we receive upon exercise of each warrant issued in a financing we consummated in April
2004. Accordingly, we have paid Burnham Hill Partners approximately $145,000 in connection with the
warrants exercised since July 16, 2006. No other commission or other remuneration was paid or given
directly or indirectly in connection with these warrant exercises.
ITEM 16. EXHIBITS
A list of exhibits filed herewith is contained in the exhibit index that immediately precedes
such exhibits and is incorporated herein by reference.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act 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 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 it is against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
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(1) For purposes of determining any liability under the Securities Act of 1933, the
information omitted from the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of 1933, each
post-effective amendment that contains a form of prospectus 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused
this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of San Diego, State of California, on July 24, 2009.
ADVENTRX PHARMACEUTICALS, INC.
By:
/s/ Brian M. Culley
Brian M. Culley
Chief Business Officer and
Senior Vice President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Brian M. Culley and Patrick L. Keran, and each of them acting individually, as his
true and lawful attorneys-in-fact and agent, with full power of each to act alone, with full powers
of substitution and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this registration statement (including post-effective
amendments and any related registration statements filed pursuant to Rule 462 and otherwise), and
to file the same with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully for 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
substitute or resubstitute, 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 by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Brian M. Culley
Chief Business Officer and Senior Vice President
July 24, 2009
Brian M. Culley
(Principal Executive Officer)
/s/ Patrick L. Keran
General Counsel, Secretary and Vice President, Legal
July 24, 2009
Patrick L. Keran
(Principal Financial and Accounting Officer)
/s/ Jack Lief
Chair of the Board
July 24, 2009
Jack Lief
/s/ Mark N.K. Bagnall
Director
July 24, 2009
Mark N.K. Bagnall
/s/ Alexander J. Denner
Director
July 24, 2009
Alexander J. Denner
/s/ Michael M. Goldberg
Director
July 24, 2009
Michael M. Goldberg
/s/ Mark J. Pykett
Director
July 24, 2009
Mark J. Pykett
/s/ Eric K. Rowinsky
Director
July 24, 2009
Eric K. Rowinsky
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Table of Contents
EXHIBIT INDEX
Exhibit
Description
2.1(1)
Agreement and Plan of Merger, dated April 7, 2006, among the registrant, Speed Acquisition, Inc., SD Pharmaceuticals, Inc. and certain individuals named therein
(including exhibits thereto)
3.1(2)
Amended and Restated Certificate of Incorporation of the registrant
3.2(3)
Certificate of Designation of Preferences, Rights and Limitations of 0% Series A Convertible Preferred Stock
3.3(4)
Certificate of Designation of Preferences, Rights and Limitations of 5% Series B Convertible Preferred Stock
3.4±
Certificate of Designation of Preferences, Rights and Limitations of [
•
]% Series C Convertible Preferred Stock
3.5(5)
Amended and Restated Bylaws of the registrant (formerly known as Biokeys Pharmaceuticals, Inc.)
4.1(6)
Form of Registration Rights Agreement entered into in October and November 2001 (including the original schedule of holders)
4.2(7)
$2.50 Warrant to Purchase Common Stock issued on April 12, 2002 to Emisphere Technologies, Inc.
4.3(6)
Form of $0.60 Warrant to Purchase Common Stock issued May 28, 2003 (including the original schedule of holders)
4.4(6)
Form of $1.25 Warrant to Purchase Common Stock issued between October 15, 2003 and December 29, 2003 (including the original schedule of holders)
4.5(6)
Common Stock and Warrant Purchase Agreement, dated as of April 5, 2004, among the registrant and the Investors (as defined therein)
4.6(6)
Registration Rights Agreement, dated April 5, 2004, among the registrant and the Investors (as defined therein)
4.7(6)
Form of $2.00 A-1 Warrant to Purchase Common Stock issued April 8, 2004 (including the original schedule of holders)
4.8(6)
Form of $2.50 A-2 Warrant to Purchase Common Stock issued April 8, 2004 (including the original schedule of holders)
4.9(8)
Common Stock and Warrant Purchase Agreement, dated April 8, 2004, between the registrant and CD Investment Partners, Ltd.
4.10(8)
Registration Rights Agreement, dated April 8, 2004, between the registrant and CD Investment Partners, Ltd.
4.11(8)
$2.00 A-1 Warrant to Purchase Common Stock issued on April 8, 2004 to CD Investment Partners, Ltd.
4.12(8)
$2.00 A-1 Warrant to Purchase Common Stock issued on April 8, 2004 to Burnham Hill Partners
4.13(8)
$2.00 A-1 Warrant to Purchase Common Stock issued on April 8, 2004 to Ernest Pernet
4.14(8)
$2.00 A-1 Warrant to Purchase Common Stock issued on April 8, 2004 to W.R. Hambrecht + Co., LLC
4.15(9)
Common Stock and Warrant Purchase Agreement, dated April 19, 2004, between the registrant and Franklin M. Berger
4.16(9)
Registration Rights Agreement, dated April 19, 2004, between the registrant and Franklin M. Berger
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Exhibit
Description
4.17(9)
$2.00 A-1 Warrant to Purchase Common Stock issued on April 19, 2004 to Franklin M. Berger
4.18(10)
Securities Purchase Agreement, dated July 21, 2005, among the registrant and the Purchasers (as defined therein)
4.19(10)
Rights Agreement, dated July 27, 2005, among the registrant, the Icahn Purchasers and Viking (each as defined therein)
4.20(11)
First Amendment to Rights Agreement, dated September 22, 2006, among the registrant and the Icahn Purchasers (as defined therein)
4.21(12)
Second Amendment to Rights Agreement, dated February 25, 2008, among the registrant and the Icahn purchasers (as defined therein)
4.22(10)
Form of $2.26 Common Stock Warrant issued on July 27, 2005 (including the original schedule of holders)
4.23(10)
Form of $2.26 Common Stock Warrant issued on July 27, 2005 (including the original schedule of holders)
4.24(12)
$0.50 Warrant (WC-291) to Purchase Common Stock transferred on June 15, 2005 to S. Neborsky and R
Neborsky TTEE Robert J. Neborsky MD Inc Comb Retirement Trust
4.25(12)
$0.50 Warrant (WC-292) to Purchase Common Stock transferred on June 15, 2005 to S. Neborsky and R
Neborsky TTEE Robert J. Neborsky MD Inc Comb Retirement Trust
4.26(12)
$2.50 Warrant to Purchase Common Stock issued on October 22, 2004 to Thomas J. DePetrillo
4.27(3)
Securities Purchase Agreement, dated June 8, 2009, by and between ADVENTRX Pharmaceuticals, Inc. and
the purchasers listed on the signature pages thereto
4.28(3)
Form of Common Stock Purchase Warrants issued on July 6, 2009 by ADVENTRX Pharmaceuticals, Inc. to the
Rodman & Renshaw, LLC
4.29(4)
Securities Purchase Agreement, dated June 29, 2009, by and between ADVENTRX Pharmaceuticals, Inc. and
the purchasers listed on the signature pages thereto
4.30(4)
Form of Common Stock Purchase Warrant issued on July 6, 2009 by ADVENTRX Pharmaceuticals, Inc. to
Rodman & Renshaw, LLC
4.31±
Securities Purchase Agreement, dated [
•
], 2009, by and between ADVENTRX Pharmaceuticals, Inc. and the
purchasers listed on the signature pages thereto
4.32±
Form of Common Stock Purchase Warrant
5.1±
Opinion of DLA Piper LLP (US)
10.1#(14)
2005 Equity Incentive Plan
10.2#(15)
Form of Stock Option Agreement under the 2005 Equity Incentive Plan
10.3#(16)
Form of Stock Option Agreement under the 2005 Equity Incentive Plan (for director option grants
beginning in 2008)
10.4#(17)
Form of Stock Option Agreement under the 2005 Equity Incentive Plan (for option grants to employees
approved in March 2008)
10.5#(2)
Form of Restricted Share Award Agreement under the 2005 Equity Incentive Plan
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Exhibit
Description
10.6#(15)
2005 Employee Stock Purchase Plan
10.7#(15)
Form of Subscription Agreement under the 2005 Employee Stock Purchase Plan
10.8#(18)
2008 Omnibus Incentive Plan
10.9#(19)
Form of Notice of Grant of Restricted Stock Units under the 2008 Omnibus Incentive Plan (for grants to
employees in January 2009)
10.10#(19)
Form of Restricted Stock Units Agreement under the 2008 Omnibus Incentive Plan
10.11#(20)
Form of Non-Statutory Stock Option Grant Agreement (for directors) under the 2008 Omnibus Incentive Plan
10.12#(20)
Form of Non-Statutory/Incentive Stock Option Grant Agreement (for consultants / employees) under the
2008 Omnibus Incentive Plan
10.13#(17)
2008 Incentive Plan
10.14†(21)
Option and License Agreement, dated January 23, 1998, between the registrant and the University of
Southern California
10.15(5)
First Amendment to License Agreement, dated August 16, 2000, between the registrant and the University
of Southern California
10.16†(21)
Option and License Agreement, dated August 17, 2000, between the registrant and the University of
Southern California
10.17†(22)
Amendment to Option and License Agreement, dated April 21, 2003, between the registrant and the
University of Southern California
10.18†(23)
Second Amendment to Option and License Agreement, dated January 25, 2007, between the registrant and
the University of Southern California
10.19†(2)
Agreement, effective as of May 1, 2005, between the registrant and Pharm-Olam International Ltd.
10.20(2)
Amendment dated July 19, 2005 to the Agreement between the registrant and Pharm-Olam International Ltd.
10.21(24)
License Agreement, dated October 20, 2006, between the registrant, through its wholly-owned subsidiary
SD Pharmaceuticals, Inc., and Theragenex, LLC
10.22(16)
License Agreement, dated December 10, 2005, between SD Pharmaceuticals, Latitude Pharmaceuticals and
Andrew Chen, including a certain letter, dated November 20, 2007, clarifying the scope of rights
thereunder
10.23†(25)
License Agreement, dated March 25, 2009, between the registrant, SD Pharmaceuticals, Inc. and Shin
Poong Pharmaceutical Co., Ltd.
10.24(26)
Standard Multi-Tenant Office Lease — Gross, dated June 3, 2004, between the registrant and George V.
Casey & Ellen M. Casey, Trustees of the Casey Family Trust dated June 22, 1998
10.25(2)
First Amendment to the Standard Multi-Tenant Office Lease — Gross, dated June 3, 2004 between the
registrant and George V. & Ellen M. Casey, Trustees of the Casey Family Trust dated June 22, 1998
10.26#(27)
Offer letter, dated March 5, 2003, to Joan M. Robbins
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Exhibit
Description
10.27#(28)
Confidential Separation Agreement and General Release of All Claims, effective December 4, 2008,
between the registrant and Joan M. Robbins
10.28#(29)
Offer letter, dated November 15, 2004, to Brian M. Culley
10.29#(19)
Retention and Incentive Agreement, dated January 28, 2009, between the registrant and Brian M. Culley
10.30#(30)
Severance Agreement and Release of All Claims, dated September 7, 2006, with Carrie Carlander
10.31#(30)
Consulting Agreement, dated September 7, 2006, with Carrie Carlander
10.32#(30)
Offer letter, dated September 7, 2006, to James A. Merritt
10.33#(16)
Letter agreement regarding terms of separation with James A. Merritt, effective as of February 12, 2008
10.34#(30)
Form of Stock Option Agreement between the registrant and James A. Merritt (included in Exhibit 10.28)
10.35#(31)
Offer letter, dated December 13, 2006, to Gregory P. Hanson
10.36#(31)
Stock Option Agreement, effective December 20, 2006, between the registrant and Gregory P. Hanson
10.37#(32)
Letter Agreement regarding terms of separation with Gregory P. Hanson, dated April 2, 2008
10.38#(32)
Consulting Agreement, dated April 2, 2008, with Gregory P. Hanson
10.39#(20)
Offer letter, dated April 1, 2008, to Mark N.K. Bagnall (including Exhibits A, B and C thereto)
10.40#(25)
Confidential Separation Agreement and General Release of All Claims, effective January 8, 2009, between
the registrant and Mark N.K. Bagnall
10.41#(28)
Confidential Separation Agreement and General Release of All Claims, effective December 31, 2008,
between the registrant and Evan M. Levine, including letter, dated November 7, 2008, related thereto
10.42#(25)
Retention and Incentive Agreement, dated January 28, 2009, between the registrant and Patrick L. Keran
10.43#(25)
Retention and Incentive Agreement, dated January 28, 2009, between the registrant and Mark E. Erwin
10.44#(25)
Retention and Incentive Agreement, dated January 28, 2009, between the registrant and Michele L. Yelmene
10.45(24)
Form of Director and Officer Indemnification Agreement
10.46#(33)
Director compensation policy
10.47(34)
Placement Agency Agreement, dated November 2, 2006, among the registrant, ThinkEquity Partners LLC and
Fortis Securities LLC
10.48(3)
Engagement Letter Agreement, dated June 7, 2009, by and between ADVENTRX Pharmaceuticals, Inc. and
Rodman & Renshaw, LLC
10.49(4)
Engagement Letter Agreement, dated June 26, 2009, by and between ADVENTRX Pharmaceuticals, Inc. and
Rodman & Renshaw, LLC
II-8
Table of Contents
Exhibit
Description
10.50±
Engagement Letter Agreement, dated [
•
], 2009, by and between ADVENTRX Pharmaceuticals, Inc. and Rodman
& Renshaw, LLC
10.51#(35)
Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive Plan (for grant to Brian M.
Culley in July 2009)
10.52#(35)
Incentive Stock Option Grant Agreement under the 2008 Omnibus Incentive Plan (for grant to Patrick L.
Keran in July 2009)
10.53#(35)
2009 Mid-Year Incentive Plan
10.54#(35)
Retention and Severance Plan (as of July 21, 2009)
21.1*
List of Subsidiaries
23.1*
Consent of J.H. Cohn LLP, Independent Registered Public Accounting Firm
23.2±
Consent of DLA Piper LLP (US) (included in Exhibit 5.1)
24.1*
Power of attorney (included on the
signature page to the registration statement)
*
Filed herewith
†
Indicates that confidential treatment has been requested or granted to
certain portions, which portions have been omitted and filed
separately with the SEC
#
Indicates management contract or compensatory plan
±
To be filed by amendment
(1)
Filed with the registrant's Amendment No. 1 to Current Report on Form 8-K/A on May 1, 2006
(SEC file number 001-32157-06796248)
(2)
Filed with the registrant's Annual Report on Form 10-K on March 16, 2006 (SEC file number
001-32157-06693266)
(3)
Filed with the registrant's Current Report on Form 8-K on June 8, 2009 (SEC file number
001-32157-09878961)
(4)
Filed with the registrant's Current Report on Form 8-K on June 30, 2009 (SEC file number
001-32157- 09917820)
(5)
Filed with the registrant's Current Report on Form 8-K on December 15, 2008 (SEC file number
001-32157-081249921)
(6)
Filed with the registrant's Registration Statement on Form S-3 on June 30, 2004 (SEC file
number 333-117022-03848890)
(7)
Filed with the registrant's Amendment No. 1 to Quarterly Report on Form 10-Q/A on October 30,
2006 (SEC file number 001-32157-061170484)
(8)
Filed with the registrant's Current Report on Form 8-K/A on April 13, 2004 (SEC file number
000-33219-04730584)
(9)
Filed with the registrant's Quarterly Report on Form 10-QSB on May 12, 2004 (SEC file number
001-32157-04797806)
(10)
Filed with the registrant's Quarterly Report on Form 10-Q on August 12, 2005 (SEC file number
001-32157-051022046)
(11)
Filed with the registrant's Current Report on Form 8-K on September 22, 2006 (SEC file number
001-32157-061103268)
(12)
Filed with the registrant's Current Report on Form 8-K on February 25, 2008 (SEC file number
001-32157-08638638)
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Table of Contents
(13)
Filed with the registrant's Registration Statement on Form S-3 on August 26, 2005 (SEC file
number 333-127857-051050073)
(14)
Filed with the registrant's Annual Report on Form 10-K on March 15, 2007 (SEC file number
001-32157-07697283)
(15)
Filed with the registrant's Registration Statement on Form S-8 on July 13, 2005 (SEC file
number 333-126551-05951362)
(16)
Filed with registrant's Annual Report on Form 10-K on March 17, 2008 (SEC file number
001-32157-08690952)
(17)
Filed with the registrant's Quarterly Report on Form 10-Q on May 12, 2008 (SEC file number
001-32157-08820541)
(18)
Filed with the registrant's Current Report on Form 8-K on June 7, 2008 (SEC file number
001-32157-08874724)
(19)
Filed with the registrant's Current Report on Form 8-K on February 2, 2009 (SEC file number
001-32157- 09561715)
(20)
Filed with the registrant's Quarterly Report on Form 10-Q on August 11, 2008 (SEC file number
001-32157-081005744)
(21)
Filed with the registrant's Registration Statement on Form 10SB/A on January 14, 2002 (SEC
file number 000-33219-2508012)
(22)
Filed with the registrant's Quarterly Report on Form 10-QSB on August 14, 2003 (SEC file
number 000-33219-03848890)
(23)
Filed with the registrant's Quarterly Report on Form 10-Q on May 8, 2007 (SEC file number
001-32157-07829156)
(24)
Filed with the registrant's Current Report on Form 8-K on October 23, 2006 (SEC file number
001-32157-061156993)
(25)
Filed with the registrant's Quarterly Report on Form 10-Q on May 15, 2009 (SEC file number
001-32157-09878961)
(26)
Filed with the registrant's Quarterly Report on Form 10-QSB on August 10, 2004 (SEC file
number 001-32157-04963741)
(27)
Filed with the registrant's Annual Report on Form 10-KSB on April 16, 2003 (SEC file number
000-33219-03651464)
(28)
Filed with the registrant's Annual Report on Form 10-K on March 23, 2009 (SEC file number
001-32157-09708145)
(29)
Filed with the registrant's Annual Report on Form 10-KSB on March 31, 2005 (SEC file number
001-32157-05719975)
(30)
Filed with the registrant's Current Report on Form 8-K on September 8, 2006 (SEC file number
001-32157-061082484)
(31)
Filed with the registrant's Current Report on Form 8-K on December 20, 2006 (SEC file number
001-32157-061290689)
(32)
Filed with the registrant's Current Report on Form 8-K on April 16, 2008 (SEC file number
001-32157-08760483)
(33)
Filed with the registrant's Current Report on Form 8-K on June 23, 2006 (SEC file number
001-32157-06922676)
(34)
Filed with the registrant's Current Report on Form 8-K on November 3, 2006 (SEC file number
001-32157-061184445)
(35)
Filed with the registrant's Current Report on Form 8-K on July 22, 2009 (SEC file number
001-32157-09957353)
II-10