Use these links to rapidly review the documentTABLE OF CONTENTS REDPOINT BIO CORPORATION (A Development-Stage Enterprise) Index to Financial Statements

Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549



FORM 10-K



(Mark One)ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                                  to


Commission File Number 000-51708



REDPOINT BIO CORPORATION(Exact name of registrant as specified in its charter)



Delaware(State or other jurisdiction of
incorporation or organization)

22-3393959(I.R.S. Employer Identification No.)7 Graphics Drive
Ewing, New Jersey(Address of principal executive offices)

08628(Zip Code)


Registrant's
telephone number, including area code:(609) 637-9700



Securities
registered pursuant to Section 12(b) of the Act:None.

Securities
registered pursuant to Section 12(g) of the Act:

Title of ClassCommon Stock, $.0001 par value per share




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. o Yes    ý No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. o Yes    ý No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days. ý Yes    o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)
is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. ý

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.

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý (Do not check if a smaller
reporting company)

Smaller reporting company o


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes
ý No

The aggregate market value of the registrant's voting shares of common stock held by non-affiliates of the registrant on June 30, 2008, based on
$0.65 per share, the last reported sale price on the OTC Bulletin Board on that date, was approximately $39,744,602.

The
number of shares of common stock, $0.0001 par value, of the registrant outstanding as of March 20, 2009 was 79,495,870 shares.

DOCUMENTS INCORPORATED BY REFERENCE

The
following documents are incorporated by reference into the Annual Report on Form 10-K: Portions of the registrant's definitive Proxy Statement for its 2009 Annual
Meeting of Stockholders are incorporated by reference into Part III of this Report.



---





Table of Contents



TABLE OF CONTENTS



Item



PagePART I

1.

BUSINESS

11A.

RISK FACTORS

221B.

UNRESOLVED STAFF COMMENTS

422.

PROPERTIES

423.

LEGAL PROCEEDINGS

424.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

42PART II

5.

MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES

436.

SELECTED FINANCIAL DATA

477.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

487A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

568.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

569.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

569A.

CONTROLS AND PROCEDURES

579B.

OTHER INFORMATION

58PART III

10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

5911.

EXECUTIVE COMPENSATION

5912.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

5913.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

5914.

PRINCIPAL ACCOUNTING FEES AND SERVICES

59PART IV

15.

EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

59SIGNATURES

60EXHIBIT INDEX

61INDEX TO FINANCIAL STATEMENTS

F-1


i

---





Table of Contents

PART I    EXPLANATORY NOTE

On March 12, 2007, Redpoint Bio Corporation ("Redpoint") entered into the Agreement and Plan of Merger, dated as of
March 12, 2007, by and among Redpoint, on the one hand, and Robcor Properties, Inc., a Delaware corporation ("Robcor"), Robcor Acquisition Corp., a Delaware corporation and wholly-owned
subsidiary of Robcor ("Merger Sub"), Robcor, LLC, a Kentucky limited liability company and wholly-owned subsidiary of Robcor ("Robcor, LLC") and Halter Financial
Investments, L.P., a Texas limited partnership, and Michael Heitz, as stockholders of Robcor, on the other hand (the "Reverse Merger Agreement"). The transactions contemplated by the Reverse
Merger Agreement (the "Closing") were consummated on March 12, 2007 (the "Closing Date").

Pursuant
to the Reverse Merger Agreement, on the Closing Date, Merger Sub merged with and into Redpoint (the "Reverse Merger"), with Redpoint being the surviving corporation and becoming
a wholly-owned subsidiary of Robcor, and the outstanding shares of capital stock, convertible notes and certain warrants to purchase capital stock of Redpoint were converted into shares of common
stock of Robcor in accordance with the Delaware General Corporation Law (the "DGCL") on the terms and conditions as set forth in the Reverse Merger Agreement. On May 3, 2007,
Redpoint and Robcor entered into an Agreement and Plan of Merger in which Robcor, the former parent company of
Redpoint after consummation of the Reverse Merger, merged with and into Redpoint. Such merger, referred to herein as the Reincorporation Merger, was deemed effective on June 15, 2007.

In
this Annual Report on Form 10-K, unless the context specifically indicates otherwise:



ITEM 1.    BUSINESS

Overview

Redpoint Bio is a development stage biotechnology company leveraging recent discoveries in the molecular biology of taste to discover
and develop novel taste modulators for the food, beverage and pharmaceutical industries. Our food and beverage program is focused on identifying novel flavor modifiers that improve the taste of
existing ingredients, enabling the development of better-tasting, less costly, and more healthful foods and beverages. We believe that our unique understanding of the biology of taste and its
relationship to metabolic processes, satiety, and diabetes impact both the development of healthier foods and, potentially, new approaches to the treatment of diabetes and obesity. In addition, we
have a program aimed at suppressing the bitterness
of oral medicines, enabling the development of novel formulations with improved acceptance and compliance across a broad range of dosage forms and therapeutic applications. Our research in diabetes
and obesity stems from the observation that taste signaling in the gut is involved in important hormone secretion processes enabling us to leverage our research on lingual taste modulation to
important therapeutic applications. We currently own or have exclusive licenses to 11 issued U.S. patents and 15 issued foreign patents. In addition, we have over 70 U.S. and foreign patent
applications pending. We have not yet developed any products that are commercially available.

Our
research and development efforts, both partnered and unpartnered, involve technology development and discovery programs aimed at the identification of novel compounds for taste

1

---



Table of Contents

modification.
We are working to identify a compound(s) that can be used to enhance the taste of both sweet and savory flavors in a wide variety of food and beverage applications. To leverage our
technology in the food and beverage markets, we have entered into a research and development agreement with Givaudan, the world's leading company in the flavors and fragrances industry. Additionally,
we are working to identify a compound(s) that could act as a universal bitter taste blocker and we are seeking collaborative formulation development programs with major pharmaceutical companies who
are seeking to extend the patent life or enhance the performance of their products. We have identified several categories of products where patient acceptability or the potential for novel formulation
options are currently limited due to the intense bitter or other aversive taste of the active pharmaceutical ingredient. We plan to incorporate the proprietary bitter taste, or aversive taste,
blockers found through our discovery programs with drugs of proven safety and efficacy to create novel, valued-added formulations.

We
intend to design our taste modifiers to be safe and effective in minute quantities, and to be able to incorporate them into food and pharmaceutical products through the GRAS
determination/notification process. Although the GRAS (Generally Recognized as Safe) process involves extensive testing to insure safety in use, the overall time required (estimated to be
12-18 months) and development costs incurred (estimated to be $1-2 million per compound) are modest compared to the size of the accessible markets. Moreover, a
single GRAS-determined taste enhancer can potentially be used in a wide range of food applications. In addition, a GRAS determination is heavily relied upon by the U.S. Food and Drug
Administration (FDA) to evaluate the safety and inclusion of flavor modifiers into pharmaceutical products. A single aversive taste blocker can potentially be used to create a multitude of new drug
formulations that in many cases may be patentable in their own right. Drug formulations where our taste modifiers are classified as flavorings can depend upon the GRAS process for marketing approval.
Novel drug formulations incorporating our taste modifiers that are used to help modify the delivery of drugs will require FDA approval through the FDA 505(b)(2) approval process.

We
believe there may be additional potential applications for our technology including discovering novel compounds for therapeutic applications. For example, a growing body of scientific
research suggests that the taste pathways that we have been investigating are also found as part of a nutrient-sensing system located in the gastrointestinal tract. This could lead to potential
opportunities for the discovery of new diabetes or obesity therapeutics. We have recently initiated a program designed to
leverage the research we have already conducted on taste modulators to further explore this opportunity. New therapeutic drug products will require FDA approval through the New Drug Application (FDA
505(b)(1) or NDA) process.

Scientific Background

The five basic taste senses include sweet, savory, bitter, salt, and sour. Savory is also sometimes referred to as "umami". The sweet,
savory, and salt tastes are appetitive, while the bitter and sour tastes are aversive. The five basic tastes are sensed primarily by the taste buds on the tongue. Sequencing of the human genome has
led to the identification of the molecular receptors and signal transduction components responsible for the sense of taste. This in turn has allowed discovery strategies originally developed for new
pharmaceutical discovery to be applied to the identification of new taste modulators.

In
the case of the sweet, savory and bitter taste sensations, taste cells on the tongue initially sense tastants like sugars (sweet flavor), amino acids (savory or umami flavor), and
bitter substances (bitter flavor) through binding of the tastant molecules to specific receptors on the taste cell surface called G-Protein Coupled Receptors, or GPCRs. Generally,
it is thought that individual taste cells express specific GPCR receptors, and sense only one kind of tastant. Binding of the tastant to the GPCR activates a signaling cascade that
ultimately triggers a nerve signal that is sensed by the brain as taste.

2

---



Table of Contents

The
signaling cascade downstream of GPCR activation provides several targets for discovery of modulators of the sweet, savory and bitter taste sensations. Redpoint Bio's discovery
programs have initially focused on finding potent and specific compounds that bind to the TRPm5 ion channel that is involved in amplification of the GPCR-linked taste signals. We
were motivated to follow this approach since biological studies showed that mice in which TRPm5 had been inactivated or "knocked out" were unable to taste sweet, savory, or bitter tastants. This in
turn suggested that enhancers of TRPm5 channel conductance could function as taste enhancers in sweet or savory taste contexts, and as blockers could work as bitter blockers in bitter taste contexts.

Robert
Margolskee, M.D., Ph.D., Chairman of our Scientific Advisory Board, is a pioneer in the elucidation of the role and identity of many of the molecular elements involved in taste.
Redpoint Bio is an exclusive licensee of key intellectual property developed in Dr. Margolskee's laboratory at Mount Sinai School of Medicine. Among the technologies transferred to Redpoint Bio
are animal models
where specific genes involved in taste modulation have been deleted or "knocked out", providing important proof of concept of the key role of these signaling elements in taste and defining them as
clear targets for modulation by small molecules.

Food and Beverage Applications

Our taste enhancer program is focused on the discovery and development of a novel, GRAS-determinable compound(s) that will
enable a significant reduction in the quantity of sugar, savory flavors and salt required to flavor beverages and processed foods. Sugar and salt are the principal flavoring agents in most beverages
and processed foods. Excess consumption of sugar and salt are linked to health problems that are a major driver of increased healthcare costs. This motivates both government and consumer demand for
healthier, good-tasting products that do not contain excessive sugar and salt. We seek to identify taste enhancers that potentially reduce both food ingredient costs and lower the caloric
and salt content of many food and beverage products. One major potential application is the combination of our taste enhancer with reduced quantities of sugar or other nutritive sweeteners to lower
the caloric content of soft drinks. Additional opportunities exist in other applications such as prepared foods, dairy products, soups, gravies and confectionary products.

We
initiated our TRPm5 taste enhancer discovery program in 2005. Since then we have discovered and applied for patents on prototype lead series developed in model taste cell systems. In
taste model systems, our prototype compounds provided up to a 5-fold enhancement of a model taste signal generated via the TRPm5 channel. Our prototype compounds are chemically diverse and
highly specific enhancers for the TRPm5 channel, suggesting the feasibility of the discovery and development program. To leverage our technology in the food and beverage markets, in March 2007 we
entered into the Givaudan Agreement where we are collaborating exclusively with each other to discover and develop taste enhancer compounds and bitter blocker compounds that act primarily through the
modulation of the TRPm5 channel.

We
also intend to partner with other major ingredient suppliers, or food and beverage companies, to develop and commercialize taste enhancers that act through a variety of other newly
discovered mechanisms of taste sensation in exchange for technology access fees, research funding, product development milestones, and/or product royalties.

Novel Pharmaceutical Formulations

We are also focusing on identifying bitter blocking compounds for incorporation into novel drug formulations that could offer
significant advantages over existing products in terms of improved patient acceptability and compliance, as well as potential efficacy and safety benefits. We initiated our TRPm5 bitter blocker
discovery program in 2004. Since then we have discovered and applied for patents on prototype lead series developed in model taste cell systems. In taste model systems, our prototype

3

---



Table of Contents

compounds
are able to block the signal generated through the TRPm5 channel at concentrations of less than one part per million. During 2008, we believe our scientists made progress in Redpoint's
discovery program for bitter blockers. Specifically, improvements in the potency of Redpoint's bitter blockers, designed to allow the development of more palatable pharmaceutical formulations, have
been achieved. For the first time, double blinded human taste panel studies have shown that Redpoint compounds are able to reduce the bitterness of salicin, a natural bitter compound from willow bark
related to aspirin. Although additional chemical optimization will be required to develop commercially practical bitter blockers, the human test data provides corroboration of the underlying
biological hypothesis.

Taste
problems with medicines have traditionally been addressed by the addition of sugar and flavoring agents, a marginally effective approach that has limited important market
applications. The most prevalent aversive taste in pharmaceutical products is bitterness. We have a novel biochemical approach to blocking the signaling pathway for bitter taste that enables the
formulation of products that cannot be made using conventional taste masking technology. We believe that the reformulation of off-patent prescription drugs with improved taste and/or a
novel technology can potentially generate significant sales with less risk, as compared with novel drugs, because the clinical efficacy of the active pharmaceutical ingredient, or API, is proven, and
the safety profile of the API is well understood.

We
have identified a number of product opportunities, which include new liquid formulations of prescription and over-the-counter, or OTC, pharmaceutical products
with improved taste that may offer better patient acceptability and compliance, and innovative products that generally could offer a new drug delivery route through absorption in the mouth. We plan to
develop and market these formulations in partnership with major pharmaceutical companies. Specifically, we plan to collaborate with major pharmaceutical and OTC companies to create new formulations,
life cycle products or line extensions of patented, off-patent, prescription or OTC products in exchange for R&D support, licensing fees/milestones and/or product royalties. We also plan
to collaborate with pharmaceutical companies to address taste issues associated with new drugs in development.

Novel Treatment Modality for Obesity and Diabetes

Our initial programs have focused on modulation of the TRPm5 ion channel, a key signaling element in taste sensation, in order to
discover novel compounds that modulate the taste of food, beverage, and pharmaceutical products. We also believe that the TRPm5 ion channel may be an attractive target for the identification and
development of a new diabetes or obesity therapeutic compound. Recent scientific research, including research conducted by members of our Scientific Advisory Board, suggest that in addition to taste
cells on the tongue, TRPm5 is expressed as part of a nutrient-sensing signal transduction chain in the gastrointestinal tract and potentially also in the pancreas. We recently initiated a program
designed to leverage the research we have already conducted on the discovery of modulators of the TRPm5 ion channel to further explore potential opportunities for the discovery of new diabetes or
obesity therapeutics.

TRPm5
modulators discovered at Redpoint have been shown to elicit hormones known to play important roles in metabolism in relevant model systems. We believe this discovery may serve as
the foundation for a new method of action in the treatment of obesity and diabetes. In particular, we recognize the possibility to develop drugs that act in the gastrointestinal tract without the need
to be absorbed into the bloodstream, potentially offering safety advantages relative to systemically bioavailable drugs in current use. We are seeking collaborations with major pharmaceutical
companies for the further development and optimization of our TRPm5 modulators for therapeutic applications in diabetes and obesity.

4

---



Table of Contents

Additional Applications of Taste Technology

In addition to the TRPm5 ion channel our technology base encompasses additional approaches to mitigating aversive taste sensations in
food products or pharmaceutical formulations, as well as potential mechanisms for discovering compounds that treat specific diseases.

One
application of our technology is in the development of low-sodium salt solutions. Towards this end, we developed Betrasalt, a proprietary formulation of FEMA
GRAS materials and potassium chloride (KCl). Potassium chloride is a well-known substitute for sodium chloride (NaCl or common table salt), but is characterized by an accompanying bitter
and metallic taste. Our Betrasalt formulation mitigates the bitter and metallic taste of potassium chloride
yet retains the cooking functionality and preservative qualities of common table salt (sodium chloride). We own or have exclusive licenses to issued and pending patents related to Betrasalt, and we
are actively seeking potential partners interested in commercializing this technology.

We
recognize the attractiveness of "natural" compounds in many markets, particularly for food applications. We have developed a novel strategy for using the information obtained through
our discovery programs to find natural substances that may be effective as taste enhancers, thus meeting increased demand for "natural" ingredient statements on food products. This strategy may
provide additional opportunities for novel patented compounds and related intellectual property, while expanding the product range and market acceptability of Redpoint Bio taste enhancement products.
The use of "natural" ingredient statements for labeling and promotion of food products is regulated by the USDA and other governing bodies, and there is a risk that they may limit use of such terms.

Market Opportunity

Healthier and Less Costly Food and Beverage Products

The basic appetitive flavors in foods include sweet, savory (umami) and salt. In many food and beverage products, sugar, high fructose
syrup, or HFS, and other flavorants represent a major and growing ingredient cost. Processed food and beverage producers are consequently motivated to explore new approaches that can reduce the
quantities of high-cost ingredients to lower overall cost of goods (COGS). One of the major drivers for the upward pressure on food and sweetener prices was created by the tremendous
expansion in biofuels, that is the conversion of agricultural resources from food to fuel production. In 2007, about 20% of the US corn crop was used for the production of biofuels, and estimates are
that this could rise to as much as 50% in the near term. While the economic and environmental benefits of biofuels are still under debate, the drive for new energy sources coupled with supportive
government policies suggest that the current trend of biofuels growth is likely to continue (sources: Business Week, The Times (London), Technology Reviewpublished by MIT). We expect that
these increases in food and beverage COGS will continue to drive interest in innovative technologies that offer the potential for reducing the amount and cost of added flavorings across a wide range
of products.

At
the same time, it is increasingly recognized that excess consumption of sugar and salt, the predominant flavoring ingredients in most processed foods and beverages, are major
contributors to disease. Both government and consumer groups have become increasingly alarmed at the increase in the rate of obesity in the population, and its related negative health consequences.
The Center for Disease Control reports in its 2003-2006 National Health and Nutrition Examination Survey that there are more than 145 million overweight and obese adults and more
than 23 million overweight and obese children and adolescents in the United States. This epidemic crosses gender, geography, socioeconomic status and race lines, although Hispanics, African
Americans and Native Americans are disproportionately affected. Moreover, this phenomenon can be linked to certain chronic diseases including type-2 diabetes, high blood pressure,
cardiovascular disease and certain cancers. This provides additional impetus for the development of products that can deliver the taste impact of sugar,

5

---



Table of Contents

monosodium
glutamate, or MSG, and salt without the harmful effects of excess dietary calories or sodium.

Sugar Reduction

Nutritive sweeteners such as cane sugar, beet sugar, and HFS are among the most commonly used food ingredients. According to Packaged
Facts, the U.S. total sweetener market was approximately $3.08 billion in 2007. The United States Department of Agriculture shows that the U.S. consumption of sweeteners, natural and nutritive,
represents approximately 6% of the market, making the global sweetener market about $51.4 billion in 2007. In some of the largest food categories such as carbonated soft drinks and
confectionary products, sugar or HFS are the major ingredients and contributors to product cost of goods. The worldwide rise in consumption of sweet foods and beverages has been linked to many health
problems, particularly obesity and diabetes.

Artificial
sweeteners provide one means to reduce caloric intake and cost, particularly in sweetened beverages like soft drinks, confectionary products, and dessert foods. A report
published by Global Industry Analysts shows the worldwide artificial sweetener market at $3.5 billion and is likely to be stimulated by a worldwide effort to combat obesity. Although there are
several artificial sweeteners on the market, there is a continued desire to develop new products that can preserve the clean sweet taste and temporal profile of nutritive sweeteners (e.g. sugar
and HFS) while also reducing the caloric content.

Currently
used non-nutritive, artificial sweeteners include saccharin, aspartame, sucralose and acesulfame potassium. Saccharin, aspartame or aspartame/acesulfame potassium
blends are the most widely used, while sucralose is experiencing the fastest growth. These sweeteners are also marketed under branded tabletop products such as Sweet 'N Low® (saccharin),
Equal®, Nutrasweet® or Canderel® (aspartame) and
Splenda® (sucralose). Food and beverage companies commonly mix artificial sweeteners to achieve specific taste profiles. Despite the wide use of artificial sweeteners, they are generally
viewed to have inferior taste properties relative to caloric sweeteners like sugar and HFS. Specifically, these include off-tastes (e.g. sweeteners like saccharin are bitter) and
altered temporal characteristics of the sweet sensation. For example, the sweet taste of many artificial sweeteners comes on more slowly and/or lingers longer than the sweet taste from sugar or HFS.

Both
sucralose and aspartame were approved as food additives through an FDA Food Additive Petition, or FAP. This process can take many years and is much more extensive than the GRAS
process that we contemplate for our products. There is some risk that government regulatory bodies will require that all sweeteners be approved through an FAP process due to the wide and unrestricted
use of artificially sweetened foods. However, we are basing our technical approach on a different mechanism than current artificial or natural sweeteners, and we believe that our novel sweet and
savory taste enhancer will be marketable through the GRAS process. However, there can be no assurance that our novel sweet and savory enhancer(s) will be marketable through the GRAS process.

Our
unique approach is to develop a GRAS-approvable "sweetness enhancer" that acts to amplify the sweet signal downstream of the sweet GPCR receptor. This is a new
approach to reducing the caloric content of sweetened food products, since virtually all of the currently marketed artificial sweeteners (e.g. sucralose, aspartame, saccharin) act by binding to
the sweet GPCR receptor. Our sweetness enhancers are designed to have no taste of their own, and to be used in very small amounts in concert with nutritive sweeteners. They act by amplifying
the sweetness intensity thereby reducing the amount of nutritive sweetener required while retaining all of their desirable temporal characteristics and "clean taste".

6

---



Table of Contents

Savory Enhancement & Salt Reduction

The most commonly used savory enhancers in current use are MSG (monosodium glutamate), IMP (inosine monophosphate) and GMP (guanosine
monophosphate). These are "nature identical" natural products that are generally made through a combination of fermentation and partial chemical synthesis. IMP and GMP are relatively
high-cost food ingredients, and MSG has been identified with the development of symptoms such as headache and flushing.

Common
salt (sodium chloride) is a very low cost ingredient that is used in relatively large quantities in many processed and snack food products. Consumers in the United States
typically consume over 4,000
mgs of sodium per day, derived primarily from common salt added to food during processing or as a condiment. This level is well above the maximum consumption level of 2,300 mgs per day as recommended
by TheDietary Guidelines for Americans, 2005published by the Department of Health and Human Services (DHHS) and the Department of Agriculture (USDA).
Excess dietary salt is thought to be a significant contributor to hypertension and associated cardiovascular disease that are linked to high morbidity and increased healthcare costs.

The
markets for foods that incorporate large quantities of salt and savory flavors are large and highly diverse, totaling over $1.9 trillion worldwide (Campbell's Soup Report 2007). Some
of the largest segments include soups (valued at $3.9 billion in the United States in 2006), and savory snacks ($61.2 billion worldwide in 2007) (Campbell's Soup Report 2007 and
Datamonitor 2008). These markets are under increased pressure from consumer groups and government regulatory agencies that are attempting to contain the increasing medical costs of an expanding aged
population through a healthier diet.

Most
salt is consumed in processed foods in the context of savory taste systems. It is well established that there is strong synergy between salt and savory flavors in foods. We
anticipate that our taste enhancer will amplify taste from both sweet and savory tastants, and so produce a context-dependent taste enhancement effect. Consequently, we believe that our taste enhancer
has many potential applications in savory (umami) taste systems that can reduce the costs and liabilities associated with conventional savory flavors like MSG, IMP, and GMP, but also be effective in
creating tasteful products that contain reduced quantities of salt.

Improved Pharmaceutical Formulations

The worldwide pharmaceutical market, expected to top $735 billion in 2008 (source: IMS) faces slowing growth and a number of
challenges over the next decade. These include patent expirations of many of the best-selling drugs, increased consumer selectivity and the increasing price pressure owing to the expansion
of managed care and other cost-containment efforts in the United States and other countries. In addition, despite large increases in R&D spending, overall productivity of the major
pharmaceutical companies has fallen, resulting in a shortfall of blockbuster drugs required to sustain industry growth and profits.

Increasingly,
both major pharmaceuticals companies and generic drug companies have come to rely on the development of novel formulations of existing products with improved properties as
a way of extending the patent lifetime of prescription products, garnering market exclusivity and maximizing the return on investment associated with the support of large sales and marketing forces.
According to a report from the National Institute of Healthcare Management, during the 1990s approximately 65% of all drug approvals were for older medicines with new dosage strengths, new routes of
administration or new combinations of older drugs. This strategy has lower risk and is less expensive thande novodrug discovery, and is increasingly
being used by pharmaceutical companies to maintain sales of current drugs as the pipeline of new drugs has thinned.

7

---



Table of Contents

Pediatric and Geriatric Formulations.A major class of products potentially benefiting from the availability of taste-improved
formulations include
pediatric and geriatric formulations. There are diverse medicines that are formulated as liquids for infants, children, aged individuals, and special populations because of the relative ease of
ingestion of liquids versus pills. According to the U.S. Census Bureau, the older population is on the threshold of a boom, with a projected doubling from 35 million in 2000 to over
70 million in 2030, representing nearly 20 percent of the total U.S. population at the latter date. About 80% of seniors have one chronic health condition, and 50% have at least two.
Many of these seniors are faced with an array of oral medicines that are taken on a regular basis, yet this same population also often has trouble swallowing pills. Current taste masking technology
using sugar and flavoring agents often does a poor job of masking the generally bitter taste of the active pharmaceutical ingredient, leading to poor compliance in many pediatric products. Also, the
large quantities of sugar used in many formulations are contraindicated in diabetics and patients with dental caries.

Oral, Rapid Acting Formulations.Another major class of products potentially benefiting from the availability of taste improved
formulations include
rapid acting formulations where the API is intended to be delivered through absorption in the mouth. The onset of efficacy of many drugs such as migraine medicines, painkillers,
anti-nausea, sedatives and antacids could be enhanced through formulations that entered the blood stream directly via absorption in the mouth. Such formulations include orally
disintegrating tablets and films, buccal strips, chewing gums and sublingual lozenges. However, owing to their bitter taste, many of these drugs are now formulated as pills that dissolve in the
stomach, leading to a much slower onset of action. Orally disintegrating tablets (ODTs) in particular have gained attention in recent years as a preferred alternative to conventional orals tablet and
capsule dosage forms, with more than a dozen companies offering platform technologies or products. Marketed products using this dosage form recently topped $1.2 billion in US sales alone
(source: Valeo Partners 2007). ODTs offer potential advantages from both a clinical (compliance, ease of swallowing, avoid first-pass metabolism, unit dose stability, faster onset) and
marketing (product differentiation, line extension, marketing exclusivity, new patent protection) standpoint. However, the broader use of ODTs has been significantly limited by the inability of
existing taste-masking technologies to block the bitter taste of many API's (source: Pharmaceutical Technology Asia). We believe that a successful bitter blocker program could facilitate broader
application of ODT and other oral technologies, offering the potential for both partnership and internally developed product opportunities.

Examples
of pharmaceutical markets where improved oral formulations incorporating our bitter blockers could be used include:



8

---



Table of Contents



Key
market drivers for more palatable drug formulations include the following:



Therapeutic Applications for Diabetes

Diabetes mellitus is a chronic metabolic disorder characterized by the body's inability to produce or properly use insulin. Insulin is
a hormone that is needed to convert sugar, starches and other food into energy stores needed for daily life. Nearly 90% of diabetics have Type 2 (non-insulin dependent) diabetes,
which is often associated with obesity, and about 10% have Type 1 (insulin dependent) diabetes. It is one of the most prevalent chronic diseases, afflicting 8% of the US population, and is a
growing global health problem, particularly in industrialized countries. Diabetes and its complications impose significant economic consequences on individuals, families, health systems and countries.
The World Health Organization (WHO) estimated that in 2008, more than 200 million people worldwide have diabetes. This number is likely to more than double by 2030. The total annual economic
cost of diabetes in 2008 was estimated to be $175 billion in the U.S. and more than $350 billion worldwide. The global diabetes prescription market was more than $21 billion in
2008, and is expected to grow to more than $34 billion in 2012. The key market segments for diabetes treatments include injectables such as insulin and GLP-1 receptor agonists, and
several
classes of oral anti-diabetics (OADs), which include sulfonylureas, DPP-IV inhibitors, PPAR agonists, and biguanides.

In
2007, the leading products for treatment of diabetes, Actos® (Takeda Pharmaceutical Company Limited) and Avandia® (GlaxoSmithKline), recorded over
$5 billion in annual sales, collectively. The most recent treatment advances for diabetes include Byetta®, a GLP-1 receptor agonist launched by Eli

9

---



Table of Contents

Lilly
and Company/Amylin Pharmaceuticals in 2006 and Januvia, a DPP-IV inhibitor launched by Merck & Co., Inc. Collectively, these new products reported
2007 sales in excess of $1 billion. Despite the range of current treatment options, diabetes remains a poorly managed disease, causing serious ancillary pathologies (e.g. neuropathy,
nephropathy, retinopathy). We believe that TRPm5 modulators may represent a new class of therapeutics with a novel mode of action, useful in addressing this unmet medical need.

Competition and Competing Technologies

We believe our taste technology approach is applicable to a wide range of food, beverage and pharmaceutical products representing many
and diverse competitive companies and approaches. The life sciences and other technology industries are characterized by rapid technological change, and the area of sensory or taste research is a
rapidly evolving field. Our future success will depend on our ability to maintain a competitive position with respect to technological advances. Technological developments by others may result in our
taste enhancers or aversive taste blockers and technologies, as well as our pharmaceutical products, becoming obsolete.

We
face substantial competition from companies pursuing the commercialization of products and services relevant to taste using various methods for the discovery of taste enhancers and
aversive taste blockers. These competitors include leading flavor companies, such as International Flavors & Fragrances Inc., Givaudan SA, Symrise and Firmenich. Senomyx is
principally focused in the area of taste enhancement for food products and uses a high throughput screening technology and synthetic chemistry to discover novel flavor enhancers, which it licenses to
end users in the food industry. Senomyx was initially focused on sweetness and savory flavor enhancers, but is now also developing programs to discover bitter blockers for food and pharmaceutical
products. During the last 2 years, Senomyx has announced success at developing sweetener enhancers for both sucrose and sucralose, although these have not yet reached the marketplace.
Nutrinova, a German ingredients company, is also developing a biotechnology approach to finding novel taste enhancers in collaboration with the German Biotechnology Research and Information Network.
We currently compete and will continue to compete in the future with these companies in collaborating with and selling flavor products and technologies to manufacturers of packaged food and beverage
products.

We
also face substantial competition from a number of companies in the pharmaceutical formulations industry. Taste masking has a long history in the pharmaceutical industry. A
traditional method of taste masking for pharmaceutical products is to mix the active pharmaceutical ingredient with flavorings and sugar syrup to mask unpleasant taste. This approach is most commonly
used for pediatric liquid formulations, as well as many OTC cough-cold remedies. FlavorRx supplies flavors at drug store pharmacies that can be compounded by the pharmacist to make certain
liquid formulations more palatable. In the pharmaceutical sector there are a number of drug delivery companies that have developed proprietary taste masking technologies that include both traditional
and novel pharmaceutics approaches. These competing technologies and companies include, but are not limited to, OraSolv® and DuraSolv® from CIMA Labs (a Cephalon company),
MicroCaps® and Liquitard® from Eurand, FlavorTech, Liquette and MicroMask from KV Pharmaceuticals, EnVel® from Catalent,
CEFORM from Biovail and WOWTab® from Astellas. Most of these more sophisticated approaches utilize some form of physical technique to sequester the active pharmaceutical ingredient away
from the taste receptors on the tongue. These include coating the drug, micro encapsulation, immobilization, use of cyclodextran carriers, or stabilization of the drug in a micellar or insoluble
phase, as a means of taste masking. These physical approaches to taste masking have several limitations:



10

---



Table of Contents



To
our knowledge, no drug delivery companies are using the knowledge of taste at the molecular level to develop programs to identify biochemical bitter blockers or other aversive taste
blockers. Biochemical bitter or other aversive taste blockers are expected to have a number of key advantages as summarized below:



11

---



Table of Contents



We
also face substantial competition with respect to our diabetes program. Type 2 diabetes is a disease characterized by persistent hyperglycemia due to the body's inability to
produce enough or respond to insulin, a hormone regulating the absorption of sugar. Most treatments, outside of insulin replacement, focus on correcting high blood sugar by either stimulating the
pancreas to produce more insulin, enhancing tissue sensitivity to insulin, or by inhibiting the production and release of glucose from the liver. There are many drugs currently available for treating
diabetes and metabolic disease, either alone or in combination with other drugs. However, many patients are still inadequately treated with poorly controlled blood sugar levels, and the unmet medical
need remains a concern.

There
are several classes of anti-diabetic treatments, either orally available or injectable, including insulin, GLP-1 receptor agonists, sulfonylureas,
DPP-IV inhibitors, PPAR agonists, and biguanides. Many of these drugs exhibit not only limited efficacy, but are also associated with less than desired tolerability and significant
mechanism-based side effects. Several new classes of anti-diabetic treatments have recently been developed, including incretin mimetics such as Exendin-4, a GLP-1
mimetic, which enhance glucose-dependent insulin secretion by the pancreatic beta-cell and slows gastric emptying, and
DPP-IV inhibitors which work by preventing the inactivation of endogenous GLP-1. Additionally, new mechanisms such as GPR119 receptor agonists are being developed as
glucose-dependent insulin and GLP-1 secretagogues expected to lower postprandial glucose and reduce weight gain.

If
successful, our core diabetes program will face competition. The major competitors to TPRM5 modulators would likely include several new classes of anti-diabetic
treatments, including the incretin mimetic Byetta® (marketed by Eli Lilly and Company and Amylin Pharmaceuticals), DPP-IV inhibitors (including Januvia marketed by
Merck & Co., Inc.), and GPR119 receptor agonists, currently in development by Metabolex, Inc., OSI Pharmaceuticals, GlaxoSmithKline, and Arena
Pharmaceuticals, Inc./Johnson & Johnson.

Although
there are several options for treating diabetes currently on the market with new drugs in development, we believe that because of the failure of current therapies to adequately
manage the disease, the diabetes market is receptive to new treatment options. We believe our TRPm5 modulators represent a first-in-class mechanism for the treatment of
diabetes that could be used in combination with current and/or emerging drugs, and have the potential to experience rapid clinical acceptance.

Many
of the abovementioned companies have substantially greater capital resources, research and development resources and experience, manufacturing capabilities, regulatory expertise,
sales and marketing resources, established relationships with consumer products companies and production facilities than us.

We
may in the future face competition from life sciences and other technology companies and other commercial enterprises. These entities engage as we do in biotechnology, biology or
chemistry and could apply this technology to the discovery and development of taste enhancers and aversive taste blockers and new pharmaceutical products. We cannot guarantee that products developed
as a result of our competitors' existing or future collaborations will not compete with our taste enhancers and aversive taste blockers and new pharmaceutical formulations.

Universities
and public and private research institutions are also potential competitors. While these organizations primarily have educational objectives, they may develop proprietary
technologies related to the sense of taste or secure patent protection that we may need for the development of our technologies and products. We may attempt to license these proprietary technologies,
but these licenses may not be available to us on acceptable terms, if at all.

Our
competitors, either alone or with their collaborative partners, may succeed in developing technologies or discovering taste enhancers and aversive taste blockers and pharmaceutical
products that are more effective, safer, more affordable or more easily commercialized than ours, and our competitors may obtain intellectual property protection or commercialize products sooner than
we do.

12

---



Table of Contents

Developments
by others may render our product candidates or our technologies obsolete. In addition, it is likely that any of our future product discovery and development collaborators would not be
prohibited from entering into research and development collaboration agreements with third parties in any product field. Our failure to compete effectively would have a significant adverse effect on
our business, financial condition and results of operations.

Regulatory Process

Regulatory Approval for New Food Flavors and Flavor Modifiers

We intend to utilize the GRAS determination process to market our taste enhancers and pharmaceutical bitter blockers. In the United
States, novel flavoring compounds, flavor enhancers and taste modulators intended for use in foods or pharmaceutical products are regulated under provisions of the Federal Food, Drug, and Cosmetic Act
administered by the FDA. In situations where compounds to be introduced as flavorings into foods or pharmaceutical products are to be administered at low levels and in defined quantities, safety
review can first be obtained through the GRAS process, which can involve FEMA (Flavor and Extracts Manufacturers Association), other independent panels of experts, and/or FDA. Redpoint Bio joined FEMA
as a participating member in May 2005 and has experience with the GRAS determination process.

The
GRAS process was established by the 1958 Food Additive Amendments to the Federal Food, Drug, and Cosmetic Act. GRAS ingredients are those which have been found to be generally
recognized as safe by "experts qualified by scientific training and experience to evaluate the safety of substances directly or indirectly added to food" (21 CFR 570.30). These experts can be convened
by any source, including FDA, industry (individual or corporation), or a trade association such as FEMA. The FEMA GRAS Panel, which has existed since 1960, has recognized many ingredients as GRAS
(over 2000). This process is the predominant process used to determine the GRAS status of synthetic and natural compounds that modify taste and/or flavor in the United States.

The
GRAS 23 list, published by FEMA, contains approximately 3,000 materials, of which 1,804 are defined chemical compounds. Of the defined chemical compounds, eight are natural; 1,280
are "nature identical" (i.e., found in nature but manufactured in large quantities through industrial-scale chemical synthesis); and 516 are "artificial" (i.e., novel compounds created
through chemical synthesis). In the past five years, approximately 290 additional compounds have been determined as GRAS by the FEMA GRAS Panel.

In
the FEMA GRAS review program, an expert panel evaluates published literature, together with experimental toxicology, metabolism, and safety data and determines whether a compound is
generally recognized as safe under the conditions and amounts of its intended use. The safety studies required for GRAS approval of a new chemical compound are extensive. GRAS safety studies typically
involve the following: pharmacological activity profiling, genotoxicity studies, in vivo reproductive toxicology, ADME (absorption, distribution, metabolism, excretion), acute toxicology, and
90-day chronic dosing, including metabolism and histopathology. We estimate that the required tests can be performed and reported in 12 to 18 months at an estimated cost of
$1-2 million.

A
FEMA GRAS determination process for new flavoring agents and taste modifiers confers some key advantages:



13

---



Table of Contents



Our
regulatory strategy is validated by clearly defined approval pathways for which we believe there are sufficient market precedents for our potential products. While there is ample
historic precedent, there can be no assurance that regulatory requirements will remain stable and that the GRAS pathway will be available in its current or modified form.

Regulatory Approval for Taste-Modified Pharmaceutical Formulations

Our strategy for the development of novel drug formulations is to incorporate our taste enhancers and aversive taste blockers into OTC
and proprietary formulations of medicines that potentially offer improved acceptability and compliance, improved efficacy, and may also potentially offer potential for use in broader patient
populations or indications. Our GRAS-approved bitter blockers may be used in many taste-modified pharmaceutical formulations such as OTC cough-cold products, some pediatric
liquid formulations, etc., where they are added as flavors, without requiring additional FDA approval. Where our bitter blockers are added to produce a novel formulation that differs from an existing
formulation in dosage or method of delivery, we will also require additional FDA regulatory approval.

We
intend to seek approval for our novel pharmaceutical formulations through the FDA 505(b)(2) approval process. In the 505(b)(2) process an applicant submits full reports of
investigations of safety and effectiveness, but at least some portion of the information submitted for approval comes from sources other than studies performed by the applicant. Drugs that may be
approved via the 505(b)(2) process include drugs that have the same active ingredients as previously approved products, but now are formulated in a different delivery mechanism or other new dosage
forms, or with different indications. The basis for the 505(b)(2) application is the prior availability of substantial safety and efficacy about the active ingredient.

We
believe our taste improved formulations would be differentiated on one or more of the following bases: improved taste, broader indications, better product convenience, acceptability
and compliance. Also, under the Federal Food, Drug, and Cosmetics Act and FDA regulations, new drug formulations may be granted exclusivity in the marketplace if: (i) new clinical data are
required for FDA approval; (ii) the drug is studied in pediatric populations; or (iii) it is submitted for approval as an orphan indication. New dosage forms may also be patentable.

Regulatory Approval for New Therapeutics

Any products we may develop as new therapeutics (e.g. the use of taste modulators as drugs to treat diabetes or obesity) are
subject to stringent government regulation in the United States by the FDA and, in many instances, by corresponding foreign and state regulatory agencies. The European Union, or EU, has vested
centralized authority in the European Medicines Evaluation Agency and Committee on Proprietary Medicinal Products to standardize review and approval across EU member nations.

These
regulatory agencies enforce comprehensive statutes, regulations, and guidelines governing the drug development process. This process involves several steps. Initially, the company
must generate preclinical data to show safety before human testing may be initiated. In the United States, the drug company must submit an IND to the FDA prior to securing authorization for human
testing. The IND must contain adequate data on product candidate chemistry, toxicology and metabolism and, where appropriate, animal research testing to support initial safety.

14

---





Table of Contents

A CTA is the European equivalent of the U.S. IND. CTA requirements are issued by the Medicines and Healthcare Products Regulatory Agency, the United Kingdom's
health authority and were enacted through the U.K. Medicines for Human Use (Clinical Trials) Regulations 2004, which implemented the EU Clinical Trials Directive in the United Kingdom.

Any
of our product candidates will require regulatory approval and compliance with regulations made by U.S. and foreign government agencies prior to commercialization in such countries.
The process of obtaining FDA or foreign regulatory agency approval has historically been extremely costly and time consuming. The FDA regulates, among other things, the development, testing,
manufacture, safety, efficacy, record keeping, labeling, storage, approval, advertising, promotion, sale, and distribution of biologics and new drugs.

The
standard process required by the FDA before a pharmaceutical agent may be marketed in the United States includes:



Preclinical
studies can take several years to complete, and there is no guarantee that an IND based on those studies will become effective to permit clinical trials to begin. Once
clinical trials are initiated, they generally take five to seven years, or longer, to complete. After completion of clinical trials of a new drug or biologic product, FDA approval of the NDA must be
obtained. This process requires substantial time and effort and there is no assurance that the FDA will accept the NDA for filing and, even if filed, that the FDA will grant approval. In the past, the
FDA's approval of an NDA has taken, on average, one to two years, but in some instances may take substantially longer. If questions regarding safety or efficacy arise, additional studies may be
required, followed by a resubmission of the NDA. Review and approval of an NDA can take up to several years.

In
addition to obtaining FDA approval for each product, each drug manufacturing facility must be inspected and approved by the FDA. All manufacturing establishments are subject to
inspections by the FDA and by other federal, state, and local agencies, and must comply with GMP requirements.

We
must also obtain regulatory approval in other countries in which we intend to market any drug. The requirements governing conduct of clinical trials, product licensing, pricing, and
reimbursement vary widely from country to country. FDA approval does not ensure regulatory approval in other countries. The current approval process varies from country to country, and the time spent
in gaining approval varies from that required for FDA approval. In some countries, the sale price of the drug must also be approved. The pricing review period often begins after market approval is
granted. Even if a foreign regulatory authority approves a drug product, it may not approve satisfactory prices for the product.

In
addition to regulations enforced by the FDA, we are also subject to regulation under the Occupational Safety and Health Act, the Environmental Protection Act, the Toxic Substances
Control Act, the Resource Conservation and Recovery Act, and other present and potential future federal, state, or local regulations. Our research and development involves the controlled use of
hazardous materials, chemicals, biological materials, and various radioactive compounds. Although we believe that

15

---



Table of Contents

our
safety procedures for handling and disposing of such materials currently comply in all material respects with the standards prescribed by state and federal regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In the event of such an accident, we could be held liable for any damages that result and any such liability could exceed
our available resources.

Marketing and Sales

As a development stage company, we currently have no sales, marketing or distribution capabilities. In general, the Company will be
dependent on our current and future collaborators for the production, marketing, sales and other aspects of the commercialization of our product candidates when such products are developed through
collaborative discovery and development programs with major food ingredient suppliers, food producers, or pharmaceutical companies. For some products, including liquid and innovative specialty drug
formulations independently developed by Redpoint Bio, the Company may build or contract a targeted marketing and sales capability.

Intellectual Property

We currently own or have exclusive licenses to 11 issued U.S. patents and 15 issued foreign patents. Also, we have over 70 U.S. and
foreign patent applications pending. In addition, we have assembled significant expertise and know how in the biology, molecular biology, cell biology and chemistry of taste and taste modifiers.
Redpoint Bio's founding intellectual property portfolio was developed in the laboratory of Robert Margolskee, M.D., Ph.D., and licensed from the Mount Sinai School of Medicine. Dr. Margolskee
is our scientific founder, Chairman of our Scientific Advisory Board, and Professor of Neuroscience and Pharmacology at the Mount Sinai School of Medicine. In-licensed technology from
Dr. Margolskee's laboratory includes patents and applications for methods and compositions for discovering bitter blockers and blocking bitterness in foods and pharmaceuticals. In addition to
intellectual property in-licensed from Mount
Sinai, scientists at Redpoint Bio have extended the portfolio with several new patent applications. These include:



Our
primary intellectual property strategy is to obtain composition-of-matter patents on new tastant compounds that can be approved through the GRAS regulatory or
FDA drug approval processes. We have already filed patent applications on lead series for both a universal bitter blocker and a sweetness enhancer, where we have developed compounds that are both
potent and specific inin vitromodel systems of taste perception.

In
addition to our taste modifiers, many pharmaceutical formulations created using our proprietary aversive taste blockers, and regulated through the FDA 505(b)(2) regulatory process,
are potentially patentable as novel formulations or drug delivery systems, for which a new, full-length patent term may be obtained. Moreover, the FDA 505 (b)(2) approval process itself
affords new label claims as well as product market exclusivity for a period of three years. For pediatric indications there is an additional period of exclusivity.

Members
of our scientific and management team have been named as inventors on over 100 issued U.S. patents, covering various areas of drug discovery, and have a strong track record of
successful

16

---



Table of Contents

management
of intellectual property covering both technology tools, new compositions of matter with pharmaceutical utility, and uses thereof.

Collaborative and Licensing Arrangements

Current and Potential Food and Beverage Partnerships

To leverage our technology in the food and beverage markets we have partnered, and intend to continue to partner, with ingredient
suppliers and food and beverage companies, to develop and commercialize taste enhancers in exchange for technology access fees, research funding, product development milestones, and product royalties.



In March 2007, we entered into a Joint Research and Development and License Agreement, which we refer to as the Givaudan Agreement,
with Givaudan Schweiz AG, a Swiss company, referred to herein as Givaudan, for the development and commercialization of compounds that enhance sweetness or savory sensation, as well as compounds that
block or desensitize bitter taste for use in the food and beverage industry. Under the terms of the agreement, Redpoint and Givaudan are collaborating exclusively with each other to discover and
develop compounds that act primarily through the modulation of the TRPm5 channel. In consideration of our agreement to conduct research and develop compounds and grant exclusive licenses and other
rights, Givaudan paid us an upfront technology fee in the amount of $1.3 million and agreed to provide research funding to us over the initial 3.5 year term of the agreement of up to
$11.6 million. Givaudan will also reimburse us for costs we incur in connection with obtaining certain regulatory approvals. Through December 31, 2008, including the upfront fee, we have
received $5.7 million in research and development funding. We are also eligible to receive milestone payments of up to $2.5 million upon the achievement of specified
development and commercialization events as well as royalty payments based on net sales of Givaudan products that contain flavor systems incorporating compounds developed under the collaboration.



In December 2007, we entered into a one year research agreement with The Coca-Cola Company, referred to herein as
Coca-Cola, for the development of certain technology for use in soft drinks and other non-alcoholic beverages. In consideration of our agreement to conduct research for the
development of certain technology and grant exclusive licenses and other rights, Coca-Cola paid us approximately $900,000. The agreement expired by its terms in December of 2008.

Potential Pharmaceutical Partnerships

We plan to form partnerships with pharmaceutical companies to develop and market liquid and innovative pharmaceutical formulations in
exchange for technology access fees, research funding, product development milestones and product royalties. We have identified a broad selection of potential products for development, including both
liquid formulations and innovative formulations that we believe would be attractive licensing candidates. In general, our strategy involves the development of a prototype formulation demonstrating the
effectiveness of our technology by combining the target API with our GRAS-approved bitter or other aversive taste blocker. Some products could incorporate third-party APIs that could
constitute line extensions to be marketed to the API patent holder. Additional prototype products could be developed with either soon-to-be or patent-expired APIs. These
products could either be licensed to the original patent holder to create a line extension, or to a generics company wishing to market a differentiated or branded generic product. In November 2008, we
announced that we had signed an agreement to collaborate with Schering-Plough Corporation in the area of taste science research for pharmaceutical applications. This expanded feasibility agreement
builds upon the successful completion of a previous research study between the parties.

17

---



Table of Contents

We
are also seeking collaborations with major pharmaceutical companies for the further development and optimization of our TRPm5 modulators for therapeutic applications in diabetes and
obesity.

We
may also form long-term strategic partnerships with food flavor companies or major pharmaceutical and biotechnology companies to support product commercialization
activities, clinical trials, product manufacturing, marketing, or distribution.

Employees

As of December 31, 2008, we employed 36 persons on a full-time basis, of whom 29 were in research and development
departments, and 7 of whom were engaged in finance, business development and administration. Of these employees, 14 hold M.D., Ph.D. or other advanced degrees. We also retain outside consultants. We
believe that while we have been successful to date in attracting skilled and experienced scientific personnel, competition for such personnel continues to be intense and there can be no assurance that
we will continue to be able to attract and retain the professionals we will need to grow our business.

On
February 2, 2009, we announced a corporate restructuring which reduced our workforce by approximately 31%. Thus, as of March 1, 2009, we employed 25 persons on a
full-time basis, of whom 19 were in research and development departments, and 6 of whom were engaged in finance, business development and administration.

Our Executive Officers

The following table identifies our current executive officers and directors:

Name

Age

Capacities in Which Served

In Current
Position SinceF. Raymond Salemme, Ph.D.(1)


63

President, Chief Executive Officer and Director


2007Scott M. Horvitz(2)


50

Chief Financial Officer, Treasurer and Secretary


2007Joseph Mollica, Ph.D.(3)


68

Chairman of the Board


2007Robert Chefitz(4)


49

Director


2007Leif Kjaergaard, Ph.D.(5)


62

Director


2007Allen Bloom, Ph.D.(6)


65

Director


2007Irwin Scher, M.D.(7)


69

Director


2007Richard P. Shanley, CPA(8)


61

Director


2007


---

18

---



Table of Contents



19

---



Table of Contents

20

---



Table of Contents



None
of our executive officers is related to any other executive officer or to any of our Directors. Our executive officers are elected annually by the Board of Directors and serve until
their successors are duly elected and qualified.

Corporate History

Redpoint was incorporated in August 1995 under the name of Linguagen Corp., based on the pioneering work of its scientific founder
Robert Margolskee, M.D., Ph.D. Dr. Margolskee is Professor of Neuroscience and Pharmacology at the Mount Sinai School of Medicine. Dr. Margolskee's laboratory has made major discoveries
in the molecular biology of taste signaling pathways. We have obtained exclusive licenses to key technology patents, covering discoveries in his laboratory, from the Mount Sinai School of Medicine.
Originally we were focused on broadening the application of natural products such as nucleotides for food and pharmaceutical taste modification applications.

Since
November 2003, we successfully recruited a professional management and scientific team with extensive experience in biotechnology, pharmaceutical discovery and product development,
and refocused our research efforts on the discovery of proprietary compounds acting through novel biochemical mechanisms, either as enhancers acting for sweet and savory tastes, or as bitter blockers
for pharmaceutical applications.

Since
refocusing our efforts, we have made key advances in the discovery of prototype compounds for both sweet and savory taste enhancement and pharmaceutical product bitter blocking. We
have filed patent applications covering both aspects of our discovery technology and chemical compositions of matter for active compounds. In order to drive our discovery programs, we built an
integrated discovery platform incorporating many state-of-the art tools and capabilities pioneered in the pharmaceutical industry, including capabilities in molecular biology,
biochemistry, pharmacology, high throughput screening, electrophysiology, cheminformatics, and transgenic/operant animal models. We complement these capabilities with sensory testing and regulatory
affairs expertise, to complete a platform for the discovery and development of proprietary compounds for use in pharmaceutical, prescription, OTC, food and beverage products.

In
March 2007, we entered into the Agreement and Plan of Merger, dated as of March 12, 2007, by and among Redpoint, on the one hand, and Robcor, Merger Sub, Robcor, LLC,
and Halter Financial Investments, L.P. and Michael Heitz, as stockholders of Robcor, on the other hand. The transactions contemplated by the Reverse Merger Agreement were consummated on
March 12, 2007.

Pursuant
to the Reverse Merger Agreement, on the Closing Date, Merger Sub merged with and into Redpoint, with Redpoint being the surviving corporation and becoming a wholly-owned
subsidiary of Robcor, and the outstanding shares of capital stock, convertible notes and certain warrants to purchase capital stock of Redpoint were converted into shares of common stock of Robcor in
accordance with the Delaware General Corporation Law on the terms and conditions as set forth in the Reverse Merger Agreement. On May 3, 2007, Redpoint and Robcor entered into an Agreement and
Plan of Merger in which Robcor, the former parent company of Redpoint after consummation of the Reverse Merger, merged with and into Redpoint. Such merger, referred to herein as the Reincorporation
Merger, was deemed effective on June 15, 2007.

21

---



Table of Contents

Redpoint
was deemed to have been the accounting acquirer in the Reverse Merger. Accordingly, the financial statements of the Company presented reflect the historical results of Redpoint
prior to the Reverse Merger, and of the combined entities following the Reverse Merger, and do not include the historical financial results of Robcor prior to the consummation of the Reverse Merger.
For analysis of the accounting treatment of the Reverse Merger and the Reincorporation Merger as well as our business, please see the accompanying financial statements.

Our
principal executive offices are located at 7 Graphics Drive, Ewing, New Jersey, 08628. Our telephone number is (609) 637-9700. Our website address is www.redpointbio.com. The information contained
on our website is not incorporated by reference into, and does not form any part of, this annual report.

Available Information

We make available the following public filings with the Securities and Exchange Commission, or the SEC, free of charge through our Web
site atwww.redpointbio.comas soon as reasonably practicable after we electronically file such material with, or furnish such material to, the
SEC:



In
addition, we make available our code of conduct free of charge through our web site. We intend to disclose any amendments to, or waivers from, our code of conduct that are required to
be publicly disclosed pursuant to rules of the SEC and NASDAQ by filing such amendment or waiver with the SEC and posting it on our web site.

No
information on our internet web site is incorporated by reference into this Annual Report on Form 10-K or any other public filing made by us with the SEC.

ITEM 1A.    RISK FACTORS

You should carefully consider the following risks and all of the other information set forth in this Annual
Report on Form 10-K before deciding to invest in shares of our common stock. The risks described below are not the only ones facing us. Additional risks not presently known to us or
that we currently deem immaterial may also impair our business operations.

If any of the following risks actually occurs, our business, financial condition or results of operations would likely suffer. In such case, the market price of
our common stock would likely decline due to the occurrence of any of these risks, and you may lose all or part of your investment.

Risks Related To Our Business and Our Industry

Redpoint is a development-stage company. We have incurred losses since inception and expect to incur additional net losses for at least the next several years.

Since our inception we have incurred significant losses and negative cash flows from operations. As of December 31, 2008, we had
an accumulated deficit of $42.5 million, and anticipate incurring additional losses for the foreseeable future. We expect to spend significant resources over the next several years to enhance
our technologies and to fund research and development of our pipeline of potential products. We have not generated significant revenues in any particular year since our inception. To date,
substantially all of our revenue has been derived from corporate collaborations, license agreements, and government grants. In order to achieve profitability, we must develop products and technologies
that can be commercialized by us or through future collaborations. Our ability to generate revenues and become profitable will depend on our ability, alone or with potential collaborators, to timely,
efficiently and successfully complete the development of our product

22

---



Table of Contents

candidates,
which may include conducting pre-clinical and clinical tests, obtaining necessary regulatory approvals, and manufacturing and marketing our product candidates. There can be no
assurance that any such events will occur or that we will ever become profitable. Even if we do achieve profitability, we cannot predict the level of such profitability. If we sustain losses over an
extended period of time, we may be unable to continue our business.

We will need substantial additional funding to develop our products and for our future operations. If we are unable to obtain the funds necessary to do so, we may be
required to delay, scale back or eliminate our product development or may be unable to continue our business.

The development of our product candidates will require a commitment of substantial funds to conduct the costly and
time-consuming research, which may include pre-clinical and clinical testing, necessary to obtain regulatory approvals and bring our products to market. We believe that our
current capital resources and the funding we expect to continue to receive from Givaudan should be sufficient to meet our operating and capital requirements at least through September 2010. Our future
requirements will depend on many factors, including:



There
can be no assurance that we will not need additional capital sooner than currently anticipated.

We
will need to raise substantial additional capital to fund our future operations. We cannot be certain that additional financing will be available on acceptable terms, or at all. In
recent years, it has been difficult for companies to raise capital due to a variety of factors, which may or may not continue. To the extent we raise additional capital through the sale of equity
securities, the ownership position of our existing stockholders could be substantially diluted. If additional funds are raised through the issuance of preferred stock or debt securities, these
securities are likely to have rights, preferences and privileges senior to our common stock. Fluctuating interest rates could also increase the costs of any debt financing we may obtain.

Failure
to successfully address ongoing liquidity requirements will have a material adverse effect on our business. If we are unable to obtain additional capital on acceptable terms when
needed, we may be required to take actions that harm our business and our ability to achieve cash flow in the future, including possibly the surrender of our rights to some technologies or product
opportunities, delaying our clinical trials or curtailing or ceasing operations.

23

---



Table of Contents

We are an early stage company and currently have no products available for sale, license or use. Our product candidates require additional research, development, testing,
expert reviews and/or and regulatory approvals before marketing. We may be unable to develop, obtain regulatory approval or market any of our product candidates. If our product candidates are delayed
or fail, our financial condition will be negatively affected, and we may have to curtail or cease our operations.

We are in the early stage of product development and we are dependent on new discoveries. We currently do not sell or license any
products to third parties and do not expect to have any products commercially available for several years, if at all. You must evaluate us in light of the uncertainties and complexities affecting an
early stage biotechnology company. Our product candidates require additional research and development, pre-clinical testing, clinical testing (for our pharmaceutical products) and
regulatory review and/or approvals clearances before marketing. There are many reasons that our product candidates may fail or not advance to commercialization, including the possibility
that:



In
addition, we may not succeed in developing taste enhancers and aversive taste blockers with the appropriate attributes required for use in successful commercial products. Successful
taste enhancers and aversive taste blockers require, among other things, appropriate biological activity, including the correct taste enhancer and aversive taste blocker properties for the product
application, an acceptable safety profile, including lack of toxicity or allergenicity, and appropriate physical or chemical properties, including relative levels of stability, volatility and
resistance to heat. Successful taste enhancers and aversive taste blockers must also be cost-efficient. We may not be able to develop taste enhancers and aversive taste blockers that meet
these criteria.

If
our product candidates are delayed or we fail to successfully develop and commercialize our product candidates, our financial condition may be negatively affected, and we may have to
curtail or cease our operations.

We may not successfully establish and maintain collaborative and licensing arrangements, which could adversely affect our ability to develop and commercialize our product
candidates.

A key element of our food and beverage strategy is to commercialize our taste enhancers through product discovery and development
collaborations with major ingredient suppliers and/or end users, such as the Givaudan Agreement. Our pharmaceutical strategy depends on establishing collaborations and licensing agreements with major
pharmaceutical, over-the-counter and generic companies. We may not be able to maintain or expand these licenses and collaborations or establish additional licensing and
collaboration arrangements necessary to develop and commercialize our product candidates. Each of

24

---



Table of Contents

our
collaboration agreements, such as the Givaudan Agreement, provide our collaborators with the ability to terminate its agreement with us prior to the expiration of the term as set forth in the
agreements. Even if we are able to maintain or establish licensing or collaboration arrangements, these arrangements may not be on favorable terms and may contain provisions that will restrict our
ability to develop, test and market our product candidates. Any failure to maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business
prospects, financial condition or ability to develop and commercialize our product candidates.

We
expect to rely at least in part on third party collaborators to perform a number of activities relating to the development and commercialization of our product candidates, including
the manufacturing of product materials, the design and conduct of clinical trials for our pharmaceutical formulations, and potentially the obtaining of regulatory approvals and marketing and
distribution of any successfully developed products. Our collaborative partners may also have or acquire rights to control aspects of our product development and clinical programs. As a result, we may
not be able to conduct these programs in the manner or on the time schedule we currently contemplate. In addition, if any of these collaborative partners withdraw support for our programs or product
candidates or otherwise impair their development, our business could be negatively affected. To the extent we undertake any of these activities internally, our expenses may increase.

In
addition, our success depends on the performance of our collaborators of their responsibilities under these arrangements. Some potential collaborators may not perform their
obligations in a timely fashion or in a manner satisfactory to us. Because such agreements may be exclusive, we may not be able to enter into a collaboration agreement with any other company covering
the same product field during the applicable collaborative period. In addition, our collaborators' competitors may not wish to do business with us at all due to our relationship with our
collaborators. If we are unable to enter into
additional product discovery and development collaborations or maintain our existing arrangements, our ability to sustain or expand our business will be significantly diminished.

If we or our collaborators are unable to obtain and maintain the GRAS determination or regulatory approval required before any taste enhancers or aversive taste blockers can
be incorporated into products that are sold, we would be unable to commercialize our taste enhancers and aversive taste blockers and our business would be adversely affected.

In the United States, the development, sale and incorporation of our taste enhancers and aversive taste blockers into products are
subject to regulation by the FDA, and in some instances, other government bodies. Obtaining and maintaining a GRAS determination or regulatory approval is typically costly and can take many years.

Depending
on the amount or intended use of a particular taste enhancer or aversive taste blocker added to a product and the number of product categories in which the flavor or flavor
enhancer will be incorporated, specific testing, safety assessment protocols, and regulatory processes must be satisfied before we or our collaborators can commercially market and sell products
containing any taste enhancers and aversive taste blockers that we may discover. A key element of our strategy is to develop flavors and flavor enhancers that will be evaluated by the FEMA (Flavor and
Extracts Manufacturers Association) GRAS Panel, which we expect will take 18 to 24 months and which is less expensive than the alternative of filing a food additive petition with the FDA, which
can take eight years or more. The FEMA GRAS review process may take longer than 24 months and cost more than we currently anticipate if additional safety studies are requested by the FEMA GRAS
Panel or are necessary to explain unexpected safety study findings. There is a risk that one or more of our product candidates may not qualify for a FEMA GRAS determination. This may occur for a
variety of reasons, including the taste enhancer's or aversive taste blocker's intended use, the amount of the taste enhancer or aversive taste blocker intended to be added to packaged foods and
beverages, the number of product categories in which the taste enhancers or aversive taste blockers will be incorporated, whether the

25

---



Table of Contents

taste
enhancer imparts sweetness, the safety profile of the taste enhancers or aversive taste blockers and the FEMA GRAS Panel's interpretation of the safety data. Even if we obtain a GRAS
determination with respect to a taste enhancer or aversive taste blocker, the FDA has the ability to challenge such determination, which could materially adversely affect our ability to market
products on schedule or at all. In the event that a particular taste enhancer or aversive taste blocker does not qualify for a FEMA GRAS determination, we may be required to pursue a lengthy FDA
approval process to reach the U.S. market, or dedicate our development efforts to alternative compounds, which would further delay commercialization. In addition, laws, regulations or FDA practice
governing the regulatory approval process, the availability of the GRAS determination process or the manufacture or labeling of such products, may change in a manner that could adversely affect our
ability to commercialize products on schedule or at all.

Sales
of our taste enhancers and aversive taste blockers outside of the United States will be subject to foreign regulatory requirements. In most cases, whether or not a GRAS
determination or FDA approval has been obtained, approval of a product by the comparable regulatory authorities of foreign countries must still be obtained prior to manufacturing or marketing the
product in those countries. A GRAS determination or FDA approval in the United States or in any other jurisdiction does not ensure approval in other jurisdictions because the requirements from
jurisdiction to jurisdiction may vary widely. Obtaining foreign approvals could result in significant delays, difficulties and costs for us and require additional safety studies and additional
expenses. If we fail to comply with these regulatory requirements or to obtain and maintain required approvals, our ability to generate revenue will be diminished.

We
and our collaborators may not be successful in overcoming these regulatory hurdles, which could result in product launch delays, unanticipated expenses, termination of collaborations,
and flavors and flavor enhancers not being approved for incorporation into consumer products. These consequences would have a material adverse effect on our business financial condition and results of
operations.

Even if we or our collaborators receive a GRAS determination or regulatory approval and incorporate our taste enhancers or aversive taste blockers into products, those
products may never be commercially successful.

Even if we discover and develop taste enhancers and aversive taste blockers that obtain the necessary GRAS determination or regulatory
approval, our success depends to a significant degree upon the commercial success of packaged food and beverage products and pharmaceutical products incorporating those taste enhancers or aversive
taste blockers. If these products fail to achieve or subsequently maintain market acceptance or commercial viability, our business would be significantly harmed because our royalty revenue is
dependent upon consumer sales of these products. In addition we could be unable to maintain our existing collaborations or attract new product discovery and development collaborators. Many factors may
affect the market acceptance and commercial success of any potential products incorporating taste enhancers or aversive taste blockers that we may discover, including:



26

---



Table of Contents



We may experience delays in clinical trials and regulatory approval relating to our products that could adversely affect our financial results and our commercial prospects
for our pharmaceutical products.

Our pharmaceutical strategy is to incorporate our taste enhancers and aversive taste blockers into proprietary formulations of
medicines that potentially offer improved acceptability and compliance, thus enhancing efficacy and possibly providing broader indications or patient populations. In addition to the GRAS regulatory or
other requirements for our taste enhancers and aversive taste blockers, we will also require FDA 505(b)(2) regulatory approvals of any novel pharmaceutical formulations that we develop with altered
delivery characteristics. In addition, any uses of our taste modulators that we develop as drugs acting to modulate incretin secretion with potential utility as therapeutic agents for diabetes or
obesity, will be subject to full FDA 505(b)(1) safety testing and clinical trials proving therapeutic efficacy as required to develop an NDA. In either case, we may be required to conduct clinical
trials to demonstrate safety and efficacy of our product candidates. For product candidates that advance to clinical testing, we cannot be certain that we or a collaborator will successfully complete
the clinical trials necessary to receive regulatory product approvals. These processes are lengthy and expensive.

We
intend to seek approval for our novel pharmaceutical formulations through the FDA 505(b)(2) approval process. If we are unable to approve our pharmaceutical formulations through the
505(b)(2) process, we may be required to pursue the more expensive and time consuming 505(b)(1) approval process. Section 505(b) of the Federal Food, Drug, and Cosmetic Act describes two types
of NDA applications that an applicant may submit for approval of innovator medicines. The first type of NDA, described under section 505(b)(1), consists of a full report of investigations of
safety and effectiveness conducted by or for the applicant or for which the applicant has the right of reference for the information. The second type of NDA, described under section 505(b)(2),
consists of a full report of investigations of safety and effectiveness where at least some portion of the information submitted for approval comes from sources other than studies performed or
sponsored by the applicant. Drugs that may be approved via the 505(b)(2) process include drugs that have the same active ingredients as previously approved products, but now are formulated in a
different delivery mechanism or other new dosage forms or with different indications. The basis for the 505(b)(2) application is that there already
is a certain amount of information that is known about the active ingredient. As such, repeating all the clinical studies required for a 505(b)(1) application would be significantly more expensive and
time consuming than the 505(b)(2) process.

To
obtain regulatory approvals, we must, among other requirements, complete clinical trials showing that our products are safe and effective for a particular indication. Under the
505(b)(2) approval process, although we may not have performed some of the studies ourselves, we must submit clinical and non-clinical data to demonstrate the medication is safe and
effective. We also must be able to provide data and information, including bioavailability or comparative bioavailability studies, to establish sufficiently the appropriateness of relying on material
without the right of reference.

We
do not know when clinical trials for our products will commence or whether we will complete any of our clinical trials on schedule or at all. There can be no assurance that clinical
trials will in fact demonstrate that our products are safe or effective.

Additionally,
we may not be able to find acceptable patients or may experience delays in enrolling patients for our clinical trials. The FDA or we may suspend our clinical trials at any
time if either believes that we are exposing the subjects participating in the trials to unacceptable health risks. The FDA or institutional review boards and/or institutional biosafety committees at
the medical institutions and healthcare facilities where we seek to sponsor clinical trials may not permit a trial to proceed or may suspend any trial indefinitely if they find deficiencies in the
conduct of the trials.

27

---



Table of Contents

Product
development costs to us and our potential collaborators will increase if we have delays in testing or approvals or if we need to perform more or larger clinical trials than
planned. We expect to continue to rely on third party clinical investigators at medical institutions and healthcare facilities to conduct our clinical trials, and, as a result, we may face additional
delaying factors outside our control. Significant delays may adversely affect our financial results and the commercial prospects for our product candidates and delay our ability to become profitable.

If our pharmaceutical product candidates, including any product candidates we may develop under our early stage diabetes program, do not successfully complete the clinical
trial process, we will not be able to market them. Even successful clinical trials may not result in a marketable product and may not be entirely indicative of a product's safety or efficacy.

Many factors, known and unknown, can adversely affect clinical trials and the ability to evaluate a product's efficacy. During the
course of treatment, patients can die or suffer other adverse events for reasons that may or may not be related to the proposed product being tested. Even if unrelated to our product, certain events
can nevertheless adversely impact our clinical trials. As a result, our ability to ultimately develop and market the products and obtain revenues would suffer.

Even
promising results in pre-clinical studies and initial clinical trials do not ensure successful results in later clinical trials, which test broader human use of our
products. Many companies in our industry have suffered significant setbacks in advanced clinical trials, despite promising results in earlier trials. Even successful clinical trials may not result in
a marketable product or be indicative of the efficacy or safety of a product. Many factors or variables could affect the results of clinical trials and cause them to appear more promising than they
may otherwise be. Product candidates that successfully complete clinical trials could ultimately be found to be unsafe or ineffective.

In
addition, our ability to complete clinical trials depends on many factors, including obtaining adequate clinical supplies and having a sufficient rate of patient recruitment. For
example, patient recruitment is a function of many factors, including:



Even
if patients are successfully recruited, we cannot be sure that they will complete the treatment process. Delays in patient enrollment or treatment in clinical trials may result in
increased costs, program delays or both.

With
respect to markets in other countries, we or a partner will also be subject to regulatory requirements governing clinical trials in those countries. Even if we complete clinical
trials, we may not be able to submit a marketing application. If we submit an application, the regulatory authorities may not review or approve it in a timely manner, if at all.

Because we cannot predict whether or when we will obtain regulatory approval to commercialize our pharmaceutical product candidates, we cannot predict the timing of any
future revenue from these product candidates.

We cannot commercialize any of our pharmaceutical product candidates to generate revenue until the appropriate regulatory authorities
have reviewed and approved the applications for our product

28

---



Table of Contents

candidates.
We cannot assure you that the regulatory agencies will complete their review processes in a timely manner or that we will obtain regulatory approval for any product candidate we or our
potential collaborators develop. Satisfaction of regulatory requirements typically takes many years, is dependent upon the type, complexity and novelty of the product and requires the expenditure of
substantial resources. Regulatory approval processes outside the United States include all or many of the risks associated with the FDA approval process and potentially others as well. In addition, we
may experience delays or rejections based upon additional government regulation from future legislation or administrative action or changes in FDA policy, or the policies of other relevant
governmental or nongovernmental entities during the period of product development, pre-clinical and clinical trials and FDA regulatory review.

We will rely on third parties to manufacture taste enhancers, aversive taste blockers and pharmaceutical product candidates. There can be no guarantee that we can obtain
sufficient and acceptable quantities of our taste enhancers or aversive taste blockers or pharmaceutical product candidates on acceptable terms, which may delay or impair our ability to develop, test
and market such products.

Our business strategy relies on third parties to manufacture and produce our taste enhancers and aversive taste blockers and
pharmaceutical product candidates in accordance with good manufacturing practices established by the FDA, or similar regulations in other countries. Our taste enhancers and aversive taste blockers and
pharmaceutical product candidates may be in competition with other products for access to these facilities and may be subject to delays in manufacture if third parties give other products greater
priority than our product candidates. These third parties also may not deliver sufficient quantities of our taste enhancers and aversive taste blockers and pharmaceutical product candidates,
manufacture our taste enhancers and aversive taste blockers and pharmaceutical product candidates in accordance with specifications, or comply with applicable government regulations. Additionally, if
the manufactured products fail to perform as specified, our business and reputation could be severely impacted.

We
expect to enter into manufacturing agreements for the production of product materials. If any manufacturing agreement is terminated or any third party collaborator experiences a
significant problem that could result in a delay or interruption in the supply of product materials to us, there are very few contract manufacturers who currently have the capability to produce our
taste enhancers and aversive taste blockers and pharmaceutical product candidates on acceptable terms, or on a timely and cost-effective basis. There can be no assurance that manufacturers
on whom we will depend will be able to successfully produce our taste enhancers and aversive taste blockers and pharmaceutical product candidates on acceptable terms, or on a timely or
cost-effective basis. There can also be no assurance that manufacturers will be able to manufacture our products in accordance with our product specifications, or will meet FDA or other
requirements. We must have sufficient and acceptable quantities of our product materials to conduct our clinical trials and to market our product candidates, if and when such products have been
approved by the FDA for marketing. If we are unable to obtain sufficient and acceptable quantities of our product material, we may be required to delay the clinical testing and marketing of our
products.

If we do not comply with applicable regulatory requirements in the manufacture and distribution of our product candidates, we may incur penalties that may inhibit our
ability to commercialize our products and adversely affect our revenue.

Our failure or the failure of our potential collaborators or third party manufacturers to comply with applicable FDA or other
regulatory requirements including manufacturing, quality control, labeling, safety surveillance, promoting and reporting may result in criminal prosecution, civil penalties, recall or seizure of our
products, total or partial suspension of production or an injunction, as well as other regulatory action against our product candidates or us. Discovery of previously unknown

29

---



Table of Contents

problems
with a product, supplier, manufacturer or facility may result in restrictions on the sale of our products, including a withdrawal of such products from the market. The occurrence of any of
these events would negatively impact our business and results of operations.

If we are unable to create and maintain sales, marketing and distribution capabilities or enter into agreements with third parties to perform those functions, we will not be
able to commercialize our product candidates.

We currently have no sales, marketing or distribution capabilities. Therefore, to commercialize our product candidates, if and when
such products have been approved and are ready for marketing, we expect to collaborate with third parties to perform these functions. We have no experience in developing, training or managing a sales
force and will incur substantial additional expenses if we decide to market any of our future products directly. Developing a marketing and sales force is also time consuming and could delay launch of
our future products. In addition, we will compete with many companies that currently have extensive and well-funded marketing and sales operations. Our marketing and sales efforts may be
unable to compete successfully against these companies.

Many potential competitors, including those who have greater resources and experience than we do, may develop products or technologies that make ours obsolete or
noncompetitive.

We believe our taste technology approach is applicable to a wide range of food, beverage and pharmaceutical products representing many
and diverse competitive companies and approaches. The life sciences and other technology industries are characterized by rapid technological change, and the area of sensory or taste research is a
rapidly evolving field. Our future success will depend on our ability to maintain a competitive position with respect to technological advances.
Technological developments by others may result in our taste enhancers or aversive taste blockers and technologies, as well as our pharmaceutical formulations, becoming obsolete.

We
face substantial competition from companies pursuing the commercialization of products and services relevant to taste using various methods for the discovery of taste enhancers and
aversive taste blockers. These competitors include leading flavor companies, such as International Flavors & Fragrances Inc., Givaudan SA, Symrise and Firmenich. Senomyx is
principally focused in the area of taste enhancement for food products and uses a high throughput screening technology and synthetic chemistry to discover novel flavor enhancers, which it licenses to
end users in the food industry. Senomyx was initially focused on sweetness and savory flavor enhancers, but is now also developing programs to discover bitter blockers for food and pharmaceutical
products. During the last 2 years, Senomyx has announced success at developing sweetener enhancers for both sucrose and sucralose, although these have not yet reached the marketplace.
Nutrinova, a German ingredients company, is also developing a biotechnology approach to finding novel taste enhancers in collaboration with the German Biotechnology Research and Information Network.
We currently compete and will continue to compete in the future with these companies in collaborating with and selling flavor products and technologies to manufacturers of packaged food and beverage
products.

We
also face substantial competition from a number of companies in the pharmaceutical formulations industry. Taste masking has a long history in the pharmaceutical industry. A
traditional method of taste masking for pharmaceutical products is to mix the active pharmaceutical ingredient with flavorings and sugar syrup to mask unpleasant taste. This approach is most commonly
used for pediatric liquid formulations as well as many over-the-counter cough-cold remedies. FlavorRx supplies flavors at drug store pharmacies that can be
compounded by the pharmacist to make certain liquid formulations more palatable. In the pharmaceutical sector there are a number of drug delivery companies that have developed proprietary taste
masking technologies that include both traditional and novel pharmaceutical approaches. These competing technologies and companies include but are not

30

---



Table of Contents

limited
to OraSolv® and DuraSolv® from CIMA Labs (a Cephalon company), MicroCaps® and Liquitard® from Eurand, FlavorTech,
Liquette and MicroMask from KV Pharmaceuticals, EnVel® from Catalent, CEFORM from Biovail and WOWTab® from Astellas. Virtually all of these approaches
including OralSolv, DuraSolv, MicroCap, Liquitard, CEFORM, EnVel and the technology used in Zydis products utilize a physical approach to sequester the active drug substance away from the taste
receptors on the tongue. These include coating the drug, micro encapsulation, immobilization, use of cyclodextran carriers, or stabilization of the drug in a micellar or insoluble phase, as the
principle means of taste masking.

We
also face substantial competition with respect or our diabetes program. Type 2 diabetes is a disease characterized by persistent hyperglycemia due to the body's inability to
produce enough or respond to insulin, a hormone regulating the absorption of sugar. Most treatments, outside of insulin replacement, focus on correcting high blood sugar by either stimulating the
pancreas to produce more insulin, enhancing tissue sensitivity to insulin, or by inhibiting the production and release of glucose from the
liver. There are many drugs currently available for treating diabetes and metabolic disease, either alone or in combination with other drugs. There are several classes of anti-diabetic
treatments, either orally available or injectable, including insulin, GLP-1 receptor agonists, sulfonylureas, DPP-IV inhibitors, PPAR agonists, and biguanides. Many of these
drugs exhibit not only limited efficacy, but are also associated with less than desired tolerability and significant mechanism-based side effects. Several new classes of anti-diabetic
treatments have recently been developed, including incretin mimetics such as Exendin-4, a GLP-1 mimetic, which enhance glucose-dependent insulin secretion by the pancreatic
beta-cell and slows gastric emptying, and DPP-IV inhibitors which work by preventing the inactivation of endogenous GLP-1. Additionally, new mechanisms such
as GPR119 receptor agonists are being developed as glucose-dependent insulin and GLP-1 secretagogues expected to lower postprandial glucose and reduce weight gain.

If
successful, our core diabetes program will face competition. The major competitors to TPRM5 modulators would likely include several new classes of anti-diabetic
treatments, including the incretin mimetic Byetta® (marketed by Eli Lilly and Company and Amylin Pharmaceuticals), DPP-IV inhibitors (including Januvia marketed by
Merck & Co., Inc.), and GPR119 receptor agonists, currently in development by Metabolex, Inc., OSI Pharmaceuticals, GlaxoSmithKline, and Arena
Pharmaceuticals, Inc./Johnson & Johnson.

Many
of these companies have substantially greater capital resources, research and development resources and experience, manufacturing capabilities, regulatory expertise, sales and
marketing resources, established relationships with consumer products companies and production facilities.

We
may in the future face competition from life sciences and other technology companies and other commercial enterprises. These entities engage as we do in biotechnology, biology or
chemistry and could apply this technology to the discovery and development of taste enhancers and aversive taste blockers and new formulations of pharmaceutical products. We cannot guarantee that
products developed as a result of our competitors' existing or future collaborations will not compete with our taste enhancers and aversive taste blockers and new pharmaceutical formulations.

Universities
and public and private research institutions are also potential competitors. While these organizations primarily have educational objectives, they may develop proprietary
technologies related to the sense of taste or secure patent protection that we may need for the development of our technologies and products. We may attempt to license these proprietary technologies,
but these licenses may not be available to us on acceptable terms, if at all.

Our
competitors, either alone or with their collaborative partners, may succeed in developing technologies or discovering taste enhancers and aversive taste blockers that are more
effective, safer, more affordable or more easily commercialized than ours, and our competitors may obtain intellectual

31

---



Table of Contents

property
protection or commercialize products sooner than we do. Developments by others may render our product candidates or our technologies obsolete. In addition, our current product discovery and
development collaborators are not prohibited from entering into research and development collaboration agreements with third parties in any product field. Our failure to compete effectively would have
a significant adverse effect on our business, financial condition and results of operations.

If we are unable to attract and retain key personnel and advisors, it may adversely affect our ability to obtain financing, pursue collaborations or develop our product
candidates.

We are highly dependent on F. Raymond Salemme, Ph.D., our Chief Executive Officer and President, as well as Scott Horvitz, our Chief
Financial Officer.

Our
future success depends on our ability to attract, retain and motivate highly qualified management and scientific, development and commercial personnel and advisors. To pursue our
business strategy, we will need to hire or otherwise engage qualified personnel and managers, including personnel with expertise in discovery, development, clinical trials, government regulation,
manufacturing, marketing and sales. Competition for qualified personnel is intense among companies, academic institutions and other organizations. If we are unable to attract and retain key personnel
and advisors, it may negatively affect our ability to successfully develop, test and commercialize our product candidates.

We use hazardous and biological materials in our business. Any claims relating to improper handling, storage or disposal of these materials could be time consuming and
costly.

Our products and processes will involve the controlled storage, use and disposal of certain hazardous and biological materials and
waste products. We and our suppliers and other collaborators are subject to federal, state and local regulations governing the use, manufacture, storage, handling and disposal of materials and waste
products. Even if we and these suppliers and collaborators comply with the standards prescribed by law and regulation, the risk of accidental contamination or injury from hazardous materials cannot be
completely eliminated. In the event of an accident, we could be held liable for any damages that result, and any liability could exceed the limits or fall outside the coverage of any insurance we may
obtain and exceed our financial resources. We may not be able to maintain insurance on acceptable terms, or at all. We may incur significant costs to comply with current or future environmental laws
and regulations.

We may be sued for product liability, which could adversely affect our business.

Because our business strategy involves the development and sale by either us or our collaborators of commercial products incorporating
our taste enhancers or aversive taste blockers, we may be sued for product liability. We may be held liable if any product we develop and commercialize, or any product our collaborators commercialize
that incorporates any of our taste enhancers or aversive taste blockers, causes injury or is found otherwise unsuitable during product testing, manufacturing, marketing, sale or consumer use. In
addition, the safety studies we must perform and the FEMA GRAS determination we must obtain prior to incorporating our taste enhancers and aversive taste blockers into a commercial product, and the
regulatory approvals required to commercialize our pharmaceutical products, will not protect us from any such liability.

If
we and our collaborators commence sale of commercial products we will need to obtain product liability insurance, and this insurance may be prohibitively expensive, or may not fully
cover our potential liabilities. Inability to obtain sufficient insurance coverage at an acceptable cost or otherwise to protect against potential product liability claims could prevent or inhibit the
commercialization of products developed by us or our product discovery and development collaborators. We may be obligated to indemnify our product discovery and development collaborators for product
liability or

32

---



Table of Contents

other
losses they incur as a result of our taste enhancers and aversive taste blockers. Any indemnification we receive from such collaborators for product liability that does not arise from our taste
enhancers or aversive taste blockers may not be sufficient to satisfy our liability to injured parties. If we are sued for any injury caused by our taste enhancers or aversive taste blockers or
products incorporating our taste enhancers or aversive taste blockers or any other products we develop, our liability could exceed our total assets.

Risks Related To Intellectual Property

If our product candidates are not effectively protected by valid, issued patents or if we are not otherwise able to protect our proprietary information and technologies, it
could harm our business.

The success of our operations will depend in part on our ability and that of our licensors to:



In
the event we are not adequately to protect our intellectual property and proprietary information, our business will be materially harmed.

We may not have adequate protection for our unpatented proprietary information, which could adversely affect our competitive position.

In addition to patents, we will substantially rely on trade secrets, know-how, continuing technological innovations and
licensing opportunities to develop and maintain our competitive position. However, it is conceivable that others may independently develop substantially equivalent proprietary information and
techniques or otherwise gain access to our trade secrets or disclose our technology. To protect our trade secrets, we may enter into confidentiality agreements with employees, consultants and
potential collaborators. However, these agreements may not provide meaningful protection of our trade secrets or adequate remedies in the event of unauthorized use or disclosure of such information.
Likewise, our trade secrets or know-how may become known through other means or be independently discovered by our competitors. Any of these events could hinder us from developing or
commercializing our product candidates.

Our ability to compete in the ingredient, food and beverage market and the pharmaceutical market may decline if we do not adequately protect our proprietary technologies.

Because of the substantial length of time and expense associated with the development of new products, we, along with the rest of the
ingredient, food and beverage industry and pharmaceutical industry, place considerable importance on obtaining and maintaining patent protection for new technologies, products and processes. Our
success depends in part on our ability to obtain and maintain intellectual property that protects our technologies, taste enhancers or aversive taste blockers and our pharmaceutical products. Patent
positions may be highly uncertain and may involve complex legal and

33

---



Table of Contents

factual
questions, including the ability to establish patentability of sequences and or structures relating to taste receptors, proteins, chemical synthesis techniques, compounds and methods for using
them to modulate taste for which we seek patent protection. No consistent pattern regarding the allowability or scope of claims in many of our pending patent applications has emerged to date. As a
result, we cannot predict the breadth of claims that will ultimately be allowed in our patent applications, if any, including those we have in-licensed or the extent to which we may
enforce these claims against our competitors. The degree of future protection for our proprietary rights is therefore highly uncertain and we cannot assure you that:



In
addition, the legal standard for patents outside the United States vary greatly and in many countries intellectual property laws are undergoing review and revision. The laws of some
countries do not protect intellectual property rights to the same extent as domestic laws. It may be necessary or useful for us to participate in opposition proceedings to determine the validity of
our competitors' patents or to defend the validity of any of our or our licensor's future patents, which could result in substantial costs and would divert our efforts and attention from other aspects
of our business.

Technologies
licensed to us by others, or in-licensed technologies, are important to our business. In particular, we depend on certain technologies relating to taste biology
licensed from the Mount Sinai School of Medicine. In addition, we may in the future acquire rights to additional technologies by licensing such rights from existing licensors or from third parties.
Such in-licenses may be costly. Also, we do not always control the patent prosecution, maintenance or enforcement of in-licensed technologies. Accordingly, we are unable to
exercise the same degree of control over this intellectual property as we do over our internally developed technologies. Moreover, some of our academic institution licensors, collaborators and
scientific advisors have rights to publish data and information to which we have rights. If we cannot maintain the confidentiality of our technologies and other confidential information in connection
with our collaborations, our ability to protect our proprietary information or obtain patent protection in the future may be impaired, which could have a significant adverse effect on our business,
financial condition and results of operations.

34

---



Table of Contents

Many of the patent applications we and our licensors have filed have not yet been substantively examined and may not result in patents being issued.

Many of the patent applications filed by us and our licensors were filed recently with the United States Patent and Trademark Office
and most have not been substantively examined and may not result in patents being issued. It is difficult to predict whether any of our or our licensors' applications will ultimately be found to be
patentable or, if so, to predict the scope of any allowed claims. In addition, the disclosure in our or our licensors' patent applications, particularly in respect of the utility of our claimed
inventions, may not be sufficient to meet the statutory requirements for patentability in all cases. As a result, it is difficult to predict whether any of our or our licensors' applications will be
allowed, or, if so, to predict the scope of any allowed claims or the enforceability of the patents. Even if enforceable, others may be able to design around any patents or develop similar
technologies that are not within the scope of such patents. Our and our licensors' patent applications may not issue as patents that will provide us with any protection or competitive advantage.

Disputes concerning the infringement or misappropriation of our proprietary rights or the proprietary rights of others could be time consuming and extremely costly and could
delay our research and development efforts.

Our commercial success, if any, will be significantly harmed if we infringe the patent rights of third parties or if we breach any
license or other agreements that we have entered into with regard to our technology or business.

We
are aware of other companies and academic institutions that have been performing research in the areas of taste modulation and taste enhancers and aversive taste blockers. In
particular, other companies and academic institutions have announced that they have conducted taste-receptor research and have published data on taste receptor sequence information and taste receptors
or filed patent applications or obtained patent protection on taste modulation or taste receptors and their uses. To the extent any of these companies or academic institutions currently have, or
obtain in the future, broad patent claims, such patents could block our ability to use various aspects of our discovery and development process and might prevent us from developing or commercializing
newly discovered taste enhancers and aversive taste blockers or otherwise conducting our business. In addition, it is possible that some of the taste enhancers or aversive taste blockers that are
discovered using our technology may not be patentable or may be covered by intellectual property of third parties.

With
respect to third-party patent rights in the area of the TRPm5 receptor specifically, we are aware of pending U.S. and foreign patent applications by competitors and others that have
claims directed to the TRPm5 receptor and/or methods of using the TRPm5 receptor to identify novel taste modulating compounds. Although these patent applications are currently undergoing examination
by the U.S. Patent and Trademark Office, and it is possible that they will not be granted or will not be granted with the current claims, it is also possible that patents will be granted on these
applications with claims that are relevant to our current or future commercialization plans. To the extent we determine that we need a license to these or other patents relating to the TRPm5 receptor
and are unable to obtain such licenses on commercially reasonable terms or at all, we may be restricted in our ability to commercialize our own TRPm5 technologies.

We
are not currently a party to any litigation, interference, opposition, protest, reexamination or any other potentially adverse governmental, ex parte or inter-party proceeding with
regard to our patent or trademark positions. However, the life sciences and other technology industries are characterized by extensive litigation regarding patents and other intellectual property
rights. Many life sciences and other technology companies have employed intellectual property litigation as a way to gain a competitive advantage. If we become involved in litigation, interference
proceedings, oppositions, reexaminations, protests or other potentially adverse intellectual property proceedings as a result, for

35

---



Table of Contents

example,
of alleged infringement by us of the rights of others or as a result of priority of invention disputes with third parties, we might have to spend significant amounts of money, time and effort
defending our position and we may not be successful. In addition, any claims relating to the infringement of third-party proprietary rights or proprietary determinations, even if not meritorious,
could result in costly litigation, lengthy governmental proceedings, diversion of management's attention and resources, or require us to enter into royalty or license agreements that are not
advantageous to us.

Should
any person have filed patent applications or obtained patents in the United States that claim inventions also claimed by us, we may have to participate in an interference
proceeding declared by U.S. Patent and Trademark Office to determine priority of invention and, thus, the right to a patent for these inventions in the United States. Such a proceeding could result in
substantial cost to us even if the outcome is favorable. Even if successful on priority grounds, an interference action may result in loss of claims based on patentability grounds raised in the
interference action. Litigation, interference proceedings or other proceedings could divert management's time and efforts. Even unsuccessful claims could result in significant legal fees and other
expenses, diversion of management's time and disruption in our business. Uncertainties resulting from initiation and continuation of any patent proceeding or related litigation could harm our ability
to compete and could have a significant adverse effect on our business, financial condition and results of operations.

An
adverse ruling arising out of any intellectual property dispute, including an adverse decision as to the priority of our inventions, could undercut or invalidate our intellectual
property position. An adverse ruling could also subject us to significant liability for damages, including possible treble damages, prevent us from using technologies or developing products, or
require us to negotiate licenses to disputed rights from third parties. Although patent and intellectual property disputes in the technology area are often settled through licensing or similar
arrangements, costs associated with these arrangements may be substantial and could include license fees and ongoing royalties. Furthermore, necessary licenses may not be available to us on
satisfactory terms, if at all. Failure to obtain a license in such a case could have a significant adverse effect on our business, financial condition and results of operations.

Risks Related to Our Fluctuating Operating Results, Possible Acquisitions and Management of Growth

We expect that our results of operations will fluctuate from period to period, and this fluctuation could cause our stock price to decline, causing investor losses.

Our operating results have fluctuated in the past and are likely to vary significantly in the future based upon a number of factors,
many of which we have little or no control over. We operate in a highly dynamic industry and future results could be subject to significant
fluctuations. These fluctuations could cause us to fail to meet or exceed financial expectations of securities analysts or investors, which could cause our stock price to decline rapidly and
significantly. Revenue and expenses in future periods may be greater or less than revenue and expenses in the immediately preceding period or in the comparable period of the prior year. Therefore,
period-to-period comparisons of our operating results are not necessarily a good indication of our future performance. Some of the factors that could cause our operating
results to fluctuate include:



36

---



Table of Contents



If we acquire products, technologies or other businesses, we will incur a variety of costs, may have integration difficulties and may experience numerous other risks that
could adversely affect our business.

To remain competitive, we may decide to acquire additional businesses, products and technologies. We currently have no commitments or
agreements with respect to, and are not actively seeking, any material acquisitions. We have limited experience in identifying acquisition targets, successfully acquiring them and integrating them
into our current infrastructure. We may not be able to successfully integrate any businesses, products, technologies or personnel that we might acquire in the future without a significant expenditure
of operating, financial and management resources, if at all. In addition, future acquisitions could require significant capital infusions and could involve many risks, including, but not limited to,
the following:



Any
of the foregoing risks could have a significant adverse effect on our business, financial condition and results of operations.

37

---





Table of Contents

To the extent we enter markets outside of the United States, our business will be subject to political, economic, legal and social risks in those markets, which could
adversely affect our business.

There are significant regulatory and legal barriers in markets outside the United States that we must overcome to the extent we enter
or attempt to enter markets in countries other than the United States. We will be subject to the burden of complying with a wide variety of national and local laws, including multiple and possibly
overlapping and conflicting laws. We also may experience difficulties adapting to new cultures, business customs and legal systems. Any sales and operations outside the United States would be subject
to political, economic and social uncertainties including, among others:



Any
changes related to these and other factors could adversely affect our business to the extent we enter markets outside the United States.

We may encounter difficulties managing our growth, which could adversely affect our business.

Our strategy includes entering into and working on simultaneous taste enhancer and aversive taste blocker discovery and development
programs across multiple markets that include both the food and beverage industry and the pharmaceutical industry. We expect to continue to grow to meet our strategic objectives. If our growth
continues, it will continue to place a strain on us, our management and our resources. Our ability to effectively manage our operations, growth and various projects requires us to continue to improve
our operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient numbers of talented employees. We may not be able to successfully implement
these tasks on a larger scale and, accordingly, we may not achieve our research, development and commercialization goals. If we fail to improve our operational, financial and management information
systems, or fail to effectively monitor or manage
our new and future employees or our growth, our business would suffer significantly. In addition, no assurance can be made that we will be able to secure adequate facilities to house our staff,
conduct our research or achieve our business objectives.

An economic downturn and adverse economic conditions may harm our business.

The recent economic downturn and adverse conditions in the national and global markets may negatively affect our operations in the
future. Our revenues are contingent upon the expenditures of the pharmaceutical, biotech, and food and beverage industries, and as these industries cut costs in response to the economic downturn, our
revenues will be similarly decreased. Furthermore, while our revenues may decrease, our costs may remain fixed, resulting in decreased earnings.

38

---



Table of Contents

Risks Related to our Common Stock; Liquidity Risks

The sale of a significant number of our shares of common stock in the public market could depress the market price of common stock.

The sale of a significant number of shares of our common stock in the public market could harm the market price of our common stock. As
additional shares of common stock have become available for resale in the public market pursuant to the registration statement and releases of lock-up agreements, the market supply of
shares of common stock has increased, which could decrease its market price. The number of shares that may be sold into the marketplace pursuant to the registration statement is significant. We
believe that such sales may severely depress the market price of our common stock. In addition, some or all of the shares of common stock may be offered from time to time in the open market pursuant
to Rule 144 (or pursuant to an additional registration statement, if one is effective), and these sales may also have a depressive effect on the market for the shares of common stock. In
general, a person who is deemed to be an affiliate who has held shares for a period of six months may, upon filing of a notification on Form 144
with the SEC, sell into the market common stock in an amount up to the greater of 1% of the outstanding shares or the average weekly number of shares sold in the last four weeks before such sale. Such
sales may be repeated once each three months. A non-affiliate holding restricted shares may sell such shares without restrictions after they have been held six months, subject only to the
current public information requirement. After an additional six months have lapsed, a non-affiliate may sell such shares without any restrictions.

The price of our common stock is expected to continue to be volatile.

The market price of our common stock, and the market prices for securities of biotechnology companies in general, have been, and are
expected to be, highly volatile. The following factors, in addition to other risk factors described in this Annual Report on Form 10-K, and the potentially low volume of trades in
our common stock, may have a significant impact on the market price of our common stock, some of which are beyond our control:



39

---



Table of Contents



The
stock market in general has recently experienced relatively large price and volume fluctuations. In particular, market prices of securities of biotechnology companies have
experienced fluctuations that often have been unrelated or disproportionate to the operating results of these companies. Continued market fluctuations could result in extreme volatility in the price
of our common stock, which could cause a decline in the value of our common stock. Investors should also be aware that price volatility may be worse if the trading volume of our common stock is low.

We do not expect to pay cash dividends in the foreseeable future.

We currently intend to retain any future earnings to finance the growth and development of our business; therefore, we do not expect to
pay any cash dividends in the foreseeable future. Any future dividends will depend on our earnings, if any, and our financial requirements.

Because Redpoint became a public company as a result of the Reverse Merger and Reincorporation Merger and not through a traditional underwritten initial public offering of
securities, the Company may not attract the attention of major brokerage firms. Additionally, as a public company, we incur substantial expenses.

As a result of the Reverse Merger and Reincorporation Merger, Redpoint became a publicly-traded company and, accordingly, will be
subject to the information and reporting requirements of the United States securities laws. The costs to public companies of preparing and filing annual and quarterly reports, proxy statements and
other information with the SEC and furnishing audited reports to stockholders have caused the Company's expenses to be higher than they would be if it were a privately-held company. In
addition, the Company will incur substantial expenses in connection with the preparation of the registration statement and related documents with respect to the registration of the common stock issued
in the Private Placement and the Reverse Merger. Security analysts of major brokerage firms may not provide coverage of the Company. No assurance can be given that brokerage firms will want to conduct
any secondary offerings on behalf of the Company in the future.

We have discretion on how we use any proceeds we receive from the exercise of warrants and options.

Our management has broad discretion on how to use and spend any proceeds we receive as a result of our security holders exercising
their warrants and options. Our stockholders may not agree with our decision on how to use such proceeds. If we fail to spend the
proceeds effectively, our business and financial condition could be harmed and we may need to seek additional financing sooner than expected.

It is not anticipated that there will be an active public market for shares of our common stock in the near term and stockholders may have to hold their shares of common
stock for an indefinite period of time. Stockholders may be unable to resell a large number of their shares of common stock within a short time frame or at or above their purchase price.

To have purchased shares of our common stock and warrants to purchase common stock in the Private Placement, an investor must have
represented that it was acquiring such shares and warrants for investment and not with a view to distribution or resale, that the investor understood that neither the common stock nor the warrants are
readily transferable and, in any event, that it must bear the economic risk of an investment in the common stock for an indefinite period of time.

If we do not comply with registration rights granted to certain holders of our restricted securities, we may be required to pay damages to such holders.

We filed a "resale" registration statement with the SEC covering all shares of common stock issued in connection with the Private
Placement, including shares of common stock into which any

40

---



Table of Contents

warrants
are exercisable, within 60 days after the final closing of the Private Placement. Such registration statement has been declared effective by the SEC. We will use our best efforts to
have such "resale" registration statement maintain its effectiveness until such time as all securities registered under the registration statement have been sold or are otherwise able to be sold under
Rule 144 of the Securities Act without regard to volume limitations, whichever is earlier. We cannot assure you that we will be able to obtain or maintain such effective registration statement.

Our common stock may be considered "a penny stock" and may be difficult to sell.

The SEC has adopted regulations that generally define "penny stock" to be an equity security that has a market or exercise price of
less than $5 per share, subject to specific exemptions. Initially, the market price of our common stock is likely to be less than $5 per share and
therefore may be designated a "penny stock" under SEC rules. This designation requires any broker or dealer selling our common stock to disclose certain information about the transaction, obtain a
written agreement from the investor and determine that the investment in our common stock by the investor is a reasonably suitable investment for such investor. These rules may restrict the ability of
brokers or dealers to sell our common stock and, as a result, may affect the ability of investors to sell their shares. In addition, unless and until our common stock is listed for trading on the
American Stock Exchange or NASDAQ Capital Market or similar market, investors may experience a lack of buyers to purchase such stock or a lack of market makers to support the stock price. Resale
restrictions on transferring "penny stocks" are sometimes imposed by some states, which may make transactions in our stock more difficult and may reduce the value of your investment.

Substantial future issuances of our common stock could depress our stock price.

The market price for our common stock could decline, perhaps significantly, as a result of issuances of a large number of shares of our
common stock in the public market or even the perception that such issuances could occur. Under our Registration Rights Agreement, certain holders of our outstanding shares of our common stock and
other securities have demand and Form S-3 registration rights. Sales of a substantial number of these shares of common stock, or the perception that holders of a large number of
shares intend to sell their shares, could depress the market price of our common stock. The existence of such registration rights could also make it more difficult for us to raise funds through future
offerings of our equity securities.

Our stockholders may experience additional dilution upon the exercise of warrants or options.

As of the final closing of the Private Placement, we issued warrants to investors to acquire approximately 10.2 million shares
of common stock and warrants to the placement agents to acquire approximately 3.6 million shares of common stock in the Private Placement. In addition, there are 16.9 million shares of
common stock underlying options that have been or may be granted pursuant to the Redpoint Bio Corporation 2007 Omnibus Equity Compensation Plan. If these warrants are exercised or converted, or if the
options are exercised, you may experience dilution in the net tangible book value of our common stock.

Directors and officers of the Company have a high concentration of our common stock ownership.

Based on the aggregate number of shares of our common stock that are outstanding as of December 31, 2008, our officers and
directors beneficially own approximately 11.4% of our outstanding common stock. Such a high level of ownership by such persons may have a significant effect in delaying, deferring or preventing any
potential change in control of the Company. Additionally, as a result of their high level of ownership, our officers and directors might be able to strongly influence the actions of the Company's
board of directors, and the outcome of actions brought to our stockholders

41

---



Table of Contents

for
approval. Such a high level of ownership may adversely affect the voting and other rights of our stockholders.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

Lease Agreement for Office and Laboratory Space in Ewing, New Jersey

On November 28, 2005, we entered into a lease agreement with BMR-7 Graphics Drive LLC to lease office and
laboratory space at 7 Graphics Drive in Ewing, New Jersey. The leased premises include approximately 18,000 square feet of office and laboratory space, and the annual base rent is $818,032, subject to
annual increases of approximately
1%. Under the lease agreement, we will also have to pay certain operating expenses associated with the leased premises. The term of the lease is ten years and commenced on May 7, 2007. We began
to occupy the space at 7 Graphics Drive on May 21, 2007.

Lease Agreement for Office and Laboratory Space in Philadelphia, Pennsylvania

On September 30, 2005, we entered into an agreement with Albert Einstein Healthcare Network, or AEHN, to use AEHN's laboratory
space located at 5501 Old York Road, Philadelphia, Pennsylvania. As amended, the agreement provides for approximately 1,500 square feet of office and laboratory space, and a base rent for the
remaining nine months of approximately $28,836. The term of the agreement has been extended until September 30, 2009. The lease may be amended in writing by mutual agreement.

ITEM 3.    LEGAL PROCEEDINGS

From time to time, the Company may become involved in various investigations, claims and legal proceedings that arise in the ordinary
course of the Company's business. These matters may relate to intellectual property, employment, tax, regulation, contract or other matters. The resolution of these matters as they arise will be
subject to various uncertainties. As of the date of this Annual Report on Form 10-K, Redpoint Bio is not a party to any material pending legal proceeding.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

42

---





Table of Contents

PART II

ITEM 5.    MARKET FOR OUR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES

Our common stock trades on the OTC Bulletin Board under the symbol "RPBC".

The
following table describes the per share range of high and low sale prices for shares of our common stock, as listed for quotation on the OTC Bulletin Board, for the periods
indicated. Please note that this information reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual
transactions.

2008:

High

LowFourth quarter, ended December 31, 2008

$
0.45

$
0.06Third quarter, ended September 30, 2008


0.65


0.26Second quarter, ended June 30, 2008


0.70


0.50First quarter, ended March 31, 2008


0.80


0.37




2007:Fourth quarter, ended December 31, 2007

$
0.84

$
0.55Third quarter, ended September 30, 2007


2.45


0.66Second quarter, ended June 30, 2007


3.00


2.00First quarter, ended March 31, 2007


4.20


1.60


As
stated earlier in the Explanatory Note, Redpoint consummated the Reverse Merger in March 2007 and the Reincorporation Merger in June 2007. Prior to such transactions, the common stock
of our predecessor registrant, Robcor, was traded on the OTC Bulletin Board (trading began in October 2006) under the symbol "RBCR" and was traded with little or no volume at a trading price at or
around $3.50 to $4.00 from October 2006 until the consummation of the Reincorporation Merger. After the completion of the Reverse Merger and the Reincorporation Merger, our stock price began trading
under the symbol "RPBC". We believe that given the lack of liquidity in the trading of our common stock prior to July 20, 2007 (the declaration of effectiveness of our Registration Statement on
Form S-1 registering the shares of common stock and the shares of common stock issuable upon exercise of the warrants issued in the private placement in connection with the Reverse
Merger) that trading in shares of our common stock began to reflect the stock price comparable to the $0.81 purchase price of one unit in the private placement, which consisted of one share of common
stock together with 0.25 warrants, at or around July 20, 2007.

As
of December 31, 2008, the closing price for our common stock was $0.14. As of March 20, 2009, there were approximately 317 holders of record of our common stock. Our
independent stock transfer agent is American Stock Transfer & Trust Company, located at 59 Maiden Lane, New York, New York 10038. Their telephone number is (800) 937-5449.

Dividend Policy

We have not declared or paid any cash dividends on common stock since our inception, and our Board of Directors currently intends to
retain all earnings for use in the business for the foreseeable future. Any future payment of dividends will depend upon our results of operations, financial condition, cash requirements, and other
factors deemed relevant by our Board of Directors. We are under no contractual obligations or restrictions to declare or pay dividends to our stockholders.

43

---



Table of Contents

Equity Compensation Plan Information

The following table provides information as of December 31, 2008 with respect to the shares of our common stock that may be
issued under our existing equity compensation plan. Prior to the Reverse Merger, Original Redpoint maintained the Linguagen Corp. 2003 Stock Incentive Plan, which we refer to as the "2003 Stock Plan."
In connection with the adoption of the Amended and Restated 2007 Equity Compensation Plan, which we refer to as the "2007 Plan," the 2003 Stock Plan merged with and into the 2007 Plan and no
additional grants may be made under the 2003 Stock Plan. Outstanding grants under the 2003 Stock Plan continue in effect in accordance with their terms as in effect before March 12, 2007
(subject to such amendments as the Compensation Committee determines, consistent with the 2003 Stock Plan, as applicable).

Plan Category

Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights

Weighted Average
Exercise Price of
Outstanding
Options, Warrants
and Rights

Number of Securities
Available for Future
Issuance Under Equity
Compensation PlansEquity compensation plans that have been approved by security holders(1)


11,022,016

$
0.52


5,898,256Equity compensation plans not approved by security holders








Total


11,022,016





5,898,256


---

Recent Sales of Unregistered Securities

We did not sell any unregistered equity securities during the fourth quarter of 2008.

Issuer Purchases of Equity Securities

We did not repurchase any shares of our equity securities during the fourth quarter of 2008.

44

---



Table of Contents

Performance Graph

The following graph compares the cumulative total stockholder return on our common stock with the cumulative total return on the NASDAQ
Composite Index, NASDAQ Biotechnology Index and the AMEX Biotechnology Index for the period beginning October 31, 2006 and ending on the last day of our last completed fiscal year. The stock
performance shown on the graph below is not indicative of future price performance.

COMPARISON OF CUMULATIVE TOTAL RETURN(1)(2)(3)  Among Redpoint, the NASDAQ Composite Index, the NASDAQ Biotechnology Index and  the AMEX Biotechnology Index

Comparison of 2 Year Cumulative Total Return  Assumes Initial Investment of $100  December 2008

GRAPHIC

45

---



Table of Contents

Company/Index

Base Period 10/06

12/06

3/07

6/07

9/07

12/07

3/08

6/08

9/08

12/08REDPOINT BIO CORPORATION


100


114.29


75.71


70.00


20.57


20.57


16.29


18.57


14.57


4.00NASDAQ COMPOSITE INDEX


100


102.22


102.67


110.58


114.98


116.40


100.25


101.07


92.39


69.88NASDAQ BIOTECHNOLOGY INDEX


100


97.97


95.34


98.50


104.85


102.47


95.84


97.37


102.61


89.53AMEX BIOTECHNOLOGY INDEX


100


98.70


99.98


101.72


107.50


102.90


96.48


96.53


102.59


84.67


---

46

---



Table of Contents

ITEM 6.    SELECTED FINANCIAL DATA

The following table sets forth our selected historical financial data as of the dates and for the periods indicated. Our selected
financial data set forth below as of December 31, 2007 and 2008 and for each of the years in the three-year period ended December 31, 2008, and for the period
August 16, 1995 (inception) to December 31, 2008, has been derived from our audited financial statements included elsewhere herein. Our selected financial data should be read in
conjunction with the Financial Statements and the Notes and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" which are included elsewhere in this
Annual Report on Form 10-K.

August 16,
1995
(Inception) to
December 31,
2008Years Ended December 31,2004

2005

2006

2007

2008(in thousands, except per share data)Statements of Operations Data:Research and grant revenue

$
224

$
410

$


$
2,229

$
3,999

$
10,462Operating expenses:Research and development


2,400


2,899


3,631


7,266


8,647


28,438General and administrative


2,659


2,126


2,811


4,511


5,608


20,202Total operating expenses


5,059


5,025


6,442


11,777


14,255


48,640Operating loss


(4,835
)

(4,615
)

(6,442
)

(9,548
)

(10,256
)

(38,178
)Interest income


32


94


53


768


565


1,519Interest expense





(100
)

(929
)

(1,696
)

(97
)

(3,431
)Loss before income taxes


(4,803
)

(4,621
)

(7,318
)

(10,476
)

(9,788
)

(40,090
)Income tax benefit





254


466





267


986Net loss


(4,803
)

(4,367
)

(6,852
)

(10,476
)

(9,521
)
$
(39,104
)Accretion of redeemable convertible preferred stock


(669
)

(1,148
)

(1,159
)

(225
)

Net loss applicable to common stockholders

$
(5,472
)
$
(5,515
)
$
(8,011
)
$
(10,701
)
$
(9,521
)Basic and diluted net loss per common share

$
(1.60
)
$
(1.25
)
$
(1.81
)
$
(0.17
)
$
(0.12
)Weighted average number of shares outstanding


3,412


4,403


4,429


63,315


79,444




As of December 31,2004

2005

2006

2007

2008(in thousands)Balance Sheet Data:Cash, cash equivalents and marketable securities

$
6,197

$
2,558

$
974

$
22,701

$
14,428Working capital


5,103


1,523


(4,880
)

20,810


12,791Total assets


7,006


3,930


2,552


24,823


16,443Long-term debt, net of current portion





1,209


635


188


1,148Deficit accumulated during the development stage


(8,770
)

(14,284
)

(22,295
)

(32,996
)

(42,517
)Total stockholders' equity (deficit)


(8,544
)

(14,010
)

(20,726
)

21,539


12,927


47

---



Table of Contents

ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

The statements contained in this Annual Report on Form 10-K that are not historical facts are forward-looking
statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended) that involve risks and uncertainties. Such forward-looking statements may be identified by,
among other things, the use of forward-looking terminology such as "believes", "expects", "may", "will", "should" or "anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy that involve risks and uncertainties. From time to time, we or our representatives have made or may make forward-looking statements, orally or in writing.
Such forward-looking statements may be included in various filings made by us with the SEC, or press releases or oral statements made by or with the approval of one of our authorized executive
officers. These forward-looking statements, such as statements regarding anticipated future revenues or operating margins, contract percentage completions, capital expenditures, and other statements
regarding matters that are not historical facts, involve predictions. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these
forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements. These factors include
those set forth in the section entitled "Item 1A. Risk Factors".

Overview

Redpoint Bio is a development stage biotechnology company leveraging recent discoveries in the molecular biology of taste to discover
and develop novel taste modulators for the food, beverage and pharmaceutical industries. Our food and beverage program is focused on
identifying novel flavor modifiers that improve the taste of existing ingredients, enabling the development of better-tasting, less costly, and more healthful foods and beverages. We believe that our
unique understanding of the biology of taste and its relationship to metabolic processes, satiety, and diabetes impact both the development of healthier foods and, potentially, new approaches to the
treatment of diabetes and obesity. In addition, we have a program aimed at suppressing the bitterness of oral medicines, enabling the development of novel formulations with improved acceptance and
compliance across a broad range of dosage forms and therapeutic applications. Our research in diabetes and obesity stems from the observation that taste signaling in the gastrointestinal tract is
involved in important hormone secretion processes enabling us to leverage our research on lingual taste modulation to important therapeutic applications.

Since
its inception in 1995, Redpoint has incurred losses and negative cash flows from operations, and such losses have continued subsequent to December 31, 2008. As of
December 31, 2008, Redpoint had an accumulated deficit of $42.5 million and anticipates incurring additional losses for the foreseeable future. We expect to spend significant resources
over the next several years to enhance our technologies and to fund research and development of our pipeline of potential products. We have not yet developed any products that are commercially
available.

Through
December 31, 2008, our revenue has come solely from corporate collaborations, license agreements, and government grants. In order to achieve profitability, we must
continue to develop products and technologies that can be commercialized by us or through existing and future collaborations.

On
March 12, 2007, we completed the first closing of our private placement of shares of common stock and warrants to purchase shares of common stock raising approximately
$17.2 million of net proceeds. On April 6, 2007, we completed the final closing of the private placement raising an additional $11.4 million of net proceeds, bringing the total
private placement net proceeds to $28.6 million.

48

---





Table of Contents

In March 2007, we entered into a Joint Research and Development and License Agreement with Givaudan Schweiz AG for the development and commercialization of
compounds that enhance sweetness or savory sensation, as well as compounds that block or desensitize bitter taste for use in the food and beverage industry. Under the terms of the agreement, Redpoint
and Givaudan are collaborating exclusively with each other to discover and develop compounds that act primarily through the modulation of the TRPm5 channel. In consideration of our agreement to
conduct research and develop compounds and grant exclusive licenses and other rights, Givaudan paid us an upfront technology fee of $1.3 million and agreed to provide research funding to us
over the initial 3.5 year term of the agreement of up to $11.6 million. If certain conditions have not been achieved in certain timeframes as set forth in the Givaudan Agreement, then
Givaudan may terminate the agreement with us prior to the expiration of the initial 3.5 year term. Givaudan will also reimburse us for costs we incur in connection with obtaining certain
regulatory approvals. Through December 31, 2008, including the upfront fee, we have received $5.7 million in research and development funding. We are also eligible to receive milestone
payments of up to $2.5 million upon the achievement of specified development and commercialization events as well as royalty payments based on net sales of Givaudan products that contain flavor
systems incorporating compounds developed under the collaboration.

In
December 2007, we entered into a one year research agreement with The Coca-Cola Company, referred to herein as Coca-Cola, for the development of certain
technology for use in soft drinks and other non-alcoholic beverages. In consideration of our agreement to conduct research for the development of certain technology and grant exclusive
licenses and other rights, Coca-Cola paid us approximately $900,000. The agreement expired by its terms in December of 2008.

Our
research and development efforts, both partnered and unpartnered, involve technology development and discovery programs aimed at the identification of novel compounds for taste
modification. We are working to identify a compound(s) that can be used to enhance the taste of both sweet and savory flavors in a wide variety of food and beverage applications. To leverage our
technology in the food and beverage markets, we have entered into a research and development agreement with Givaudan, the world's leading company in the flavors and fragrances industry. Additionally,
we are working to identify a compound(s) that could act as a universal bitter taste blocker and we are seeking collaborative formulation development programs with major pharmaceutical companies who
are seeking to extend the patent life or enhance the performance of their products. We have identified several categories of products where patient acceptability or the potential for novel formulation
options are currently limited due to the intense bitter or other aversive taste of the active pharmaceutical ingredient. We plan to incorporate the proprietary bitter taste or aversive taste blockers
found through our discovery programs with drugs of proven safety and efficacy to create novel, valued-added formulations.

During
2008, we believe our scientists made progress in Redpoint's discovery program for bitter blockers. Specifically, improvements in the potency of our bitter blockers, designed to
allow the development of more palatable pharmaceutical formulations, have been achieved. For the first time, double blinded human taste panel studies have shown that Redpoint compounds are able to
reduce the bitterness of salicin, a natural bitter compound from willow bark related to aspirin. Although additional chemical optimization will be required to develop commercially practical bitter
blockers, the human test data provides corroboration of the underlying biological hypothesis.

We
intend to design our taste modifiers to be safe and effective in minute quantities, and to be able to incorporate them into food and pharmaceutical products through the GRAS
determination/notification process. Although the GRAS (Generally Recognized as Safe) process involves extensive testing to insure safety in use, the overall time required (estimated to be
12-18 months) and development costs incurred (estimated to be $1-2 million per compound) are modest compared to the size of the accessible markets. Moreover, a
single GRAS-determined taste enhancer can potentially be used in a wide range of food applications. GRAS determination is heavily relied upon by the U.S. Food

49

---



Table of Contents

and
Drug Administration (FDA) to evaluate the safety and inclusion of flavor modifiers into pharmaceutical products. A single aversive taste blocker can potentially be used to create a multitude of
new drug formulations that in many cases may be patentable in their own right. Our GRAS-approved aversive-taste blockers may be used in many taste-modified pharmaceutical formulations such
as OTC cough-cold products, some pediatric liquid formulations, etc., where they are added as flavors, without requiring FDA approval. Where our aversive-taste blockers are added to
produce a novel formulation that differs from an existing formulation in dosage or method of delivery, we will require additional FDA regulatory approval through the FDA 505(b)(2) approval process.

We
believe there may be additional potential applications for our technology. For example, a growing body of scientific research suggests that the taste pathways that we have been
investigating are also found as part of a nutrient-sensing system located in the gastrointestinal tract. This could lead to potential opportunities for the discovery of new diabetes or obesity
therapeutics. We have recently initiated a program designed to leverage the research we have already conducted on taste modulators to further explore this opportunity. Any uses of our taste modulators
that we develop as drugs acting to modulate incretin secretion with potential utility as therapeutic agents for diabetes or obesity, will be subject to full FDA 505(b)(1) safety testing and clinical
trials proving therapeutic efficacy as required to develop an NDA.

Revenue

To date, our revenue has come solely from corporate collaborations, licensing agreements and government grants. Since our inception, we
have undertaken research projects for which we were the recipient of several Small Business Innovative Research, or SBIR, Awards. The SBIR Awards were sponsored by the National Institutes of Health.
The last SBIR related research project was completed in 2004.

To
leverage our technology in the food and beverage markets, in March 2007, we entered into the Givaudan Agreement where we are collaborating exclusively with each other to discover and
develop Enhancer Compounds and Bitter Blocker Compounds that act primarily through the modulation of the TRPm5 channel. Also, in December 2007, we entered into a one year research agreement with
Coca-Cola for the development of certain technology for use in soft drinks and other non-alcoholic beverages. The agreement with Coca-Cola expired in December 2008.
We may also partner with other major ingredient suppliers, or food and beverage companies, to develop and commercialize taste enhancers that act through a variety of other newly discovered mechanisms
of taste sensation in exchange for technology access fees, research funding, product development milestones, and product royalties.

We
plan to form partnerships with pharmaceutical companies to develop and market liquid and innovative pharmaceutical formulations in exchange for technology access fees, research
funding, product development milestones and product royalties. We have identified a broad selection of potential products for development, including both liquid formulations and innovative
formulations that we believe would be attractive licensing candidates. In general, our strategy involves the development of a prototype formulation demonstrating the effectiveness of our technology by
combining the target API with our GRAS-approved bitter or other aversive taste blocker. Some products could incorporate third-party APIs that could constitute line extensions to be
marketed to the API patent holder. Additional prototype products could be developed with either soon-to-be or patent-expired APIs. These products could either be licensed to
the original patent holder to create a line extension, or to a generics company wishing to market a differentiated or branded generic product. In November 2008, we announced that we had signed an
agreement to collaborate with Schering Corporation, a subsidiary of Schering-Plough Corporation, in the area of taste science research for pharmaceutical applications. This expanded
feasibility agreement builds upon the successful completion of a previous research study between the parties.

50

---



Table of Contents

We
are also seeking collaborations with major pharmaceutical companies for the further development and optimization of our TRPm5 modulators for therapeutic applications in diabetes and
obesity.

Any
failure to maintain or establish licensing or collaboration arrangements on favorable terms could adversely affect our business prospects, financial condition or ability to develop
and commercialize our product candidates.

Research and Development

Our research and development expenses consist primarily of internal costs associated with our bitter blocker and taste enhancer
research programs as well as amounts paid to third parties to conduct research on our behalf. Our internal research and development costs are comprised of salaries and related benefits, facilities and
depreciation on laboratory equipment, compound acquisition costs and research supplies. We charge research and development costs to operations as incurred. We anticipate that research and development
expenses will continue to increase as we advance our research and development programs, including our recently initiated diabetes/obesity drug discovery effort where we are in the early stages of
leveraging the research we have already conducted on the discovery of modulators of the TRPm5 ion channel to further explore potential opportunities for the discovery of new diabetes or obesity
therapeutics.

General and Administrative

Our general and administrative expenses consist primarily of salaries and related benefit expenses for business development, financial,
legal and other administrative functions. In addition, we incur external costs for professional fees for legal, patent and accounting services.

Results of Operations



Research and Grant Revenue.For the year ended December 31, 2008, we recorded revenue of $4.0 million, which included
$3.1 million from our Givaudan Agreement, which began in March 2007, for the development and commercialization of compounds that enhance sweetness or savory sensation as well as compounds that
block or desensitize bitter taste for use in the food and beverage industry. The revenues from Givaudan include $0.4 million attributable to the upfront fee which is being recognized as revenue
over the initial 3.5 year term of the agreement and $2.7 million of research funding. The remaining $0.9 million of revenue was primarily from our Coca-Cola Agreement,
which began in December 2007, for the development of certain technology for use in soft drinks and other non-alcoholic beverages. The Coca-Cola Agreement ended in December
2008. During the year ended December 31, 2007, we recorded revenue of $2.2 million, which included $2.1 million from our Givaudan Agreement. The revenue from Givaudan included
$0.3 million attributable to the upfront fee and $1.8 million of research funding. The remaining $0.1 million of revenue was from various other contracts with food and
pharmaceutical companies.

Research and Development Expenses.Our research and development expenses were $8.6 million for the year ended December 31,
2008
compared to $7.3 million for the year ended December 31, 2007. During the year ended December 31, 2007, the Company recorded a $1.6 million non-cash charge in
connection with the issuance of approximately 2.0 million shares of our common stock related to anti-dilution protection for Dr. Margolskee, the Company's founder.
Dr. Margolskee's anti-dilution protection terminated upon completion of the final closing of the Private Placement on April 6, 2007. During the year ended December 31,
2008, we experienced increased costs associated with our taste modifier and diabetes research programs. In particular, our facilities costs increased as a result of our move to our new location in
Ewing, New Jersey, effective in May 2007. Our new, state-of-the-art

51

---



Table of Contents

facility
in Ewing, New Jersey is enabling us to move ahead with the continued expansion of our research and development operations. In addition, salaries and related benefits and R&D supplies costs
increased.

General and Administrative Expenses.Our general and administrative expenses were$5.6 million
for the year ended December 31, 2008 compared to $4.5 million for the year ended December 31, 2007. The increase of $1.1 million was related to costs associated with
Redpoint becoming a public company, such as legal, investor relations and business development fees as well as expenses associated with patent filings. In addition, during the years ended
December 31, 2008 and 2007, we recognized non-cash compensation expense of approximately $0.7 million and $0.4 million, respectively, pursuant to Statement of
Financial Accounting Standards (SFAS) No. 123 (revised 2004)Share-Based Payment(SFAS 123R).

Interest Income.Interest income was$0.6 million for the year ended
December 31, 2008
compared to $0.8 million during the year ended December 31, 2007.

Interest Expense.Interest expense was $0.1 million for the year ended December 31, 2008 compared to $1.7 million during
the
year ended December 31, 2007. In May, June and October 2006, we entered into a convertible debt financing agreement with certain of our investors, which provided for $4.1 million in
funding. In addition to the issuance of 5% secured promissory notes, our investors received warrants to purchase additional shares of our stock. We allocated the proceeds from the financing between
the notes and the warrants based on their relative fair values. The fair value of the warrants was recorded against the carrying value of the notes as an original issue discount (OID) which was being
amortized as interest expense over a one-year period from the original issuance date of the notes. During the year ended December 31, 2007, we recognized a non-cash
charge to interest
expense of $0.3 million for the amortization of the OID, which was fully expensed upon the completion of the first closing of our private placement when the promissory notes were converted to
common stock. Furthermore, in accordance with EITF No. 00-27,Application of Issue No. 98-5 to Certain Convertible
Instruments, and EITF No. 98-5,Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable
Ratios, after considering the allocation of the proceeds to the promissory notes, the Company determined that the promissory notes contained a contingent beneficial conversion
feature (Contingent BCF). The Contingent BCF existed at the date of the issuance of the promissory notes due to the fact that the original carrying value of promissory notes, after allocation of the
proceeds, would be less than the purchase price of the new series of stock paid by investors in the new series. In accordance with EITF No. 98-5, during the year ended
December 31, 2007, the Contingent BCF of $1.2 million was recognized as additional non-cash interest expense when the promissory notes were converted into shares of common
stock.

Income Tax Benefit.During 2008, we sold $2.5 million of our New Jersey State operating loss carryforwards resulting in the
recognition of an
income tax benefit of $0.3 million. Due to the Company's history of losses, we have not recognized the benefit of any of our other net operating loss carryforwards.



Research and Grant Revenue.For the year ended December 31, 2007, we recorded revenue of $2.2 million, which included
$2.1 million from our Givaudan Agreement, which began on March 27, 2007, for the development and commercialization of compounds that enhance sweetness or savory sensation as well as
compounds that block or desensitize bitter taste for use in the food and beverage industry. The revenues from Givaudan include $0.3 million attributable to the upfront fee which is being
recognized as revenue over the initial 3.5 year term of the agreement and $1.8 million of research funding. The remaining $0.1 million of revenue was from various other contracts
with food and pharmaceutical companies, including the commencement of our Coca-Cola Agreement, which

52

---



Table of Contents

began
on December 13, 2007, for the development of certain technology for use in soft drinks and other non-alcoholic beverages. During the year ended December 31, 2006, we
did not generate any research and grant revenue, as we focused our efforts on advancing our technologies and did not enter into any discovery collaborations.

Research and Development Expenses.Our research and development expenses were $7.3 million for the year ended December 31,
2007
compared to $3.6 million for the year ended December 31, 2006. The increase was primarily attributable to a $1.6 million non-cash charge in connection with the
issuance of approximately 2.0 million shares of our common stock related to anti-dilution protection for Dr. Margolskee, the Company's founder. Dr. Margolskee's
anti-dilution protection terminated upon completion of the final closing of the Private Placement on April 6, 2007. In addition, we experienced increased costs associated with our
investment in our bitter blocker and taste enhancer research programs as well as amounts paid to third parties to conduct research on our behalf. In particular, our facilities costs increased as a
result of our move to our new location in Ewing, New Jersey, effective in May 2007. Our new, state-of-the-art facility in Ewing, New Jersey is enabling us to move
ahead with the continued expansion of our research and development operations. In addition, salaries and related benefits, depreciation on laboratory equipment and R&D supplies costs increased. In
addition, during the year ended December 31, 2007 we recognized non-cash R&D related compensation expense of approximately $0.1 million pursuant to SFAS 123R and a
nominal amount during the year ended December 31, 2006.

General and Administrative Expenses.Our general and administrative expenses were $4.5 million for the year ended December 31,
2007
compared to $2.8 million for the year ended December 31, 2006. The increase of $1.7 million was related to costs associated with Redpoint becoming a public company, such as
increases in accounting, legal and investor relations fees, as well as expenses associated with patent filings and our move to our new facility. During the year ended December 31, 2007 we also
incurred an expense of approximately $0.1 million as a result of the write-off of the remaining lease obligation on our prior facility which we no longer occupy. Approximately
$0.2 million of the increase was related to executive severance in connection with a separation agreement that we entered into with a former officer during the year ended December 31,
2007. In addition, during the year ended December 31, 2007, we recognized non-cash G&A related compensation expense of approximately $0.4 million pursuant to
SFAS 123R.

Interest Income.Interest income was $0.8 million for the year ended December 31, 2007 compared to $53,000 for the year ended
December 31, 2006. The significant increase was due to interest earned on our cash, cash equivalents and marketable securities that resulted from proceeds from our private placement in March
2007.

Interest Expense.Interest expense was $1.7 million for the year ended December 31, 2007 compared to $0.9 million for the
year
ended December 31, 2006. In May, June and October 2006, we entered into a convertible debt financing agreement with certain of our investors, which provided for $4.1 million in funding.
In addition to the issuance of 5% secured promissory notes, our investors received warrants to purchase additional shares of our stock. We allocated the proceeds from the financing between the notes
and the warrants based on their relative fair values. The fair value of the warrants was recorded against the carrying value of the notes as an original issue discount (OID) which was being amortized
as interest expense over a one-year period from the original issuance date of the notes. During the year ended December 31, 2007 and December 31, 2006, we recognized a
non-cash charge to interest expense of $0.3 million and $0.6 million, respectively, for the amortization of the OID, which was fully expensed upon the completion of the first
closing of our private placement when the promissory notes were converted to common stock. Furthermore, in accordance with Emerging Issues Task Force (EITF) No. 00-27, Application of Issue No. 98-5 to Certain
Convertible Instruments, and EITF No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or

53

---



Table of Contents

Contingently Adjustable Ratios, after considering the allocation of the proceeds to the promissory notes, the Company determined that the promissory notes contained a
contingent beneficial conversion feature (Contingent BCF). The Contingent BCF existed at the date of the issuance of the promissory notes due to the fact that the original carrying value of promissory
notes, after allocation of the proceeds, would be less than the purchase price of the new series of stock paid by investors in the new series. In accordance with EITF No. 98-5, the
Contingent BCF of $1.2 million was recognized as additional non-cash interest expense when the promissory notes were converted into shares of common stock.

During
2005, we borrowed $2.0 million to finance the purchase of laboratory and office equipment at interest rates ranging between 9.4% and 10.4%. Interest expense on these
borrowings was $0.1 million for each of the years ended December 31, 2007 and 2006.

Income Tax Benefit.During 2006, we sold $5.8 million of our New Jersey State operating loss carryforwards resulting in the
recognition of an
income tax benefit of $0.5 million. Due to the Company's history of losses, we have not recognized the benefit of any of our other net operating loss carryforwards.

Liquidity and Capital Resources

At December 31, 2008, we had cash, cash equivalents and marketable securities of $14.4 million and working capital of
$12.8 million. Since inception, we have used $30.0 million of cash to fund our operating activities and $3.4 million for capital expenditures. Through December 31, 2008, we
have funded substantially all of our operations and capital expenditures through private placements of equity and convertible debt securities totaling $45.8 million, cash received from
corporate collaborations totaling $9.2 million, government grants totaling $1.8 million, and capital equipment and working capital financing totaling $3.6 million.

In
September 2008, we entered into a Loan and Security Agreement in which we are authorized to borrow up to $2.0 million for the purchase of certain equipment, a portion of the
proceeds which may be used for general corporate working capital purposes. During 2008, we borrowed approximately $1.5 million pursuant to the Loan and Security Agreement, of which
approximately $1.0 million was for equipment previously purchased and approximately $0.5 million was for general working capital.

On
March 12, 2007, we completed the first closing of our Private Placement of shares of common stock and warrants to purchase shares of common stock raising approximately
$17.2 million of net proceeds. On April 6, 2007 we completed the final closing of our Private Placement raising an additional $11.4 million of net proceeds, bringing the total
private placement net proceeds to $28.6 million. On March 27, 2007, we entered into the Givaudan Agreement for the development and commercialization of compounds that enhance sweetness
or savory sensation as well as compounds that block or desensitize bitter taste for use in the food and beverage industry. Pursuant to the Givaudan Agreement, Givaudan agreed to pay us an upfront
technology fee of $1.3 million and provide research funding to us over the initial 3.5 year term of the Givaudan Agreement of up to $11.6 million. We believe that our current
capital resources and the funding we expect to continue to receive from Givaudan should be sufficient to meet our operating and capital requirements at least through September 2010.

We
expect that substantially all of our cash-flow for the foreseeable future will come from corporate collaborations, license agreements and interest earned on the proceeds
from our sales of marketable securities. During 2009, we expect to recognize approximately $3.0 million as revenue, primarily from Givaudan, which includes $0.4 million of the upfront
technology fee that we received from Givaudan which is being recognized as revenue over the related performance period and $2.6 million pursuant to research funding. We are subject to those
risks associated with any biotechnology company that has substantial expenditures for research and development. There can be

54

---



Table of Contents

no
assurance that our research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable.
In addition, we operate in an environment of rapid technological change and we are largely dependent on
the services of our employees and consultants. The stock market in general has recently experienced large price and volume fluctuations and the market price of our common stock has experienced
significant volatility. For us to fund our operations and to commercially develop our products, additional equity and/or debt financing will be required. There is no assurance that such financing will
be available to us as needed and as a result, we may need to pursue other strategic alternatives. In connection therewith, in November 2008, we retained the life sciences advisory firm of
Burrill & Company to advise us on strategic alternatives from acquiring synergistic assets to monetizing existing assets.

Summary of Contractual Obligations

The following table summarizes our obligations to make future payments under our current contractual obligations as of
December 31, 2008:

Payments Due by PeriodTotal

2009

2010-2011

2012-2013

ThereafterOperating leases

$
6,824,000

$
857,000

$
1,673,000

$
1,698,000

$
2,596,000Long-term debt


1,667,000


519,000


796,000


352,000


License payments


275,000


25,000


50,000


50,000


150,000$
8,766,000

$
1,401,000

$
2,519,000

$
2,100,000

$
2,746,000


Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been
prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and reported amount of revenue and expenses during the reporting period. On
an ongoing basis, we evaluate our judgments and estimates, including those related to revenue recognition, long-lived assets, accrued liabilities, share-based payments and income taxes. We
base our judgment and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. During 2008, there have been no material changes in our
critical accounting policies.

While
our significant accounting policies are described in more detail in Note 3 to our financial statements, we believe the following accounting policies to be critical to the
judgments and estimates used in the preparation of our financial statements:



Revenue from corporate collaborations and licensing agreements consist of up-front fees, research and development funding,
and milestone payments. Nonrefundable up-front fees are deferred and recognized as revenue over the related performance period. We estimate the performance period based on the specific
terms of each collaborative agreement, but the actual performance may vary. We adjust the performance periods based on available facts and circumstances. Revenue from research and development
agreements and government grants is recognized pursuant to the related agreements as

55

---



Table of Contents

work
is performed and related costs are incurred. Revenue resulting from the achievement of substantive milestone events as defined in the agreements is recognized when the milestone is achieved.



We follow SFAS 123R, under which we recognize compensation cost for awards to employees and non-employee board
members based on the grant-date fair value of stock-based awards over the period during which an award holder is required to provide service in exchange for the award. No compensation is
recognized for awards for which the award holder does not tender the requisite service. At December 31, 2008, total unrecognized compensation expense related to non-vested stock
options granted prior to that date was $2.0 million, which is expected to be recognized over a weighted average period of 2.4 years.

Prior
to 2006, we applied the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25,Accounting for
Stock Issued to Employees,and related interpretations, to account for fixed-plan stock options granted to employees and directors. Under APB Opinion No. 25,
we did not record compensation expense for stock options since the current fair value of the underlying stock equaled the exercise price of the options.

In
estimating the fair value of stock options, we use the Black-Scholes option-pricing model which requires us to make estimates about certain inputs regarding the volatility of our
common stock and the expected term of our options. Until there is significant public trading activity in our common stock, we will use the average historical volatility of a group of pubic company
peers. In addition, we have used the "simplified" method as described in SEC Staff Accounting Bulletin No. 107 to determine the expected life of our options.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our carrying values of cash and cash equivalents, marketable securities, accounts receivable, accounts payable, accrued expenses and
debt are a reasonable approximation of their fair value. The estimated fair values of financial instruments have been determined by us using available market information and appropriate valuation
methodologies.

We
have not entered into and do not expect to enter into, financial instruments for trading or hedging purposes. We do not currently anticipate entering into interest rate swaps and/or
similar instruments. We have no material currency exchange risk exposure as of December 31, 2008. Our primary market risk exposure with regard to financial instruments is to changes in interest
rates, which would impact interest income earned on such instruments. A one percent change (100 basis points) in interest rates on our investments would have impacted interest income by approximately
$0.2 million for the year ended December 31, 2008.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on
Form 10-K. A list of the financial statements filed herewith is found at "Item 15. Exhibits, Financial Statements and Financial Statement Schedules".

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

56

---



Table of Contents

ITEM 9A.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of
December 31, 2008. In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving their objectives and management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and
procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2008, our disclosure controls and procedures were
(1) effective in that they were designed to ensure that material information relating to us is made known and accumulated and communicated to management, including our chief executive officer
and chief financial officer, by others within the Company, as appropriate to allow timely decisions regarding required disclosures, and (2) effective in that they provide that information
required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and
forms.

No
changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal
quarter ended December 31, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management's Responsibility for Financial Statements

Our management is responsible for the integrity and objectivity of all information presented in this annual report. The financial
statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management's best estimates and judgments. Management
believes the financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company's financial position and results of operations.

The
Audit Committee of the Board of Directors meets regularly with the Company's independent registered public accounting firm and representatives of management to review accounting,
financial reporting, internal control and audit matters, as well as the nature and extent of the audit effort. The Audit Committee is responsible for the engagement of the independent registered
public accounting firm. The independent registered public accounting firm has free access to the Audit Committee.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control
over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act and is a process designed by, or under the supervision of, our
principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures
that:



57

---



Table of Contents



Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This
annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was
not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's
report in this annual report.

Our
management assessed the effectiveness of the company's internal control over financial reporting as of December 31, 2008. In making this assessment, the company's management
used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal ControlIntegrated
Framework.

Based
on its evaluation, our management has concluded that, as of December 31, 2008, our internal control over financial reporting was effective.

ITEM 9B.    OTHER INFORMATION

None.

58

---



Table of Contents

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information relating to our directors and nominees for election as directors under the heading "Election of Directors" in our
definitive proxy statement for the 2009 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement. The information relating to our executive officers in response to
this item is contained in part under the caption "Our Executive Officers" in Part I of this Annual Report on Form 10-K and the remainder is incorporated herein by reference
to our definitive proxy statement for the 2009 Annual Meeting of Stockholders.

We
have adopted a written code of conduct that applies to all of our employees, including our principal executive officer, principal financial officer and principal accounting officer,
or persons performing similar functions. We make available our code of conduct free of charge through our web site which is located at www.redpointbio.com. We intend to disclose any amendments to, or
waivers from, our code of conduct that are required to be publicly disclosed pursuant
to rules of the SEC and NASDAQ by filing such amendment or waiver with the SEC and by posting it on our web site.

ITEM 11.    EXECUTIVE COMPENSATION

The discussion under the heading "Executive Compensation" in our definitive proxy statement for the 2009 Annual Meeting of Stockholders
is incorporated herein by reference to such proxy statement.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The discussion under the heading "Security Ownership of Certain Beneficial Owners and Management" in our definitive proxy statement for
the 2009 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The discussion under the heading "Certain Relationships and Related Transactions and Director Independence" in our definitive proxy
statement for the 2009 Annual Meeting of Stockholders is incorporated herein by reference to such proxy statement.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

The discussion under the heading "Independent Auditors Fees and Other Matters" in our definitive proxy statement for the 2009 Annual
Meeting of Stockholders is incorporated herein by reference to such proxy statement.

PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

(a)

(1)

Financial Statements.Reference is made to the Index to Financial Statements on Page F-1.(2)

Financial Statement Schedule.Not applicable.(3)

Exhibits.Reference is made to the Index to Exhibits on Page 61.


59

---





Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized this 26th day of March, 2009.

REDPOINT BIO CORPORATIONBy:

/s/ F. RAYMOND SALEMME, PH.D.F. Raymond Salemme, Ph.D., President, Chief Executive Officer and Director (Principal Executive Officer)


Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

Signature

Title

Date/s/ F. RAYMOND SALEMME F. Raymond Salemme

President, Chief Executive Officer and Director (Principal Executive Officer)

March, 26, 2009/s/ SCOTT HORVITZ Scott Horvitz

Chief Financial Officer, Treasurer and Secretary (Principal Financial and Accounting Officer)

March, 26, 2009/s/ JOSEPH MOLLICA Joseph Mollica

Chairman of the Board

March, 26, 2009/s/ ALLEN BLOOM Allen Bloom

Director

March, 26, 2009/s/ ROBERT CHEFITZ Robert Chefitz

Director

March, 26, 2009/s/ LEIF KJAERGAARD Leif Kjaergaard

Director

March, 26, 2009/s/ IRWIN SCHER Irwin Scher

Director

March, 26, 2009/s/ RICHARD SHANLEY Richard Shanley

Director

March, 26, 2009


60

---





Table of Contents

EXHIBIT INDEX

2.1

Agreement and Plan of Merger, dated May 3, 2007, between Robcor Properties, Inc. and Redpoint Bio Corporation (Incorporated by reference to Exhibit A of the Registrant's Schedule 14C filed with the
Commission on May 3, 2007).3.1

Third Amended and Restated Certificate of Incorporation of Redpoint Bio Corporation (Incorporated by reference to Exhibit 3.1 of the Registrant's Amendment No. 1 to the Registration Statement on
Form S-1 (Registration No. 333-143507) filed on July 2, 2007).3.2

Amended and Restated Bylaws of Redpoint Bio Corporation (Incorporated by reference to Exhibit C of the Registrant's Schedule 14C filed with the Commission on May 3, 2007).4.1

Form of Warrant issued by the Company to investors in the private placement on March 12, 2007 and April 6, 2007 (Incorporated by reference to Exhibit 4.1 of the Registrant's Current Report on
Form 8-K filed with the Commission on March 16, 2007).4.2

Placement Agent Warrant issued by the Company to each of National Securities Corporation and Brean Murray, Carret & Co., LLC (Incorporated by reference to Exhibit 4.2 of the Registrant's
Current Report on Form 8-K filed with the Commission on March 16, 2007).4.3

Form of common stock Certificate (Incorporated by reference to Exhibit 4.3 of the Registrant's Amendment No. 1 to the Registration Statement on Form S-1 (Registration No. 333-143507) filed on
July 2, 2007).10.1

Agreement and Plan of Merger, dated as of March 12, 2007, by and among Redpoint Bio Corporation, on the one hand, and Robcor Properties, Inc., Robcor Acquisition Corp., Robcor LLC, Halter Financial
Investments, L.P. and Michael Heitz (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on March 13, 2007).10.2

Form of Subscription Agreement, dated March 12, 2007 and April 6, 2007, by and between Redpoint Bio Corporation and the signatories thereto (Incorporated by reference to Exhibit 10.1 of the Registrant's
Current Report on Form 8-K filed with the Commission on April 9, 2007).10.3

Form of Lockup Agreement by officers, directors, and certain stockholders (Incorporated by reference to Exhibit 10.14 of the Registrant's Current Report on Form 8-K filed with the Commission on March 16,
 2007).10.4

Lease Agreement, dated December 9, 2002, by and between Eastpark at 8A and Linguagen Corp. (Incorporated by reference to Exhibit 10.4 of the Registrant's Current Report on Form 8-K filed with the
Commission on March 16, 2007).10.5

Lease Agreement, dated as of September 30, 2005, between Albert Einstein Healthcare Network and Linguagen Corp. (Incorporated by reference to Exhibit 10.5 of the Registrant's Current Report on Form 8-K
filed with the Commission on March 16, 2007).10.6

Amendment to Lease Agreement between Albert Einstein Healthcare Network and Linguagen Corp., effective as of June 1, 2006, by and between Albert Einstein Healthcare Network and Linguagen Corp. (Incorporated by
reference to Exhibit 10.6 of the Registrant's Current Report on Form 8-K filed with the Commission on March 16, 2007).10.7

Amendment No. 2 to Lease Agreement between Albert Einstein Healthcare Network and Linguagen Corp., dated as of August 4, 2006, by and between Albert Einstein Healthcare Network and Linguagen Corp.
(Incorporated by reference to Exhibit 10.7 of the Registrant's Current Report on Form 8-K filed with the Commission on March 16, 2007).


61

---



Table of Contents

10.8

Amendment No. 3 to Lease Agreement between Albert Einstein Healthcare Network and Linguagen Corp., dated as of January 2, 2007, by and between Redpoint Bio Corporation and Albert Einstein Healthcare Network
(Incorporated by reference to Exhibit 10.8 of the Registrant's Current Report on Form 8-K filed with the Commission on March 16, 2007).10.9

Lease Agreement, dated as of November 28, 2005, by and between BMR-7 Graphics Drive LLC and Linguagen Corp. (Incorporated by reference to Exhibit 10.9 of the Registrant's Current Report on Form 8-K
filed with the Commission on March 16, 2007).10.10

First Amendment to Lease Agreement, dated as of October 25, 2005, by and between BMR-7 Graphics Drive LLC and Linguagen Corp. (Incorporated by reference to Exhibit 10.10 of the Registrant's Current
Report on Form 8-K filed with the Commission on March 16, 2007).10.11

Acknowledgement of Term Commencement Date and Term Expiration Date, dated May 7, 2007, by and between Redpoint Bio Corporation and BMR-7 Graphics Drive LLC (Incorporated by reference to Exhibit 10.11 of
the Registrant's Amendment No. 1 to the Registration Statement on Form S-1 (Registration No. 333-143507) filed on July 2, 2007).10.12

Employment Agreement, dated May 25, 2004, between Linguagen Corp. and Dr. Raymond F. Salemme (Incorporated by reference to Exhibit 10.11 of the Registrant's Current Report on Form 8-K filed with
the Commission on March 16, 2007).**10.13

Employment Agreement, dated December 28, 2005, between Linguagen Corp. and Dr. Susan Welsh (Incorporated by reference to Exhibit 10.12 of the Registrant's Current Report on Form 8-K filed with the
Commission on March 16, 2007).**10.14

Employment Agreement, dated June 28, 2004, between Linguagen Corp. and Scott Horvitz (Incorporated by reference to Exhibit 10.13 of the Registrant's Current Report on Form 8-K filed with the Commission
on March 16, 2007).**10.15

Master Security Agreement, dated as of February 16, 2005, by and between Oxford Finance Corporation and Linguagen Corp. (Incorporated by reference to Exhibit 10.3 of the Registrant's Current Report on
Form 8-K filed with the Commission on March 16, 2007).10.16

2007 Omnibus Equity Compensation Plan (Incorporated by reference to Exhibit 10.15 of the Registrant's Current Report on Form 8-K filed with the Commission on March 16, 2007).**10.17

Registration Rights Agreement, dated March 12, 2007, by and among Robcor, National Holdings Corporation, Brean Murray, Carret & Co., LLC and the parties set forth on the signature page and
Exhibit A thereto (Incorporated by reference to Exhibit 10.16 of the Registrant's Current Report on Form 8-K filed with the Commission on March 16, 2007).10.18

Registration Rights Agreement, dated March 12, 2007, by and among Robcor and certain existing stockholders of Redpoint (Incorporated by reference to Exhibit 10.17 of the Registrant's Current Report on
Form 8-K filed with the Commission on March 16, 2007).10.19

Placement Agency Agreement, dated December 4, 2006, by and among Redpoint, National Securities Corporation and Brean Murray, Carret & Co., LLC (Incorporated by reference to Exhibit 10.18
of the Registrant's Current Report on Form 8-K filed with the Commission on March 16, 2007).10.20

Amendment No. 1 to the Placement Agency Agreement, dated March 6, 2007, by and among Redpoint, National Securities Corporation and Brean Murray, Carret & Co., LLC (Incorporated by
reference to Exhibit 10.19 of the Registrant's Current Report on Form 8-K filed with the Commission on March 16, 2007).


62

---



Table of Contents

10.21

Advisory Agreement, dated March 8, 2007, by and between Halter Financial Group, L.P., and Redpoint Bio Corporation (Incorporated by reference to Exhibit 10.20 of the Registrant's Current Report on
Form 8-K filed with the Commission on March 16, 2007).10.22

Separation Agreement and General Release, dated as of April 25, 2007, by and between Redpoint Bio Corporation and Susan Welsh (Incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on
Form 8-K filed with the Commission on April 26, 2007).**10.23

Joint Research and Development and License Agreement, dated March 27, 2007, by and between Givaudan Schweiz AG and Redpoint Bio Corporation (Incorporated by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q filed with the Commission on May 15, 2007).10.24

Amended and Restated License Agreement, effective as of April 2, 2003, between Mount Sinai School of Medicine of New York University and Linguagen Corp. (Incorporated by reference to Exhibit 10.1 of the
Registrant's Current Report on Form 8-K filed with the Commission on March 16, 2007).10.25

First Amendment to Amended and Restated License Agreement, dated as of November 10, 2003, between Mount Sinai School of Medicine of New York University and Linguagen Corp. (Incorporated by reference to
Exhibit 10.2 of the Registrant's Current Report on Form 8-K filed with the Commission on March 16, 2007).10.26

Side Letter, dated July 11, 2007, to Placement Agency Agreement, dated December 4, 2006, as amended, by and between National Securities Corporation and Brean Murray, Carret & Co., LLC
(Incorporated by reference to Exhibit 10.26 of the Registrant's Amendment No. 3 to the Registration Statement on Form S-1 (Registration No. 333-143507) filed on July 18, 2007).10.27

Employment Agreement dated September 10, 2007, by and between Redpoint Bio Corporation and Scott Siegel, Ph.D. (Incorporated by reference to Exhibit 10.1 of the Company's Current Repot on Form 8-K filed
on October 1, 2007).**10.28

Research Agreement, dated December 13, 2007, by and between the Coca-Cola Company and Redpoint Bio Corporation (Incorporated by reference to Exhibit 10.28 of the Company's Annual Report on Form 10-K
filed on March 14, 2008).10.29

Loan and Security Agreement, dated September 25, 2008, by and between Redpoint Bio Corporation and CIT Healthcare LLC (Incorporated by reference to Exhibit 10.1 of the Registrant's Quarterly Report on
Form 10-Q filed with the Commission on November 7, 2008).10.30

Separation of Employment Agreement and General Release, by and between the Company and Robert W. Bryant, Ph.D., dated January 9, 2009 (Incorporated by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed with the Commission on January 15, 2009).**10.31

Confidential Separation Agreement and General Release, by and between the Company and Scott Siegel, Ph.D., dated February 26, 2009 (Incorporated by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed with the Commission on March 4, 2009).**10.32

Amendment to Employment Agreement by, and between the Company and Dr. F. Raymond Salemme, dated December 22, 2008 (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on
Form 8-K filed on December 23, 2008).**


63

---



Table of Contents

10.33

Amendment to Employment Agreement by, and between the Company and Scott M. Horvitz, dated December 22, 2008 (Incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed on
December 23, 2008).**10.34

Amendment to Employment Agreement by, and between the Company and Dr. Scott A. Siegel, dated December 22, 2008 (Incorporated by reference to Exhibit 10.3 of the Company's Current Report on Form 8-K
filed on December 23, 2008).**17.1

Resignation Letter of David Patchen, dated March 10, 2008 (Incorporated by reference to Exhibit 17.1 of the Registrant's Current Report on Form 8-K filed with the Commission on March 12,
2008).17.2

Resignation Letter of Philip L. Smith, Ph.D., dated March 10, 2008 (Incorporated by reference to Exhibit 17.2 of the Registrant's Current Report on Form 8-K filed with the Commission on March 12,
2008).21.1

List of Subsidiaries.*23.1

Consent of KPMG LLP.*31.1

Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer).*31.2

Certification Pursuant to Rule 13a-14(a) and 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer).*32.1

Certification Pursuant to 18 U.S.C. Section 1350 (Chief Executive Officer).*32.2

Certification Pursuant to 18 U.S.C. Section 1350 (Chief Financial Officer).*


---

64

---





Table of Contents



REDPOINT BIO CORPORATION  (A Development-Stage Enterprise)  Index to Financial Statements



PageReport of Independent Registered Public Accounting Firm

F-2Balance Sheets

F-3Statements of Operations

F-4Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

F-5Statements of Cash Flows

F-7Notes to Financial Statements

F-8


F-1

---





Table of Contents



Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders
Redpoint Bio Corporation

We
have audited the accompanying balance sheets of Redpoint Bio Corporation (a development-stage enterprise) (the "Company") as of December 31, 2007 and 2008, and the related
statements of operations, redeemable convertible preferred stock and stockholders' equity (deficit), and cash flows for each of the years in the three-year period ended December 31,
2008 and for the period from August 16, 1995 (inception) to December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement. 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, the financial statements referred to above present fairly, in all material respects, the financial position of Redpoint Bio Corporation as of December 31, 2007 and
2008, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2008 and for the period from August 16, 1995
(inception) to December 31, 2008, in conformity with U.S. generally accepted accounting principles.

/s/  KPMG LLP

Philadelphia,
Pennsylvania
March 26, 2009

F-2

---





Table of Contents



REDPOINT BIO CORPORATION        (A Development-Stage Enterprise)        Balance Sheets

December 312007

2008AssetsCurrent assets:Cash and cash equivalents

$
5,789,997

$
3,130,561Marketable securities


16,911,413


11,296,952Accounts receivable


50,114


139,095Prepaid expenses and other current assets


505,994


313,456Total current assets


23,257,518


14,880,064Property and equipment, net


1,295,943


1,240,514Other assets


269,850


321,978Total assets

$
24,823,311

$
16,442,556Liabilities and Stockholders' EquityCurrent liabilities:Current portion of long-term debt

$
447,767

$
519,155Accounts payable


710,880


877,642Accrued expenses


514,019


305,580Accrued compensation


402,863


15,610Deferred revenue


371,424


371,320Total current liabilities


2,446,953


2,089,307Long-term debt


187,576


1,147,952Deferred revenue


650,007


278,582Total liabilities


3,284,536


3,515,841Commitments (Note 13)Stockholders' equity:Preferred Stock; 10,000,000 shares authorized, $0.0001 par value, none issued





Common stock; authorized 150,000,000 shares; $0.0001 par value, issued and outstanding 79,223,987 at December 31, 2007 and issued and outstanding
79,495,870 shares at December 31, 2008


7,922


7,950Additional paid-in capital


54,485,373


55,371,501Deficit accumulated during the development stage


(32,996,231
)

(42,517,290
)Accumulated other comprehensive income


41,711


64,554Total stockholders' equity


21,538,775


12,926,715Total liabilities and stockholders' equity

$
24,823,311

$
16,442,556


See
accompanying notes to financial statements.

F-3

---





Table of Contents



REDPOINT BIO CORPORATION        (A Development-Stage Enterprise)        Statements of Operations

August 16,
1995
(Inception) to
December 31,
2008Years ended December 31,2006

2007

2008Research and grant revenue

$


$
2,229,461

$
3,999,252

$
10,461,574Operating expenses:Research and development


3,630,515


7,266,542


8,647,432


28,437,727General and administrative


2,811,217


4,510,708


5,607,309


20,201,911Total operating expenses


6,441,732


11,777,250


14,254,741


48,639,638Operating loss


(6,441,732
)

(9,547,789
)

(10,255,489
)

(38,178,064
)Interest income


52,731


768,204


565,177


1,518,578Interest expense


(928,941
)

(1,696,802
)

(97,519
)

(3,430,893
)Loss before income taxes


(7,317,942
)

(10,476,387
)

(9,787,831
)

(40,090,379
)Income tax benefit


465,803





266,772


985,978Net loss


(6,852,139
)

(10,476,387
)

(9,521,059
)
$
(39,104,401
)Accretion of redeemable convertible preferred stock


(1,158,553
)

(224,846
)

Net loss applicable to common stockholders

$
(8,010,692
)
$
(10,701,233
)
$
(9,521,059
)Basic and diluted net loss per common share

$
(1.81
)
$
(0.17
)
$
(0.12
)Weighted average number of shares outstanding


4,429,100


63,314,679


79,443,622


See
accompanying notes to financial statements.

F-4

---



Table of Contents

REDPOINT BIO CORPORATION
(A Development-Stage Enterprise)
Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)
Period from August 16, 1995 (inception) to December 31, 2008

Stockholders' Equity (Deficit)Redeemable convertible preferred stockDeficit
accumulated
during
development
stageSeries A

Junior

Common Stock





Accumulated
other
comprehensive
incomeAdditional
paid-in
capital

Stock
subscription
receivableShares

Amount

Shares

Amount

Shares

Amount

TotalInception, August 16, 1995




$





$





$


$


$


$


$


$
Issuance of common stock for services














2,782,000


278


722











1,000Net loss


























(3,785
)




(3,785
)Balance, December 31, 1995














2,782,000


278


722





(3,785
)




(2,785
)Net loss


























(7,069
)




(7,069
)Balance December 31, 1996














2,782,000


278


722





(10,854
)




(9,854
)Net loss


























(48,185
)




(48,185
)Balance, December 31, 1997














2,782,000


278


722





(59,039
)




(58,039
)Net loss


























113,785





113,785Balance, December 31, 1998














2,782,000


278


722





54,746





55,746Net loss


























(73,505
)




(73,505
)Balance, December 31, 1999














2,782,000


278


722





(18,759
)




(17,759
)Issuance of common stock














282,373


28


294











322Issuance of common stock for dilution provisions














7,428

















Net income


























42,905





42,905Balance, December 31, 2000














3,071,801


306


1,016





24,146





25,468Common stock reacquired and retired














(1,669,200
)

(167
)

107











(60
)Issuance of common stock














1,112,800


111


3,995


(4,106
)







Issuance of common stock for dilution provisions














4,237

















Common stock reacquired and retired














(20,170
)
















Net income


























116,192





116,192Balance, December 31, 2001














2,499,468


250


5,118


(4,106
)

140,338





141,600Issuance of common stock for services














515,838


52


926











978Net loss


























(864,319
)




(864,319
)Balance, December 31, 2002














3,015,306


302


6,044





(723,981
)




(721,741
)Sale of Series A Preferred stock net of $257,240 of expenses


1,285,714


2,442,759


























Conversion of principal portion of notes payable


623,963


1,310,320


























Conversion of accrued interest on notes payable








236,987


497,673




















Accretion of Series A Preferred to redemption value





48,826




















(48,826
)




(48,826
)Issuance of common stock for dilution provisions














673,272


67


101,577











101,644Issuance of common stock options for services




















3,087











3,087Proceeds from stockholder note























4,106








4,106Common stock reacquired and retired














(678,263
)

(68
)

(110,900
)




(164,032
)




(275,000
)Net loss


























(2,360,483
)




(2,360,483
)Balance, December 31, 2003


1,909,677


3,801,905


236,987


497,673


3,010,315


301


(192
)




(3,297,322
)




(3,297,213
)


See accompanying notes to financial statements.

F-5

---



Table of Contents

REDPOINT BIO CORPORATION
(A Development-Stage Enterprise)
Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)
Period from August 16, 1995 (inception) to December 31, 2008

Stockholders' Equity (Deficit)Redeemable convertible preferred stockDeficit
accumulated
during
development
stageSeries A

Junior

Common Stock





Accumulated
other
comprehensive
incomeAdditional
paid-in
capital

Stock
subscription
receivableShares

Amount

Shares

Amount

Shares

Amount

TotalSale of Series A Preferred stock net of $83,144 of expenses


4,535,158


9,440,688


























Accretion of Series A Preferred to redemption value





669,228




















(669,228
)




(669,228
)Issuance of common stock for dilution provisions














1,391,000


139


209,861











210,000Issuance of common stock options for services




















15,391











15,391Net loss


























(4,803,026
)




(4,803,026
)Balance, December 31, 2004


6,444,835


13,911,821


236,987


497,673


4,401,315


440


225,060





(8,769,576
)




(8,544,076
)Accretion of Series A Preferred to redemption value


























(1,147,404
)




(1,147,404
)Issuance of common stock for dilution provisions














2,790





421











421Issuance of common stock














89,204


9


13,431











13,440Issuance of warrants and stock options for services




















34,782











34,782Net loss


























(4,367,326
)




(4,367,326
)Balance, December 31, 2005


6,444,835


15,059,225


236,987


497,673


4,493,129


449


273,694





(14,284,306
)




(14,010,163
)Accretion of Series A Preferred to redemption value


























(1,158,553
)




(1,158,553
)Issuance of warrants to purchase preferred stock




















1,228,568











1,228,568Proceeds from warrants




















23,750











23,750Stock-based compensation




















50,801











50,801Common stock reacquired and retired














(53,784
)

(5
)

(8,116
)










(8,121
)Net loss


























(6,852,139
)




(6,852,139
)Balance, December 31, 2006


6,444,835


16,217,778


236,987


497,673


4,439,345


444


1,568,697





(22,294,998
)




(20,725,857
)Accretion of Series A Preferred to redemption value





224,846




















(224,846
)




(224,846
)Conversion of preferred stock


(6,444,835
)

(16,442,624
)

(236,987
)

(497,673
)

22,774,963


2,278


16,938,019











16,940,297Conversion of convertible notes payable and warrants














7,256,697


725


5,093,074











5,093,799Sale of common stock, net of issuance costs of $4,406,015














42,180,263


4,218


28,578,767











28,582,985Issuance of common stock for dilution provisions














2,017,407


202


1,631,507











1,631,709Issuance of common stock upon exercise of options and warrants














555,312


55


83,241











83,296Stock-based compensation




















592,068











592,068Comprehensive loss:Net loss


























(10,476,387
)




(10,476,387
)Unrealized gain on marketable securities





























41,711


41,711Total comprehensive loss
































(10,434,676
)Balance, December 31, 2007














79,223,987


7,922


54,485,373





(32,996,231
)

41,711


21,538,775Issuance of common stock upon exercise of options














271,883


28


40,754











40,782Stock-based compensation




















845,374











845,374Comprehensive loss:Net loss


























(9,521,059
)




(9,521,059
)Net unrealized gain on marketable securities





























22,843


22,843Total comprehensive loss
































(9,498,216
)Balance, December 31, 2008




$





$



79,495,870

$
7,950

$
55,371,501

$


$
(42,517,290
)
$
64,554

$
12,926,715


See accompanying notes to financial statements.

F-6

---





Table of Contents



REDPOINT BIO CORPORATION        (A Development-Stage Enterprise)        Statements of Cash Flows

August 16,
1995
(Inception) to
December 31,
2008Years ended December 31,2006

2007

2008Cash flows from operating activities:Net loss

$
(6,852,139
)
$
(10,476,387
)
$
(9,521,059
)
$
(39,104,401
)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation


408,004


492,679


624,835


2,133,836Amortization of discounts and premiums on marketable securities





(194,729
)

(290,371
)

(485,100
)Options, warrants and stock issued for services and dilution provisions


50,801


2,223,777


845,374


3,461,284Beneficial conversion feature





1,228,565





1,228,565Amortization of discount on convertible notes


597,903


302,032





899,935Amortization of deferred financing costs


97,158


36,664


10,952


144,774Debt inducement charge











361,598Interest expense on convertible notes











136,075Changes in assets and liabilities:Accounts receivable





(50,114
)

(88,981
)

(139,095
)Prepaid expenses and other assets


(491,505
)

(414,744
)

181,915


(891,512
)Accounts payable


555,209


75,932


268,340


1,178,011Accrued expenses and accrued compensation


677,061


(8,122
)

(595,692
)

452,800Deferred revenue





1,021,431


(371,529
)

649,902Net cash used in operating activities


(4,957,508
)

(5,763,016
)

(8,936,216
)

(29,973,328
)Cash flows from investing activities:Purchases of marketable securities





(22,424,973
)

(21,069,320
)

(43,494,293
)Maturity of marketable securities





5,750,000


26,996,994


32,746,994Purchases of property and equipment


(69,264
)

(838,540
)

(670,983
)

(3,366,280
)Net cash (used in) provided by investing activities


(69,264
)

(17,513,513
)

5,256,691


(14,113,579
)Cash flows from financing activities:Proceeds from issuance of long-term debt








1,503,900


3,614,710Net proceeds from convertible notes


3,943,491








5,253,811Repayments of debt


(515,650
)

(574,133
)

(524,593
)

(2,000,060
)Net proceeds from issuance of preferred stock











11,883,447Net proceeds from issuance of common stock and warrants


23,750


28,582,985





28,624,603Proceeds from exercise of common stock options and warrants





83,296


40,782


124,078Common stock reacquired


(8,121
)







(283,121
)Net cash provided by financing activities


3,443,470


28,092,148


1,020,089


47,217,468Net (decrease) increase in cash and cash equivalents


(1,583,302
)

4,815,619


(2,659,436
)

3,130,561Cash and cash equivalents, beginning of year


2,557,680


974,378


5,789,997


Cash and cash equivalents, end of year

$
974,378

$
5,789,997

$
3,130,561

$
3,130,561Supplemental cash flow disclosures:Noncash investing and financing activities:Increase (decrease) in property and equipment included in accounts payable

$


$
109,665

$
(101,578
)
$
8,087Conversion of notes payable and accrued interest to preferred stock











1,446,395Conversion of notes payable and accrued interest to common stock





3,896,001





3,896,001Conversion of preferred and junior preferred stock to common stock





16,940,297





16,940,297Accretion of preferred stock


1,158,553


224,846





3,248,857Warrants issued in connection with notes payable


1,228,568








1,258,642Cash paid for interest


142,693


93,803


87,250


500,127


See accompanying notes to financial statements.

F-7

---





Table of Contents



REDPOINT BIO CORPORATION        (A Development-Stage Enterprise)        Notes to Financial Statements

(1) Description of the Business

Redpoint Bio Corporation ("Redpoint" or the "Company") is leveraging recent discoveries in the molecular biology of taste to discover and develop novel taste modulators for the food,
beverage and pharmaceutical industries. Redpoint's food and beverage program is focused on identifying novel flavor modifiers that improve the taste of existing ingredients, enabling the development
of better-tasting, less costly, and more healthful foods and beverages. The Company's unique understanding of the biology of taste and its relationship to metabolic processes, satiety, and diabetes
impact both the development of healthier foods and, potentially, new approaches to the treatment of diabetes and obesity. In addition, the Company has program aimed at suppressing the bitterness of
oral medicines, enabling the development of novel formulations with improved acceptance and compliance across a broad range of dosage forms and therapeutic applications. Redpoint's research in
diabetes and obesity stems from the observation that taste signaling in the gut is involved in important hormone secretion processes enabling the Company to leverage its research on lingual taste
modulation to important therapeutic applications.

Since
its inception in 1995, the Company has incurred losses and negative cash flows from operations, and such losses have continued subsequent to December 31, 2008. As of
December 31, 2008, the Company had an accumulated deficit of $42.5 million and anticipates incurring additional losses for the foreseeable future. The Company expects to spend
significant resources over the next several years to enhance its technologies and to fund research and development of its pipeline of potential products.
Through December 31, 2008, substantially all of the Company's revenue has been derived from corporate collaborations, license agreements, and government grants. In order to achieve
profitability, the Company must continue to develop products and technologies that can be commercialized by the Company or through existing and future collaborations.

The
Company is subject to those risks associated with any biotechnology company that has substantial expenditures for research and development. There can be no assurance that the
Company's research and development projects will be successful, that products developed will obtain necessary regulatory approval, or that any approved product will be commercially viable. In
addition, the Company operates in an environment of rapid technological change and is largely dependent on the services of its employees and consultants. For the Company to fund its operations and to
commercially develop its products, additional equity and/or debt financing will be required. There is no assurance that such financing will be available to the Company as needed.

(2) Reverse Triangular Merger, Financing, Reincorporation Merger



Robcor Properties, Inc., a Florida corporation ("Robcor"), and its newly-formed subsidiary, Robcor Acquisition Corp., a Delaware
corporation ("Merger Sub") entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated March 12, 2007, by and among, Redpoint, formerly a privately-held Delaware
corporation, on the one hand, and Robcor, Merger Sub, Robcor LLC, a Kentucky limited liability company and wholly-owned subsidiary of Robcor ("Robcor LLC") and Halter Financial
Investments, L.P., a Texas limited partnership ("Halter"), and Michael Heitz ("Heitz"), as stockholders of Robcor, on the other hand. Pursuant to the Merger Agreement, Merger Sub, which Robcor
had incorporated in the state of Delaware for the purpose of completing the transaction, merged into Redpoint (the "Reverse Merger") on March 12, 2007 (the "Closing" or the "Closing Date") with
Redpoint continuing as the surviving entity in the Reverse Merger. As a result of the

F-8

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(2) Reverse Triangular Merger, Financing, Reincorporation Merger (Continued)

Reverse
Merger, Redpoint became a wholly-owned subsidiary of Robcor. In connection with the Reverse Merger, each share of capital stock of Redpoint was converted into 2.7820 shares of common stock of
Robcor and all of Redpoint's convertible promissory notes were converted into shares of common stock of Robcor.

Redpoint
was deemed to have been the accounting acquirer in the Reverse Merger. Accordingly, the financial statements of the Company presented reflect the historical results of Redpoint
prior to the Reverse Merger, and of the combined entities following the Reverse Merger, and do not include the historical financial results of Robcor prior to the consummation of the Reverse Merger.
In connection with the Reverse Merger, Redpoint issued 1,391,000 shares of common stock to Robcor shareholders which have been treated as issuance costs in connection with the Private Placement.



Concurrently with the completion of the Reverse Merger, Robcor received $17.2 million in net proceeds from the initial closing
of a private placement of approximately 24.7 million shares of common stock at a price of $0.81 per share, and warrants to purchase approximately 6.2 million shares of Robcor common
stock at an exercise price of $1.35 per share (the "Private Placement"). The initial closing of the Private Placement occurred on March 12, 2007, concurrently with the completion of the Reverse
Merger.

In
connection with the Private Placement, Redpoint engaged two placement agents which were issued five-year warrants to buy approximately 2.0 million shares of Robcor
common stock equal to 10% of the number of shares of common stock sold in the Private Placement at an exercise price of $0.97 per share; provided, however, no warrants were issued to the placement
agents with respect to shares and warrants sold to existing Redpoint stockholders.

On
April 6, 2007, Robcor sold an additional 16.1 million shares of common stock and warrants to purchase 4.0 million shares of common stock which resulted in net
proceeds of approximately $11.3 million. In connection with the April closing, warrants to purchase an additional 1.6 million shares of common stock were issued to the placement agents.



On June 15, 2007, Robcor was merged with and into Redpoint, its wholly-owned subsidiary, with Redpoint being the surviving
corporation pursuant to the Agreement and Plan of Merger dated May 3, 2007. As a result of the merger, the Company's state of incorporation changed from Florida to Delaware.

In
connection with the reincorporation merger, the authorized number of shares of common stock was decreased from 1,000,000,000 shares of common stock, no par value per share, to
150,000,000 shares of common stock, $0.0001 par value per share, and the authorized number of shares of preferred stock was decreased from 20,000,000 shares of preferred stock, no par value per share,
to 10,000,000 shares of preferred stock, $0.0001 par value per share. The Company's share data and capital stock have been retrospectively adjusted for all periods presented to reflect the
reincorporation merger.

F-9

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(2) Reverse Triangular Merger, Financing, Reincorporation Merger (Continued)

In
addition, the maximum number of shares of common stock reserved for issuance under the Company's 2007 Omnibus Equity Compensation Plan was increased from 13,511,562 to 17,644,267
shares.

(3) Summary of Significant Accounting Policies

(a) Use of Estimates

The
preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from such estimates.

(b) Cash and Cash Equivalents

The
Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents.

(c) Marketable Securities

Marketable
securities include investments in debt securities having original maturities of greater than three months. These marketable securities are treated
for financial reporting purposes as available-for-sale and as such are reported at their fair
market values. Unrealized gains and losses are recorded as a separate component of stockholders' equity. Any realized gains and losses are recorded in the results of operations.

(d) Concentrations of Credit Risk

Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash equivalents and marketable securities. The Company
has established guidelines relating to diversification and maturities that allows the Company to manage risk.

(e) Revenue Recognition

Revenue
from corporate collaborations and licensing agreements consists of up-front fees, research and development funding, and milestone payments.



Non-refundable upfront fees are recognized as revenue when we have a contractual right to receive such payment, the
contract price is fixed or determinable, the collection of the resulting receivable is reasonably assured, and we have no further performance obligations under the license agreement.

Multiple
element arrangements are analyzed to determine whether the deliverables, which often include a license and performance obligations, such as research and development services,
can be separated or whether they must be accounted for as a single unit of accounting in accordance with Emerging Issues Task Force (EITF) Issue No. 00-21,
Accounting for Revenue Arrangements with Multiple Deliverables. If the fair value of the undelivered performance obligations can be determined, such obligations would then be
accounted for separately as performed. However, if the elements are

F-10

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(3) Summary of Significant Accounting Policies (Continued)

considered
to either (i) not have stand-alone value or (ii) have standalone value but the fair value of any of the undelivered performance obligations cannot be determined, the
arrangement would then be
accounted for as a single unit of accounting and all of the payments are recognized as revenue over the estimated period of when the performance obligations are performed. Whenever we determine that
an arrangement should be accounted for as a single unit of accounting, we must determine the period over which the performance obligations will be performed and revenue will be recognized. Significant
management judgment is required in determining the period over which we are expected to complete our performance obligations under an arrangement.



Our collaboration agreements may also contain substantive milestone payments that are recognized upon achievement of the milestone only
if all of the following conditions are met:



Determination
as to whether a payment meets the aforementioned conditions involves management's judgment. If any of these conditions are not met, the resulting payment would not be
considered a substantive milestone, and therefore the resulting payment would be considered part of the consideration for the single unit of accounting and be recognized as revenue as such performance
obligations are performed.



Reimbursement of research and development costs is recognized as revenue provided the provisions of EITF Issue
No. 99-19,Reporting Revenue Gross as a Principal Versus Net as an Agent, are met, the amounts are fixed and determinable, and
collection of the related receivable is reasonably assured.

(f) Property and Equipment

Property
and equipment are recorded at cost and depreciated on a straight-line basis over their estimated useful lives. The Company uses a life of
four to five years for laboratory equipment, three to seven years for office equipment and furniture, and the lesser of the useful life or the remaining life of the underlying facility lease for
leasehold improvements. Expenditures for repairs and maintenance are charged to expense as incurred, while major renewals and betterments are capitalized. Upon disposition of assets, the cost and
related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the Statements of Operations.

F-11

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(3) Summary of Significant Accounting Policies (Continued)

(g) Research and Development

Research
and development costs are charged to expense as incurred. These expenses include internal research and development as well as research conducted on
behalf of
the Company by third parties, including sponsored university-based research agreements and clinical study vendors. Costs incurred in obtaining technology licenses are charged immediately to research
and development expense if the licensed technology has not reached technological feasibility and has no alternative future uses.

(h) Impairment of Long-Lived Assets

In
accordance with Statement of Financial Accounting Standards (SFAS) No. 144,Accounting for the Impairment or Disposal of
Long-Lived Assets(SFAS No. 144), long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the
estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, then an impairment charge is recognized in
the amount by which the carrying amount of the asset exceeds the fair value of the asset. The Company has not recorded any impairment charges pursuant to SFAS No. 144.

(i) Income Taxes

Income
taxes are accounted for under the asset-and-liability method. Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

(j) Stock-Based Compensation

Effective
January 1, 2006, the Company adopted SFAS No. 123 (revised 2004),Share-Based Payment(SFAS 123R) using the prospective method of adoption. Under SFAS 123R, the Company recognizes compensation cost for awards to employees and nonemployee board members based on the
grant-date fair value of stock-based awards over the period during which an award holder is required to provide service in exchange for the award. No compensation cost is recognized for
awards for which the award holder does not render the requisite service.

Prior
to 2006, the Company applied the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations, to account for its fixed-plan stock options granted to employees and
directors. Under APB Opinion No. 25, the Company did not record compensation expense for its stock options since the current fair value of the underlying stock equaled the exercise price of the
options.

The
fair value of stock options is determined using the Black Scholes option-pricing model and is recognized as expense over the requisite service period using the
straight-line method.

F-12

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(3) Summary of Significant Accounting Policies (Continued)

To
satisfy the exercise of options, the Company plans to issue new shares rather than purchase shares on the open market.

(k) Net Loss per Common Share

Basic
net loss per common share is computed in accordance with SFAS No. 128,Earnings per Share, by
dividing the net loss allocable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per common share is computed by dividing
net loss allocable to common stockholders by the sum of the weighted-average number of common shares outstanding for the period and the number of additional shares that would have been outstanding if
dilutive potential common shares had been issued. Potential common shares are excluded from the calculation of diluted net loss per common share if the effect on net loss per share is antidilutive. In
all periods presented, our diluted net loss per common share is equal to basic net loss per common share because giving effect in the computation of diluted net loss per common share to the exercise
of outstanding options and warrants and the conversion of convertible preferred stock (see notes 10 and 11) would have been antidilutive.

(l) Fair Value of Financial Instruments

The
fair value of our financial instruments is the amount for which the instrument could be exchanged in a current transaction between willing parties. As of
December 31, 2008, the carrying values of cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses, and accrued compensation
equaled or approximated their respective fair values because of the short duration of these instruments. In addition, we believe the carrying value of our debt instruments, which do not have readily
ascertainable market values, approximate their fair values, given that the interest rates on outstanding borrowings approximate market rates.

(m) Comprehensive Loss

We
apply SFAS No. 130,Reporting Comprehensive Income. This statement requires the classification of
items of other comprehensive income (loss) by their nature and disclosure of the accumulated balance of other comprehensive income (loss) separately from accumulated deficit and additional
paid-in capital, in the stockholders' equity section of our balance sheet. Accumulated other comprehensive income consisted of unrealized gains and losses on marketable securities.

(n) Recent Accounting Pronouncements

In
June 2007, the Financial Accounting Standards Board (FASB) issued EITF 07-03,Accounting for Nonrefundable
Advance Payments for Goods or Services to Be Used in Future Research and Development Activities(EITF 07-03). EITF 07-03 specifies that
nonrefundable advance payments for future research and development activities should be deferred and capitalized and should be recognized as an expense as the related goods are delivered or the
related services are performed. If, subsequent to an advance payment, an entity no longer expects the goods to be delivered or services to be rendered, the capitalized advance payment should be
charged to expense. As the guidance in EITF 07-03 is consistent with our existing policy, the adoption of EITF 07-03 effective January 1, 2008 did not have
any impact on our financial statements or related disclosures.

F-13

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(3) Summary of Significant Accounting Policies (Continued)

In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements("SFAS No. 157"). SFAS No. 157 clarifies the
definition of fair value, establishes a framework for measuring fair value and expands disclosures on fair value measurements. In February 2008, the FASB issued two final staff positions ("FSP")
amending SFAS No. 157. FSP SFAS 157-1 amends SFAS No. 157 to exclude SFAS No. 13,"Accounting for Leases"and
its related interpretive accounting pronouncements that address leasing transactions. FSP SFAS 157-2 delays the effective date of SFAS No. 157 until fiscal years beginning
after November 15, 2008 for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The Company
adopted SFAS No. 157 on January 1, 2008, except for the items covered by FSP SFAS 157-2.

SFAS
No. 157 establishes a three-tier fair value hierarchy, which prioritize the inputs used in measuring fair value as follows:



The
Company's marketable securities are reported at fair value on the balance sheet based on quoted prices in active markets for identical assets (Level 1).

(4) Research and Collaboration Agreements

Since inception, the Company has undertaken research projects for which it was the recipient of several Small Business Innovative Research (SBIR) Awards. The SBIR Awards were sponsored
by the National Institutes of Health. In connection with these SBIR projects, the Company recognized $1,796,324 of revenue. The last research project was completed in 2004.

Givaudan.In March 2007, the Company entered into a Joint Research and Development and License Agreement (the "Givaudan Agreement")
with Givaudan
Schweiz AG, a Swiss company ("Givaudan") for the development and commercialization of compounds that enhance sweetness or savory sensation, as well as compounds that block or desensitize bitter taste
for use in the food and beverage industry. Under the terms of the Givaudan Agreement, Redpoint received an upfront payment of $1,300,000 and will receive research funding over the initial
3.5 year term of the Givaudan Agreement, of up to $11,600,000. Redpoint is also eligible to receive reimbursement for costs incurred in connection with obtaining certain regulatory approvals.
Redpoint will also be eligible to receive milestone payments of up to $2,500,000 upon the achievement of specified development and commercialization events as well as royalty payments based on net
sales of Givaudan products that contain flavor systems incorporating compounds developed under the collaboration. The upfront payment of $1,300,000 is being recognized as revenue on a
straight-line basis over the initial term of the Givaudan Agreement. During 2007 and 2008, the Company recognized $279,000 and $371,000, respectively, of revenue attributable to the
amortization of the upfront fee and $1,841,000 and $2,688,000, respectively, of revenue from research funding.

Coca-Cola.In December 2007, the Company entered into a research agreement (the "Coca-Cola Agreement") with The
Coca-Cola Company ("Coca-Cola") for the development of certain technology

F-14

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(4) Research and Collaboration Agreements (Continued)

for
use in soft drinks and non-alcoholic beverages. Under the terms of the Coca-Cola Agreement, the Company recognized $20,000 and $898,000 of revenue from research funding in
2007 and 2008, respectively. The agreement expired by its terms in December of 2008.

(5) Marketable Securities

The following is a summary of available-for-sale securities:

Gross UnrealizedAs of December 31, 2007

Amortized Cost

Gains

Losses

Fair ValueCorporate debt securities

$
13,885,003

$
38,655

$


$
13,923,658Asset-backed securities


2,984,699


3,056





2,987,755Total

$
16,869,702

$
41,711

$


$
16,911,413




Gross UnrealizedAs of December 31, 2008

Amortized Cost

Gains

Losses

Fair ValueCorporate commercial paper

$
4,125,301

$
24,185

$


$
4,149,486Government-sponsored enterprise debt


6,597,497


40,440





6,637,937United States treasury notes


509,600





(71
)

509,529Total

$
11,232,398

$
64,625

$
(71
)
$
11,296,952


At
December 31, 2008, all available-for-sale securities mature within one year. During the years ended December 31, 2007 and 2008, amortization of
discounts and premiums related to marketable securities resulted in income of $194,729 and $290,371, respectively.

(6) Property and Equipment

Property and equipment consisted of the following:

December 312007

2008Laboratory equipment

$
2,478,595

$
3,017,053Office equipment and furniture


265,491


290,187Leasehold improvements


18,145


24,3972,762,231


3,331,637Less accumulated depreciation


(1,466,288
)

(2,091,123
)$
1,295,943

$
1,240,514


Depreciation
expense was $408,004, $492,679, $624,835, and $2,133,836 for the years ended December 31, 2006, 2007, 2008 and period from August 16, 1995 (inception) through
December 31, 2008, respectively.

F-15

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(7) Accrued Expenses

Accrued expenses consisted of the following:

December 312007

2008Professional fees

$
383,366

$
205,101Accrued franchise tax


50,183


Other


80,470


100,479$
514,019

$
305,580


(8) Debt

(a) Master Security Agreement and Loan and Security Agreement

In
February 2005, the Company entered into a Master Security Agreement with a finance company that provided for borrowings up to $3,200,000, subject to certain
conditions, through December 2005. During 2005, the Company borrowed $2,001,810 under the Master Security Agreement in order to finance the purchase of laboratory and office equipment. Amounts
borrowed are evidenced with promissory notes and are repayable in equal monthly payments, over 36 to 48 months, and are collateralized by the purchased equipment. The notes bear interest at
rates varying between 9.4% and 10.4%. As of December 31, 2007 and 2008, $635,343 and $187,577, respectively was outstanding under the Master Security Agreement.

In
connection with the borrowings under the Master Security Agreement, the Company issued the finance company warrants to purchase 53,039 shares of the Company's common stock at an
exercise price of $0.75 per share. The estimated fair value of the warrants of $30,074, determined using the Black-Scholes option-pricing model, was accounted for as deferred financing costs and is
being amortized to interest expense over the remaining term of the notes.

In
September 2008, the Company entered into a Loan and Security Agreement with another finance company that provided for borrowings up $2,000,000 for the purchase of certain equipment
and to be used for working capital purposes. During 2008, the Company borrowed $1,556,357 under the Loan and Security Agreement, of which $1,479,530 was outstanding at December 31, 2008.
Amounts borrowed are evidenced with a promissory note, are repayable in equal monthly payments over 48 months, and are collateralized by the purchased equipment. The note bears interest of
12.1%. The Loan and Security Agreement contains certain protective provisions, including a material adverse change clause. As of December 31, 2008, the Company was in compliance with these
protective provisions.

F-16

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(8) Debt (Continued)

The
scheduled maturities of long-term debt outstanding at December 31, 2008 are as follows:

2009

$
519,1552010


374,1102011


422,1002012


351,7421,667,107Less current portion


(519,155
)$
1,147,952


Interest
expense on notes payable recorded during the years ended December 31, 2006, 2007 and 2008 was $142,963, $89,138 and $86,568, respectively.

(b) Convertible Notes Payable

In
May, June and October 2006, the Company entered into a convertible debt financing agreement with certain of its existing investors which provided for
$4,116,774 in funding. The Company issued 5% secured promissory notes (the Promissory Notes) with principal amounts totaling $4,093,021 and warrants to purchase shares of a new series of preferred
stock that may be designated in the future in a Qualified Financing, as defined in such Promissory Notes. The Promissory Notes were due on the earliest to occur of: (i) demand by holders of a
majority of the outstanding principal at any time after the one year anniversary of the initial May closing; (ii) a Liquidation Event, as defined; and (iii) the two-year
anniversary of the initial May closing. In conjunction with the Reverse Merger, the Promissory Notes and accrued interest were converted into 5,223,522 shares of common stock and warrants were
exercised resulting in the issuance of 2,033,175 shares of common stock.

In
connection with the issuance of the Promissory Notes, the Company incurred $149,533 of debt issuance costs which were capitalized and were being amortized as interest expense over the
one year anniversary of the initial May issuance date of the Promissory Notes. During the years ended December 31, 2006 and 2007, interest expense was $89,639 and $29,126, respectively, related
to amortization of the debt issuance costs.

In
accordance with APB Opinion No. 14,Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants, the Company
allocated the proceeds from the financing between the Promissory Notes and warrants based on their relative estimated fair values of $4,093,021 and $1,228,565, respectively. The relative fair value of
the warrants was recorded against the carrying value of the Promissory Notes as an original issue discount (OID) which was being amortized as interest expense over the one year anniversary of the
initial May issuance date of the Promissory Notes until the closing of the Reverse Merger. During the years ended December 31, 2006 and 2007, the Company recognized a noncash charge to interest
expense of $597,903 and $302,032, respectively, for the amortization of the OID.

In
accordance with EITF No. 00-27,Application of Issue No. 98-5 to Certain Convertible Instruments,
and EITF No. 98-5,Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Ratios, after
considering the allocation of the proceeds to the Promissory

F-17

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(8) Debt (Continued)

Notes,
the Company determined that the Promissory Notes contained a contingent beneficial conversion feature (Contingent BCF). The Contingent BCF existed at the date of the issuance of the Promissory
Notes due to the fact that the original carrying value of Promissory Notes, after allocation of the proceeds, would be less than the purchase price of the new series of preferred stock paid by
investors in the new series. In accordance with EITF No. 98-5, during the year ended December 31, 2007, the Contingent BCF of $1,228,565 was recognized as additional interest
expense when the Promissory Notes were converted into shares of common stock.

(9) Related-Party Transactions

The Company has licensed the rights to certain patents and pending patents in the area of taste receptors and taste inhibitors from a research institution that is a stockholder of the
Company. The license agreement, as amended, required a payment of $130,000. In addition, the Company is required to pay royalties on future sales, if any, of certain products covered by the license
agreement. Commencing in July 2004, the Company is obligated to pay a minimum annual fee, creditable against royalties, of $25,000 to the licensor through the expiration of the
last-to-expire patent. The Company estimates the term of the license agreement to be through December 2019.

(10) Redeemable Convertible Preferred Stock

During 2003 and 2004, the Company sold an aggregate of 5,820,875 shares of convertible preferred stock (Series A) at $2.10 per share, for gross proceeds of $12,223,832.

In
connection with the conversion of a previously outstanding convertible note, the Company issued 623,963 shares of Series A and also issued 236,987 shares of Junior Preferred in
connection with the conversion of the accrued interest on the convertible notes in 2003.

Dividends
on each outstanding share of Series A and Junior Preferred accrued and compounded annually, and were cumulative at the annual rate of 8%. Dividends were payable only
when and if declared by the board of directors.

Each
share of Preferred Stock was convertible at any time at the option of the holder into the number of shares of common stock obtained by dividing the original issue price (subject to
certain adjustments), plus accrued and unpaid dividends, by the conversion price, as defined. The Preferred Stock was mandatorily convertible in the event of an initial public offering, as defined.

At
any time on or after October 31, 2008, the holders of a majority of the Preferred Stock could have required the Company to redeem the Series A at the applicable
redemption price. In the case of the Series A, the redemption price was equal to the greater of (i) the original issue price plus any accumulated unpaid dividends, or (ii) the
fair value of the shares of common stock then issuable upon conversion of such shares of Series A. In the case of the Junior Preferred, the redemption price was equal to the original issue
price of $2.10 per share.

In
connection with the Reverse Merger, the Series A and Junior Preferred converted into 22,774,963 shares of common stock.

F-18

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(11) Stockholders' Equity

(a) Common Stock

The
Company was party to a number of agreements that provided for dilution protection to certain investors. In connection with the Reverse Merger and closing
of the Private Placement, the Company issued approximately 2.0 million shares of common stock to a founder and shareholder of the Company pursuant to certain antidilution protection. During
2007, the Company recorded a charge of $1.6 million to research and development expenses related to the issuance of such shares of common stock, which represented the fair value of those
shares. As of December 31, 2008, none of the Company's existing agreements contain dilution protection provisions.

(b) Warrants

As
of December 31, 2008, the following warrants to purchase Common Stock were outstanding:

Number of
shares

Exercise
price

Expiration53,039

$0.75

February-December 20126,182,287

$1.35

March 20104,015,059

$1.35

April 20103,574,906

$0.97

April 201213,825,291


(c) Registration Rights

On
June 5, 2007, the Company filed a "resale" registration statement with the SEC covering all shares of common stock issued in the Private Placement
and in connection with the Reverse Merger, including shares of common stock into which certain warrants are exercisable. Such registration statement was declared effective on July 20, 2007. The
Company will use its best efforts to maintain its effectiveness until such time as all securities registered under the registration statement have been sold or are otherwise able to be sold under
Rule 144 of the Securities Act without regard to volume limitations, whichever is earlier.

If
the Company fails to maintain the effectiveness of the "resale" registration statement, a 1% penalty will be assessed for each monthly period that the registration statement is not
effective, capped at 12%. The penalty will be payable monthly in either cash or additional shares of common stock, as determined by the Company. The Company follows FASB Staff Position No.
EITF 00-19-2,Accounting for Registration Payment Arrangements(EITF 00-19-2), which
specifies that registration payment arrangements should play no part in determining the initial classification of, and subsequent accounting for, securities to which the payments relate. Contingent
obligations in a registration payment arrangement are separately analyzed under SFAS No. 5,Accounting for Contingencies,and FASB Interpretation
No. 14,Reasonable Estimation of the Amount of a Loss. If we determine a penalty payment is probable and can be reasonably estimated, a liability
will be recorded. As of December 31, 2008, we concluded the likelihood of having to make any payments under the arrangements was remote, and therefore did not record any related liability.

F-19

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(12) Stock Options Plans

In November 2003, the Company adopted the 2003 Stock Incentive Plan, as amended (the 2003 Plan), that authorized the Company to grant up to 6,523,790 shares of common stock to eligible
employees, directors, and consultants of the Company in the form of restricted stock and stock options. The amount and terms of grants are determined by the board of directors. The term of the options
could have been up to 10 years, and options were exercisable in cash or as otherwise determined by the board of directors. Generally, options vest 25% upon the first anniversary of the date of
grant and ratably each month thereafter through the fourth anniversary of the date of grant.

On
March 12, 2007, the Company adopted the Redpoint Bio Corporation 2007 Omnibus Equity Compensation Plan ("2007 Plan"), which provided for the issuance of up to 13,511,562 shares
of common stock, subject to adjustment in certain circumstances. In connection with the adoption of the 2007 Plan, the 2003 Plan merged with and into the 2007 Plan and no additional grants may be made
thereafter under the 2003 Plan. Outstanding grants under the 2003 Plan will continue in effect in accordance with their terms as in effect before March 12, 2007 and the shares with respect to
outstanding grants under the 2003 Plan will be issued or transferred under the 2007 Plan. The 2007 Plan is now the Company's only plan in effect.

On
April 20, 2007, the Company approved an amendment to the 2007 Plan, which increased the maximum number of shares of common stock reserved for issuance under the 2007 Plan by an
additional 4,132,705 shares from 13,511,562 to 17,644,267 shares of common stock. As of December 31, 2008, 5,898,256 shares were reserved for future issuances under the 2007 Plan.

The
following is a summary of stock option activity under the Plan through December 31, 2008:

Number of
shares

Weighted-average
exercise price

Weighted-average
remaining
contractual term

Intrinsic
ValueOutstanding at December 31, 2005


4,602,925

$
0.15Granted


952,835


0.20Forfeited


(129,711
)

0.15Outstanding at December 31, 2006


5,426,049


0.16Granted


5,782,016


0.79Forfeited


(1,187,238
)

0.61Exercised


(416,866
)

0.15Outstanding at December 31, 2007


9,603,961


0.49Granted


1,689,938


0.65Forfeited





Exercised


(271,883
)

0.15Outstanding at December 31, 2008


11,022,016

$
0.52

7.4 years


Exercisable at December 31, 2008


6,417,936

$
0.37

6.6 years





The
total intrinsic value of stock options exercised during the years ended December 31, 2007 and 2008 was $240,380 and $88,709.

F-20

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(12) Stock Options Plans (Continued)

All
options granted to date have exercise prices equal to the fair value of the underlying common stock on the date of grant. Prior to the effectiveness of the registration statement on
Form S-1, which occurred on July 20, 2007, all options were granted with an exercise price equal to the estimated fair value of the underlying common stock as determined by
the board of directors. Subsequent to that date, all options have been granted with an exercise price equal to the most recent trading price of the Company's common stock. The Company received
proceeds of $83,296 and $40,782 for option exercises in 2007 and 2008, respectively.

The
per-share weighted average fair value of the options granted during the years ended December 31, 2006, 2007 and 2008 was estimated at $0.34, $0.52 and $0.41 on the
date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

December 312006

2007

2008Expected dividend yield








Expected volatility


73%


68%


68%Risk-free interest rate


4.37%


4.45%


3.05%Expected life of options


6 years


6 years


6 years


The
expected term assumption is based on the use of the simplified method. The expected volatility of share options was calculated based on a historical volatility analysis of public
company peers that were similar to the Company for a term equivalent to the expected term of the option. The risk-free rate of the option is based on the zero-coupon U.S.
Treasury yield at the date of grant for a term equivalent to the expected term of the option.

The
Company recognized $17,644, $489,845 and $860,396 of stock-based employee compensation expense pursuant to SFAS 123R for the years ended December 31, 2006, 2007 and
2008 respectively. As of December 31, 2008, there was $1,912,864 of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over a weighted
average period of 2.4 years.

During
2005, 2006, and 2008 the Company granted options to purchase 166,920, 166,920 and 40,000 shares, respectively, of common stock to non-employee consultants. The grants
vest over three years. The Company recorded $33,158, $102,223 and $(15,022) of stock-based compensation
expense (benefit) during the years ended December 31, 2006, 2007, and 2008, respectively, which represents the estimated fair value of the options based on the Black-Scholes option-pricing
model.

(13) Commitments

(a) Leases

The
Company leases office and laboratory space and equipment under operating leases expiring through 2017. Rent expense under these operating leases was
$221,000, $792,000 and $967,000 for the years ended December 31, 2006, 2007 and 2008, respectively.

F-21

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(13) Commitments (Continued)

Future
minimum lease payments as of December 31, 2008 are as follows:

Year Ending December 31,

Amount2009

$
856,5372010


833,6522011


839,7232012


845,9152013


852,230Thereafter


2,595,860$
6,823,917


In
October 2006, the Company paid a $250,000 deposit for its new facility which has been recorded in other assets on the accompanying balance sheet.

(b) Employment-Related Agreements

The
Company has entered into employment agreements with certain key executives, providing for base salaries plus performance incentive bonuses. In March 2007,
the Company entered into a separation agreement with a former officer that required the Company to make an aggregate payment of $169,900, which was paid in bimonthly installments through September
2007.

(14) Income Taxes

As of December 31, 2008, the Company had approximately $32,428,000 and $21,412,000 of federal and state net operating loss carryforwards, respectively, and approximately $847,000
and $542,000 of federal and state research and development credit carryforwards, respectively, available to offset future federal and state taxable income. The federal net operating loss carryforward
will expire beginning in 2022, and the state net operating loss carryforwards began expiring in 2008. The federal research and development credit carryforward will expire beginning in 2020, and the
state research and development carryforward will expire beginning in 2018.

F-22

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(14) Income Taxes (Continued)

The
following table summarizes the components of the deferred tax assets and liabilities as of:

December 312007

2008Net operating losses

$
9,107,000

$
12,689,000Research and development credit


1,023,000


1,205,000Other temporary differences


860,000


765,000Gross deferred tax assets


10,990,000


14,659,000Valuation allowance


(10,948,000
)

(14,598,000
)Total deferred tax assets


42,000


61,000Fixed assets


(42,000
)

(61,000
)Total deferred tax liabilities


(42,000
)

(61,000
)Net deferred tax assets

$


$



In
assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences representing net future deductible
amounts become deductible. Due to the Company's history of losses, the deferred tax assets are fully offset by a
valuation allowance at December 31, 2007 and 2008. The valuation allowance in 2008 increased by $3,650,000 over 2007 related primarily to additional net operating losses incurred by the
Company.

Under
the Tax Reform Act of 1986, the utilization of a corporation's net operating loss and tax credit carryforwards is limited following a greater than 50% change in ownership during a
three-year period. Any unused annual limitation may be carried forward to future years for the balance of the net operating loss and tax credit carryforward period. Prior equity financings
may significantly limit our ability to utilize net operating loss and tax credit carryforwards against future taxable income under Sections 382 and 383.

During
2005, 2006 and 2008, the Company sold $3,128,427, $5,776,876 and $2,462,129 of New Jersey State operating loss carryforwards resulting in the recognition of a benefit of $253,403,
$465,803 and $266,772 respectively.

In
July 2006, the FASB issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes (FIN 48). FIN 48
clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS No. 109,Accounting for Income
Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position reported or expected to
be reported on a tax return. FIN 48 also provides guidance on the recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We adopted the
provisions of FIN 48 on January 1, 2007. Upon adoption of FIN 48 and through December 31, 2008, we determined that we had no liability for uncertain income taxes as
prescribed by FIN 48. Our policy is to recognize potential accrued interest and penalties related to the liability for uncertain tax benefits, if applicable, in income tax expense. Net
operating loss and credit carryforwards since inception remain open to examination by taxing

F-23

---



Table of Contents

REDPOINT BIO CORPORATION

(A Development-Stage Enterprise)

Notes to Financial Statements (Continued)

(14) Income Taxes (Continued)

authorities,
and will continue to remain open for a period of time post utilization. The adoption of FIN 48 did not have an impact on the Company's results of operations and financial position.

(15) 401(k) Plan

The Company maintains a defined contribution 401(k) plan available to eligible employees. Employee contributions are voluntary and are determined on an individual basis, limited by the
maximum amounts allowable under federal tax regulations. During the year ended December 31, 2007, the Company began making matching contributions in the amount of 50% of employee contributions
up to 6%. The Company, in its discretion, may also make certain contributions to the plan. The Company contributed $57,000 and $92,000 as matching contributions for the years ended December 31,
2007 and 2008, respectively.

(16) Quarterly Results (unaudited)

The following tables summarize the quarterly results of operations for each of the quarters in 2007 and 2008. These quarterly results are unaudited, but in the opinion of management,
have been prepared on the same basis as our audited financial information and include all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation of the
information set forth herein.

2007 ResultsQuarter EndedMarch 31

June 30

September 30

December 31

Total YearRevenues

$
40,851

$
675,542

$
710,123

$
802,945

$
2,229,461Net loss applicable to common stockholders


(5,272,315
)

(1,588,505
)

(1,909,144
)

(1,931,269
)

(10,701,233
)Basic and diluted net loss per common share(1)

$
(0.30
)
$
(0.02
)
$
(0.02
)
$
(0.02
)
$
(0.17
)




2008 ResultsQuarter EndedMarch 31

June 30

September 30

December 31

Total YearRevenues

$
908,605

$
1,031,305

$
1,057,174

$
1,002,168

$
3,999,252Net loss applicable to common stockholders(2)


(2,491,869
)

(2,594,300
)

(2,609,143
)

(1,825,747
)

(9,521,059
)Basic and diluted net loss per common share(1)

$
(0.03
)
$
(0.03
)
$
(0.03
)
$
(0.02
)
$
(0.12
)


---

F-24

---