**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**




**FORM
      10-KSB**




**ý**
            **ANNUAL
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                OF 1934****For
                the Fiscal Year Ended December 31, 2005****o**
            **TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934****For
                the Transition Period From
                            
                to**




**Commission
      File No. 0-23553**




**IMCOR
      PHARMACEUTICAL CO.**


(Name
      of
      small business issuer in its charter)




**NEVADA**


(State
      or
      other jurisdiction of incorporation or organization)




**62-1742885**


(I.R.S.
      Employer Identification No.)




**P.O.
      Box 2389**


**LA
      JOLLA, CA 92037**


(Address
      of principal executive offices) (Zip Code)




**(858)
      410-5601**


(Registrant’s
      telephone number, including area code)




Securities
      registered under Section 12(b) of the Exchange Act: **None**




Securities
      registered under Section 12(g) of the Exchange Act: **common stock, par value $.001 per share**




Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or 15(d) of the Exchange Act during the past 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.  Yes ý No o




Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will 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-KSB or any
      amendment to this Form 10-KSB. o  ****







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





The
      issuer’s revenues for its most recent fiscal year: $725,575.




The
      aggregate market value of voting and non-voting common stock held by
      non-affiliates computed as of March 31, 2006, based upon the last sale price
      of
      the common stock reported on the Pink Sheets was approximately $230,802. 
For purposes of this calculation only, the registrant has assumed that its
      directors and executive officers, and any person known to the issuer to hold
      10%
      or more of the outstanding common stock, are affiliates.




The
      number of shares outstanding of each of the registrant’s classes of common
      stock, as of March 31, 2006 was 6,962,455.












**TABLE
      OF CONTENTS**








PART
                I.ITEM
                1
            DESCRIPTION
                OF BUSINESS.
            1ITEM
                2
            DESCRIPTION
                OF PROPERTY.
            13ITEM
                3
            LEGAL
                PROCEEDINGS.
            13ITEM
                4
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS.
            14PART
                II.ITEM
                5
            MARKET
                FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
                ISSUER PURCHASES OF EQUITY SECURITIES.
            14ITEM
                6
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
            17ITEM
                7
            FINANCIAL
                STATEMENTS.
            F-1ITEM
                8
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                DISCLOSURE.
            31ITEM
                8A
            CONTROLS
                AND PROCEDURES.
            31ITEM
                8B
            OTHER
                INFORMATION.
            32PART
                III.ITEM
                9
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
                SECTION
                16(a) OF THE EXCHANGE ACT.
            32ITEM
                10
            EXECUTIVE
                COMPENSATION.
            34ITEM
                11
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                STOCKHOLDER MATTERS.
            37ITEM
                12
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS.
            39ITEM
                13
            EXHIBITS.
            39ITEM
                14
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES.
            45














**PART
      I.**




IMCOR
      Pharmaceutical Co. and its wholly-owned subsidiary, Sentigen, Ltd., are
      collectively referred to as “IMCOR,” the “company,” “we,” or “us.” Portions of
      the discussion in this Form 10-KSB contain forward-looking statements and
      are subject to the “Risk Factors” described below in Item 1.




**ITEM
      1. DESCRIPTION OF BUSINESS**




**INTRODUCTION**





The
      company was incorporated on December 28, 1994 as a Nevada corporation under
      the
      name MT Financial Group, Inc. (“MT Financial”). On May 15, 1997, MT Financial
      changed its name to Photogen Technologies, Inc. (then subsequently on February
      5, 2004 to IMCOR Pharmaceutical Co. to reflect the changed nature of our
      business to imaging pharmaceuticals). On March 4, 2005, we effected a
      one-for-twenty reverse split of our common stock and the trading symbol for
      our
      common stock changed to “ICRP.” We also effected a one-for-four reverse split of
      our common stock in 2002. Unless otherwise indicated, all data (including
      historical numbers) in this Form 10-KSB reflect the impact of the reverse
      splits.




We
      are a
      development stage pharmaceutical company previously focused on developing
      medical imaging pharmaceutical products.  We have one FDA approved
      product, *Imagent®* (perflexane lipid microspheres), an ultrasound imaging contrast agent that
      we
      acquired in June 2003.





As
      discussed below, we are not currently developing our technologies or
      manufacturing products using those technologies and, instead, we are
      implementing a restructuring plan and evaluating our alternatives with respect
      to efforts to maximize value to the company, and our shareholders and creditors.
      We will continue to consider as alternatives the sale or license of our
      remaining assets, a merger or other strategic transaction.





**TECHNOLOGIES
      AND PRODUCTS:** ***IMAGENT***




On
      June 18, 2003, we acquired related diagnostic imaging assets from Alliance
      Pharmaceutical Corp. (“Alliance”).  The focus of this acquisition was *Imagent* ,
      an FDA
      approved contrast agent for ultrasound imaging. Included in our purchase was
      the
      lease of an FDA-approved manufacturing facility, the marketing, manufacturing
      and supporting infrastructure with experience in the diagnostic imaging field
      and an intellectual property portfolio of approximately thirty patents in the
      area of ultrasound imaging.





*Imagent* is a
      sterile powder comprising hollow, porous microspheres that contain the internal
      gases perflexane vapor and nitrogen. It was sold in a complete kit which
      includes the sterile water for reconstitution and all other components necessary
      to prepare and administer the agent; all of which are conveniently stored at
      room temperature. When the sterile water is added, the formulation is a
      dispersion of flexible, surfactant-coated microbubbles in a buffered solution.
      The microbubbles suspended within this solution are, on average, smaller than
      a
      red blood cell and, upon injection, circulate freely within the small blood
      vessels, through the organs and tissue. During an ultrasound exam, the
      microbubbles are highly “echogenic” in that they strongly reflect the ultrasound
      beam and provide enhancement within the area being examined.




The
      FDA
      approved *Imagent* in May
      2002 for marketing in the U.S. for use in patients with sub-optimal
      echocardiograms. Sub-optimal exams often occur in patients who are obese or
      have
      other body characteristics or lung conditions which make it difficult for
      ultrasound waves to penetrate the chest. As the microbubbles travel within
      the
      bloodstream they allow visualization of the blood flow and anatomy within the
      left ventricle or the main pumping chamber of the heart. By improving the
      delineation of the endocardial borders of the heart with contrast, the physician
      is better able to diagnose heart disease during an echocardiography examination.


1





As
      part
      of the *Imagent* acquisition, we also assumed a worldwide development and commercialization
      agreement for *Imagent* with
      Schering Aktiengesellschaft (“Schering AG”) providing us exclusive rights to
      market the product worldwide until mid-2008, with Schering AG to be paid a
      royalty based on a percentage of net sales.  At the expiration of the
      period, we have the right to pay all of any remaining royalty obligations to
      Schering AG up to $20,000,000 and thus retain all rights to the product on
      a
      worldwide basis, or alternatively, to allow Schering AG the opportunity to
      obtain co-promotion rights along with us. With the ability to enter into
      worldwide development and commercialization agreements for *Imagent* ,
      in
      December 2003, we **** entered
      into a product license agreement with Kyosei Pharmaceutical Co., Ltd.
      (“Kyosei”), a unit of Sakai Chemical Industry Co. Ltd., for the development and
      marketing of *Imagent* in Japan
      for all radiology and cardiology indications.  We expect to modify the
      Kyosei agreement as part of our restructuring plan.




In
      connection with our restructuring plan, we have suspended manufacturing
      operations and vacated our leased manufacturing facility located in San Diego,
      California. On May 18, 2005, we notified the FDA of the cessation of our
      manufacturing operations. Because we no longer manufacture *Imagent* a sales
      staff is not necessary. Therefore, we no longer maintain the contract sales
      agreement with Cardinal Health, Inc. for the sale of *Imagent* .
      See
“ *Risk
      Factor -- We no longer maintain any internal quality control and stability
      program for Imagent,* ”
      below.




In
      October 2004, we entered into a non-exclusive technology cross-license agreement
      with Bristol-Myers Squibb Medical Imaging, Inc. covering ultrasound contrast
      agent patents. Under the agreement, Bristol-Myers Squibb Medical Imaging, Inc.
      and IMCOR will have the right to further develop and commercialize their
      respective ultrasound contrast imaging agents without risk of infringing upon
      the other company’s patent rights and without having to pay further license fees
      or royalties. We received a total payment of $8,500,000 under the terms of
      the
      license agreement and a related stock purchase agreement with Bristol-Myers
      Squibb Company for our Series A Convertible Preferred Stock, and we will have
      the right of first negotiation to license select compounds from Bristol-Myers
      Squibb Medical Imaging, Inc.. Elsewhere in this Form 10-KSB, we refer to
      Bristol-Myers Squibb Medical Imaging, Inc. and Bristol-Myers Squibb Company
      collectively as “Bristol-Myers Squibb.” In 2005, we also entered into a
      cross-license agreement with affiliates of GE Healthcare Ltd. to settle patent
      infringement litigation. This license was valued at $1,200,000 in favor of
      IMCOR, for which we received $1,000,000 directly. The balance, or $200,000,
      was
      paid directly to Alliance.




**MARKETS
      FOR** ***IMAGENT***




The
      market for the current indication of all ultrasound contrast agents is for
      use
      in imaging patients with sub-optimal echocardiograms. The potential of this
      market is anticipated to be approximately 20% of the 18 million echocardiograms
      performed annually in the U.S. The larger market opportunity will be for
      indications in the diagnosis of coronary artery disease (“CAD”).




Approximately
      13 million Americans have CAD. It is the number one contributor to death in
      America, accounting for almost 1 in 5 deaths. CAD occurs when the coronary
      arteries become blocked with plaque and no longer deliver adequate amounts
      of
      blood, containing nutrients and oxygen, to the heart. The two most commonly
      used
      non-invasive imaging techniques for the detection of CAD are nuclear stress
      perfusion imaging and stress echocardiography imaging. A nuclear stress
      perfusion examination involves the injection of radioactive labeled drugs at
      rest and during stress initiated by physical activity or administration of
      a
      drug. The patient is then imaged, most commonly using SPECT (single photon
      emission computed tomography) cameras to detect disparities between the stress
      and resting perfusion (blood flow) in major areas of the myocardium. Nuclear
      imaging assesses blood flow to the heart muscle by the radioactive material
      attaching to live muscle cells of the heart, providing a difference in
      enhancement between labeled and non-labeled tissue. The limitations of nuclear
      cardiology are that it:


2





·
            Uses
                radioactive drugs,





·
            Requires
                expensive imaging equipment,





·
            Is
                usually performed in a hospital,





·
            Requires
                subjecting the patient to cardiac stress,
                and





·
            Costs
                about $1,000 per procedure and takes 5-6 hours to
                perform.





Sales
      of
      nuclear stress contrast agents in the U.S. market are currently approximately
      $600 million annually. By 2007, approximately 7 million nuclear stress exams
      are
      expected to be performed in the U.S. annually.




Stress
      echocardiography imaging, or stress echo, assesses the ability of the heart
      to
      contract and circulate blood by observing motion of the walls of the heart
      in
      real time. Patients with CAD typically have inadequate perfusion to certain
      segments of the heart. The reduced flow, during stress, will cause the walls
      of
      the heart to move abnormally particularly when increased demands on the heart
      require more blood flow. This is detected as wall motion abnormalities during
      a
      stress echo. Stress is induced in the patient by exercise or pharmacologic
      agents. This imaging procedure is performed in 30-45 minutes. There are
      approximately 3 million stress echo studies performed in the U.S. each
      year.




Following
      a positive exam by either nuclear stress imaging or stress echo imaging, an
      invasive coronary angiogram is usually conducted for a definitive diagnosis
      and
      to determine the best method for treatment. This is an invasive examination
      whereby a catheter in inserted in the major artery of the thigh, and threaded
      to
      the heart vessels to inject an x-ray contrast agent. The procedure allows
      visualization of the coronary blood vessels, but involves safety risks and
      requires at least a day’s stay in the medical unit. There are about 3 million of
      these procedures performed annually in the U.S. Each procedure costs about
      $3,000.




While
      no
      ultrasound contrast agent is approved for assessment of perfusion to the heart
      (also called “myocardial perfusion”), non-clinical and clinical research has
      been conducted to investigate the ability of agents to evaluate the blood flow
      to the heart muscle and to assist in the detection of CAD. The approval of
      this
      indication for myocardial perfusion in the detection of CAD with ultrasound
      contrast represents a very large market opportunity of over 10 million patients,
      potentially representing a $1 billion opportunity.




**RAW
      MATERIALS SUPPLY**





We
      have
      no existing agreements with any raw material providers. Any party to whom we
      grant the right to further develop *Imagent* would
      have to enter into such agreements.


3





**RESTRUCTURING
      PLAN**





In
      April
      2005, we adopted an initial restructuring plan which included a
      reduction-in-force of a majority of the full-time employees and part-time
      employees or consultants who perform administrative support, manufacturing
      and
      related functions. In addition, a limited number of full-time employees were
      transferred to part-time positions to assist us with the actions necessary
      to
      curtail our operations. We also temporarily suspended our manufacturing
      operations.




Our
      board
      of directors later concluded that, for a variety of factors, including some
      of
      which are cited in Notes 1 and 13 of our financial statements, it was not
      probable that we would obtain additional cash funds to continue operating even
      on a limited basis in the near term. Therefore, during May 2005, we modified
      our
      restructuring plan to include the disposition of furniture, fixtures and
      equipment, to vacate our premises, and other steps to effect an orderly
      cessation or suspension of operations other than those necessary to facilitate
      completion of the restructuring plan.




We
      incurred approximately $34,000 in cash disbursements for severance pay
      associated with this restructuring plan during the fiscal year ended December
      31, 2005, and also paid approximately $191,000 in previously accrued vacation
      obligations, primarily to terminated employees (which is required under
      California employment laws). We also terminated our vacation benefit program.
      In
      addition, we negotiated two cash retention bonuses totaling $80,000 with two
      employees deemed integral to our restructuring efforts as part of this
      restructuring plan; however, one of the employees, as consideration, also waived
      any further claim he had to a previously earned, accrued but unpaid bonus of
      $60,000 from 2003. Accordingly, we recognized on a net basis only $20,000 bonus
      expense in the quarter ended June 30, 2005. The retention bonus obligations
      have
      been fully paid and all efforts required of these two individuals were largely
      concluded by September 30, 2005.




As
      part
      of the employee reduction plan, the employment of our CEO and President was
      terminated effective May 31, 2005. We recorded a reserve for severance (equal
      to
      one year’s salary, as required by this individual’s employment contract),
      amounting to $275,000, as expense during the quarter ending June 30, 2005.
      This
      obligation remains unpaid and is accordingly included in accrued expenses at
      December 31, 2005.




We
      also
      concluded a negotiation with EOP-Industrial Portfolio, LLC (“EOP”), the lessor
      of our facility at 6175 Lusk Boulevard, San Diego, California. Pursuant to
      the
      terms of our agreement with EOP, we vacated the premises on or about July 31,
      2005 and surrendered our lease security deposit totaling $297,000. We were
      released from all other obligations, including past due rents totaling
      approximately $331,292 at July 31, 2005 (approximately $248,469 at June 30,
      2005), as well as late payment fees and any future lease payments, commitments
      and/or contingencies. Future minimum lease payments at June 30, 2005 eliminated
      as result of the lease termination agreement totaled approximately $2,244,113
      at
      that date. In addition, Alliance, which was the lease guarantor, was also
      released from any and all claims, commitments and contingencies.




As
      a
      result of implementing our plan to vacate the premises, we recorded a leasehold
      valuation impairment allowance of approximately $3,072,000 in the quarter ending
      June 30, 2005, leaving a net carrying value of leasehold improvements as of
      June
      30, 2005 totaling $20,000. In July 2005, the remaining net carrying value of
      the
      leasehold improvements was written off in connection with our vacating the
      premises, and therefore its carrying value was $0 at December 31, 2005. Based
      on
      a reimbursement of $20,000 received in July 2005 from the successor tenant
      related to the leasehold improvements, no gain or loss was
      recorded.




On
      June
      16, 2005, we sold the majority of our excess equipment at a public auction,
      which netted us $270,820 ($175,000 of which was received by June 30, 2005).
      The
      balance of $95,820 was recorded as accounts receivable at that date, and was
      subsequently received during the quarter ended September 30, 2005. At June
      30,
      2005, we recorded an equipment valuation impairment allowance of approximately
      $193,000, leaving a net carrying value of $31,220 for unsold equipment remaining
      as of that date. This amount was received prior to December 31, 2005 and
      therefore its carrying value was $0 at December 31, 2005. On June 15, 2005,
      we
      notified the California State FDA of our facility shut-down.


4




The
      remainder of our equipment and leasehold interest was sold during the quarter
      ended September 30, 2005 for $51,220 and, accordingly, all carrying values
      of
      related assets, accumulated depreciation and amortization, and valuation
      impairment allowances were adjusted to zero as of December 31,
      2005.




Our
      subsidiary, Sentigen, Ltd., a Bermuda entity, currently has no operations.
      It is
      likely to be administratively dissolved by the Bermuda authorities.




During
      the quarter ending June 30, 2005, we solicited interest from several parties
      regarding our technology license asset, which related to our iodinated
      diagnostic compound (called N1177 and PH-50, substantially same compound for
      different indications). An agreement in principle was reached with a party
      to
      acquire these related assets for $102,500, net of third party intermediary
      compensation costs. Accordingly, we recorded a technology license valuation
      impairment allowance of approximately $570,000 in the quarter ending June 30,
      2005, leaving a net carrying value of technology license as of June 30, 2005
      of
      $102,500.




During
      the quarter ended September 30, 2005, we and the third party completed the
      asset
      purchase agreement for the sale of our assets exclusively related to N1177
      and
      PH-50. The sale included certain patent rights related to N1177 and PH-50 and
      other intellectual property, including our technology license asset. The
      agreement called for an aggregate purchase price (net of a third party
      intermediary fee of $102,500) which was due in two payments, the first of which
      was paid at closing and the balance of $31,000 was paid prior to year end upon
      satisfactory conclusion of certain required follow-on activities. Accordingly,
      all carrying values of this technology license related to its cost, accumulated
      amortization and valuation allowance have been adjusted to zero as of December
      31, 2005.




When *Imagent* was
      initially acquired in June 2003, we acquired the underlying technology of the
      FDA approved product *Imagent* ,
      and an
      ongoing operation which held the possibility at the time that we could generate
      at least two strategic sources of revenue: (a) from direct product sales and
      (b)
      from product licensing and/or technology cross-licensing activities. For those
      reasons, the accounting policy was then established that the value of *Imagent* should
      be amortized on a straight-line basis into expense over the estimated useful
      remaining life of the underlying intellectual property, including the patent
      estate, which was 12 years from the date of the acquisition.


5




As
      a
      result of the second part of the strategic revenue plan, that of obtaining
      cash-based revenues from product licensing and/or technology cross-licensing
      activities, we received:




§
            $4,000,000
                paid by Kyosei, a unit of the Sakai Group in Japan, in December 2003
                and
                April 2004 pursuant to a product license, which was potentially worth
                as
                much as $10,000,000 to us if the future milestone obligations could
                be
                met;





§
            $4,000,000
                paid by Bristol-Myers Squibb in October 2004 for a technology
                cross-license; and





§
            $1,200,000
                paid by Amersham Health Inc. and affiliates in September 2005 for
                a
                technology cross-license.





The
      Kyosei product license agreement contemplated certain ongoing collaborative
      activities between the company and Kyosei, enabling us to achieve future
      payments upon the fulfillment of prospective performance obligations by each
      party. The two technology cross-license agreements with BMSMI and Amersham
      likewise do not contemplate any future performance obligations in the
      furtherance of the respective agreements.




Furthermore,
      because *Imagent* and the
      follow-on transactions for the above-described strategic revenues collected
      so
      far, as well as the derivative royalties obligation owed to Schering AG pursuant
      to the Kyosei product license agreement, are inextricably related to one
      another, the accounting policies have been implemented with the primary
      objective being to match the recognition of license/cross-license revenue and
      royalties expense to the amortization of *Imagent* .
      Therefore, up to December 31, 2005, the related license fees and royalties
      have
      been deferred and only partially recognized on a straight-line basis into
      license revenue and royalties expense, based on schedules which commence on
      the
      dates the respective transactions were concluded, and over the remaining
      estimated useful lives of the underlying technology.




We
      face
      certain continuing challenges to preserve and optimize the value of *Imagent* for the
      benefit of creditors and shareholders, not the least of which is the current
      lack of a full-time staff and reduced financial resources. Without an immediate
      capability to manufacturing the *Imagent* product,
      we can no longer support the prospective aspects of the Kyosei product license
      agreement as currently constructed, therefore putting out of practical reach,
      at
      least for the time being, any portion of the future potential payments totaling
      $6 million which might have otherwise flowed from this contract. In addition,
      it
      is similarly unlikely that we could readily restart the production of *Imagent* without
      first commencing a lengthy and costly process to reestablish manufacturing
      capabilities, which also puts out of reach for the time being the additional
      possibility of *Imagent* product
      sales. Continued protection of the value of our patent portfolio may represent
      another potential source of revenues for us, if factors warrant and the
      underlying cost-benefit analysis supports such action(s). And while our history
      of enforcing our rights in patents indicates that there is merit in this
      approach, patent protection, enforcement and/or possible litigation activities
      can be costly, time consuming and the results are inherently uncertain, so
      there
      can be no assurance that this business strategy will result in net benefits
      to
      us.




Prior
      to
      December 31, 2005, we were not able to predict what types of arrangements might
      ultimately be made with potential business partners for*Imagent*,
      financial or otherwise.  However, based on potential transaction values
      which might be concluded in the near term, we have determined that the carrying
      value of the Imagent
      assets should be written down as of December 31, 2005 through the establishment
      of an allowance for valuation impairment to its currently estimated fair value
      of $1,000,000. Furthermore, since the lack of adequate capital and a
      full-time staff make it impracticable to continue normal operating activities
      and due to the likelihood that additional value will most readily be created
      only through opportunistic circumstances related to strategic technology
      transactions with others, we have concluded that the remaining deferred
      revenues and related deferred royalties assets, should be written down to
      zero, rather than amortized into future operations.




Therefore,
      at December 31, 2005, for the reasons stated
      above, and in order to effect the adjusted carrying balance of the Purchased
      Technology at $1,000,000, we established an impairment allowance of $11,373,572
      for the Purchased Technology as of December 31, 2005.  We also recognized
      the related remaining deferred revenue totaling $8,119,485 and the corresponding
      remaining deferred royalties of $416,666 as of December 31, 2005.  These
      adjustments together resulted in an additional $3,670,753 in net impairment
      losses.




As
        a
        result of the above activities involving the facilities lease termination,
        sale
        of equipment, sale of the technology license and impairment of the Purchased
        Technology, together with the recognition of the related deferred revenues
        and
        corresponding deferred royalties, we recorded cumulative asset impairment
        losses
        during 2004 and 2005 totaling $7,781,045 through December 31, 2005 (see Note
        13
        of our financial statements).
  We
        continue to evaluate our alternatives with respect to selling or otherwise
        maximizing asset values related to our remaining assets, principally consisting
        of *Imagent* .
        We will
        continue to consider as alternatives the sale or license of our remaining
        assets, a merger or other material transaction. Such a transaction may include
        selling *Imagent* ,
        a
        license or sale of the patent portfolio underlying *Imagent* ,
        a
        manufacturing rights agreement, or another form of transaction. To date,
        efforts
        to complete such an arrangement have not been successful. However, we are
        still contacting interested or potentially interested parties, and there
        remains some potential for a sale, license, development agreement or comparable
        transaction.


6




In
      August
      2005, we notified the FDA that we suspended any activity related to the
      Investigational New Drug Application (“IND”). During the next year, we will
      focus our limited resources primarily on preserving the value of the *Imagent* assets,
      to the extent possible, and exploring various options concerning our business,
      including joint venturing, licensing or selling the *Imagent* assets
      and other possible strategic transactions. We no longer have human, financial
      and other resources available to us at this time to carry out our original
      business plan or fully develop and commercialize *Imagent* on our
      own.




Furthermore,
      to date our board of directors has only authorized activities in support of
      the
      restructuring plan in order to maximize asset value to creditors and
      shareholders. Subject to the availability of capital, we intend to protect
      our
      patent portfolio, and seek additional value for the benefit of creditors and
      shareholders if factors warrant and the underlying cost-benefit analysis
      supports such action(s). While our history of enforcing our rights in patents
      indicates that there is merit in this approach, patent protection, enforcement
      and/or possible litigation activities can be costly, time consuming and the
      results are inherently uncertain, so there can be no assurance that this
      business strategy will result in net benefits to the company. Nevertheless,
      this
      additional investigation must be conducted before we can reach any definitive
      conclusions as to the ultimate values of the *Imagent* assets.




**PATENTS**




We
      have
      issued U.S. patents and pending U.S. patent applications, which are directed
      to
      the composition, manufacture, and use of novel stabilized microbubble
      compositions used in ultrasound or harmonic ultrasound imaging.  Foreign
      applications directed to the same subject matter are also granted or pending.
      We
      also have five issued U.S. patents covering the use of various contrast agents,
      including *Imagent* ,
      in
      harmonic imaging.




We
      also
      attempt to protect our proprietary products, processes and other information
      by
      relying on trade secret laws and non-disclosure and confidentiality agreements
      with our employees, consultants, and certain other persons who have access
      to
      such products, processes and information. Among other things, these agreements
      affirm that all inventions conceived by employees are the exclusive property
      of
      the company. “IMCOR” is a trademark and *Imagent* ® is a
      registered trademark of IMCOR. All other trademarks or trade names used in
      this
      registration statement are trademarks or trade names of their respective
      owners.




**GOVERNMENT
      REGULATIONS**




Because
      we are not currently undertaking any development, manufacturing, or marketing
      activities, compliance with regulatory matters requires only annual updates
      of
      the IND and New Drug Application (“NDA”) to the FDA.





All
      of
      the products that can be developed from our technologies require approval by
      the
      FDA prior to sales being made within the U.S. and by comparable foreign agencies
      prior to sales being made outside the U.S. *Imagent* has
      received FDA approval for use in patients with sub-optimal echocardiograms.
      The
      FDA and comparable foreign regulatory agencies impose substantial requirements
      on the manufacturing and marketing of pharmaceutical products and medical
      devices. These agencies and other entities extensively regulate, among other
      things, research and development activities and the testing, manufacturing,
      quality control, safety, effectiveness, labeling, storage, record keeping,
      approval, advertising and promotion of these products.


7




The
      regulatory process required by the FDA through which our products must
      successfully pass before they may be marketed in the U.S. generally involves
      the
      following:





·
            Preclinical
                laboratory and animal testing,





·
            Submission
                of an IND which must become effective before clinical trials may
                begin,





·
            Adequate
                and well-controlled human clinical trials to establish the safety
                and
                efficacy of the product for its intended indication,
                and





·
            Submission
                of a NDA or supplemental NDA, and subsequent approval by the FDA
                to market
                a given product for a given
                indication.





Data
      from
      preclinical and clinical trials are submitted to the FDA in the form of an
      NDA.
      The marketing of pharmaceuticals in the U.S. may not begin without FDA approval.
      The approval process is affected by a number of factors, including the
      demonstration of manufacturing, quality control, pre-clinical toxicology and
      pharmacology testing results, and safety and efficacy demonstrated in clinical
      trials. Regulatory authorities may deny an application in their sole discretion,
      if they determine that applicable regulatory criteria have not been satisfied
      or
      if they determine the submission is not adequate and additional testing or
      information is required. One of the conditions for initial marketing approval,
      as well as continued post-approval marketing, is that a prospective
      manufacturer’s quality control and manufacturing procedures conform to the cGMP
      regulations of the regulatory authority. In complying with these regulations,
      a
      manufacturer must continue to expend time, money and effort in the area of
      production, quality control and quality assurance to ensure full compliance.
      Manufacturing establishments, both foreign and domestic, also are subject to
      inspections by or under the authority of the FDA and by other federal, state,
      local or foreign agencies. Discovery of previously unknown problems with a
      product or manufacturer may result in restrictions on such product or
      manufacturer, including withdrawal of the product from the market.




We,
      like
      other public companies, are also subject to the requirements of the federal
      securities laws. Among other things, these laws regulate how we raise capital
      and how we manage our internal financial and disclosure controls and reporting.
      Recent amendments to the federal securities laws under the Sarbanes-Oxley Act
      have increased our focus on improving and documenting our internal controls,
      which is costly. As a company under the Securities and Exchange Commission’s
“small business” regulations, we are not required to comply with certain
      portions of the requirements related to internal controls over financial
      reporting until our fiscal year ending December 31, 2006, which mitigated these
      costs (somewhat, but not completely) for the 2005 fiscal year.




Another
      area of regulation that could impact the value of *Imagent* is
      ongoing developments in health care reimbursement and delivery practices as
      a
      means to better control health care costs. Currently, *Imagent* qualifies for reimbursement in both the in-patient and out-patient cardiac
      settings by the Centers for Medicare & Medicaid Services.




**COMPETITION**




The
      industry for contrast agents is intensely competitive, and subject to
      significant change with respect to technology for the diagnosis and treatment
      of
      disease. We expect that competition in the ultrasound contrast imaging agent
      field (and for our other potential products) will be based primarily on each
      product’s safety profile, efficacy, stability, ease of administration, breadth
      of approved indications, and physician, healthcare payor and patient acceptance.
      There are two ultrasound contrast agents approved in the U.S. for use in
      cardiology which are competitive with *Imagent* : *Optison* (sales
      currently on hold by GE Healthcare, Inc.), and *Definity* (sold by
      Bristol-Myers Squibb). Bracco International filed an NDA in the U.S. late in
      2000 for *SonoVue* ® ,  POINT
      Biomedical Corp. has completed a Phase III myocardial perfusion study
      for *CardioSphere* and is
      preparing for an NDA submission, and Acusphere Inc. has initiated a Phase III
      myocardial perfusion study in December 2003 for its AI-700 product.


8




*Imagent* contains
      no human blood components (albumin), does not require refrigeration, and does
      not require a mechanical shaker to activate the product. *Optison* contains
      human albumin, carrying the appropriate label warnings for injection of a human
      based product; and it also requires refrigeration. Having this component has
      limited Optison’s development in certain countries. *Definity* requires
      a mechanical shaker to manufacture the microbubble at the patient’s bedside as
      well as it requires refrigeration. *SonoVue* in
      approved in Europe and carries a restrictive use label warning in cardiac
      patients. *CardioSphere* contains
      human albumin and requires refrigeration. AI-700 also requires refrigeration.




**RISK
      FACTORS**




This
      Form 10-KSB contains (and other filings with the Securities and Exchange
      Commission, press releases and other public statements we may issue from time
      to
      time may contain) forward-looking statements regarding our business and
      operations. Statements in this document that are not historical facts are
      forward-looking statements. Such forward-looking statements include those
      relating to:





·
            Our
                current business and product development
                plans,





·
            Our
                future business and product development
                plans,





·
            The
                timing and results of regulatory approval for proposed products,
                and





·
            Projected
                capital needs, working capital, liquidity, revenues, costs, and
                income.





Examples
      of forward-looking statements include predictive statements, statements that
      depend on or refer to future events or conditions, and statements that may
      include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,”
“estimates,” “should,” “may,” or similar expressions, or statements that imply
      uncertainty or involve hypothetical events.





Forward-looking
      statements involve known and unknown risks and uncertainties that may cause
      our
      actual results in future periods to differ materially from what is currently
      anticipated. We make cautionary statements in certain sections of this
      Form 10-KSB, including under “Risk Factors.” You should read these
      cautionary statements as being applicable to all related forward-looking
      statements wherever they appear in this Form 10-KSB, in the materials
      referred to in this Form 10-KSB, in the materials incorporated by reference
      into this Form 10-KSB, or in our press releases or other public statements.
      In light of these risks, uncertainties and assumptions, the forward-looking
      events discussed in this Form 10-KSB or other documents incorporated by
      reference might not occur. No forward-looking statement is a guarantee of future
      performance and you should not place undue reliance on any forward-looking
      statement. We do not undertake any obligation to release publicly any revisions
      to these forward looking statements, to reflect events or circumstances after
      the date of this Form 10-KSB, or to reflect the occurrence of unanticipated
      events, except as may be required under applicable securities laws.


9





**We
      currently have insufficient funds available to pay all of our
      liabilities.**




Our
      cash
      and cash equivalents at December 31, 2005 was approximately $717,024. At
      December 31, 2005, we had current liabilities totaling approximately
      $4,816,991.




**If
      we are unable to find a partner or buyer of our remaining assets at acceptable
      prices we will continue to be unable to meet our obligations to our creditors
      and may enter into bankruptcy proceedings, or liquidate and dissolve under
      applicable state laws.**




We
      have
      implemented a restructuring plan which resulted in a reduction-in-force of
      all
      our employees, terminating sales efforts and manufacturing operations,
      terminating clinical development, vacating our leased premises, selling our
      furniture, fixtures and manufacturing equipment, and selling our rights to
      N1177
      (an iodine-based nanoparticulate contrast agent) and PH-50, which is the same
      or
      substantially similar compound as N1177 for a different indication. Our board
      of
      directors has authorized actions necessary to effectuate the restructuring
      plan **.**




We
      plan
      to focus our efforts primarily on exploring various options concerning our
      business, including licensing or selling all or a portion of our remaining
      assets ( *Imagent* ),
      finding a partner with whom to pursue the clinical development and
      commercialization of *Imagent* and
      maintain our patent portfolio. To date, we have not been able to raise
      sufficient capital to operate the company, and the difficulties and delays
      in
      settling the lawsuit with Amersham Health, Inc. have resulted in our vacating
      our manufacturing facility, stopping the manufacturing of our *Imagent* product,
      and terminating clinical development. We need to find an acceptable buyer or
      partner for our *Imagent* assets
      in order to proceed with any type of development plan. If we are not able to
      find a buyer or partner for these assets in a timely manner and at acceptable
      prices, we will continue to not have sufficient funds to meet our obligations
      to
      our creditors and may be forced into voluntary or involuntary bankruptcy
      proceedings, or liquidate and dissolve under applicable state laws. The steps
      to
      sell or otherwise dispose of our assets (including negotiating agreements and
      obtaining shareholder approval to the extent required) are costly and will
      diminish the proceeds available for other purposes.




**We
      expect to incur significant costs in connection with Securities Exchange Act
      of
      1934 compliance and may elect to remove the company from the Securities Exchange
      Act of 1934 reporting requirements, which would make Rule 144 resales
      unavailable to investors.**




We
      are
      currently subject to the rules of the Exchange Act and the related reporting
      requirements. Compliance with the reporting requirements of the Exchange Act
      requires the timely filing of Quarterly Reports on Form 10-QSB, Annual Reports
      on Form 10-KSB and Current Reports on Form 8-K, among other actions. Our
      compliance with the reporting requirements involves significant costs and
      expenditures of management’s time. Given our current financial position and the
      limited resources of our management, our board of directors may elect to remove
      the company from the reporting obligations of the Exchange Act at some point
      in
      2006 or thereafter. If we make such an election, investors would not be able
      to
      utilize Rule 144 in connection with the resale of their shares of our common
      stock (until the shares become freely tradable under Rule 144(k)).




**Our
      current financial situation could lead to shareholder or creditor litigation
      which could result in substantial costs and distract our management from our
      restructuring efforts.**




Historically,
      companies in financial situations similar to ours have often been the target
      of
      litigation by creditors or shareholders. We may become involved in this type
      of
      litigation as a result of the actions we have taken and/or our inability to
      meet
      our obligations to our creditors and others. If such a lawsuit is filed against
      us, the litigation is likely to be expensive, and, even if we ultimately
      prevail, the process will divert our attention away from implementing our
      current restructuring plan. If we do not prevail in such a lawsuit, we may
      be
      liable for damages. We cannot predict the amount of such damages, but they
      may
      be significant and could further reduce our limited available cash.


10




**We
      have a history of losses, and we do**  **not
      expect to achieve or maintain profitability in the future or pay cash
      dividends.**




We
      have
      incurred losses since the beginning of our operations. As of December 31, 2005,
      we have incurred cumulative net losses (before dividends on preferred stock)
      of
      approximately $90,889,216. We expect our losses to increase in the future as
      our
      financial resources are used to preserve the value of our assets and to the
      extent possible, pay creditors. It is unlikely that we will be able to achieve
      or maintain profitability in the future.




We
      do not
      anticipate paying any dividends on our common stock in the foreseeable future,
      and, given our outstanding debt to creditors, it is unlikely that shareholders
      will receive funds from us if it is dissolved.




**We
      no longer maintain a manufacturing facility and we may encounter difficulties
      restarting our manufacturing operations if we chose to do so in the future
      or
      contracting with a contract manufacturer.**




We
      have
      suspended manufacturing operations and vacated our leased manufacturing facility
      located in San Diego, California. We do not have the resources to resume
      manufacturing at another facility ourselves and we cannot assume that a third
      party would be able to take over manufacturing. Any purchaser of *Imagent* or
      development or manufacturing partner will be required to comply with FDA
      manufacturing standards. A new manufacturing facility would require FDA
      submissions and approvals. Timing of this event, should it occur, would affect
      initiation of clinical trials and regulatory submissions. All of the above
      has
      prevented us from being able to fulfill certain of our contractual obligations
      to provide product (including fulfilling our obligations under our license
      agreement with Kyosei).




**We
      no longer maintain any internal quality control and stability program for** ***Imagent*** **.**




Since
      we
      have suspended manufacturing operations and vacated our leased manufacturing
      facility located in San Diego, California, we entered into an agreement with
      Cardinal Health, Inc. to maintain and conduct our stability samples. On August
      17, 2005, we terminated this agreement and consequently the testing program,
      resulting in the inability to support any clinical testing of the
      product.




**We
      no longer maintain any clinical or regulatory staff.**




We
      are
      required to rely on the services of outside consultants for clinical and
      regulatory advice, and maintenance of the IND and NDA. If we cannot use the
      services of those consultants, the IND and NDA may have to be abandoned,
      significantly reducing the assets of the corporation. In August 2005, we
      notified the FDA that we suspended any activity related to the IND.




**Failure
      to achieve and maintain effective internal controls in accordance with Section
      404 of the Sarbanes-Oxley Act could have a material adverse effect on our
      business and operating results.**




Effective
      internal controls are necessary for us to provide reliable financial reports
      and
      effectively prevent fraud. If we cannot provide reliable financial reports
      and
      prevent fraud, our operating results could be harmed and current and potential
      stockholders could lose confidence in our financial reporting, which could
      have
      a material adverse effect on our stock price and ability to raise capital.
      In
      September 2004, we and our independent registered public accounting firm
      concluded that our internal controls and procedures had certain material
      weaknesses and reportable conditions. For further information concerning our
      controls, see ****** *“Part
      II. Other Information, Item 3. Controls and Procedures.”*


11




Beginning
      in May 2004, we began to implement steps to address our internal controls and
      procedures. We have completed certain steps and had started to implement
      remediation procedures to address the identified reportable conditions and
      material weaknesses. However, based on our limited capital resources and the
      adoption of a restructuring plan in April 2005, which included a
      reduction-in-force of our full-time employees and part-time employees or
      consultants who perform administrative support, manufacturing and related
      functions, we have been unable to complete the previously identified remediation
      plans. Since it is unlikely that we can further rectify these material
      weaknesses through measures and improvements to our systems and procedures,
      management may encounter difficulties in timely assessing business performance
      and identifying incipient strategic and oversight issues.




We
      are
      committed to maintaining high standards of corporate governance and public
      disclosure. As a result, our efforts to comply with evolving laws, regulations
      and standards have resulted in, and are likely to continue to result in,
      management time and attention being focused on compliance activities. In
      particular, although the SEC has granted an extension for compliance with
      certain aspects of Section 404 of the Sarbanes-Oxley Act of 2002 and the related
      regulations regarding our required assessment of our internal controls over
      financial reporting and our independent registered public accounting firm’s
      audit of that assessment, compliance with these regulations will require the
      commitment of significant financial and managerial resources. In addition,
      if we
      fail to maintain the adequacy of our internal controls, we may not be able
      to
      ensure that we can conclude on an ongoing basis that we have effective internal
      controls over financial reporting in accordance with Section 404 of the
      Sarbanes-Oxley Act.




**We
      depend on a small number of consultants to provide management expertise, and
      the
      loss of this expertise may interfere with our operations or delay our ability
      to
      implement our restructuring plan.**




We
      currently have one acting Principal Executive Officer (Mr. DeFranco) who was
      a
      part-time employee of the company until October 2005. Mr. DeFranco became a
      consultant to the company in November 2005 and is engaged by us on a part-time,
      as needed basis through April 30, 2006. **** We
      also
      have retained Larry D. Grant, a consultant, to provide advisory and management
      services, on a part-time basis, on financial, operational and strategic matters.
      These individuals have entered into consulting agreements, confidentiality
      and/or non-competition agreements with us. If an individual performing one
      of
      these executive or consulting functions for us terminates his association with
      us or breaches their agreement with us:




·
            We
                would not have anyone available to promote or negotiate a sale or
                development transaction with a
                third-party,





·
            We
                could suffer competitive disadvantage or loss of intellectual property
                protection, and





·
            We
                could experience a delay in our ability to implement our restructuring
                plan until we arrange for another individual or firm to fulfill the
                role.





**Two
      related stockholders have significant voting power, which may delay or prevent
      a
      change of control of IMCOR and may limit the trading volume of our common
      stock.**




As
      of
      December 31, 2005, two related stockholders controlled approximately 4,652,969
      shares, or 66.8% of our issued and outstanding common stock at that date. This
      concentration of ownership and control may delay or prevent a change in control
      of IMCOR, and may also result in a small supply of shares available for purchase
      in the public securities markets. These factors may affect the market and the
      market price for its common stock in ways that do not reflect the intrinsic
      value of our common stock.




**We
      have issued a substantial number of securities convertible into shares of our
      common stock that will result in substantial dilution to the ownership interests
      of our existing shareholders.**


12




As
      of
      December 31, 2005, we had reserved 2,437,691 shares of our common stock for
      issuance upon exercise or conversion of warrants or stock options (including
      options that have been granted and that are available for grant in the future).
      Furthermore, on October 29, 2004, we issued and sold 4,500 shares of our newly
      issued Series A Convertible Preferred Stock which are convertible into 833,334
      shares of our common stock.




If
      our
      options and warrants are all issued and exercised, or convertible securities
      converted, investors may experience significant dilution in the voting power
      of
      their common stock. The sale of these shares could also place downward pressure
      on the overall market price of our common stock.




**Applicable
      Securities and Exchange Commission rules governing the trading of “penny stocks”
limits the trading and liquidity of our common stock, which may affect the
      trading price of our common stock.**




Our
      common stock currently is quoted on the Pink Sheets. We are not considering
      seeking a listing of our shares on another exchange at this time. As a result,
      our common stock may have fewer market makers, lower trading volumes and larger
      spreads between bid and asked prices than securities listed on an exchange
      such
      as the New York Stock Exchange or the NASDAQ Stock Market. These factors may
      result in higher price volatility and less market liquidity for our common
      stock.




Because
      our common stock is currently trading below $5.00 per share, our common stock
      is
      considered a “penny stock” and subject to Securities and Exchange Commission
      rules and regulations, which impose limitations upon the manner in which our
      shares can be publicly traded. Our common stock may also trade below $5.00
      per
      share in the future. These regulations require the delivery, prior to any
      transaction involving a penny stock, of a disclosure schedule explaining the
      penny stock market and the associated risks. Under these regulations, certain
      brokers who recommend such securities to persons other than established
      customers or certain accredited investors must make a special written
      suitability determination regarding such a purchaser and receive such
      purchaser’s written agreement to a transaction prior to sale. These regulations
      have the effect of limiting the trading activity of our common stock and
      reducing the liquidity of an investment in our common stock.




**ITEM
      2. DESCRIPTION OF PROPERTY.**




We
      do not
      own any real estate. In 2005, we vacated our leased premises of approximately
      53,000 square feet in San Diego, California. We currently do not maintain
      executive offices or facilities for research, development or manufacturing.




**ITEM
      3. LEGAL PROCEEDINGS.**




On
      June
      18, 2003, we, together with Alliance (as the previous owner of *Imagent* ),
      filed
      a complaint against Amersham Health, Inc. and two other Amersham affiliates
      (now
      known as GE Healthcare Ltd.) (collectively, “Amersham”) alleging that certain
      Amersham products infringe on claims in the patents covering *Imagent* .
      The
      case is captioned as *Photogen
      Technologies, Inc. and Alliance Pharmaceutical Corp. v. Amersham Health Inc.
      et.
      al.* ,
      Civil
      Action No. 03CV2853(SRC), in the United States District Court for the District
      of New Jersey.  Our complaint alleged that principally through the Optison®
product, Amersham infringed on eight patents we owned. We also alleged
      misappropriation of trade secrets as well as other state law claims against
      Amersham. We sought damages, an injunction against Amersham, a declaratory
      judgment and other relief.




Amersham
      denied the material allegations of our claims and asserted certain affirmative
      defenses and counterclaims. Amersham’s counterclaims included claims of patent
      infringement of the fifteen Amersham patents, breach of contract, breach of
      good
      faith and fair dealing, and tortious interference with contract. We and
      Alliance, as well as Amersham, also amended their respective complaints to
      include allegations of antitrust violations by the other parties.


13




To
      resolve this litigation, we entered into a Settlement Agreement and License
      (the
“Amersham Settlement”) dated as of September 19, 2005 with Amersham, Alliance
      and Molecular Biosystems, Inc. The Amersham Settlement resolved the parties’
claims arising under the case described above. Under the terms of the Amersham
      Settlement, our technology cross license was valued at $1,200,000 in favor
      of
      IMCOR, for which we received $1,000,000 directly from Amersham. The balance,
      or
      $200,000, was paid directly by Amersham to Alliance which served as the cash
      consideration to Alliance under the separate but concurrent Alliance Settlement
      discussed below. The parties dismissed their litigation and granted each other
      fully paid-up, irrevocable, royalty-free, non-exclusive cross-licenses, with
      the
      right to sublicense, and mutual releases.




We
      also
      entered into a Settlement Agreement with Alliance (the “Alliance Settlement”)
      dated as of September 19, 2005 pursuant to which: (i) each party’s respective
      ongoing obligations to one another under the Asset Purchase Agreement dated
      June
      10, 2003 between us and Alliance were terminated, (ii) each party granted the
      other a mutual general release (which resolved, among other things, the parties’
claims against one another for various accumulated post-closing payments),
      and
      (iii) the parties agreed to share in the proceeds of future transactions
      involving the disposition of our *Imagent* asset in
      accordance with the following schedule:




**Proceeds**
            **Alliance
                Percentage**
            **IMCOR
                Percentage**$1
                to $1,450,0000
            10%,
                not to exceed $100,000
            90%$1,450,001
                to $5,000,000
            30%
            70%$5,000,001
                and above
            33.3%
            66.7%





On
      May
      11, 2005, we were served with an unlawful detainer lawsuit by EOP regarding
      our
      default on its building lease to pay $84,641 of rent that was due April 1,
      2005.
      The future minimum rents due on this lease were approximately $2,490,000 as
      of
      March 31, 2005. EOP continued to hold a $297,000 security deposit related to
      this lease at June 30, 2005. On July 19, 2005, we concluded two concurrent,
      interdependent negotiations with both EOP and a new tenant, resulting in the
      execution of a lease termination agreement with EOP on that date. Pursuant
      to
      the terms of this agreement, we were allowed to occupy the premises until July
      31, 2005, with the only consideration being the surrender of the lease deposit
      totaling $297,000. We were further released from all other obligations,
      including past due rents totaling approximately $331,292 at July 31, 2005
      (approximately $248,469 at June 30, 2005), late payment fees and any future
      lease payments, commitments and/or contingencies.




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




None.




**PART
      II.**




**ITEM
      5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS
      ISSUER PURCHASES OF EQUITY SECURITIES.**




**Common
      Stock**




Our
      common stock is quoted from time to time on the Pink Sheets under the symbol
      “ICRP.PK” Until June 28, 2004 our stock traded in the Nasdaq SmallCap Market. As
      of March 31, 2006, there were approximately 6,962,455 shares of our common
      stock outstanding and as of March 31, 2006 there were approximately 133
      stockholders of record. Holders of our common stock are entitled to receive
      such
      dividends as may be declared by our Board of Directors. We have not declared
      or
      paid cash dividends on our common stock and we do not anticipate paying any
      cash
      dividends in the foreseeable future.


14




The
      high
      and low sales prices (adjusted to reflect our one-for-twenty reverse split)
      for
      our common stock during the fiscal quarters ended March 31, 2004 and June 30,
      2004 (the periods during which our common stock was listed on the Nasdaq
      SmallCap Market) are set forth below. The high and low bid prices for our common
      stock during the fiscal quarters ended September 30, 2004 and December 31,
      2004
      and for each quarter of the fiscal year ended December 31, 2005 (the period
      during which our common stock was listed on the Pink Sheets) are also set forth
      below.






**Year
                Ended**
              **December
                31, 2004**
              **(Amounts
                in $)**
            
            **Year
                Ended**
              **December
                31, 2005**
              **(Amounts
                in $)****High**
            
            **Low**
            
            **High**
            
            **Low**1st
                Quarter
            
            $
            39.00
            
            $
            22.00
            
            $
            2.00
            
            $
            1.602nd
                Quarter
            
            
            44.00
            
            
            6.00
            
            
            1.65
            
            
            0.063rd
                Quarter
            
            
            6.20
            
            
            2.00
            
            
            0.65
            
            
            0.064th
                Quarter
            
            
            15.00
            
            
            0.80
            
            
            0.35
            
            
            0.06




In
      addition, for comparison purposes, set forth below are the trading prices (as
      opposed to the bid prices set forth in the above table for those periods) for
      our common stock during the fiscal quarters ended September 30, 2004 and
      December 31, 2004 when the stock was quoted on the Pink Sheets.





**Year
                Ended**
              **December
                31, 2004**
              **(Amounts
                in $)****High**
            
            **Low**3rd
                Quarter
            $
            8.00
            
            $
            2.004th Quarter
            
            17.50
            
            
            0.90





The
      foregoing information was obtained from the National Association of Securities
      Dealers and the Pink Sheets as reported on the Nasdaq SmallCap Market and the
      Pink Sheets, respectively. The quotations generally reflect inter-dealer prices,
      without retail mark-up, mark-down or commission and may not represent actual
      transactions. The foregoing information reflects **** trade
      or **** bid
      prices, as indicated. See “ *Risk
      Factor—Two related stockholders has significant voting power, which may delay or
      prevent a change of control of IMCOR and may limit the trading volume of our
      common stock,* ”
above,
      regarding the possible effects of the concentrated ownership of our stock on
      the
      market of our stock.





In
      2005,
      we did not grant any qualified and non-qualified stock options pursuant to
      our
      2000 Long Term Incentive Compensation Plan.




During
      the fourth quarter of 2004, we issued common and preferred stock as follows:





·
            In
                October 2004, we sold an aggregate of 4,500 shares of our recently
                authorized Series A Convertible Preferred Stock for a purchase price
                of
                $4,500,000 in connection with a cross-licensing agreement (see “Series A
                Convertible Preferred Stock”
below”).





·
            In
                November and December 2004, we issued an aggregate of 5,512 shares
                in
                connection with a settlement with a former creditor of
                Alliance.





15


During
      2005, we issued 2,961,353 shares of our common stock as compensation for past
      services and to satisfy late registration penalties, without registration under
      the Securities Act of 1933, as amended. The following is a summary of the common
      shares issued:




Date
            Shares
            
            Description1/11/2005
            328,053
            
            Late
                registration penalties1/20/2005
            101,378
            
            Legal
                services performed2/8/2005
            4,232
            
            Consulting
                services performed2/8/2005
            64,628
            
            Late
                registration penalties4/11/2005
            454,149
            
            Late
                registration penalties12/30/2005
            2,008,913
            
            Late
                registration penalties





In
      December 2005, we executed a previously negotiated agreement with Oxford
      Bioscience Partners IV L.P., MRNA Fund II, L.P. and Mi3 L.P. to cease the
      accrual of shares of the Company’s common stock, effective as of June 30, 2005,
      to be delivered to those investors as a penalty for our failure to have an
      effective registration statement in place under the terms of the registration
      rights agreements dated April 19, 2004 between the company and those
      investors.




These
      securities were offered and sold by us in reliance upon exemptions from the
      registration requirements provided by Section 4(2) of the Securities Act and
      Regulation D under the Securities Act relating to sales not involving any public
      offering, and/or Rule 701 under the Securities Act relating to transactions
      occurring under compensatory benefit plans. We relied on representations and
      warranties from the purchaser of the securities that they were acquiring the
      securities for their own account and not with a view to, or for sale in
      connection with, any distribution of the securities in violation of the
      Securities Act.




All
      of
      the shares issued in January through April 2005 were subject to pending
      registration statements which are not currently effective. The effectiveness
      of
      the registration statements was delayed while we responded to the SEC’s various
      comments which arose during the comment process. Given our current financial
      circumstances and our goal to maximize the funds available to our creditors,
      our
      board of directors has determined that we will not continue to pursue our
      efforts to effect our registration statements currently on file with the SEC
      (File Nos. 333-122625 and 333-117907). Those registration statements, which
      are
      not currently effective, will be withdrawn.




We
      have
      stopped accruing penalty shares for the security holders who received shares
      subject to that certain registration rights agreement dated as of April 14,
      2004
      because without an effective registration statement we are unable to abide
      by
      the contractual requirement that the penalty shares such parties receive freely
      tradable shares. In general, privately issued shares held by investors for
      more
      than one year may be sold under Rule 144.




Many
      of
      our investors have held their shares in the Company for more than a year and
      will be qualified to sell their shares under Rule 144, subject to the
      restrictions set forth therein; ** indeed,
      several such investors have sold shares utilizing Rule 144. However, given
      our
      current financial situation, at some point in 2006 or thereafter we may elect
      to
      cease reporting under the Exchange Act, and as a result, investors will no
      longer be eligible to resell their shares of our common stock under Rule 144
      (unless the shares have been held for two years, in which case they would be
      freely saleable under Rule 144(k)).




As
      of
      March **** 31 ,
      2006,
      approximately 6,522,372 shares of our common stock are “restricted stock” or are
      beneficially owned by persons who as of March 31, 2006 were affiliates of
      the company as defined in Rule 144 under the Securities Act. For purposes
      of this calculation only (and the comparable disclosure on the cover page of
      this Form 10-KSB) we have assumed that officers, directors, 10%
      stockholders and that stock held by Oxford Bioscience Partners IV L.P. and
      MRNA
      Fund II L.P., other than shares and warrants which are covered by an effective
      registration statement, would be deemed to be beneficially owned by Jonathan
      Fleming (a director) (although Mr. Fleming disclaims beneficial ownership of
      those shares for all other purposes), and that a person beneficially owns stock
      subject to an option, warrant or convertible instrument that is exercisable
      or
      convertible within 60 days from March 31, 2006. A portion of those
      shares would be eligible for resale by company affiliates and others who have
      satisfied the requisite holding periods, subject to the volume limitations
      and
      other provisions of Rule 144 and applicable law. As of March 31, 2006, we
      had approximately 440,083 shares eligible for sale free of restriction under
      Rule 144(k) which are not subject to an effective registration statement.


16




**Equity
      Compensation Plan Information**




See
      Part III Item 11 for information regarding our equity compensation
      plans.




**Series A
      Convertible Preferred Stock**




In
      October 2004, in connection with our technology cross-licensing agreement,
      we
      entered into a securities purchase agreement with Bristol-Myers Squibb pursuant
      to which we sold an aggregate of 4,500 shares of Series A Convertible Preferred
      Stock for a total purchase price of $4,500,000. The Certificate of Designation,
      Preferences and Rights which authorizes the Series A Convertible Preferred
      Stock
      generally provides that:





·
            In
                the event of any liquidation, dissolution or winding up of the company
                (including the sale of all or substantially all the assets of the
                company
                unless the holders of 66-2/3% of the preferred stock then outstanding
                vote
                not to treat such a sale as a liquidation event), whether voluntary
                or
                involuntary, and subject to the rights of the holders of any future
                senior
                securities, each holder of preferred stock is entitled to be paid
                out of
                the funds and assets of the company available for distribution to
                holders
                of our capital stock before any payment or setting apart for payment
                of
                any amount shall be made in respect of any common stock, an amount
                equal
                to $1,000 per share of preferred
                stock;





·
            The
                holder of the preferred stock shall have no voting rights except
                as
                required by law; and





·
            The
                preferred stock is convertible into common stock at a ratio of 185.1854
                shares of common stock for each share of preferred stock. As of December
                31, 2005, conversion of the preferred stock would result in issuance
                of
                833,334 shares of our common stock. We have the right to require
                conversion of the preferred stock into common stock if the closing
                price
                of our common stock exceeds $8.10 per share for ten consecutive trading
                days. The conversion ratio is subject to adjustments for dilution
                resulting from stock splits and combinations, certain dividends and
                distributions, reorganization, reclassification or merger of the
                company.





**ITEM
      6. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION.**




Portions
      of the discussion in this item contain forward-looking statements and are
      subject to the “Risk Factors” described above. All forward-looking statements
      included in this item are based on information available to us on the date
      hereof, and we assume no obligation to update any such forward-looking
      statements. Our actual results could differ materially from those anticipated
      in
      these forward-looking statements as a result of a number of factors, including
      those set forth in the section captioned “RISK FACTORS” and elsewhere in this
      Form 10-KSB.




The
      following should be read in conjunction with our audited financial statements
      included herein. References to the “ *Imagent* Business” are to the property, plant and equipment, technology and medical
      imaging business of Alliance that we acquired on June 18, 2003. References
      to the “Purchased Technology” are to the technology and intellectual property
      that are part of the *Imagent* Business.


17




These
      financial statements present the results of operations of the *Imagent* Business
      following its acquisition on June 18, 2003 and have been adjusted to reflect
      the
      one-for-twenty reverse split effected on March 4, 2005.





**Liquidity;
      Capital Resources**





The
      independent registered public accounting firm's report dated April 14, 2006
      included in our December 31, 2005 Annual Report on Form 10-KSB, as amended,
      contained the following explanatory paragraph:




The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 2 to the financial
      statements, the Company's recurring losses from operations and requirement
      for additional funding raise substantial doubt about its ability to continue
      as
      a going concern. Management’s plans concerning these matters are described
      in Notes 2 and 13. The financial statements do not include any adjustments
      that
      might result from the outcome of this uncertainty.




At
      December 31, 2005, we had cash and cash equivalents totaling approximately
      $717,024, compared to $4,721,456 at the end of the 2004 fiscal year. At December
      31, 2005, we had a net shareholders' deficit position of $2,955,432, compared
      to
      a net shareholders' equity position of $11,943,329 **** at
      the
      end of the 2004 fiscal year.




During
      2005, our board of directors continued to implement our restructuring plan
      that
      resulted in cessation or suspension of substantially all operations, including
      significant employee reduction-in-force, sale of excess equipment, suspension
      of
      manufacturing and clinical activities, cessation of manufacturing and selling
      activities, vacating our premises, and the sale of certain of our technology.




As
      discussed in Item 3 above, we entered into the Amersham Settlement dated as
      of
      September 19, 2005 with Amersham, Alliance and Molecular Biosystems, Inc. The
      Amersham Settlement resolves the parties’ claims arising under the case
      captioned *IMCOR
      Pharmaceutical Co., Alliance Pharmaceutical Corp. and Molecular Biosystems
      Inc.
      v. Amersham Health Inc., Amersham Health AS and Amersham plc.* ,
      Civil
      Action No. 03-2853 (SRC) filed in the United States District Court, District
      of
      New Jersey. Under the terms of the Amersham Settlement, the Company’s technology
      cross license was valued at $1,200,000 in favor of the Company, for which the
      Company received $1,000,000 directly from Amersham. The balance, or $200,000,
      was paid directly by Amersham to Alliance which served as the cash consideration
      to Alliance under the separate but concurrent Alliance Settlement discussed
      below. The parties granted each other fully paid-up, irrevocable, royalty-free,
      non-exclusive cross-licenses, with the right to sublicense, and mutual releases.




In
      addition, we entered into the Alliance Settlement dated as of September 19,
      2005
      with Alliance pursuant to which: (i) each party’s respective ongoing obligations
      to one another under the Asset Purchase Agreement dated as of June 10, 2003
      between IMCOR and Alliance were terminated, (ii) each party granted the other
      a
      mutual general release (which resolved, among other things, the parties’ claims
      against one another for various accumulated post-closing payments), and (iii)
      the parties agreed to share in the proceeds of future transactions involving
      the
      disposition of our *Imagent®* (perflexane lipid microspheres) asset. As a result of the Alliance Settlement,
      a
      variety of receivables, payables and other obligations between us and Alliance
      were settled without any additional payment from us during the fiscal year
      ended
      December 31, 2005.


18




We
      received $1,000,000 directly from Amersham, of which the following items were
      immediately paid (leaving us a net cash amount of $831,562 from this $1,000,000)
      (all amounts approximate):




·
            $48,000
                for legal expenses necessary to prepare filings, audits, and to meet
                our
                other compliance and reporting requirements under the Securities
                and
                Exchange Commission rules; and




·
            $120,000
                for payment of patent and other legal work that we incurred during
                the
                final steps of settlement negotiations with Amersham and Alliance,
                which
                was critical and integral to reaching a satisfactory conclusion to
                those
                disputes.




From
      September 21, 2005 through December 31, 2005, significant uses of our cash
      were
      (leaving us a net cash amount of $717,024 at December 31, 2005) (all amounts
      approximate):




·
            $10,000
                to settle and release claims of certain of our unsecured creditors
                totaling $115,000 for a gain on extinguishment of debt of $105,000
                (this
                is part of our $5,200,000 of debt); and




·
            $169,000
                for several categories including: additional legal fees ($27,000),
                outside
                accountants ($15,000), consultant fees ($32,500), compliance with
                reporting requirements under the Securities and Exchange Commission
                rules
                ($27,000), and final payroll and retention bonuses
                ($44,000).




From
          January 1, 2006 through March 31, 2006, significant uses of our cash were
          (leaving us a net cash amount of approximately $490,000 at March 31, 2006)
          (all
          amounts approximate):


·
            $17,000
                to settle and release claims of certain of our unsecured creditors
                totaling $159,000 for a gain on extinguishment of debt of $142,000
                (this
                is part of our $5,200,000 of debt);




·
            $26,000
                as a partial payment on certain other accounts payable obligations;
                and




·
            $188,000
                for several categories including: legal and intellectual property
                matters
                ($32,000), consultant fees ($31,500), prepayment of audit fees ($35,000),
                and director and officer insurance to mitigate the costs of us providing
                mandatory indemnification pursuant to our articles of incorporation
                and
                bylaws ($75,000).




Based
      on
      potential transaction values which might be concluded in the near term, we
      have
      determined that the carrying value of the *Imagent* assets should be
      written down as of December 31, 2005 through the establishment of an allowance
      for valuation impairment to its currently estimated fair value of $1,000,000.
      Furthermore, since the lack of adequate capital and a full-time staff make
      it
      impracticable to continue normal operating activities due to the likelihood
      that
      additional value will most readily be created only through opportunistic
      circumstances related to strategic technology transactions with others, we
      have concluded that the remaining deferred revenues and related deferred
      royalties assets, should be recognized currently, rather than amortized into
      future operations, and that correspondingly the Purchased Technology asset
      should be written down to zero rather than amortized into future operations.




We
      are
      still considering our alternatives with respect to efforts to sell or otherwise
      maximize asset values related to the Purchased Technology, and will continue
      to
      consider as alternatives the sale or license of our remaining assets, a merger
      or other material transaction. Such a transaction may include selling the
      Purchased Technology, a license or sale of the patent portfolio underlying
      the
      Purchased Technology, a manufacturing rights agreement, or another form of
      transaction.


19




The
      above
      transactions, taken together, resulted in gross decreases to shareholders’
equity totaling approximately $14,898,761 during the year ended December 31,
      2005. The most significant reduction to shareholders’ equity during this same
      period resulted from continuing net losses, totaling approximately $17,697,883.
      Accordingly, the net shareholders’ equity of $11,943,329 at December 31, 2004
      was reduced to a deficit of $2,955,432 at December 31, 2005.





During
      2004, we financed our operations and serviced a portion of our secured and
      unsecured debt and secured puttable share obligations with the proceeds of
      the
      financings we closed in the second quarter of 2004, the payments we received
      from Kyosei (net of taxes and expenses), net proceeds from our sale of Series
      A
      Convertible Preferred Shares to Bristol-Myers Squibb and the related technology
      cross-license, and through borrowings from our principal institutional investors
      (which were converted into common stock in the second quarter of 2004).




We
      utilized approximately $14,806,000 in available cash for continuing operations
      during 2004 (including approximately $1,111,000 to satisfy certain obligations
      we assumed pursuant to the acquisition of the *Imagent* Business), which, after giving effect to the $6,000,000 received pursuant to
      our
      Kyosei and Bristol-Myers Squibb license agreement transactions, netted to
      approximately $8,806,000, as reported in our consolidated statements of cash
      flows for the year then ended.




Our
      financial condition raises substantial doubt about our ability to continue
      as a
      going concern without further adjustments to our levels of expenditures that
      we
      deem necessary to maximize the remaining asset values. In 2005, our operations
      consumed approximately $5,773,000 in cash. However, after giving effect to
      the
      $1,000,000 received from Amersham, the $344,384 received from the disposal
      of
      property, plant and equipment, the $102,500 received from the disposal of our
      technology license, and the conversion of the various deposits totaling $324,750
      to partially satisfy certain obligations, our net cash expenditures for 2005
      were approximately $4,004,432.




During
      the quarter ended September 30, 2005, we reduced our “Assumed acquisition
      obligations” by $200,000 as a result of reaching overall settlements in
      litigation and other disputes involving the Purchased Technology. See Note
      8 to
      our financial statements. The remainder of the “Assumed acquisition obligations”
relates primarily to past due payment obligations owed to several parties
      totaling $622,750 at December 31, 2005. During 2005, we also paid out $353,884
      in salary-related costs which had been accrued at December 31, 2004 in “Accrued
      payroll, deferred bonuses and related expenses,” including $156,172 in accrued
      salary, $159,787 in earned vacation and $37,925 in the remainder of a severance
      obligation for a former employee. During the quarter ended June 30, 2005, our
      former CEO’s employment with the company was terminated, and we recorded a
      reserve for severance totaling $275,000. This individual is also owed $206,250
      for a bonus earned in 2004. No portion of these obligations, totaling $481,250,
      has been paid; such amounts are included in “Accrued payroll, deferred bonuses
      and related expenses” at December 31, 2005. For a discussion of other changes in
      accrued expenses and assumed acquisition obligations see Note 7 to our financial
      statements.




In
      connection with our acquisition of the *Imagent* Business, we were obligated to pay additional amounts to Alliance secured and
      unsecured creditors at various times between 90 and 365 days after the
      closing, (i) an aggregate of $2,500,000 to Xmark (a creditor of Alliance)
      which was paid in 2004, (ii) subject to reaching satisfactory agreements
      with certain Alliance secured and unsecured creditors, an aggregate amount
      of up
      to approximately $3,000,000 to creditors other than Xmark, of which all but
      approximately $1,179,000 has been paid, (iii) pay certain royalties based
      upon sales of *Imagent* through
      June 2010, subject to certain offsets, and (iv) deliver an aggregate
      of approximately 102,700 shares of our common stock (which has been completed).
      Our obligations to Xmark were secured by a first priority security interest
      on
      the *Imagent* related
      tangible and intangible assets, which was released in the fourth quarter of
      2004
      after the final payment.


20




The
      remaining unpaid obligations assumed in connection with the *Imagent* Business
      acquisition referenced above now totals approximately $925,000 at year end
      2005.  This includes $622,750 related to certain notes (of which all
      remain past due at year end).





At
      the
      time of the acquisition of the *Imagent* Business, we entered into a lease agreement with a unit of Baxter International
      for certain equipment used for the manufacture of *Imagent* .
      Our
      annual cost for this lease is approximately $126,000. Baxter took back their
      equipment and we no longer have this obligation.




In
      2004,
      we recognized the issuance of 11,250 shares of common stock that had previously
      been subject to rescission.




In
      1999,
      we received $12,015,000 from a unit of Élan through its investment in our Series
      A Convertible Exchangeable Preferred Stock that we issued in connection with
      our
      joint venture. This Series A Preferred Stock was converted into common stock
      in
      June 2004, and the amount previously designated as mezzanine equity has been
      returned to equity on the December 31, 2004 balance sheet. Under the Certificate
      of Designations of the Series A Preferred Stock originally held by Élan,
      the holder had a Liquidation Preference entitling it as of December 31,
      2003 to the first $16,036,810 of funds available for distribution to
      stockholders upon liquidation of the company and to convert shares of the Élan
      Series A Preferred Stock into common stock at any time after
      October 20, 2001 at a conversion price of $84.68 per share. Alternatively,
      the holder of the Élan Series A Preferred Stock could exchange the initial
      12,015 shares of the Élan Series A Preferred Stock for common shares of
      Sentigen so that the holder of Series A Preferred Stock owned 50% of the
      equity of Sentigen. Because the initial value of the Élan Series A
      Preferred Stock was exchangeable at the holder’s option into additional shares
      of Sentigen, we reclassified $12,015,000 as mezzanine equity until such time
      that the exchange right terminated either by the passage of time or the
      agreement of the holder to terminate or irrevocably to not exercise the right.
      All of the Series A Preferred Stock issued in connection with the joint venture
      was converted into 9,763 shares of our common stock in June 2004 and the joint
      venture was terminated.




**Results
      of Operations**





**As
      a result of the restructuring plans adopted in April and May of 2005, and which
      continued to be carried out through December 31, 2005, the results of the fiscal
      year ended December 31, 2005 are not likely to be indicative of the following
      fiscal year.**





*Revenue
      and License Fees*




We
      have
      not generated significant product revenues during 2004 or 2005 due to capital
      constraints limiting our sales and marketing capability and the cessation of
      manufacturing operations related to the closing of our FDA-approved
      manufacturing facility. Any sales of products are therefore included in our
      financial statements under “investment and other income.”




License
      revenues relate to the amortization of license revenue received
      but previously deferred in December 2003 ($2,000,000), April 2004
      ($2,000,000), October 2004 ($4,000,000) and September 2005
      ($1,200,000).


21




In
      December 2003, we entered into a product license agreement with Kyosei for
      the development and marketing of *Imagent* in Japan
      for all radiology and cardiology indications. We received a gross payment of
      $2,000,000 from Kyosei in late 2003 and another $2,000,000 in the second quarter
      of 2004 (both of which were recorded as deferred revenue on a gross basis),
      less
      a total of $400,000 of taxes withheld at the source (for which $200,000 was
      charged against operations in each of 2003 and 2004). As a result of these
      Kyosei payments, we paid Schering AG $100,000 in 2004 and owe an additional
      $400,000 at December 31, 2005. We recognize income from these payments ratably
      over the remaining lives of our related underlying *Imagent* patents,
      as calculated at the time the respective payments are received. Accordingly,
      we
      recognized $338,095 as earned license revenue in 2005, and $295,238 as license
      revenue in 2004.




In
      addition to the $4,000,000 already received, the agreement with Kyosei provides
      for an additional $6,000,000 to be paid to us in increments based largely on
      the
      achievement by Kyosei of certain milestones of clinical development, including
      the commencement of and completion of clinical studies and approval for sale
      by
      Japanese regulatory authorities. We can no longer fulfill our obligations under
      this contract and therefore we do not expect any further benefit from this
      agreement.




In
      2004,
      we entered into a non-exclusive technology cross-license agreement with
      Bristol-Myers Squibb. We received a gross payment of $4,000,000 in connection
      with the license and an additional $4,500,000 under a related stock purchase
      agreement. We have recognized $59,702 and $358,212 in earned license revenue
      for
      2004 and 2005, respectively, in connection with this technology license
      utilizing the same revenue recognition method described above. We do not owe
      Schering AG any royalty on the payments from this technology license because,
      among other things, it did not involve our sale of products.




On
      September 19, 2005, we entered into the Amersham Settlement with Amersham,
      Alliance and Molecular Biosystems, Inc. The Amersham Settlement resolved the
      parties’ claims arising under the litigation. Under the terms of the Amersham
      Settlement, we received a technology cross-license which was valued at
      $1,200,000 in favor of the company, for which we received $1,000,000 directly
      from Amersham. The balance, or $200,000, was paid directly by Amersham to
      Alliance which served as the cash consideration to Alliance under the separate
      but concurrent Alliance Settlement more fully discussed in Note 3 to our
      financial statements. The parties dismissed their litigation and granted each
      other fully paid-up, irrevocable, royalty-free, non-exclusive cross-licenses,
      with the right to sub-license, and mutual releases.





*Research
      and Development*




Essentially
      all of our research expenses since the third quarter of 2004 until early second
      quarter 2005 have been directed toward infrastructure and expenses associated
      with regulatory compliance and continued development of *Imagent* for new
      indications and the maintenance of our manufacturing capability. Since early
      in
      the second quarter of 2005, the majority of the costs have been expended with
      a
      focus on patent considerations, regulatory and clinical considerations in
      keeping with our overall objective to preserve net asset values for the benefit
      of creditors and shareholders. In August 2005, we notified the FDA that we
      suspended any activity related to the IND. Our regulatory and clinical
      operations were discontinued as part of our restructuring plan.




The
      following is a summary of our major research and development cost categories
      (all amounts approximate):


22





Fiscal
                Year Ended
              December
                31, 2004
            
            Fiscal
                Year Ended
              December
                31, 2005
            
            Increase/
              (Decrease)
              2004
                to 2005Personnel
            
            $
            2,089,000
            
            $
            746,000
            
            
            ($1,343,000
            )Contract
                consultants
            
            
            924,000
            
            
            341,000
            
            
            (583,000
            )Patent
                costs
            
            
            374,000
            
            
            148,000
            
            
            (226,000
            )Production
                facilities costs
            
            
            293,000
            
            
            122,000
            
            
            (171,000
            )Supplies
            
            
            232,000
            
            
            17,000
            
            
            (215,000
            )Gain
                on equipment lease settlement
            
            
            (126,000
            )
            
            --
            
            
            126,000Other
            
            
            8,000
            
            
            75,000
            
            
            67,000Total
            
            $
            3,794,000
            
            $
            1,449,000
            
            
            ($2,345,000
            )




Personnel,
      contract consultants’ charges, patent costs, production facilities costs and
      supplies all decreased from the fiscal year ended December 31, 2004 to
      negligible amounts during the comparable 2005 period, primarily due to our
      cessation of operations and implementation of other aspects of our restructuring
      plan. The majority of these 2005 costs were incurred in the six months ended
      June 30, 2005 related to our efforts to initially commence our Phase II clinical
      trials for a new indication for *Imagent* (primarily incurred January - mid-April 2005), and then, upon the Board’s
      decision to implement our restructuring plan, since mid-April 2005 converting
      our efforts to preserve asset values for the benefit of creditors and
      shareholders.




Our
      research and development expenses related to *Imagent* were
      approximately $3,728,000 and $1,449,000 for the 2004 and 2005 fiscal years,
      respectively. Expenses were less in 2005 because of our restructuring plan.
      We
      have incurred a total of $6,842,000 in development expense for *Imagent* .




*Selling,
      General and Administrative Expense*




The
      following is a summary of the major cost categories in selling general and
      administrative expenses (all amounts approximate):





Fiscal
                Year
              ended
              December
                31,
              2004
            
            Fiscal
                Year
              ended
              December
                31,
              2005
            
            Increase/
              (Decrease)
              2004
                to 2005Personnel
            
            $
            1,497,000
            
            $
            845,000
            
            
            ($652,000
            )Contract
                consultants
            
            
            1,979,000
            
            
            646,000
            
            
            (1,333,000
            )Stock
                options
            
            
            959,000
            
            
            1,078,000
            
            
            119,000Legal
                and accounting
            
            
            2,281,000
            
            
            1,324,000
            
            
            (957,000
            )Fees
            
            
            2,371,000
            
            
            1,675,000
            
            
            (696,000
            )Facilities
                costs
            
            
            1,634,000
            
            
            937,000
            
            
            (697,000
            )Insurance
            
            
            680,000
            
            
            476,000
            
            
            (204,000
            )Depreciation
                & amortization
            
            
            1,824,000
            
            
            618,000
            
            
            (1,206,000
            )Amortization
                of purchase technology
            
            
            1,303,000
            
            
            1,303,000
            
            
            --Other
            
            
            861,000
            
            
            396,000
            
            
            (465,000
            )Total
            
            $
            15,389,000
            
            $
            9,298,000
            
            
            ($6,091,000
            )







Personnel,
      contract consultants, facilities and insurance expenses decreased from 2004
      to
      the comparable 2005 period, primarily due to our efforts to cut expenses and
      implement our restructuring plan.


23




Personnel
      costs incurred during 2004 include a contractually obligated bonus of $206,250
      to our then chief executive officer, which remains unpaid in its entirety at
      December 31, 2005. In addition, the personnel costs incurred for 2005 include
      approximately $329,000 in net one-time charges for severance and incentive
      retention bonuses. Gross charges incurred during 2005 totaled $389,000, but
      were
      offset by the waiver of a previously granted but unpaid bonus of $60,000
      negotiated as part of the retention bonus arrangement made with our chief
      operating officer. Of the gross charges of $389,000, $34,000 represented nominal
      severance incentives paid to former staff in order to induce an
      orderly restructuring of our affairs as they transitioned from our employ, $275,000
      reflects the accrual of a one year salary severance obligation contractually
      owed to our former chief executive officer whose employment with us ended on
      May
      31, 2005 (and which also remains unpaid in its entirety at December 31, 2005)
      and $80,000 in incentive retention bonuses issued in favor of our chief
      operating officer and one other employee who were both deemed integral to
      conducting the orderly restructuring of our operations in a manner necessary
      to
      preserve net asset values for creditors and shareholders. Of this $80,000,
      $30,000 was paid during the quarter ending June 30, 2005, another $35,000 was
      paid in the quarter ending September 30, 2005, and $15,000 was paid in the
      quarter ending December 31, 2005.




Contract
      consultant charges decreased significantly from the fiscal year ended December
      31, 2004 for the comparable 2005 period, due to the restructuring plan commenced
      in the second quarter of 2005 and our cancellation in December 2004 of a
      contract we had with a third party to market the *Imagent* product
      in December 2004.




Stock
      option expense increased during the fiscal year ended December 31, 2005 over
      the
      comparable 2004 period, primarily due to the accelerated expense recognition
      of
      approximately 88,290 option-shares which had previously been issued at then
      below market strike prices to our former chief executive officer, but which
      became 100% vested on his employment termination date of May 31, 2005. (Total
      option-shares vesting in favor of our former chief executive officer on May
      31,
      2005 totaled approximately 315,594, but the additional option-shares had been
      issued at strike prices at least equal to fair market value or had been
      previously expensed, all for no current effect.)




Legal
      and
      accounting expense decreased significantly from the fiscal year ended December
      31, 2005 from the comparable period in 2004. Costs incurred during the first
      six
      months of 2005 were relatively higher, primarily due to increased legal fees
      associated with litigation and various registration statement filings with
      the
      Securities Exchange Commission and an increase in the audit fees for the
      Company’s 2004 Annual Report on Form 10-KSB filed in March 2005, as amended.
      However, as a result of completing or curtailing these activities, costs for
      these items were lower in the remainder of 2005.




Fees
      incurred during the fiscal year ended December 31, 2005 relate almost entirely
      to late registration penalties that began accruing in January 2005 for shares
      for which we have filed two registration statements.  One was declared
      effective but suspended by the company because we did not have sufficient
      resources to update it; and the second was not pursued by the company.  We
      have stopped accruing penalty shares for the security holders who received
      shares subject to that certain registration rights agreement dated as of April
      14, 2004 because without an effective registration statement we are unable
      to
      abide by the contractual requirement that the penalty shares such parties
      receive are freely tradable shares.   In addition, we entered into an
      agreement with Oxford Bioscience Partners IV L.P., MRNA Fund II, L.P. and
      Mi3 L.P. to cease accruing penalty shares as of June 30, 2005.  In general,
      privately issued shares held by the investors for more than one year may be
      sold
      under Rule 144.




Fees
      incurred during the fiscal year ended December 31, 2004 related primarily to
      (a)
      carrying costs associated with various Xmark obligations, a former note holder
      and investor which held a secured blanket lien in our assets, which was released
      when the obligations were extinguished in the fourth quarter of 2004 and (b)
      the
      commencement of the incurrence of late registration penalties associated with
      obligations arising from the Company’s equity transaction previously concluded
      June 30, 2004, and for which the Company was unable to meet its registration
      requirements to those shareholders.


24




Depreciation
      and amortization costs decreased from the fiscal year ended December 31, 2004
      for the comparable 2005 period as we terminated the recording of depreciation
      after April 2005, at which time we took equipment out of use and prepared it
      for
      our public auction conducted in June 2005.




*Loss
      on Disposal of Property, Plant and Equipment*





During
      the year ended December 31, 2005, furniture, fixtures and equipment with a
      net
      book value of $550,689 ($1,827,859 cost, less $1,083,993 accumulated
      depreciation and amortization and less $193,177 allowance for impairment
      reserve) was sold or otherwise disposed of for $324,384 in net proceeds,
      resulting in a loss on disposal of equipment totaling $226,305. No such losses
      were incurred in 2004.





*Impairment
      Losses*




In
      2005,
      we recorded the impairment losses totaling a net amount of approximately
      $7,506,500 in order to reflect fair market value of certain assets for which
      were able to make reasonable estimations, all as a result of our restructuring
      activities (all amounts approximate):




·
            Leasehold
                improvements - $3,072,500 (reduced to a carrying value of $20,000
                at June
                30, 2005; this amount was received prior to December 31, 2005 and
                therefore its carrying value was $0 at December 31,
                2005);




·
            Equipment
                - $193,000 (reduced to a carrying value of $31,220 at June 30, 2005;
                this
                amount was received prior to December 31, 2005 and therefore its
                carrying
                value was $0 at December 31, 2005);
                and




·
            Technology
                license - $570,500 (reduced to a carrying value of $102,500 at June
                30,
                2005; this amount was received prior to December 31, 2005 and therefore
                its carrying value was $0 at December 31,
                2005);




·
            Purchased
                Technology - $11,373,500 (reduced to a carrying value of $1,000,000
                at
                December 31, 2005); and




·
            Deferred
                royalties - $416,500 (reduced to a carrying value of $0 at December
                31,
                2005).




In
      addition, the above impairment charges, totaling approximately $15,626,000,
      were
      offset by the adjustment of previously deferred revenue totaling
      approximately $8,119,500, resulting in net impairment charges recognized in
      2005
      amounting to approximately $7,506,500.




We
      also
      recorded an allowance for valuation impairment for our patents during 2004
      related to our subcutaneous lymphography technology that we acquired from
      Alliance in 1999. In December 2004, after consideration of our decision to
      focus
      on the approval of *Imagent* for a
      new label indication, our limited resources, the results of our attempts to
      find
      development partners for the related technologies, and our belief that there
      was
      little probability of any future cash flows relating to these patents, we
      determined that future cash flows related to patents were going to be less
      than
      the carrying value of these patents. Therefore, we recorded an allowance for
      valuation impairment in the fourth quarter of 2004 related to these patents
      equal to their carrying value at that time of $274,479.




*Loss
      from Joint Venture*





The
      Sentigen joint venture was terminated June 10, 2004 and Sentigen became a wholly
      owned subsidiary of the company. The loss from joint venture in 2004 totaling
      $2,213,646 consisted of our share of the joint venture’s amortization of its
      technology license costs up to the termination date, plus the write-down to
      a
      new implicit value derived from the then fair value of the underlying common
      shares issued in consideration of the surrender of the former joint venture
      partner’s minority 19.9% interest therein.


25




*Investment
      and Other Income*





Investment
      and other income for the years ended December 31, 2004 and 2005 was $235,664
      and
      $42,875, respectively. Investment and other income for 2005 decreased from
      the
      comparable period in 2004, primarily due to income recorded related to the
      settlement of a lease obligation in 2004 for an amount less than the original
      loss provision recorded in 2003. In addition, revenues from sales of our *Imagent* product
      were lower in 2005 as a result of our curtailing of marketing efforts in 2005
      as
      part of the implementation of our restructuring plan.




Investment
      income for the years ended December 31, 2004 and 2005 was $16,280 and
      $3,952, respectively. Investment income is generated by the amount of capital
      in
      our investment portfolio prior to it being used to fund our operations and
      the
      rate of interest earned on that capital.




*Gain
      on Extinguishment of Debt*





In
      2005,
      we obtained a full and fair settlement and release of obligations totaling
      $114,802 in exchange for cash payments of $10,360, resulting in a gain on the
      extinguishment of debt of $104,442.





*Interest
      Expense*





Interest
      expense was $591,688 and $90,857 for the years ended December 31, 2004 and
      2005,
      respectively. Interest expense for the year ended December 31, 2005 decreased
      by
      $500,831 compared to the comparable period in 2004, due to the reduction of
      our
      notes payable and other interest bearing obligations during the second through
      fourth quarters of 2004.




In
      2004,
      interest expense was attributable primarily to our bridge loan from a bank,
      our
      notes to certain of our principal investors and our obligations to certain
      creditors of Alliance that we assumed in connection with our purchase of the *Imagent* Business. In 2005, interest expense was attributable to royalties accrued from
      Schering AG, obligations assumed in the Alliance transactions, and amounts
      owed
      to certain shareholders.




*Equipment
      and Leasehold Improvements*




In
      2004,
      we purchased approximately $115,000 of equipment related primarily to a
      necessary upgrade of our information technology systems and nominal acquisitions
      of equipment for our manufacturing facility.




During
      May 2005, we modified our restructuring plan to include the disposition of
      furniture, fixtures and equipment, to vacate our premises, and other steps
      to
      effect an orderly cessation or suspension of operations other than those
      necessary to facilitate completion of the restructuring plan.




On
      June
      16, 2005, we sold the majority of our excess equipment at a public auction,
      which netted us $270,820 ($175,000 of which was received by June 30, 2005).
      The
      balance was subsequently received during the quarter ended September 30, 2005.
      At June 30, 2005, we recorded an equipment valuation impairment allowance of
      approximately $193,000. The remainder of our equipment and leasehold interest
      was sold in the quarter ended September 30, 2005 for $51,220 and in the quarter
      ended December 31, 2005 for $22,295 and, accordingly, all carrying values of
      related assets, accumulated depreciation and amortization, and valuation
      impairment allowances were adjusted to zero as of December 31, 2005. See
“ *Item
      1 - Restructuring Plan* ,”
      above.


26





In
      the
      quarter ended December 31, 2005, we collected $1,500 in miscellaneous
      collections attributed to assets whose book value had previously been written
      off, and also collected a net payment of $20,795 from our property and
      liability insurance carrier as a result of a submitted claim for stolen property
      which occurred during the period we were vacating the premises in favor of
      the
      new tenant. As a result, our furniture, fixtures and equipment was sold or
      otherwise disposed of for $344,384 in net proceeds, resulting in a loss on
      disposal of equipment totaling $226,305 at December 31, 2005.





*Preferred
      Stock*




In
      1999,
      we issued Series A Convertible Exchangeable Preferred Stock to units of Élan in
      connection with the Sentigen joint venture with Élan. This Series A Preferred
      was converted into common stock in June 2004 and is no longer outstanding.
      (This
      is different from the Series A that was issued to Bristol-Myers Squibb in
      October, 2004 and which remains outstanding.) The holder of the Élan
      Series A Preferred Stock was entitled to a mandatory, cumulative,
      semi-annual payment-in-kind dividend of 7% (i.e., 0.07 additional shares of
      Series A Preferred Stock). We also issued Series B Preferred Stock in
      February 2000, which was retired in November 2002 when the holders
      converted all of their issued and outstanding Series B Preferred shares
      (including accrued and unpaid dividends) into shares of our common stock at
      an
      exchange rate of 4.25 (pre-reverse split).





Additionally,
      the terms of the Élan Series A Preferred Stock and the Series B
      Preferred Stock created additional preferred returns for the holders. The Élan
      Series A Preferred Stock was issued with detachable warrants. The value
      allocated to those warrants caused the preferred shareholders to receive an
      additional return. As a result of the combination of the mandatory dividends,
      the preferential value amortization, we recorded preferred stock dividends
      of
      $498,060 and $0 in 2004 and 2005, respectively, for our series of Preferred
      Stock.




*Loss
      Attributable to Common Shareholders*




As
      a
      result of the above factors, the net loss applicable to common shareholders
      (after preferred dividends) was $22,170,695 and $17,697,883 for the years ended
      December 31, 2004 and 2005 respectively. Basic and diluted loss per common
      share was $8.20 and $2.95, respectively, for these periods. Weighted average
      shares utilized in these calculations were 2,704,703 and 6,003,141,
      respectively. The increase in weighted shares outstanding was due primarily
      to
      the issuance of shares in settlement of penalties and late registration
      fees.






**Plan
      of Operation**




In
      April
      and May 2005 ,
      we
      adopted a restructuring plan that resulted in cessation o r
      suspension of substantially all operations, including significant employee
      reduction-in-force, sale of excess equipment, suspension of manufacturing and clinical activities,
      cessation of current selling activities, vacating its premises, and the sale
      of
      certain of our technolog y.
      We
      also helped locate a third party to occupy our facility, and accordingly were
      able to negotiate a lease termination agreement which was concluded in July
      2005. However, abandoning our facility resulted in us no longer being able
      to
      manufacture *Imagent* ourselves.




We
      have
      also sold our equipment and other licensed technology assets except for the *Imagent* Purchased Technology.




Therefore,
      we are currently unable to operate in a manner that would allow us to further
      develop or promote the *Imagent* product.
      In August 2005, we notified the FDA that we suspended any activity related
      to
      the Investigational New Drug Application. During the next several months, we
      will focus our limited resources primarily on preserving the value of the
      Purchased Technology, to the extent possible, and exploring various options
      concerning our business, including joint venturing, licensing or selling our
      Imagent Purchased Technology and other possible strategic transactions. We
      no
      longer have current human, financial and other resources available to us at
      this
      time to carry out our original business plan or fully develop and
      commercialize *Imagent* on our
      own.


27





**Contractual
      Obligations**





The
      following table summarizes our approximate contractual obligations as of
      December 31, 2005 and the effect such obligations are expected to have on our
      liquidity and cash flow for future periods:







Total
              Obligations
              All
                Years
            
            2006
            
            2007
            
            2008
            
            2009*Imagent*purchase obligations and related notes (remaining)
            
            $
            807,000
            
            $
            807,000
            
            $
            0
            
            $
            0
            
            $
            0Notes
                payable
            
            
            192,000
            
            
            192,000
            
            
            0
            
            
            0
            
            
            0Accrued
                royalty liabilities
            
            
            402,000
            
            
            402,000
            
            
            0
            
            
            0
            
            
            0Severance
                and unpaid bonus to former CEO
            
            
            481,000
            
            
            481,000
            
            
            0
            
            
            0
            
            
            0Settlement
                amounts owed and guaranteed pursuant to equipment lease
                settlement
            
            
            493,000
            
            
            493,000
            
            
            0
            
            
            0
            
            
            0Other
                liabilities- past due
            
            
            600,000
            
            
            600,000
            
            
            0
            
            
            0
            
            
            0Accounts
                payable- past due
            
            
            1,842,000
            
            
            1,842,000
            
            
            0
            
            
            0
            
            
            0Total
                contractual cash obligations
            
            $
            4,817,000
            
            $
            4,817,000
            
            $
            0
            
            $
            0
            
            $
            0




We
      have
      been released from operating lease obligations totaling approximately
      $2,285,000, which were related to our facilities lease at 6175 Lusk Boulevard
      in
      San Diego, pursuant to a lease termination agreement executed July 19, 2005
      and
      made effective on or about July 31, 2005.




As
      of
      December 31, 2005, we have not entered into any purchase orders for capital
      equipment.





**Significant
      Estimates**




Our
      discussion and analysis of our financial condition and results of operations
      are
      based on our consolidated financial statements, which have been prepared in
      accordance with generally accepted accounting principles in the United States.
      The preparation of these financial statements requires us to make estimates
      and
      judgments that affect the reported amounts of assets, liabilities and expenses.
      On an on-going basis, we evaluate our estimates and judgments, including those
      related to evaluation of impairment analysis of long-lived assets. We based
      our
      estimates on historical experience and on various other assumptions 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
      that are not readily apparent from other sources. Actual results may differ
      from
      these estimates under different assumptions or conditions. We believe our most
      significant estimates relate to the impairment analysis we perform on long-lived
      assets to assess when a change in circumstances indicates that the carrying
      value may not be recoverable and we estimate the probable future cash flows
      related to that asset. We base our valuation assumptions on currently available
      information including estimates of market size and penetration, pricing,
      competitive threats and general operating expenses. These estimates may change
      and such changes may impact future estimates of carrying value.


28




We
      consider the valuation of our investment in the *Imagent* Business
      to be a significant estimate. The carrying value of the *Imagent* Business
      at December 31, 2005 was approximately $1,000,000, net of accumulated
      depreciation and amortization and allowances for impairment, including assets
      purchased subsequent to the acquisition of the *Imagent* Business. On an annual basis (or more often as conditions may warrant), we
      evaluate the carrying value of the *Imagent* Business
      and make any necessary adjustments. Our valuation assumptions have been based
      on
      currently available information including estimates of market size and
      penetration, pricing, competitive threats and general operating expenses. These
      estimates may change and such changes may impact future estimates of carrying
      value.




Prior
      to
      termination of our joint venture activity with Élan, we considered our
      investment in the joint venture’s technology license with units of Élan to be a
      significant estimate. In June 2004, the joint venture was terminated and the
      holder of our then outstanding Series A Preferred Stock converted it, including
      accrued and unpaid dividends, into 9,763 shares of our common stock at a
      conversion price of $1,693.60 per share. (The Preferred Stock formerly held
      by
Élan is different from the newly authorized Series A Convertible Preferred Stock
      recently issued to Bristol-Myers Squibb in connection with a cross-license
      agreement, which remains outstanding and is unrelated to the former Élan joint
      venture.) On the conversion date, the value of our common stock was $15 per
      share, which was deemed to be the implicit factor to value the 19.9% of Sentigen
      that Élan sold to IMCOR at $146,447. Accordingly, we wrote down the carrying
      value of our 80.1% share of the related technology license then held by Sentigen
      to $589,469.





Separately,
      on June 10, 2004, the company and Elan terminated the joint venture. As a
      result, on that date Sentigen became a wholly-owned subsidiary of the company
      and was consolidated in our financial statements. Elan had substantive
      participating rights in Sentigen, including the requirement for approval of
      the
      business plan and budgets and equal representation on the management committee
      which decides all day-to-day functions. As a result, our investment in Sentigen
      was accounted for using the equity method until June 10, 2004.





**Recent
      Accounting Pronouncements**





In
      November 2004, the FASB issued SFAS No. 151, “Inventory Costs - an Amendment of
      ARB No. 43, Chapter 4.” The statement requires abnormal amounts of idle facility
      and related expenses to be recognized as current period charges and also
      requires that allocation of fixed production overheads to the costs of
      conversion be based on the normal capacity of the production facilities. SFAS
      No. 151 is effective for inventory costs incurred during fiscal years beginning
      after June 15, 2005. The adoption of this statement is not expected to have
      a
      material impact on our financial statements.




In
      December 2004, the FASB issued revised SFAS No. 123 (SFAS No. 123R),
“Share-Based Payment.” This statement eliminates the ability to account for
      share-based compensation transactions using the intrinsic value-based method
      under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued
      to Employees,” and requires instead that such transactions be accounted for
      using a fair-value-based method. SFAS No. 123R is effective for Small Business
      Issuers for financial statements issued for the first interim period beginning
      after December 15, 2005. Currently, we disclose the pro forma net income and
      related pro forma income per share information in accordance with SFAS No.
      123,
      Accounting for Stock-Based Compensation, and SFAS No. 148, Accounting for
      Stock-Based Compensation Costs—Transition and Disclosure. We are evaluating the
      impact of this statement, which could have a material impact on our results
      of
      operations.


29




In
      December 2004, the FASB issued FAS 153, “Exchanges of Non-monetary Assets.” The
      provisions of this statement are effective for non-monetary asset exchanges
      occurring in fiscal periods beginning after June 15, 2005. The provisions of
      this statement should be applied prospectively, and eliminates the exception
      from fair value measurement for non-monetary exchanges of similar productive
      assets in paragraph 21(b) of APB Opinion No. 29, “Accounting for Non-monetary
      Transactions,” and replaces it with an exception for exchanges that do not have
      commercial substance. The adoption of this statement is not expected to have
      a
      material effect on our consolidated financial statements.






On
        June
        7, 2005, FASB issued Statement No. 154, “Accounting Changes and Error
        Corrections, a replacement of APB Opinion No, 20, Accounting Changes and
        Statement No. 3 Reporting Accounting Changes in Interim Financial Statements”
(“SFAS No. 154”). SFAS No. 154 changes the requirements for the accounting for,
        and reporting of, a change in accounting principle. Previously most voluntary
        changes in accounting principles were required to be recognized by way of
        a
        cumulative effect adjustment within net income during the period of the change.
        SFAS No. 154 requires retrospective application to prior periods’ financial
        statements, unless it is impracticable to determine either the period-specific
        effects or the cumulative effect of the change. SFAS No. 154 is effective
        for
        accounting changes made in years beginning after December 15, 2005; however,
        SFAS No. 154 does not change the transition provisions of any existing
        accounting pronouncements. The Company does not expect that the adoption
        of SFAS
        No. 154 will have a material effect on its financial statements or results
        of
        operations.




In
        February 2006, The FASB issued SFAS No. 155, “Accounting for Certain Hybrid
        Financial Instruments, and amendment of FASB statements No. 133 and 140” (“SFAS
        No. 155”). This statement permits fair value measurement for any hybrid
        financial instrument that contains an embedded derivative that otherwise would
        require bifurcation. This statement is effective for all financial instruments
        acquired or issued after the beginning of an entity’s first full fiscal year
        that begins after September 15, 2006. Earlier adoption is permitted as of
        the
        beginning of an entity’s fiscal year. The Company does not expect that the
        adoption of SFAS No. 155 will have a material effect on the Company’s financial
        statements or its results of operations.




30


**ITEM
      7. FINANCIAL STATEMENTS.**


**INDEX
          TO FINANCIAL STATEMENTS**


**Page**Report
                  of Independent Registered Public Accounting Firms
              
              F-1FINANCIAL
                  STATEMENTS:Consolidated
                  Balance Sheets as of December 31, 2005 and 2004
              
              F-3Consolidated
                Statements of Operations for the Years EndedDecember 31, 2005 and 2004 and for the Period from November 3,
                  1996(inception)
                  through December 31, 2005
              
              F-5Consolidated
                  Statements of Shareholders' Equity (Deficit) forthe
                  Period from November 3, 1996 (inception) throughDecember
                  31, 2005
              
              F-6Consolidated
                  Statements of Cash Flows for the Years EndedDecember
                  31, 2005 and 2004 and for the Period fromNovember
                  3, 1996 (inception) through December 31, 2005
              
              F-12Notes
                  to Consolidated Financial Statements
              
              F-15









**REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 To
        the
        Board of Directors and Stockholders of
 IMCOR
        Pharmaceuticals Co.
 La
        Jolla,
        California
 
 We
        have
        audited the accompanying consolidated balance sheet of IMCOR Pharmaceuticals
        Co.
        and Subsidiaries (formerly Photogen Technologies, Inc.), a development stage
        company, as of December 31, 2005, and the related consolidated statements
        of
        operations, shareholders’ equity (deficit), and cash flows for the year then
        ended, and for the period from November 3, 1996 (inception) through December
        31,
        2005. 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 audit. The Company’s financial statements for the period
        from November 3, 1996 (inception) through December 31, 2004 were audited
        by
        other auditors whose report, dated March 19, 2005 expressed an unqualified
        opinion on those statements and included an explanatory paragraph regarding
        the
        Company’s ability to continue as a going concern. The statements for the period
        from November 3, 1996 (inception) to December 31, 2004 reflect a deficit
        accumulated during the development stage of $73,191,333. The other auditors’
report has been furnished to us, and our opinion, insofar as it relates to
        the
        amounts included for such prior periods, is based solely on the report of
        such
        other auditors.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. The Company is not required
        to
        have, nor were we engaged to perform, an audit of its internal control over
        financial reporting. Our audit included consideration of internal control
        over
        financial reporting as a basis for designing audit procedures that are
        appropriate in the circumstances, but not for the purpose of expressing an
        opinion on the effectiveness of the Company’s internal control over financial
        reporting. Accordingly, we express no such opinion. An audit 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 audit provides
        a
        reasonable basis for our opinion.
 
 In
        our
        opinion, based on our audit and the report of other auditors, such financial
        statements present fairly, in all material respects, the financial position
        of
        IMCOR Pharmaceuticals Co. as of December 31, 2005, and the results of its
        activities and cash flows for the year ended December 31, 2005 and for the
        period from November 3, 1996 (inception) through December 31, 2005, in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 2 to the financial
        statements, the Company’s recurring losses from operations and requirement for
        additional funding raise substantial doubt about its ability to continue
        as a
        going concern. Management’s plans concerning these matters are described in
        Notes 2 and 13. The financial statements do not include any adjustments that
        might result from the outcome of this uncertainty.
 
 /s/
        Peterson & Co., LLP
  PETERSON
        & CO., LLP
 San
        Diego, California
 April
        14,
        2006
  F-1
  
 **Report
        of Independent Registered Public Accounting Firm**
 
 
 Board
        of
        Directors
 IMCOR
        Pharmaceutical Co. (formerly Photogen Technologies, Inc.)
 
 We
        have
        audited the accompanying consolidated balance sheets of IMCOR Pharmaceutical
        Co.
        and Subsidiaries (formerly Photogen Technologies, Inc.), a development stage
        company, as of December 31, 2004, and the related consolidated statements
        of
        operations, shareholders' equity (deficit) and cash flows for the year then
        ended. 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 audit 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 consideration
        of
        internal control over financial reporting as a basis for designing audit
        procedures that are appropriate in the circumstances, but not for the purpose
        of
        expressing an opinion on the effectiveness of the Company's internal control
        over financial reporting. Accordingly, we express no such opinion. An audit
        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
        audit provides a reasonable basis for our opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the financial position of IMCOR Pharmaceutical
        Co. and
        Subsidiaries (formerly Photogen Technologies, Inc.) at December 31, 2004,
        and
        the results of its operations and its cash flows for the year then ended,
        in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 1 to the financial
        statements, the Company has reported accumulated losses since inception which
        raises substantial doubt about its ability to continue as a going concern.
        Management's plans in regard to these matters are described in Note 1. The
        financial statements do not include any adjustments that might result from
        the
        outcome of this uncertainty.
  /s/
        Moss
        Adams LLP
  Moss
        Adams LLP
 San
        Diego, California
 March
        19,
        2005




F-2
 
 IMCOR
          PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
          Photogen Technologies, Inc.)
 (A
          Development Stage Company)
 CONSOLIDATED
          BALANCE SHEETS
 
 December
                    31,
                  2004
                
                December
                    31,
                  2005ASSETSCurrent
                    Assets:Cash
                    and cash equivalents
                
                $
                4,721,456
                
                $
                717,024Accounts
                    receivable
                
                
                33,916
                
                
                --Prepaid
                      expenses
                
                
                442,802
                
                
                144,5355,198,174
                
                
                861,559Property,
                    plant and equipment, net
                
                
                4,427,043
                
                
                --Other
                    assets:Purchased
                    technology, net
                
                
                13,676,750
                
                
                1,000,000Technology
                    license, net
                
                
                696,408
                
                
                --Deferred
                    royalties, net
                
                
                458,333
                
                
                --Deposits
                
                
                324,750
                
                
                --15,156,241
                
                
                1,000,000$
                24,781,458
                
                $
                1,861,559
 
 
   F-3
  
 IMCOR
          PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
          Photogen Technologies, Inc.)
 (A
          Development Stage Company)
 CONSOLIDATED
          BALANCE SHEETS (Continued)
 
 December
                    31,
                  2004
                
                December
                    31,
                  2005LIABILITIES
                    AND SHAREHOLDERS' EQUITY (DEFICIT)Current
                    Liabilities:Notes
                    payable - unsecured
                
                $
                192,233
                
                $
                192,233Current
                    portion of deferred license revenue
                
                
                696,307
                
                
                --Accounts
                    payable
                
                
                1,916,551
                
                
                1,841,667Accrued
                    expenses and assumed acquisition obligations
                
                
                2,191,301
                
                
                1,888,161Accrued
                    royalty fees
                
                
                400,000
                
                
                401,946Accrued
                    equipment lease obligation
                
                
                492,984
                
                
                492,984Total
                    current liabilities
                
                
                5,889,376
                
                
                4,816,991Deferred
                    license revenue
                
                
                6,948,753
                
                
                --Commitments
                    and contingencies (Notes 3, 8, and 13)SHAREHOLDERS'
                    EQUITY (DEFICIT):Preferred
                    stock, $.01 par value; 5,000,000 shares authorizedSeries
                    A preferred stock: 4,500 sharesauthorized,
                    issued and outstanding as of December 31, 2004and
                    2005, respectively; $1,000 liquidation preference per
                    share($4,500,000
                    in aggregate as of December 31, 2004and
                    2005, respectively)
                
                
                45
                
                
                45Common
                    stock, $.001 par value; 200,000,000 shares authorized;4,000,916
                    and 6,962,455 shares issued and outstandingas
                    of December 31, 2004 and 2005, respectively
                
                
                4,001
                
                
                6,962Additional
                    paid-in capital
                
                
                84,020,364
                
                
                87,926,777Common
                    stock to be issued
                
                
                1,120,752
                
                
                --Unearned
                    compensation
                
                
                (10,500
                )
                
                --Deficit
                    accumulated during the development stage
                
                
                (73,191,333
                )
                
                (90,889,216
                )11,943,329
                
                
                (2,955,432
                )$
                24,781,458
                
                $
                1,861,559
  See
          notes
          to consolidated financial statements.
 F-4
  IMCOR
          PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
          Photogen Technologies, Inc.)
 (A
          Development Stage Company)
 CONSOLIDATED
          STATEMENTS OF OPERATIONS
 
 Year
                    Ended
                  December
                    31,
                  2004
                
                Year
                    Ended
                  December
                    31,
                  2005
                
                Period
                    from
                  Inception
                  (November
                    3,
                  1996)
                    to
                  December
                    31,
                  2005License
                    revenue
                
                $
                354,940
                
                $
                725,575
                
                $
                1,080,515Operating
                    expenses:Research and development
                
                
                3,794,063
                
                
                1,449,149
                
                
                12,129,528Sales,
                    general and administrative
                
                
                15,389,363
                
                
                9,297,898
                
                
                55,576,550Restructuring
                    charges
                
                
                --
                
                
                --
                
                
                1,541,455Provision
                    for future lease payments
                
                
                --
                
                
                --
                
                
                1,264,208Loss
                    on disposal of property, plant and equipment
                
                
                --
                
                
                226,305
                
                
                226,305Impairment
                    losses, net
                
                
                274,479
                
                
                7,506,566
                
                
                7,781,045Total
                    operating expenses
                
                
                19,457,905
                
                
                18,479,918
                
                
                78,519,091Operating
                    loss
                
                
                (19,102,965
                )
                
                (17,754,343
                )
                
                (77,438,576
                )Loss
                    from joint venture
                
                
                (2,213,646
                )
                
                --
                
                
                (14,518,000
                )Investment
                    and other income
                
                
                235,664
                
                
                42,875
                
                
                1,494,874Gain
                    on extinguishment of debt
                
                
                --
                
                
                104,442
                
                
                104,442Interest
                    expense
                
                
                (591,688
                )
                
                (90,857
                )
                
                (1,632,607
                )Loss
                    from continuing operations
                
                
                (21,672,635
                )
                
                (17,697,883
                )
                
                (91,989,867
                )Discontinued
                    operations:Operating
                    loss from therapeutic business
                
                
                --
                
                
                --
                
                
                (10,679,101
                )Gain
                    from split-off of therapeutic business
                
                
                --
                
                
                --
                
                
                11,779,752--
                
                
                --
                
                
                1,100,651Net
                    loss
                
                
                (21,672,635
                )
                
                (17,697,883
                )
                $
                (90,889,216
                )Dividends
                    on preferred stock
                
                
                (498,060
                )
                
                --Net
                    loss attributable to common shareholders
                
                $
                (22,170,695
                )
                $
                (17,697,883
                )Basic
                    and Diluted loss per common share fromcontinuing
                    operations
                
                $
                (8.20
                )
                $
                (2.95
                )Basic
                    and Diluted Loss per common sharefrom
                    discontinued operations
                
                $
                --
                
                $
                --Basic
                    and diluted net loss per common share
                
                $
                (8.20
                )
                $
                (2.95
                )Weighted
                    average number of common sharesoutstanding-
                    basic and diluted
                
                
                2,704,703
                
                
                6,003,141
 
 See
          notes
          to consolidated financial statements.
  F-5
 IMCOR
            PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
            Photogen Technologies, Inc.)
 (A
            Development Stage Company)
 CONSOLIDATED
            STATEMENTS OF SHAREHOLDER EQUITY (DEFICIT)
 
 Common
                  
                  
                  
                  
                  
                  DeficitPreferred
                      Stock
                  
                  
                  
                  
                  
                  
                  
                  Stock
                  
                  Unearned
                  
                  Additional
                  
                  AccumulatedSeries
                      A
                  
                  Series
                      B
                  
                  Common
                      Stock
                  
                  Members'
                  
                  To
                      Be
                  
                  Compen-
                  
                  Paid-in
                  
                  DevelopmentShares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Capital
                  
                  Issued
                  
                  sation
                  
                  Capital
                  
                  Stage
                  
                  TotalContribution
                      of capital
                  
                  
                  --
                  
                  $
                  --
                  
                  
                  --
                  
                  $
                  --
                  
                  
                  --
                  
                  $
                  --
                  
                  $
                  7,268
                  
                  $
                  --
                  
                  $
                  --
                  
                  $
                  --
                  
                  $
                  --
                  
                  $
                  7,268Net
                      loss for the period ended December 31, 1996
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (1,779
                  )
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (1,779
                  )**Balance,
                      at December 31, 1996**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **5,489**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **5,489**Contribution
                      of capital
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --Net
                      loss for the period January 1, 1997 to May 15, 1997
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  3,511
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (3,511
                  )
                  
                  --**Balance,
                      at May 15, 1997**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **9,000**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **(3,511**
                  **)**
                  
                  **5,489**--Issuance
                      of common stock
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  78,910
                  
                  
                  79
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  1,803,371
                  
                  
                  --
                  
                  
                  1,803,450Effect
                      of recapitalization and merger
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  371,090
                  
                  
                  371
                  
                  
                  (9,000
                  )
                  
                  --
                  
                  
                  --
                  
                  
                  1,210,816
                  
                  
                  1,732
                  
                  
                  1,203,919Cost
                      associated with recapitalization and merger
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (371,111
                  )
                  
                  --
                  
                  
                  (371,111
                  )Net
                      loss for the period May 16, 1997 to December 31, 1997
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (554,702
                  )
                  
                  (554,702
                  )**Balance,
                      at December 31, 1997**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **450,000**
                  
                  
                  **450**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **2,643,076**
                  
                  
                  **(556,481**
                  **)**
                  
                  **2,087,045**Issuance
                      of common stock
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  10,938
                  
                  
                  11
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  6,999,989
                  
                  
                  --
                  
                  
                  7,000,000Costs
                      associated with common stock issuance
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (50,000
                  )
                  
                  --
                  
                  
                  (50,000
                  )Options
                      issued to consultants
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  45,446
                  
                  
                  --
                  
                  
                  45,446Net
                      loss for the year ended December 31,  1998
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (1,973,913
                  )
                  
                  (1,973,913
                  )**Balance,
                      at December 31, 1998**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **460,938**
                  
                  
                  **461**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **9,638,511**
                  
                  
                  **(2,530,394**
                  **)**
                  
                  **7,108,578**
 
  F-6
  IMCOR
            PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
            Photogen Technologies, Inc.)
 (A
            Development Stage Company)
 CONSOLIDATED
            STATEMENTS OF SHAREHOLDER EQUITY (DEFICIT) (Continued)
 
 Common
                  
                  
                  
                  
                  
                  DeficitPreferred
                      Stock
                  
                  
                  
                  
                  
                  
                  
                  Stock
                  
                  Unearned
                  
                  Additional
                  
                  AccumulatedSeries
                      A
                  
                  Series
                      B
                  
                  Common
                      Stock
                  
                  Members'
                  
                  To
                      Be
                  
                  Compen-
                  
                  Paid-in
                  
                  DevelopmentShares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Capital
                  
                  Issued
                  
                  sation
                  
                  Capital
                  
                  Stage
                  
                  TotalExercise
                      of stock options
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  56
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  50,063
                  
                  
                  --
                  
                  
                  50,063Issuance
                      of warrants and options
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  3,664,749
                  
                  
                  --
                  
                  
                  3,664,749Issuance
                      of common stock
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  6,298
                  
                  
                  6
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  6,082,648
                  
                  
                  --
                  
                  
                  6,082,654Issuance
                      of preferred stock
                  
                  
                  12,015
                  
                  
                  120
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  11,578,839
                  
                  
                  --
                  
                  
                  11,578,959Reclassification
                      of Series A shares as mezzanine equity in accordance with EITF
                      D-98
                  
                  
                  (12,015
                  )
                  
                  (120
                  )
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (11,578,839
                  )
                  
                  --
                  
                  
                  (11,578,959
                  )Net
                      loss for the year ended December 31,  1999
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (6,052,841
                  )
                  
                  (6,052,841
                  )**Balance,
                      at December 31, 1999**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **467,292**
                  
                  
                  **467**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **19,435,971**
                  
                  
                  **(8,583,235**
                  **)**
                  
                  **10,853,203**Stock
                      option compensation
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  125,020
                  
                  
                  --
                  
                  
                  125,020Issuance
                      of warrants and options
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  1,366,050
                  
                  
                  --
                  
                  
                  1,366,050Issuance
                      of preferred stock dividend
                  
                  
                  841
                  
                  
                  8
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (8
                  )
                  
                  --
                  
                  
                  --Issuance
                      of preferred stock
                  
                  
                  --
                  
                  
                  --
                  
                  
                  337,056
                  
                  
                  3,370
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  5,272,970
                  
                  
                  --
                  
                  
                  5,276,340Beneficial
                      accretion of Series A shares reclassified as mezzanine
                      equity
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (240,464
                  )
                  
                  --
                  
                  
                  (240,464
                  )Net
                      loss for the year ended December 31,  2000
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (10,787,062
                  )
                  
                  (10,787,062
                  )**Balance,
                      at December 31, 2000**
                  
                  
                  **841**
                  
                  
                  **8**
                  
                  
                  **337,056**
                  
                  
                  **3,370**
                  
                  
                  **467,292**
                  
                  
                  **467**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **25,959,539**
                  
                  
                  **(19,370,297**
                  **)**
                  
                  **6,593,087**Stock
                      option compensation
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  64,729
                  
                  
                  --
                  
                  
                  64,729Issuance
                      of common stock for cash
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  2,462
                  
                  
                  2
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  418,721
                  
                  
                  --
                  
                  
                  418,723
 
  F-7
  IMCOR
            PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
            Photogen Technologies, Inc.)
 (A
            Development Stage Company)
 CONSOLIDATED
            STATEMENTS OF SHAREHOLDER EQUITY (DEFICIT) (Continued)
 
 Common
                  
                  
                  
                  
                  
                  DeficitPreferred
                      Stock
                  
                  
                  
                  
                  
                  
                  
                  Stock
                  
                  Unearned
                  
                  Additional
                  
                  AccumulatedSeries
                      A
                  
                  Series
                      B
                  
                  Common
                      Stock
                  
                  Members'
                  
                  To
                      Be
                  
                  Compen-
                  
                  Paid-in
                  
                  DevelopmentShares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Capital
                  
                  Issued
                  
                  sation
                  
                  Capital
                  
                  Stage
                  
                  TotalIssuance
                      of common stock in satisfaction of anti-dilution provision
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  9,543
                  
                  
                  10
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (10
                  )
                  
                  --
                  
                  
                  --Issuance
                      of preferred stock dividend
                  
                  
                  --
                  
                  
                  --
                  
                  
                  20,224
                  
                  
                  202
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (202
                  )
                  
                  --
                  
                  
                  --Beneficial
                      accretion of Series A shares reclassified as mezzanine
                      equity
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (195,577
                  )
                  
                  --
                  
                  
                  (195,577
                  )Net
                      loss for the year ended December 31,  2001
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (9,723,016
                  )
                  
                  (9,723,016
                  )**Balance,
                      at December 31, 2001**
                  
                  
                  **841**
                  
                  
                  **8**
                  
                  
                  **357,280**
                  
                  
                  **3,572**
                  
                  
                  **479,297**
                  
                  
                  **479**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **26,247,200**
                  
                  
                  **(29,093,313**
                  **)**
                  
                  **(2,842,054**
                  **)**Stock
                      option compensation
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  73,870
                  
                  
                  --
                  
                  
                  73,870Issuance
                      of warrants for service
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  322,000
                  
                  
                  --
                  
                  
                  322,000Issuance
                      of options in settlement of lawsuit
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  806,415
                  
                  
                  --
                  
                  
                  806,415Employee
                      compensation from stock options
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  988,184
                  
                  
                  --
                  
                  
                  988,184Issuance
                      of preferred stock dividends
                  
                  
                  --
                  
                  
                  --
                  
                  
                  40,194
                  
                  
                  402
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (402
                  )
                  
                  --
                  
                  
                  --Conversion
                      of Series B to common stock
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (397,474
                  )
                  
                  (3,974
                  )
                  
                  21,116
                  
                  
                  21
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  3,953
                  
                  
                  --
                  
                  
                  --Beneficial
                      inducement costs for convertible debt converted
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  206,348
                  
                  
                  --
                  
                  
                  206,348Conversion
                      of line of credit with Élan to common stock
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  6,422
                  
                  
                  6
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  3,082,481
                  
                  
                  --
                  
                  
                  3,082,487Conversion
                      of line of credit with entity controlled by director of company
                      to common
                      stock
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  115,741
                  
                  
                  116
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  2,499,884
                  
                  
                  --
                  
                  
                  2,500,000Retirement
                      of common stock returned in shareholder transaction
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (256,855
                  )
                  
                  (257
                  )
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (12,226,062
                  )
                  
                  --
                  
                  
                  (12,226,319
                  )
 
  F-8
  IMCOR
            PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
            Photogen Technologies, Inc.)
 (A
            Development Stage Company)
 CONSOLIDATED
            STATEMENTS OF SHAREHOLDER EQUITY (DEFICIT) (Continued)
 
 Common
                  
                  
                  
                  
                  
                  DeficitPreferred
                      Stock
                  
                  
                  
                  
                  
                  
                  
                  Stock
                  
                  Unearned
                  
                  Additional
                  
                  AccumulatedSeries
                      A
                  
                  Series
                      B
                  
                  Common
                      Stock
                  
                  Members'
                  
                  To
                      Be
                  
                  Compen-
                  
                  Paid-in
                  
                  DevelopmentShares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Capital
                  
                  Issued
                  
                  sation
                  
                  Capital
                  
                  Stage
                  
                  TotalIssuance
                      of common stock for cash
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  441,153
                  
                  
                  441
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  9,141,460
                  
                  
                  --
                  
                  
                  9,141,901Netlossfor
                      the year ended December  31, 2002
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  348,119
                  
                  
                  348,119**Balance,
                      at December  31, 2002**
                  
                  
                  **841**
                  
                  
                  **8**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **806,874**
                  
                  
                  **806**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **31,145,331**
                  
                  
                  **(28,745,194**
                  **)**
                  
                  **2,400,951**Issuance
                      of common stock for cash
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  1,389
                  
                  
                  1
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  29,999
                  
                  
                  --
                  
                  
                  30,000Issuance
                      of common stock for standstill agreement
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  37,500
                  
                  
                  38
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  1,173,712
                  
                  
                  --
                  
                  
                  1,173,750Conversion
                      of Series B to common stock
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  5
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --Options
                      issued to consultants for services
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  9,200
                  
                  
                  --
                  
                  
                  9,200Shares
                      issued to consultant for services
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  3,438
                  
                  
                  4
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  132,258
                  
                  
                  --
                  
                  
                  132,262Employee
                      compensation from stock options
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  1,236,566
                  
                  
                  --
                  
                  
                  1,236,566Shares
                      issued in Technology Purchase
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  109,907
                  
                  
                  110
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  5,583,158
                  
                  
                  --
                  
                  
                  5,583,268Shares
                      to be issued in Technology Purchase
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  5,043,226
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  5,043,226Shares
                      previously subject to rescission
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  6,231
                  
                  
                  6
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  649,994
                  
                  
                  --
                  
                  
                  650,000Shares
                      issued to Xmark for penalties
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  4,941
                  
                  
                  5
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  163,671
                  
                  
                  --
                  
                  
                  163,676Shares
                      issued to Xmark for interest
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  1,082
                  
                  
                  1
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  48,596
                  
                  
                  --
                  
                  
                  48,597Shares
                      to be issued to Xmark  and other former Alliance creditors for
                      interest and penalties
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  76,933
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  76,933Options
                      exercised through cashless exercise
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  1,861
                  
                  
                  2
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (2
                  )
                  
                  --
                  
                  
                  --Xmark
                      puttable shares classified as mezzanine equity
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (1,969,668
                  )
                  
                  --
                  
                  
                  (1,969,668
                  )
 
  F-9
  IMCOR
            PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
            Photogen Technologies, Inc.)
 (A
            Development Stage Company)
 CONSOLIDATED
            STATEMENTS OF SHAREHOLDER EQUITY (DEFICIT) (Continued)
 
 Common
                  
                  
                  
                  
                  
                  DeficitPreferred
                      Stock
                  
                  
                  
                  
                  
                  
                  
                  Stock
                  
                  Unearned
                  
                  Additional
                  
                  AccumulatedSeries
                      A
                  
                  Series
                      B
                  
                  Common
                      Stock
                  
                  Members'
                  
                  To
                      Be
                  
                  Compen-
                  
                  Paid-in
                  
                  DevelopmentShares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Capital
                  
                  Issued
                  
                  sation
                  
                  Capital
                  
                  Stage
                  
                  TotalNet
                      loss for the year ended December  31, 2003
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (22,773,504
                  )
                  
                  (22,773,504
                  )**Balance,
                      at December  31, 2003**
                  
                  
                  **841**
                  
                  
                  **8**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **973,228**
                  
                  
                  **973**
                  
                  
                  **--**
                  
                  
                  **5,120,159**
                  
                  
                  **--**
                  
                  
                  **38,202,815**
                  
                  
                  **(51,518,698**
                  **)**
                  
                  **(8,194,743**
                  **)**Shares
                      issued to consultant for services
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  11,562
                  
                  
                  12
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (10,500
                  )
                  
                  43,675
                  
                  
                  --
                  
                  
                  33,187Shares
                      to be issued for legal fees
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  247,865
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  247,865Employee
                      compensation from stock options
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  959,283
                  
                  
                  --
                  
                  
                  959,283Shares
                      issued in*Imagent*Business purchase
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  99,276
                  
                  
                  99
                  
                  
                  --
                  
                  
                  (5,043,226
                  )
                  
                  --
                  
                  
                  5,043,127
                  
                  
                  --
                  
                  
                  --Shares
                      issued for penalties
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  8,935
                  
                  
                  9
                  
                  
                  --
                  
                  
                  (107,513
                  )
                  
                  --
                  
                  
                  244,460
                  
                  
                  --
                  
                  
                  136,956Shares
                      to be issued to Xmark and secured creditors for interest and
                      penalties
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  252,357
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  252,357Shares
                      issued as payment for promissory notes
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  1,679,173
                  
                  
                  1,679
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  13,431,705
                  
                  
                  --
                  
                  
                  13,433,384Shares
                      issued for cash, net
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  1,268,750
                  
                  
                  1,269
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  9,323,731
                  
                  
                  --
                  
                  
                  9,325,000Shares
                      to be issued to investors for late registration
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  832,300
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  832,300Issuance
                      of stock in settlement of lease
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  30,829
                  
                  
                  31
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  586
                  
                  
                  --
                  
                  
                  617Xmark
                      puttable shares issued from mezzanine equity
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  1,969,668
                  
                  
                  --
                  
                  
                  1,969,668Conversion
                      of Series A to common stock
                  
                  
                  (841
                  )
                  
                  (8
                  )
                  
                  --
                  
                  
                  --
                  
                  
                  9,763
                  
                  
                  10
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  12,161,445
                  
                  
                  --
                  
                  
                  12,161,447Retirement
                      of puttable shares
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (80,600
                  )
                  
                  (81
                  )
                  
                  --
                  
                  
                  (203,190
                  )
                  
                  --
                  
                  
                  (1,575,176
                  )
                  
                  --
                  
                  
                  (1,778,447
                  )Adjust
                      shares for prior rounding
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --Shares
                      to be issued to consultants for services
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  22,000
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  22,000Shares
                      issued for cash, net
                  
                  
                  4,500
                  
                  
                  45
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  4,139,955
                  
                  
                  --
                  
                  
                  4,140,000
 
  F-10
  IMCOR
            PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
            Photogen Technologies, Inc.)
 (A
            Development Stage Company)
 CONSOLIDATED
            STATEMENTS OF SHAREHOLDER EQUITY (DEFICIT) (Continued)
 
 Common
                  
                  
                  
                  
                  
                  DeficitPreferred
                      Stock
                  
                  
                  
                  
                  
                  
                  
                  Stock
                  
                  Unearned
                  
                  Additional
                  
                  AccumulatedSeries
                      A
                  
                  Series
                      B
                  
                  Common
                      Stock
                  
                  Members'
                  
                  To
                      Be
                  
                  Compen-
                  
                  Paid-in
                  
                  DevelopmentShares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Shares
                  
                  Amount
                  
                  Capital
                  
                  Issued
                  
                  sation
                  
                  Capital
                  
                  Stage
                  
                  TotalProceeds
                      from contribution by shareholder
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  46,690
                  
                  
                  --
                  
                  
                  46,690Warrants
                      issued for services rendered
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  28,400
                  
                  
                  --
                  
                  
                  28,400Net
                      loss for the year ended December  31, 2004
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (21,672,635
                  )
                  
                  (21,672,635
                  )**Balance
                      December 31, 2004**
                  
                  
                  **4,500**
                  
                  
                  **45**
                  
                  
                  **--**
                  
                  
                  **--**
                  
                  
                  **4,000,916**
                  
                  
                  **4,001**
                  
                  
                  **--**
                  
                  **$**
                  **1,120,752**
                  
                  **$**
                  **(10,500**
                  **)**
                  
                  **84,020,364**
                  
                  
                  **(73,191,333**
                  **)**
                  
                  **11,943,329**Shares
                      issued for services
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  105,610
                  
                  
                  105
                  
                  
                  --
                  
                  
                  (269,865
                  )
                  
                  10,500
                  
                  
                  269,760
                  
                  
                  --
                  
                  
                  10,500Employee
                      compensation from stock options
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  
                  
                  
                  --
                  
                  
                  1,077,780
                  
                  
                  --
                  
                  
                  1,077,780Shares
                      issued for penalties
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  2,855,743
                  
                  
                  2,856
                  
                  
                  --
                  
                  
                  (850,887
                  )
                  
                  --
                  
                  
                  2,516,623
                  
                  
                  --
                  
                  
                  1,668,592Options
                      issued in settlement of claim
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  42,250
                  
                  
                  --
                  
                  
                  42,250Shares
                      issued per round-up requirement related to reverse stock split
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  186
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --Net
                      loss for the year ended December  31, 2005
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  --
                  
                  
                  (17,697,883
                  )
                  
                  (17,697,883
                  )**Balance
                      December 31, 2005**
                  
                  
                  **4,500**
                  
                  **$**
                  **45**
                  
                  
                  **--**
                  
                  **$**
                  **--**
                  
                  
                  **6,962,455**
                  
                  **$**
                  **6,962**
                  
                  **$**
                  **--**
                  
                  **$**
                  **--**
                  
                  **$**
                  **--**
                  
                  **$**
                  **87,926,777**
                  
                  **$**
                  **(90,889,216**
                  **)**
                  **$**
                  **(2,955,432**
                  **)**
   
 F-11
 IMCOR
        PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
        Photogen Technologies, Inc.)
 (A
        Development Stage Company)
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 
 Year
                  Ended
                December
                  31,
                2004
              
              Year
                  Ended
                December
                  31,
                2005
              
              Period
                  from
                Inception
                (November
                  3,
                1996)
                  to
                December
                  31,
                2005CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income (loss)
              
              $
              (21,672,635
              )
              $
              (17,697,883
              )
              $
              (90,889,216
              )Loss
                  from discontinued operations
              
              
              --
              
              
              --
              
              
              (1,100,651
              )Adjustments
                  to reconcile net income (loss) to cashby operating activities:Depreciation and amortization
              
              
              3,126,628
              
              
              1,920,667
              
              
              8,406,351Loss (gain) on disposal of property, plant and equipment
              
              
              (2,200
              )
              
              226,305
              
              
              262,529Gain on sale of marketable securities
              
              
              --
              
              
              --
              
              
              (18,503
              )United States Treasury Notes amortization
              
              
              --
              
              
              --
              
              
              12,586Stock option compensation
              
              
              959,283
              
              
              1,077,780
              
              
              4,961,399Gain from equipment lease settlement
              
              
              (126,257
              )
              
              --
              
              
              (126,257
              )License revenue deferred
              
              
              6,000,000
              
              
              1,000,000
              
              
              9,000,000Recognition of deferred license revenue
              
              
              (354,940
              )
              
              (725,575
              )
              
              (1,080,515
              )Amortization
                  of deferred royalties expense
              
              
              41,667
              
              
              41,667
              
              
              83,334Valuation impairment allowances
              
              
              274,479
              
              
              7,506,566
              
              
              7,781,045Beneficial inducement costs for convertible notes
              
              
              --
              
              
              --
              
              
              206,348Issuance of warrants for services rendered
              
              
              28,400
              
              
              --
              
              
              4,345,491Issuance of stock options in settlement of lawsuit
              
              
              --
              
              
              --
              
              
              806,415Issuance of stock for standstill agreement
              
              
              --
              
              
              --
              
              
              1,173,750Issuance of stock for services rendered
              
              
              303,052
              
              
              10,500
              
              
              445,814Issuance of stock for interest payments and penalties
              
              
              1,221,612
              
              
              1,668,592
              
              
              3,179,410Equity in loss of affiliate
              
              
              2,213,646
              
              
              --
              
              
              14,518,000Changes in operating assets and liabilities:Accounts receivable
              
              
              (33,916
              )
              
              33,916
              
              
              --Prepaid expenses
              
              
              49,916
              
              
              298,267
              
              
              (144,535
              )Deferred royalties expense
              
              
              (500,000
              )
              
              --
              
              
              (500,000
              )Accounts payable
              
              
              105,398
              
              
              (74,884
              )
              
              1,985,306Accrued expenses and assumed acquisition obligations
              
              
              (450,492
              )
              
              (58,944
              )
              
              (413,957
              )Accrued equipment lease obligation
              
              
              --
              
              
              --
              
              
              1,050,589Other
              
              
              10,000
              
              
              --
              
              
              10,000Net cash used in continuing operating activities
              
              
              (8,806,359
              )
              
              (4,773,026
              )
              
              (36,045,267
              )Net cash used in discontinued operations
              
              
              --
              
              
              --
              
              
              (10,679,101
              )
 
 
 F-12
  IMCOR
        PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
        Photogen Technologies, Inc.)
 (A
        Development Stage Company)
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS (Continued)
 
 Year
                  Ended
                December
                  31,
                2004
              
              Year
                  Ended
                December
                  31,
                2005
              
              Period
                  from
                Inception
                (November
                  3,
                1996)
                  to
                December
                  31,
                2005CASH
                  FLOWS FROM INVESTING ACTIVITIES:Sale
                  of marketable securities
              
              
              --
              
              
              --
              
              
              2,164,464Purchases
                  of marketable securities
              
              
              --
              
              
              --
              
              
              (2,182,967
              )Purchases
                  of United States Treasury Notes
              
              
              --
              
              
              --
              
              
              (38,656,973
              )Sale
                  of United States Treasury Notes
              
              
              --
              
              
              --
              
              
              39,778,548Purchase
                  of property, plant and equipment
              
              
              (114,757
              )
              
              (3,040
              )
              
              (754,674
              )Proceeds
                  from disposal of property, plant and equipment
              
              
              2,200
              
              
              344,384
              
              
              492,135Proceeds
                  from disposal of technology license
              
              
              --
              
              
              102,500
              
              
              102,500Patent
                  acquisition costs
              
              
              --
              
              
              --
              
              
              (237,335
              )Investment
                  in and advances to affiliate
              
              
              --
              
              
              --
              
              
              (15,107,468
              )Increase
                  in note receivable
              
              
              --
              
              
              --
              
              
              (1,255,000
              )Decrease
                  (increase) in deposits
              
              
              13,633
              
              
              324,750
              
              
              (439,370
              )Purchase
                  of Imagent business
              
              
              --
              
              
              --
              
              
              (5,074,761
              )Net
                  cash provided by (used in) investing activities
              
              
              (98,924
              )
              
              768,594
              
              
              (21,170,901
              )Net
                  cash used in investing activities of discontinued
                  operations
              
              
              --
              
              
              --
              
              
              (1,306,676
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESPrincipal
                  payments on capital leases
              
              
              --
              
              
              --
              
              
              (291,704
              )Net
                  proceeds from issuance of equity and mezzanine equity
              
              
              13,465,000
              
              
              --
              
              
              54,004,340Capital
                  contributions from shareholders
              
              
              46,690
              
              
              --
              
              
              1,958,364Principal
                  payments on acquisition debt
              
              
              (1,250,000
              )
              
              --
              
              
              (2,500,000
              )Principal
                  payments on other debt
              
              
              (3,350,641
              )
              
              --
              
              
              (3,350,641
              )Proceeds
                  from issuance of debt
              
              
              3,133,096
              
              
              --
              
              
              20,544,721Payments
                  on lease settlement obligation
              
              
              (75,000
              )
              
              --
              
              
              (75,000
              )Cost
                  of recapitalization
              
              
              --
              
              
              --
              
              
              (371,111
              )Net
                  cash provided by financing activities
              
              
              11,969,145
              
              
              --
              
              
              69,918,969NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              3,063,862
              
              
              (4,004,432
              )
              
              717,024CASH
                  AND CASH EQUIVALENTS, BEGINNING OF YEAR
              
              
              1,657,594
              
              
              4,721,456
              
              
              --CASH
                  AND CASH EQUIVALENTS, END OF YEAR
              
              $
              4,721,456
              
              $
              717,024
              
              $
              717,024SUPPLEMENTAL
                  SCHEDULE OF CASH FLOWSINFORMATIONInterest
                  paid
              
              $
              85,320
              
              $
              --
              
              $
              481,769
 
 F-13
 
 IMCOR
        PHARMACEUTICAL CO. AND SUBSIDIARIES
 (formerly
        Photogen Technologies, Inc.)
 (A
        Development Stage Company)
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS (Continued)
 
 **NON-CASH
        INVESTING AND FINANCING ACTIVITIES:**
 
 **YEAR
        ENDED DECEMBER 31, 2005:**
 
 In
        February 2005, the Company issued modified options in further settlement
        of
        claims by a former employee. The modification of the options resulted in
        a
        $42,250 decrease of accrued expenses with a corresponding increase in additional
        paid-in capital.
 
 In
        September 2005, the Company entered into two simultaneous agreements with
        GE
        Healthcare Ltd. and Alliance Pharmaceutical Corp., for among other things,
        a
        technology cross-license valued at $1,200,000 in favor of the Company, for
        which
        the Company received $1,000,000. By agreement, the balance, or $200,000,
        was
        paid directly by GE Healthcare Ltd. to Alliance Pharmaceutical Corp., resulting
        in a non-cash increase in license revenue deferred and a decrease in assumed
        acquisition liabilities.
 
 **YEAR
        ENDED DECEMBER 31, 2004:**
 
 As
        part
        of the settlement of a lease obligation, the Company paid $75,000, issued
        30,829
        shares of common stock and utilized a $98,721 lease deposit to offset the
        estimate of the liability recorded at December 31, 2003. The Company recorded
        a
        $126,257 credit to expenses in 2004 which represented the amount by which
        the
        estimated liability at December 31, 2003 exceeded the value of the settlement
        reached in 2004. As a result the following items in the balance sheet were
        reduced: Deposits: $98,721; Accounts payable: $73,639; Accrued lease obligation
        - current: $93,068; and Accrued lease obligation - long-term:
        $133,888.
 
 The
        Company abandoned and sold $52,851 of fully depreciated equipment and leasehold
        improvements.
 
 In
        April
        and June 2004, the Company issued 1,679,173 shares of common stock in settlement
        of $13,433,384 in Lines of Credit Secured, including $713,884 of interest
        accrued which was added to the principal balance in 2003 and 2004.
 
 In
        June
        2004, the holder of the Series A Preferred Stock elected to convert these
        shares
        into 9,763 shares of common stock and surrender its interest in a joint venture
        with the Company. As a result, $12,015,000 of mezzanine equity was reclassified
        into shareholders’ equity, shareholders equity was also increased by $146,447
        for the value of the common shares issued, and the investment in and advances
        to
        affiliate was increased by a similar amount. Simultaneously, the investment
        in
        and advances to affiliate was reduced by $735,916 and technology license
        was
        increased by a similar amount to reflect the consolidation of the joint venture
        with the Company.
 
 In
        June
        2004, the Company issued secured promissory notes to Xmark Fund Ltd. and
        Xmark
        Fund L.P. totaling $2,128,447 to retire 80,599 common shares that had a put
        feature, extinguish obligations to issue additional shares valued at $166,458
        ($123,409 accrued in 2004), as well as pay a $350,000 fee. As a result of
        this
        transaction and the holder of the puttable shares, having sold a portion
        of the
        shares and thereby extinguishing $314,630 of the put feature, Puttable Shares
        decreased by $1,969,668 and shareholder equity increased by
        $191,221.
 
 In
        March
        2004, the Company issued 99,276 shares of common stock at a value of $5,043,226
        related to the purchase of *Imagent* in June
        2003. These shares had been classified in Common Stock to be
        Issued.
 
 As
        a
        result of settlement of liabilities assumed in the *Imagent* acquisition for amounts less than the original estimate, accrued expenses
        and
        leasehold improvement costs were decreased by $240,000 each.
 
 See
        accompanying notes to consolidated financial statements *.*
 F-14
  **IMCOR
        Pharmaceutical Co. and Subsidiaries**
 **(formerly
        Photogen Technologies, Inc.)**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements (Continued)**
  **1.
        Operations and Restructuring Overview**
  IMCOR
        Pharmaceutical Co. (formerly Photogen Technologies, Inc.) and Subsidiaries
        (the
“Company”) is a development-stage
        pharmaceutical company previously focused on developing medical imaging
        pharmaceutical products. On
        February 5, 2004, the Company changed its name to IMCOR Pharmaceutical Co.
        to reflect the changed nature of the Company’s business to imaging
        pharmaceuticals.
 
 One
        of
        the imaging agents is an FDA approved product, *Imagent* **®** (perflexane
        lipid microspheres) (“ *Imagent* ”),
        an
        ultrasound imaging contrast agent that was acquired in June 2003. *Imagent* had been
        previously approved for marketing by the FDA for use in patients with
        sub-optimal echocardiograms to opacify the left ventricle of the heart and
        improve delineation of the endocardial borders of the heart. Additionally,
        the
        Company had previously sought to expand the label indication for *Imagent* to
        myocardial perfusion imaging for the detection of coronary artery
        disease.
 
 During
        the second quarter of 2005, the Company’s board of directors concluded that
        substantial additional capital resources required to fund its ongoing operations
        would not be forthcoming, and as more further described in Note 13, the Company
        has adopted and implemented an evolving restructuring plan that resulted
        in
        cessation or suspension of substantially all operations, including significant
        employee reduction-in-force, sale of excess equipment, suspension of
        manufacturing and clinical activities, cessation of current selling activities,
        vacating its premises, and the sale of certain of its technology. During
        the
        quarter ending September 30, 2005 the Company entered into a technology
        cross-license and two settlement agreements to resolve certain litigation
        and
        related disputes with other parties, as further described in Notes 3 and
        8.
 
 As
        a
        result of these restructuring activities, the Company is no longer able to
        operate in a manner that would allow it to further develop or promote the *Imagent* product
        on its own, and is currently evaluating its alternatives with respect to
        efforts
        to sell or otherwise maximize asset values related to the “Purchased Technology”
(defined as the assets acquired on June 18, 2003 from Alliance Pharmaceutical
        Corp. (“Alliance”) which relate to the medical imaging business,
        including *Imagent* ®
        (perflexane lipid microspheres), an FDA-approved product), and will continue
        to
        consider as alternatives the sale or license of it’s remaining assets, a merger
        or other material transaction. Such a transaction may include selling the
        Purchased Technology, a license or sale of the patent portfolio underlying
        the
        Purchased Technology, a manufacturing rights agreement, or another form of
        transaction. While such efforts as of December 31, 2005 have resulted in
        the
        solicitation of limited interest in such an arrangement, no definitive
        agreements have been reached nor transactions concluded. However, the Company
        is
        still contacting other interested or potentially interested parties, and
        believes the potential for a sale, license, development agreement or comparable
        transaction is possible.
 
 The
        Company had two additional contrast agents in development for use in computed
        tomography (“CT”) and x - ray imaging with potential applications,
        (1) as a blood pool agent to diagnose diseased tissue in the cardiovascular
        system and other organs (PH-50), and (2) to diagnose cancer metastasizing
        into the lymphatic system (N1177). PH-50 and N1177 are iodinated nanoparticulate
        formulations and were still in early stages of development when the Company
        concluded a sale of the Technology License (to which these assets relate)
        for
        $102,500 in the third quarter 2005.
 
 For
        the
        two years prior to the acquisition of the *Imagent* business
        in 2003, substantially all the Company’s research and development efforts were
        focused on the preclinical testing of PH-50. In addition, the Company had
        conducted research and development activities on the development of certain
        therapeutic photodynamic therapy applications and the development of a medical
        laser. These operations were split-off to the founding scientists as of
        November 12, 2002 and were recorded as discontinued operations in the
        financial statements.
 
 The
        Company has previously realized only minimal revenues resulting from the
        licensing and sale of *Imagent* through
        the date of the suspension of selling activities in the second quarter of
        2005.
        Such sales were intermittent and represented selective market efforts and
        were
        not necessarily indicative of future revenues or market penetration which
        might
        have been derived from the Company’s then current or prospective indications,
        and in the event adequate financial resources had been available to the
        Company.
 
 Currently,
        the Company's core business focus has evolved from an operating entity
        conducting research and development, manufacturing and limited selling
        activities, to one which is now developing alternatives with respect to
        maximizing the asset value for its remaining principal Purchased Technology
        asset, continuing to protect its patent portfolio, securing extended payment
        terms and/or release of creditor claims in exchange for significantly discounted
        settlement payments to its current creditors and conducting other
        compliance-related activities, including the submission of required filings
        with
        the Securities and Exchange Commission (SEC). Costs associated with conducting
        these activities will be incurred only so long as sufficient capital remains
        available, and with the overall primary objective remaining as that of
        maximizing net values available to unsecured creditors first and shareholders
        second.
 F-15
 **IMCOR
        Pharmaceutical Co. and Subsidiaries**
 **(formerly
        Photogen Technologies, Inc.)**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements (Continued)**
  **2.
        Summary of Significant Accounting Policies:**
  **Liquidity
        and Basis of Presentation - Going Concern:** The
        accompanying consolidated financial statements are prepared assuming the
        Company
        is a going concern.  The Company has  reported
        accumulated losses since inception of $90,889,216, and as of December 31,
        2005,
        has a working capital deficit of approximately $3,955,000. In
        addition, and as indicated above and in more details in Note 13, a restructuring
        plan was implemented commencing in the second quarter of 2005.
  To
        the
        extent that the Company was able to estimate with reasonable certainty the
        fair
        value of certain assets as a result of its restructuring activities, it provided
        for certain valuation impairment allowances during the second quarter ended
        June
        30, 2005 where necessary to reflect those certain assets at such estimated
        fair
        values, including property, leasehold improvements, and equipment and technology
        license. Those adjustments were charged to “Impairment losses.” However, the
        Company was not able at that date, nor again at the third quarter ending
        September 30, 2005, to make a determination with respect to a potential
        impairment of the fair market value of the Purchased Technology, together
        with
        the related deferred royalties asset and the deferred license revenue, due
        to
        the then continuing activities involving potential commercial alternatives
        for
        its intellectual property and the related uncertainty attributed to any
        potential outcomes.
 
 Accordingly
        the Company continued to amortize into expense portions of the Purchased
        Technology and the related deferred royalties asset and recognize into income
        portions of the deferred license revenue, in accordance with its previously
        established accounting policies (see below) throughout the year ending December
        31, 2005.
 
 At
        December 31, 2005 the Company reassessed the carrying value of the Purchased
        Technology and the related deferred royalties asset and the deferred revenue,
        after taking into consideration the following factors:
 Ø
              The
                  fourth quarter experience related to the continued solicitation
                  of
                  interest in alternative transactions involving the Company’s Purchased
                  Technology, particularly in the aftermath of the settlement of
                  its
                  litigation and the corresponding entry into the technology cross-license
                  and the two settlement agreements;
 Ø
              The
                  continued evolution of the Company’s business model from an operating
                  entity with research and development, manufacturing and limited
                  selling
                  capabilities to a holder of intellectual property which might have
                  commercial application to other interested parties;
                  and
 Ø
              The
                  lack of adequate capital which precludes the Company from supporting
                  next-stage obligations associated with its current product license
                  for*Imagent*,
                  wherein it acts as the licensor, and which has therefore disrupted
                  the
                  prospective nature of this commercialization activity with the
                  licensee
                  and which may therefore require an adjustment to the future business
                  arrangements between the parties, which currently is being explored
                  but
                  has not concluded. See Note 14; and
 Ø
              The
                  uncertainty about obtaining additional capital in amounts adequate
                  to
                  provide for the continued protection of the Company’s patent portfolio
                  associated with the Purchased Technology, notwithstanding the two
                  technology cross-licenses entered into in the fourth quarter 2004
                  and the
                  third quarter 2005, respectively.
 
 In
        light
        of these factors, discussed in greater detail in Note 13, the Company determined
        that as of December 31, 2005 there was less uncertainty as to the respective
        carrying balances of the Purchased Technology and the related deferred royalties
        asset and the deferred revenue, and therefore a) the related Purchased
        Technology asset should be adjusted to a reduced estimated fair value, and
        the amount of the write-down recognized as additional “Impairment losses,” b)
        the deferred revenue associated with its product license and two technology
        cross-licenses should be adjusted to zero and recognized as a reduction of
        “Impairment losses” and c) the deferred royalties asset which relates to the
        subject product license should be accordingly written off, with the
        corresponding charge made as an increase to “Impairment losses.”
 F-16
 **IMCOR
          Pharmaceutical Co. and Subsidiaries**
 **(formerly
          Photogen Technologies, Inc.)**
 **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements (Continued)**
 The
        financial statements do not include any additional adjustments to reflect
        the
        possible future effects on the recoverability and classification of assets
        or
        the amount and classification of liabilities that may result from the outcome
        of
        any remaining uncertainties.
  **Recapitalization
        and Merger** - In May
        1997, IMCOR Pharmaceutical Co. (formerly known as Photogen Technologies,
        Inc.
        which was then known as M T Financial Group, Inc. (“M T Financial”)), acquired
        Photogen, Inc. through a subsidiary merger. As a result, Photogen, Inc. became
        a
        wholly-owned subsidiary of M T Financial and then M T Financial changed its
        name
        to Photogen Technologies, Inc. (then subsequently on February 5, 2005 to
        IMCOR
        Pharmaceutical, Co.).
 
 **Principles
        of Consolidation** - The
        accompanying consolidated financial statements include the accounts of IMCOR
        Pharmaceutical Co. and its wholly owned subsidiary, Sentigen Ltd. (“Sentigen”),
        a Bermuda entity. Sentigen was a joint venture with Elan International, Ltd.
        which was formed in October 1999 with the Company as an 80.1% owner. Elan
        was a
        19.9% owner but retained substantive participation and management rights.
        On
        June 10, 2004, the joint venture was terminated and Sentigen became a wholly
        owned subsidiary of the Company. The Company’s investment in Sentigen was
        accounted for under the equity method from inception through June 10, 2004
        and
        consolidated thereafter. All inter-company transactions have been eliminated.
        Sentigen currently has no operations and it is likely that it will be dissolved
        by the Bermuda authorities.
 
 **Stock
        Splits** -
        On
        March 4, 2005, the Company effected a 1-for-20 reverse stock split of its
        common
        stock. In November 2002, the Company effected a 1-for-4 reverse stock split
        of
        its common stock. All share and per share amounts related to common stock
        in the
        consolidated financial statements have been retroactively adjusted for all
        periods presented to give effect to these reverse stock splits.
  **Use
        of Estimates** - The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and the disclosure of contingent assets and liabilities at the
        date
        of the financial statements, as well as the reported amounts of revenue and
        expenses during the reporting period.  Actual results could differ
        materially from the estimates and assumptions that the Company uses in the
        preparation of its financial statements.
  **Cash
        Equivalents** - Highly
        liquid investments with a maturity of three months or less when purchased
        are
        classified as cash equivalents. Cash equivalents are carried at cost, which
        approximate their fair market value.
  **Concentration
        Risk** - The Company
        maintains its cash in bank deposit accounts which, at times, may exceed
        federally insured limits. The Company has not experienced any losses in such
        accounts and believes it is not exposed to significant concentration risk
        based
        on the quality of the financial institutions where deposits are
        maintained.
  **Property,
        Plant and Equipment -** Property,
        plant and equipment are stated at cost.  Depreciation and amortization of
        equipment are provided for using the straight-line method over the estimated
        useful lives of the assets.  Computers and laboratory equipment are being
        depreciated over three years, and furniture and fixtures are being depreciated
        over seven years.  Leasehold improvements are being amortized on a
        straight-line basis over the lives of the respective leases or the service
        lives
        of the improvements, whichever is shorter. Expense for maintenance and repairs
        are expensed as incurred. Any impairment in the carrying values of these
        respective assets has been estimated from time-to-time, and is charged to
        “Impairment losses” when appropriate. Upon disposition, all associated property,
        plant and equipment asset costs, together with the related accumulated
        depreciation and amortization and allowance for valuation impairment for
        the
        respective assets are written off, and to the extent that such net carrying
        values exceeded the amount of the disposition proceeds received, if any,
        such
        difference is then charged to “Loss on sale of equipment.”
  **Long-Lived
        Assets -** The
        Company reviews the carrying values of its long-lived assets for possible
        impairment whenever an event or change in circumstances indicates that the
        carrying value of these assets may not be recoverable and recognizes a loss
        in
        the form of an allowance for valuation impairment when it is probable that
        the
        estimated future cash flows will be less than the carrying value of the asset.
        Any long-lived assets held for disposal are reported at the lower of their
        carrying amounts or fair value less cost to sell.
 
 **Intangible
        Assets and Deferred Royalties** -
        Intangible assets are amortized on a straight-line basis over their estimated
        useful lives. Deferred royalties assets are amortized over the same period
        as
        the related deferred revenue to which these assets relate. The carrying values
        of intangible assets are periodically reviewed and impairments, if any, are
        recognized when the expected future benefit to be derived from an intangible
        asset is less than its carrying value. Upon
        disposition, all associated intangible asset and deferred royalties asset
        costs,
        together with the related accumulated amortization and allowance for valuation
        impairment for the respective assets are written off, and to the extent that
        such net carrying values exceeded the amount of the disposition proceeds
        received, if any, such difference is then additionally recognized.
 F-17
 **IMCOR
          Pharmaceutical Co. and Subsidiaries**
 **(formerly
          Photogen Technologies, Inc.)**
 **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements (Continued)**
 **Research
        and Development** -
        Research and development costs are charged to expense when
        incurred.
  **Revenue
        Recognition and Deferred Revenue -** Prior
        to
        December 31, 2005, the Company recognized revenue arising from previously
        received payments related to product and technology cross-license agreements
        ratably over remaining useful life (10-12 years) of the related technology
        as
        calculated from that time forward the respective licensing payments were
        received. At December 31, 2005, the Company recognized the then remaining
        deferred revenue as a reduction of “Impairment losses” related to the
        corresponding impairment write downs on intangible assets and deferred royalties
        made on a contemporaneous basis. See Notes 6, 13 and 14.
 
 **Income
        Taxes** - Deferred
        tax liabilities and assets are provided for differences between the book
        and tax
        bases of existing assets and liabilities and tax loss carryforwards and credits
        using tax rates expected to be in effect in the years in which differences
        are
        expected to reverse. Valuation allowances are provided to the extent realization
        of tax assets is not considered likely .
 
 **Basic
        and Diluted Loss Per Common Share** - Basic
        and diluted loss per common share is computed based on the weighted average
        number of common shares outstanding. Loss per share excludes the impact of
        outstanding options, warrants and convertible preferred stock as they are
        antidilutive. Potential common shares excluded from the calculation at each
        of
        the years ended December 31, are as follows:
 
 2004
              
              2005Options
                  pursuant to plans
              
              
              516,670
              
              
              167,017Options
                  outside of plans, net of cashless component
              
              
              15,727
              
              
              34,977Warrants
              
              
              820,147
              
              
              819,736Issuable
                  upon conversion of preferred stock
              
              
              833,334
              
              
              833,334Total
              
              
              2,185,878
              
              
              1,855,064
  Basic
        and
        diluted loss per common share in 2004 includes 417,965 shares to be issued,
        all
        of which were issued in 2005.
  **Fair
        Value of Financial Instruments** - The
        carrying amounts reported in the consolidated balance sheets for cash, accounts
        payable and accrued expenses approximate
        fair value because of the short-term nature of these amounts. The carrying
        value of unsecured notes payable approximates its fair value, as interest
        approximates market rates.
  **Gain
        on Extinguishment of Debt** -
        Reductions of amounts owed obtained through debt settlement arrangements
        with
        creditors are recorded as gains from extinguishment of debt in the period
        such
        arrangements are reached.
  **Stock
        Options** - The
        Company’s stock option plans are accounted for using the intrinsic-value method
        of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock
        Issued to Employees,” and related interpretations. The intrinsic-value method
        requires that compensation expense, if any, be determined by calculating
        the
        difference between the fair value of the Company’s common stock and the option’s
        strike price at a measurement date. The measurement date is generally when
        the
        number of shares and the option strike price are known. The Company uses
        the
        fair-value method to account for non-employee stock-based compensation. The
        Company has also adopted the disclosure requirements of SFAS No. 148,
“Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment
        to FASB Statement No. 123.” Options issued to non-employees are accounted for
        using the recognition provisions of SFAS No. 123, “Accounting for Stock-Based
        Compensation,” using the fair value-based method.
 
 The
        Company has computed the pro forma disclosures required by SFAS No. 123,
        “Accounting for Stock-Based Compensation,” for options granted using the
        Black-Scholes option-pricing model prescribed by SFAS No. 123. The assumption
        used and weighted-average information are as follows for each of the years
        ended
        December 31,:
 
 2004
              
              2005Weighted-average
                  fair value of options granted
              
              $
              6.60
              
              $
              1.60Expected
                  dividend yield
              
              $
              --
              
              $
              --Risk-free
                  interest rate at grant date
              
              
              3.79
              %
              
              3.44
              %Expected
                  stock price volatility
              
              
              183.24
              %
              
              233.16
              %Expected
                  option lives (years)
              
              
              5
              
              
              5
  F-18
 
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 If
        the
        Company had elected to recognize compensation expense based on the fair value
        at
        the grant dates, consistent with the method prescribed by SFAS No. 123, net
        loss
        per basic and diluted share would have been changed to the pro forma amount
        indicated below for each of the years ended December 31, as
        follows:
  2004
              
              2005Applicable
                  to common stockholders:Net
                  loss, as reported
              
              $
              (22,170,695
              )
              $
              (17,697,883
              )Add
                  stock based compensation expense
              
              
              959,283
              
              
              1,077,780included
                  in reported net lossLess
                  total stock-based employeecompensation
                  expense determined underthe
                  fair-value based method for all awards
              
              
              (1,752,190
              )
              
              (3,478,149
              )Pro
                  forma net loss
              
              $
              (22,963,602
              )
              $
              (20,098,252
              )Net
                  loss per common share (basic and diluted):
              
              $
              (8.20
              )
              $
              (2.95
              )Reported
              
              $
              (8.49
              )
              $
              (3.35
              )Pro
                  forma
 
 **Recent
        Accounting Pronouncements:**
  In
        November 2004, the FASB issued SFAS No. 151, “Inventory Costs - an Amendment of
        ARB No. 43, Chapter 4.” The statement requires abnormal amounts of idle facility
        and related expenses to be recognized as current period charges and also
        requires that allocation of fixed production overheads to the costs of
        conversion be based on the normal capacity of the production facilities.
        SFAS
        No. 151 is effective for inventory costs incurred during fiscal years beginning
        after June 15, 2005. The adoption of this statement is not expected to have
        a
        material impact on the Company’s financial statements.
  In
        December 2004, the FASB issued revised SFAS No. 123 (SFAS No. 123R),
“Share-Based Payment.” This statement eliminates the ability to account for
        share-based compensation transactions using the intrinsic value-based method
        under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued
        to Employees,” and requires instead that such transactions be accounted for
        using a fair-value-based method. SFAS No. 123R is effective for Small Business
        Issuers for financial statements issued for the first interim period beginning
        after December 15, 2005. Currently, the Company discloses the pro forma net
        income and related pro forma income per share information in accordance with
        SFAS No. 123, Accounting for Stock-Based Compensation, and SFAS No. 148,
        Accounting for Stock-Based Compensation Costs—Transition and Disclosure. The
        Company is evaluating the impact of this statement, which could have a material
        impact on its results of operations.
  In
        December 2004, the FASB issued FAS 153, “Exchanges of Nonmonetary Assets.” The
        provisions of this statement are effective for non-monetary asset exchanges
        occurring in fiscal periods beginning after June 15, 2005. This statement
        eliminates the exception from fair value measurement for non-monetary exchanges
        of similar productive assets in paragraph 21(b) of APB Opinion No. 29,
“Accounting for Nonmonetary Transactions,” and replaces it with an exception for
        exchanges that do not have commercial substance. The adoption of this statement
        is not expected to have a material effect on the Company’s consolidated
        financial statements. This statement will be applied prospectively.
  On
        June
        7, 2005, FASB issued Statement No. 154, “Accounting Changes and Error
        Corrections, a replacement of APB Opinion No, 20, Accounting Changes and
        Statement No. 3 Reporting Accounting Changes in Interim Financial Statements”
(“SFAS No. 154”). SFAS No. 154 changes the requirements for the accounting for,
        and reporting of, a change in accounting principle. Previously most voluntary
        changes in accounting principles were required to be recognized by way of
        a
        cumulative effect adjustment within net income during the period of the change.
        SFAS No. 154 requires retrospective application to prior periods’ financial
        statements, unless it is impracticable to determine either the period-specific
        effects or the cumulative effect of the change. SFAS No. 154 is effective
        for
        accounting changes made in years beginning after December 15, 2005; however,
        SFAS No. 154 does not change the transition provisions of any existing
        accounting pronouncements. The Company does not expect that the adoption
        of SFAS
        No. 154 will have a material effect on its financial statements or results
        of
        operations.
 F-19
 **IMCOR
          Pharmaceutical Co. and Subsidiaries**
 **(formerly
          Photogen Technologies, Inc.)**
 **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements (Continued)**
 In
        February 2006, The FASB issued SFAS No. 155, “Accounting for Certain Hybrid
        Financial Instruments, and amendment of FASB statements No. 133 and 140” (“SFAS
        No. 155”). This statement permits fair value measurement for any hybrid
        financial instrument that contains an embedded derivative that otherwise
        would
        require bifurcation. This statement is effective for all financial instruments
        acquired or issued after the beginning of an entity’s first full fiscal year
        that begins after September 15, 2006. Earlier adoption is permitted as of
        the
        beginning of an entity’s fiscal year. The Company does not expect that the
        adoption of SFAS No. 155 will have a material effect on the Company’s financial
        statements or its results of operations.
  **Reclassification:** Certain
        reclassifications have been made to the prior years' financial statements
        to
        conform to the current year presentation. These reclassifications had no
        effect
        on previously reported results of operations or retained
        earnings.

















F-20


**IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 **3.
        Acquisition of** ***Imagent*** **Business:**
  On
        June 18, 2003, the Company acquired the medical imaging business from
        Alliance Pharmaceutical Corp. (“Alliance”), pursuant to an Asset Purchase
        Agreement dated June 10, 2003 (the “Alliance Asset Purchase Agreement”). The
        acquisition costs and allocation to the assets acquired and liabilities assumed
        were as follows:
  Total
                  consideration and acquisition costs:Fair
                  value of common stock issued in 2003
              
              $
              5,583,268Fair
                  value of common stock issued in 2004
              
              
              5,043,226Prior
                  cash advances from Company
              
              
              4,018,052Cash
                  paid at closing
              
              
              669,117Current
                  year payments to vendors on behalf of Alliance
              
              
              388,387Notes
                  payable assumed
              
              
              2,500,000Obligation
                  to pay Alliance creditors
              
              
              3,421,891Acquisition
                  costs
              
              
              1,254,205$
              22,878,146Fair
                  value of assets acquired:Leasehold
                  improvements
              
              $
              5,527,738Equipment
              
              
              1,712,2627,240,000Purchased
                  technology
              
              
              15,638,146$
              22,878,146
 
 The
        fair
        value of the common stock issued in 2003 and 2004 were all based on the fair
        value of the shares of stock on June 18, 2003, which was the date the shares
        were issuable .
        The
        Alliance Asset Purchase Agreement provided that the Company was obligated
        to pay
        Alliance creditors up to a specified amount for various categories of creditors.
        During 2004, some obligations to Alliance creditors were satisfied for less
        than
        the amounts originally estimated and as a result, the Company reduced both
        accrued expenses and the original acquisition cost of the leasehold improvements
        by $240,000.
  Prior
        to
        reaching a settlement agreement with Alliance dated September 19, 2005 in
        conjunction with the settlement of certain litigation (see Note 8) (the
“Alliance Settlement”), the Company was obligated to pay Alliance under the
        Alliance Asset Purchase Agreement contingent consideration (“Earnout”) based on
        revenues from the sale of *Imagent* from
        June 18, 2003 through June 18, 2010, subject to certain reductions. The Earnout
        was to be based on varying percentages applied to the revenue during the
        twelve
        month periods ending on each anniversary date as follows: 7.5% *of* revenue
        up to $20,000,000; 10% of ** revenue
        from $20,000,001 up to $30,000,000; 15% of ** revenue
        from $30,000,001 up to $40,000,000; and 20% of ** revenue
        in excess of $40,000,000. The Earnout was to have been reduced by the net
        amounts the Company was obligated to pay pursuant to a license agreement
        with
        Schering Aktiengesellschaft (“Schering AG”) and any amounts that may be due from
        Alliance pursuant to an indemnification agreement. The Earnout was subject
        to
        three additional offsets that were to have been applied in different priorities
        but in total may have provided reductions to the Earnout obligation up to
        approximately $7,000,000. Due to the absence of any meaningful current or
        expected revenue from *Imagent* ,
        management was not previously able to, and therefore did not include the
        present
        value of future estimated Earnout payments in the determination of the
        consideration paid for the acquisition. Future Earnout obligations under
        the
        original arrangement would have therefore have been expensed in the periods
        when
        they could have been reasonably estimated.
 
 F-21
 **IMCOR
          Pharmaceutical Co. and Subsidiaries**
 **(formerly
          Photogen Technologies, Inc.)**
 **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements (Continued)**
 As
        noted
        above, the Company entered into the Alliance Settlement on September 19,
        2005,
        pursuant to which (i) each party’s respective ongoing obligations to one another
        under the Alliance Asset Purchase Agreement were terminated, including any
        obligations related to Earnout and Future Earnout, (ii) each party granted
        the
        other a mutual general release (which resolved, among other things, the parties’
claims against one another for various accumulated post-closing payments),
        and
        (iii) the parties agreed to share in the proceeds of future transactions
        involving the disposition of the Company’s *Imagent* asset in
        accordance with the following schedule:
 **Proceeds**
                **Alliance
                    Percentage**
                **Company
                    Percentage**$1
                    to $1,450,000
                10.0%,
                    not to exceed $100,000
                90.0%
                    of first $1,000,000;
                  100.0%
                    of next $450,000$1,450,001
                    to $5,000,000
                30.0%
                70.0%$5,000,001
                    and above
                33.3%
                66.7%
  The
        purchase costs allocated to intangible assets related to the acquisition
        of the
        Purchased Technology were estimated by management based on the fair value
        of the
        assets acquired. Purchased Technology has been amortized on a straight-line
        basis over the estimated remaining life of twelve years up to and through
        December 31, 2005.  Purchased Technology is stated at cost, less
        accumulated amortization and allowance for impairment. See Note 6.
  **4.
        Investment in and Advances to Affiliate**
 On
        October 7, 1999, Sentigen, Ltd. (“Sentigen”) was formed as a joint venture
        between the Company and Elan International Services, Ltd. (“Elan”) to develop
        and commercialize
        nanoparticulate diagnostic imaging agents for the detection and treatment
        of
        cancer through lymphography. As part of the organization of Sentigen in
        1999:
 
 Elan
        was
        issued 2,980 shares of Sentigen non-voting convertible preferred stock for
        $2,985,000 representing a 19.9% ownership interest. The Company was issued
        12,000 shares of Sentigen’s common stock for $12,015,000 representing an 80.1%
        ownership interest.
 
 Elan
        purchased 12,015 shares of the Company’s Series A convertible exchangeable
        preferred stock for $12,015,000. In connection with the issuance of the
        Company’s preferred stock to Elan, the Company granted warrants to Elan to
        purchase 5,000 shares of the Company’s common stock at $1,693.60 per share which
        was valued at $678,000. As a result, a preferred stock dividend of $436,041
        was
        recorded for the accretion of the preferred stock to its face value of
        $12,015,000 over the period until it was first convertible. Beginning in
        2000,
        in accordance with EITF 00-27, the Company recorded an additional preferred
        stock dividend to represent the beneficial conversion feature associated
        with
        the intrinsic value of the Series A Preferred conversion option. As a result,
        an
        additional preferred stock dividend of $436,041 was recorded over the period
        until it was first convertible. As of December 31, 2001, the beneficial
        conversion feature was fully recorded.
 
 Elan
        purchased 5,769 shares of the Company’s common stock for $6,000,000. The Company
        was required to issue an additional 9,543 shares of the Company’s common stock
        to adjust the number of shares issued to equal the effective per share price
        of
        the Company’s next offering of common stock in a third-party
        offering.
 
 Sentigen
        used the $15,000,000 received from the Company and Elan to purchase from
        Elan a
        worldwide license to certain patented Elan
        technology related to the joint venture. The
        acquisition of the license by Sentigen was for certain issued patents with
        multiple applications and not for the use of pending or in process research
        and
        development, and therefore capitalized.
 
 Elan
        also
        granted the Company a line of credit of $4,806,000 to be used by the Company
        to
        fund its portion of Sentigen’s research and development. Principal and interest
        under the line of credit, if any, were due and payable in 2005 or, at the
        option
        of Elan, converted into the Company’s common stock at $1,452 per share.
        Borrowings under the line of credit bore interest at 8%. On November 12,
        2002, the total borrowings of $2,846,910 and accrued interest of $235,577
        were
        converted to common stock at a conversion price of $480 per share and the
        line
        of credit was cancelled. A beneficial conversion amount of $206,348 was added
        to
        additional paid-in capital as a result of the decrease in the original
        conversion price.
 F-22
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 In
        June 2004 the holder of the Company's Series A Preferred Stock sold
        that instrument and the purchaser converted all Series A Preferred Stock,
        including accrued and unpaid dividends, into 9,763 shares of the Company's
        common stock at a conversion price of $1,693.60 per share. On the conversion
        date, the value of the Company's common stock was $15.00 per share, which
        was
        deemed to be the implicit factor to value the 19.9% of Sentigen that Elan
        sold
        to the Company for $146,447. Accordingly, the Company wrote down the carrying
        value of its 80.1% share of the related technology license then held by Sentigen
        to $589,469.
 
 Separately,
        on June 10, 2004, the Company and Elan terminated the joint venture. As a
        result, on that date Sentigen became a wholly owned subsidiary of the Company
        and was consolidated in the Company’s financial statements.
 
 Elan
        had
        substantive participating rights in Sentigen, including the requirement for
        approval of the business plan and budgets and equal representation on the
        management committee which decides all day-to-day functions.  As a result,
        the Company’s investment in Sentigen was accounted for using the equity method
        until June 10, 2004.
  The
        following is summarized unaudited financial information of Sentigen as of
        June
        10, 2004 and the period from January 1, 2004 through June 10, 2004:
  June
                  10,2004Cash
              
              $
              --License
                  purchased from Elan, net
              
              
              735,916Total
                  assets
              
              $
              735,916Due
                  to affiliates
              
              $
              --Total
                  shareholders’ equity
              
              
              735,916Total
                  liabilities and equity
              
              $
              735,916Operating
                  expenses:Amortization
                  of license
              
              $
              432,067Impairment
                  of license
              
              
              2,402,660Net
                  loss
              
              $
              2,834,727
 
 The
        License purchased from Elan is net of accumulated amortization of $3,611,424
        as
        of June 10, 2004, and also net of cumulative allowances for valuation impairment
        of $10,652,660 as of June 10, 2004. Allowances for valuation impairment were
        recorded as follows: $2,500,000 in 2002, $5,750,000 in 2003 and $2,402,660
        in
        the period ended June 10, 2004, and were charged to “Loss from joint venture.”
In each of these cases, the allowance for valuation impairment was based
        on
        Sentigen’s assessment of the future cash flows or a valuation of the fair value
        of the license.
  **5.
        Property, Plant and Equipment**
  Property,
        plant and equipment consist of the following at each of the years ended
        December 31,:
  2004
              
              2005Leasehold
                  improvements
              
              $
              5,287,738
              
              $
              --Furniture,
                  fixtures and equipment
              
              
              1,824,819
              
              
              --Total
              
              
              7,112,557
              
              
              --Accumulated
                  depreciation and amortization
              
              
              (2,685,514
              )
              
              --Property,
                  plant and equipment, net
              
              $
              4,427,043
              
              $
              --
 
 Maintenance
        and repairs are charged to operations as incurred.
 F-23
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements
            (Continued)**
 When
        assets are taken out of service, an allowance for impairment is recorded
        to the
        extent that the then net carrying book value (cost, less accumulated
        depreciation and amortization) exceed estimated proceeds to be received.
        When
        assets are sold, or otherwise disposed of, the cost and related accumulated
        depreciation and amortization and allowance for valuation impairment are
        removed
        from the accounts and any gain or loss is included in operations.
  Depreciation
        and amortization expense on property, plant and equipment was $1,742,274
        and
        $593,901 in 2004 and 2005, respectively, at the time the assets were taken
        out
        of service pursuant to the Company’s restructuring activities commenced during
        the second quarter. See Note 13. In addition an impairment allowance reserve
        was
        established totaling $3,265,492, of which $3,072,315 was attributed to leasehold
        improvements and $193,177 was attributed to furniture, fixtures and
        equipment.
 
 During
        the year ended December 31, 2005, furniture, fixtures and equipment with
        a net
        book value of $550,689 ($1,827,859 cost, less $1,083,993 accumulated
        depreciation and amortization and less $193,177 allowance for impairment
        reserve) was sold or otherwise disposed of for $324,384 in net proceeds,
        resulting in a loss on disposal of equipment totaling $226,305.
 
 On
        July
        19, 2005, and as part of its continued restructuring activities, the Company
        concluded two concurrent, interdependent negotiations with EOP-Industrial
        Portfolio, LLC (“EOP”), its lessor of the Company’s leased facilities property
        located at 6175 Lusk Boulevard in San Diego, California, and a new tenant
        for
        this property. See Note 8
        for
        additional discussion. As a result of these negotiations, the Company executed
        a
        lease termination agreement, involving among other things, a surrender of
        the
        facility and the underlying leasehold improvements with a net book value
        of
        $20,000 ($5,287,738 cost, less $2,195,423 accumulated amortization and less
        $3,072,315 allowance for impairment reserve). Concurrent with that transaction
        and pursuant to an agreement with the new tenant, the Company received $20,000
        from the new tenant, resulting in no gain or loss in the leasehold improvements,
        other than to the extent of the previously recorded impairment allowance
        noted
        above.
 
 
 F-24
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 **6.
        Intangible Assets and Deferred Royalties:**
 
 The
        cost
        and accumulated amortization of intangible assets and deferred royalties
        as of
        each of the years ended December 31, are as follows:
 
 2004
              
              2005Purchased
                  technology:Cost
              
              $
              15,638,146
              
              $
              15,638,146Less
                  allowance for valuation impairment
              
              
              --
              
              
              (11,373,572
              )Accumulated
                  amortization
              
              
              (1,961,396
              )
              
              (3,264,574
              )$
              13,676,750
              
              $
              1,000,000Patents:Cost
              
              $
              500,000
              
              $
              500,000Less
                  allowance for valuation impairment
              
              
              (274,479
              )
              
              (274,479
              )Accumulated
                  amortization
              
              
              (225,521
              )
              
              (225,521
              )$
              --
              
              $
              --Technology
                  license:Cost
              
              $
              735,916
              
              $
              --Less
                  allowance for valuation impairment
              
              
              --
              
              
              --Accumulated
                  amortization
              
              
              (39,508
              )
              
              --$
              696,408
              
              $
              --Deferred
                  royalties:Cost
              
              $
              500,000
              
              $
              500,000Less
                  allowance for valuation impairment
              
              
              --
              
              
              (416,666
              )Accumulated
                  amortization
              
              
              (41,667
              )
              
              (83,334
              )$
              458,333
              
              $
              --
 
 In
        December 2004, the Company determined, after consideration of its decision
        to
        focus on the approval of *Imagent* in a new
        application, its limited resources, and the results of attempts to find
        development partners for the related technologies that the future cash flows
        related to patents were going to be less than the carrying value of patents.
        Therefore, in December 2004 the Company recorded an allowance for valuation
        impairment for $274,479 related to the patents to reduce the carrying value
        to
        zero because the Company did not believe there was a realistic probability
        of
        future cash flows related to this asset.
 
 During
        the quarter ended June 30, 2005 the Company, as part of its restructuring
        activities (see Note 13) solicited interest from several parties regarding
        its
        technology license asset, which related to its PH-50 and N-1177 compounds.
        An
        agreement in principal was reached with one party by June 30, 2005 to sell
        this
        asset for $102,500, net of certain costs, and an impairment allowance of
        $570,321 was then recorded, resulting in a net carrying cost of $102,500
        ($735,916 cost, less $63,095 accumulated amortization and less $570,321
        allowance for impairment reserve). During the quarter ending September 30,
        2005
        an agreement was reached finalizing this sale, and the Company received the
        contemplated $102,500, resulting in no further gain or loss on the sale of
        this
        technology license asset, other than to the extent of the previously recorded
        impairment allowance noted above.
 
 As
        previously discussed, the carrying values of the Purchased Technology were
        amortized on a straight-line basis over their estimated useful lives ranging
        from 10-12 years through December 31, 2005. The deferred royalties asset
        was
        amortized into operations over the same period as the related deferred revenues
        associated from a product license agreement to which these assets relate,
        which
        is 12 years, also through December 31, 2005. However, in light of the additional
        considerations addressed by the Company associated with its continuing
        restructuring activities (See Notes 2 and 13), management determined at December
        31, 2005 that impairment allowances for the Purchased Technology and the
        deferred royalties assets, amounting to $11,373,572 and $416,666, respectively.
 F-25
 **IMCOR
              Pharmaceutical Co. and Subsidiaries**
 **(formerly
              Photogen Technologies, Inc.)**
 **(A
              Development Stage Company)**
 **Notes
              to Consolidated Financial Statements (Continued)**
 Amortization
        expense for purchased technology, patents and technology license was $1,342,687
        and $1,326,766 in 2004 and 2005, respectively. There is no additional
        amortization contemplated in the next five years, as the only remaining
        intangible asset with any carrying value, Purchased Technology, is being
        held in
        contemplation of reaching one or more alternative transactions which will
        result
        in net cash payments to the Company that will meet or exceed the Company’s
        current estimate of value for this asset as recorded at December 31,
        2005.
 
 **7.
        Accrued Expenses and Assumed Acquisition Obligations:**
  December
                  31,
              
              December
                  31,2004
              
              2005Assumed
                  acquisition obligations
              
              $
              1,179,051
              
              $
              924,784Accrued
                  payroll, deferred bonuses and related expenses
              
              
              723,707
              
              
              512,656Accrued
                  legal fees
              
              
              --
              
              
              139,153Accrued
                  interest
              
              
              30,711
              
              
              121,568Other
                  accrued expenses
              
              
              257,832
              
              
              190,000$
              2,191,301
              
              $
              1,888,161
 
 During
        the quarter ended September 30, 2005, the Company reduced its “Assumed
        acquisition obligations” by $200,000 as a result of reaching overall settlements
        in litigation and other disputes involving the Purchased Technology. See
        Note 8.
        The remainder of the “Assumed acquisition obligations” relates primarily to past
        due payment obligations owed to several parties totaling $622,750 at December
        31, 2005.
 
 During
        2005 the Company also paid out $353,884 in salary-related costs which had
        been
        accrued at December 31, 2004 in “Accrued payroll, deferred bonuses and related
        expenses,” including $156,172 in accrued salary, $159,787 in earned vacation and
        $37,925 in the remainder of a severance obligation for a former employee.
 
 During
        the quarter ended June 30, 2005, the former CEO’s employment with the Company
        was terminated, and the Company recorded a reserve for severance totaling
        $275,000. This individual is also owed $206,250 for a bonus earned in 2004.
        No
        portion of these obligations, totaling $481,250, has been paid; such amounts
        are
        included in “Accrued payroll, deferred bonuses and related expenses” at December
        31, 2005.
 
 One
        of
        the Company’s law firms had originally agreed to accept shares of the Company’s
        common stock for a portion of their services rendered during the six months
        ending June 30, 2005. However, prior to the end of this period, the law firm
        advised the Company that it preferred to be compensated for these services
        in
        cash payment, to the extent the Company is ultimately able to pay. The Company
        agreed to this request and has accordingly recorded this obligation, totaling
        $139,153, to “Accrued legal fees.”
 
 Incurred
        but unpaid interest totaling $121,568, which represents an increase of $90,857
        from December 31, 2004 to December 31, 2005, is included in “Accrued interest,”
and is associated with various interest-bearing obligations, including “Notes
        payable unsecured” ($192,233), “Accrued royalty fees” owed to Schering AG
        ($401,946) and various payable obligations associated with the “Assumed
        acquisition obligations” referenced above ($622,750). ****
 
 Incurred
        but unpaid Board fees, including related fees for service on various committees,
        totaling $180,000, and which were incurred during the periods April 1 to
        December 31, 2004 ($79,000) and January 1 to December 31, 2005 ($101,000) are
        included in “Other accrued expenses.” There have been no payments for any such
        obligations incurred after the first quarter ending March 31, 2004.
  **8.
        Commitments and Contingencies**
  **Leases:** The
        Company previously leased its facilities and certain equipment under
        non-cancelable operating leases, which expired at various times through 2008.
        The facilities leases required the Company to pay for all maintenance, insurance
        and property taxes.
 F-26
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 As
        more
        completely discussed in Note 13, the Company was released from the remainder
        of
        its building lease obligations related to future minimum rental payments
        totaling $2,244,113 pursuant to a lease termination agreement executed July
        19,
        2005 and made effective on or about July 31, 2005. The Company incurred total
        charges, net of final adjustment, with the landlord totaling $540,825 ($447,490
        base rent and $93,335 for maintenance, insurance and property taxes), $243,825
        of which was paid in cash and the remainder, totaling $297,000, was settled
        by
        the surrender of the Company’s security deposit asset of like amount, pursuant
        to the lease termination agreement.
 
 The
        Company had two other lease obligations for rental equipment, but at the
        time of
        vacating its former facilities, the Company made this equipment available
        back
        to the respective lessors, and believes it has no further financial obligations
        beyond that which was incurred in 2005 totaling approximately
        $123,000.
 
 Commencing
        approximately August 1, 2005, the Company rented temporary office space,
        originally for a minimum of 3 months, but then converting this arrangement
        to
        month-to-month by year end. Total expense incurred under this arrangement
        totaled $12,654 for the reminder of the year ended December 31,
        2005.
 
 Total
        rental expense charged to operations for the years ended December 31, 2004
        and 2005 was approximately $1,002,000 and $583,000, respectively. In addition
        to
        the rental expense, the charges from the landlord at 6175 Lusk Boulevard
        in San
        Diego, California for maintenance, insurance and property taxes totaled
        approximately $146,000 in 2004 and $93,000 in 2005.
 
 **License
        Agreements:** As part
        of the acquisition of the *Imagent* business
        from Alliance in June 2003, the Company assumed a license agreement between
        Alliance and Schering AG (“Schering AG License”) which provides the Company with
        exclusive marketing and manufacturing rights, drug compositions, and medical
        devices and systems related to perfluorocarbon ultrasound imaging products,
        including *Imagent* ,
        in the
        United States, for a five-year period from the date of the first commercial
        sale
        of a related product, which was August 2003. Schering AG is entitled to royalty
        payments based on five percent of sales revenues and ten percent of license
        fee
        revenues that are received as lump sum payments. Schering AG is entitled
        to a
        minimum royalty payment of $500,000 for lump sum license fee revenues received.
        If at the expiration of the five-year period the Company has not provided
        royalty payments to Schering AG in excess of $20,000,000 then Schering AG
        has
        the option to become a co-promoter of products, in which event the Company
        will
        be entitled to receive royalty payments from Schering AG. During the year
        ended
        December 31, 2004 the Company accrued $500,000 as the royalty obligation
        related
        to the product license agreement described in Note 14. The Company deferred
        this
        cost and has amortized it to expense over the same period that it has amortized
        the license revenue to income though December 31, 2005. See Note 13 for
        additional discussion about the carrying costs of this deferred royalties
        asset
        at December 31, 2005.
  **Litigation:** ****** On
        June 18, 2003, the Company, together with Alliance, the prior owner of the
        Purchased Technology, filed a complaint against Amersham Health, Inc. and
        two
        other Amersham affiliates (now known as GE Healthcare Ltd.) (collectively
        “Amersham”) alleging that certain Amersham products infringed on claims in the
        patents covering *Imagent* .
        The
        complaint alleged that principally through the Optison® product, Amersham
        infringed on eight patents owned by the Company. The Company further alleged
        misappropriation of trade secrets as well as other state law claims against
        Amersham.
  Amersham
        denied the material allegations of the Company’s claims and asserted certain
        affirmative defenses and counterclaims. Amersham’s counterclaims included claims
        of infringement of the fifteen Amersham patents, breach of contract, breach
        of
        good faith and fair dealing, and tortious interference with contract. The
        Company and Alliance, as well as Amersham, also amended their complaints
        to
        include allegations of antitrust violations by the other parties.
  The
        Company entered a Settlement Agreement and License (the “Amersham Settlement”)
        dated as of September 19, 2005 with Amersham, Alliance and Molecular Biosystems,
        Inc. The Amersham Settlement resolved the parties’ claims arising under the case
        described above. Under the terms of the Amersham Settlement, the Company’s
        technology cross-license was valued at $1,200,000 in favor of the Company,
        for
        which the Company received $1,000,000 directly from Amersham. The balance,
        or
        $200,000, was paid directly by Amersham to Alliance which served as the cash
        consideration to Alliance under the separate but concurrent Alliance Settlement
        more fully discussed in Note 3. The parties dismissed their litigation and
        granted each other fully paid-up, irrevocable, royalty-free, non-exclusive
        cross-licenses, with the right to sub-license, and mutual releases.
 F-27
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 On
        May
        11, 2005, the Company was served with an unlawful detainer lawsuit by EOP,
        the
        lessor of the property located at 6175 Lusk Boulevard in San Diego, California,
        regarding the Company’s default on its building lease for failing to pay $84,861
        of rent that was due April 1, 2005. EOP continued to hold a $297,000 security
        deposit related to this lease at June 30, 2005. EOP asserted in this lawsuit
        it
        was entitled to terminate the lease, demand all past due amounts under the
        lease
        immediately, repossess the premises, demand payment for all unrelated costs
        and
        expenses, and/or assert any other rights that may be available in law or
        in
        equity. As described more in Notes 8 and 13, as part of the Company’s
        restructuring activities commenced in the second quarter ended June 30, 2005,
        the Company was allowed to peacefully vacate the premises by July 31, 2005
        pursuant to a lease termination agreement. The Company was further released
        from
        all past due rents, late payment fees and any future lease payments for which
        the base rents totaled at least $2,244,000.
  **9.
        Notes Payable:**
  **Notes
        Payable- Secured** - In
        conjunction with the acquisition of the *Imagent* business, the Company assumed $2,500,000 of secured promissory notes that
        were
        payable in two equal installments in August and November of 2003. The Company
        was not able to make the scheduled payments and on August 18, 2003, the Company
        paid the lender $1,250,000 and the lender extended the due date of the second
        payment to April 2004 in exchange for agreeing to pay extension fees that
        totaled $200,000 in 2003 and $200,000 in 2004. Interest on these notes payable
        accrued at 7.25 percent which were payable in shares of the Company’s stock
        based on a conversion of $1 per share. These notes were secured by a first
        priority security interest in the *Imagent* related
        tangible and intangible assets. The note payable was paid in May 2004. As
        of
        December 31, 2004 all liens and security interests related to these obligations
        have been removed.
 
 **Lines
        of Credit- Secured** - During
        2003 and 2004 the Company borrowed funds pursuant to $4,160,000
        of Revolving Convertible Senior Secured Promissory Notes (“Revolving Notes”) and
        other non-convertible notes payable (“Demand Notes”) (collectively, the
“Promissory Notes”) to three institutional investors (“Investors”) which are
        also shareholders of the Company. In addition, at that time, two of the
        Company’s directors were officers or general partners in the Investors. The
        Promissory Notes were secured by a first priority security interest on all
        the
        Company’s assets (subordinate to the senior security interest of the secured
        note payable described above), accrued interest at 7.25% per annum, compounded
        monthly, and were due on August 5, 2003 (Revolving Notes) or on demand
        (Demand Notes). The Company defaulted on its obligation to complete a qualified
        financing by August 2003 for the conversion of the Revolving Notes into the
        Company’s common stock. In 2003 the Company had borrowed $11,735,036, including
        accrued interest of $318,036 under the Promissory Notes, and in 2004 the
        Company
        borrowed $1,698,348, including $395,848 of interest accrued during the year.
        In
        April and June of 2004, all of the principal and accrued interest was converted
        into 1,679,173 shares of the Company’s common stock at $8.00 per
        share.
 
 In
        June
        2004, the Company borrowed approximately $700,000 from a bank and repaid
        the
        loan in July 2004.
 
 As
        of
        December 31, 2004 all liens and security interests related to these obligations
        have been removed, and remain so at December 31, 2005.
 
 **Notes
        Payable - Unsecured** :
 
 The
        unsecured notes payable bear interest at eight percent annually.
  One
        of
        the Company’s directors is a general partner in the two entities that are owed
        $192,233 as of both December 31, 2004 and 2005.
 
 **10.
        Shareholders’ Equity** **(Deficit)
        and Mezzanine Equity:**
  **(a) 
        Series A Preferred Stock:**
  **Series
        A-New:** In
        October 2004, the Company authorized and issued 4,500 shares of Series A
        Convertible Preferred Stock (“Series A-New”) to Bristol-Meyers Squibb Medical
        Imaging, Inc. (“BMSMI”) for $4,500,000 in conjunction with a non-exclusive
        technology cross-licensing agreement whereby BMSMI also paid the Company
        $4,000,000. Each share of the Series A-New is entitled to a liquidation
        preference of $1,000 per share and is convertible into 833,334 shares of
        the
        Company’s common stock at an effective conversion rate of $5.40 per common
        share. The Company may force the conversion of these shares into common stock
        after October 2005 in the event that the value of the Company’s common stock
        exceeds $8.10 for ten consecutive days. This mandatory conversion feature
        is
        limited to converting into an amount of common shares which does not exceed
        19.9
        percent of the then outstanding shares of the Company’s common
        stock.
 F-28
 
 **IMCOR
              Pharmaceutical Co. and Subsidiaries**
 **(formerly
              Photogen Technologies, Inc.)**
 **(A
              Development Stage Company)**
 **Notes
              to Consolidated Financial Statements (Continued)**
 An
        investment banking firm was paid a $680,000 fee and issued warrants expiring
        in
        October 2009 to purchase 66,667 shares of the Company’s common stock at $5.40
        per share. The Company estimated $60,400 value for the warrants using the
        Black-Sholes pricing model. These costs were allocated pro rata between the
        value of the cross-licensing agreement and the value of the Series A-New
        shares.
        Accordingly, $392,000 was charged to shareholders’ equity as a reduction of the
        proceeds from the Series A-New shares and $348,400 was charged to
        expense.
 
 **Series
        A-Old** :
        In
        October 1999 the Company issued 12,015 shares of preferred stock as Series
        A Preferred Stock (“Series A-Old”).  For the first six years from issuance,
        the preferred stock had a mandatory dividend of 7%.  Such dividends were
        cumulative, compounded on a semiannual basis, and were payable semiannually
        solely by the issuance of additional shares of the Series A-Old. At the time
        these shares were outstanding, the Company had a deficit and, as a result,
        the
        dividends were recorded against paid-in capital. In accordance with the
        provisions of the agreement, the Company issued 841 additional shares of
        the
        Series A-Old in 2000 in settlement of dividend requirements.  At
        December 31, 2003, there were 12,856 shares of Series A-Old outstanding.
        The Company had accrued 3,679 preferred shares in fulfillment of the dividend
        requirements since 2001. The liquidation preference was $1,000 per share,
        which
        amounted to $16,036,810 as of December 31, 2003. The
        Series A-Old was convertible into common stock of the Company with an initial
        conversion price of $1,693.60 from October 2001 through October
        2005. The
        Series A-Old was also exchangeable into additional shares of Sentigen to
        raise
        its ownership percentage to fifty percent until October 2005. As a result
        of
        this exchange feature, $12,015,000 was classified as mezzanine
        equity.
 
 In
        June
        2004, the holder of the Series A-Old converted all shares, including accrued
        but
        unpaid dividends, into 9,763 shares of the Company’s common stock. Accordingly,
        the $12,015,000 classified as mezzanine equity was reclassified to permanent
        equity and the liquidation preference of $16,534,840 related to these shares
        was
        extinguished.
  **(b)**  **Series
        B Preferred Stock** - In
        February 2000, the Company completed a private placement of its Series B
        Convertible Preferred Stock (“Series B Preferred”). The Company received cash
        proceeds, net of related expenses, of $5,276,340 in exchange for 337,056
        shares
        of the Series B Preferred. The Series B Preferred had an annual dividend
        rate of
        6 percent. In accordance with the provisions of the agreement, the Company
        issued additional preferred shares of 20,224 in 2001 and 40,194 in 2002 in
        settlement of dividend requirements.
  In
        conjunction with the financing on November 12, 2002 all of the Series B
        Preferred was converted into common stock.  In exchange for this
        conversion, the then conversion ratio of 0.01809 was changed to 0.05313. 
As a result, the Series B Preferred was converted into 21,116 shares of common
        stock and a beneficial conversion amount of $668,464 has been recorded. 
The Series B Preferred is no longer outstanding, nor is there any liquidation
        preference associated with the Series B Preferred.
  **(c)
        Common Stock** - As
        of
        December 31, 2004, the Company was subject to four groups of registration
        rights
        agreements. In the aggregate, these agreements cover approximately
        5,553,969 **** shares
        of
        common stock (including approximately 735,881 shares issuable upon the exercise
        of warrants and 833,334 shares issuable upon the conversion of the Series
        A
        Convertible Preferred Stock) and require the Company to register those shares
        under various terms and subject to specific conditions in the agreements.
        In
        accordance with the terms of certain of these registration rights agreements,
        on
        January 11, 2005 a registration statement became effective relating to the
        resale of 2,332,679 shares of common stock including 735,881 shares issuable
        upon the exercise of warrants. In addition, on February 8, 2005 the Company
        filed a registration statement relating to the resale of 2,448,467 shares
        of
        common stock.
 F-29
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 All
        of the
        shares issued in January through April 2005 were subject to pending registration
        statements which are not currently effective. The effectiveness of the
        registration statements was delayed while the Company responded to the SEC’s
        various comments which arose during the comment process. Given the Company's
        current financial circumstances and its goal to maximize the funds available
        to
        its creditors, its board of directors has determined that the Company will
        not
        continue to pursue its efforts to effect its registration statements currently
        on file with the SEC (File Nos. 333-122625 and 333-117907). Those registration
        statements, which are not currently effective, will be withdrawn.
 
 The
        Company has
        stopped accruing penalty shares for the security holders who received shares
        subject to that certain registration rights agreement dated as of April 14,
        2004
        because without an effective registration statement the Company is unable
        to
        abide by the contractual requirement that the penalty shares such parties
        receive freely tradable shares.  In addition, we entered into an agreement
        with Oxford Bioscience Partners IV L.P., MRNA Fund II, L.P., and Mi3 L.P.
        to cease accruing penalty shares as of June 30, 2005.   In general,
        privately issued shares held by investors for more than one year may be sold
        under Rule 144.
 
 Many
        of
        the Company's investors have held their shares in the Company for more than
        a
        year and will be qualified to sell their shares under Rule 144, subject to
        the
        restrictions set forth therein; ** indeed,
        several such investors have sold shares utilizing Rule 144. However, given
        the
        Company's current financial situation, at some point in 2006 or thereafter
        the
        Company may elect to cease reporting under the Exchange Act, and as a result,
        investors will no longer be eligible to resell their shares of the Company's
        common stock under Rule 144 (unless the shares have been held for two years,
        in
        which case they would be freely saleable under Rule 144(k)).
 
 On
        March 13, 1998, the Company completed a private placement of 10,938 shares
        of common stock for $640 per share to a number of accredited investors. 
The Company received $6,950,000, net of related expenses of approximately
        $50,000 from this offering.
  On
        February 9, 2001, the Company’s shelf registration on Form S-3 was declared
        effective.  Under the shelf registration, the Company could have issued up
        to $40,000,000 of common stock.  As of December 31, 2002, 8,694 shares
        had been issued under the shelf registration for cash proceeds of $1,068,723,
        net of related expenses of $56,252.  The Company’s registration statement
        is no longer effective.
  As
        of
        April 2, 2001, the Company no longer met the eligibility requirements to
        continue selling shares under the S-3.  Prior to realizing it was
        ineligible to continue using the S-3, the Company sold 6,231 shares of common
        stock for $650,000.  Through June 2003, this amount had been
        reclassified from permanent equity to mezzanine equity as the Company could
        be
        required to repay a portion of this amount to the purchaser.  In the second
        quarter of 2003 the Company recognized in permanent equity the issuance of
        these
        shares.
  On
        November 12, 2002, the Company completed a private placement of 416,667
        shares of common stock for $21.60 per share to a number of accredited
        investors.  The Company received proceeds of $8,677,000, net of related
        expenses of $387,000.  Proceeds included cash of $6,113,000 and the
        conversion of a credit facility with an entity controlled by a then director
        of
        the Company with borrowings of $2,500,000 which converted into 115,741 shares
        of
        common stock.
  In
        December 2002, the Company completed a second closing of the
        November 12, 2002 private placement in which 140,227 shares of common stock
        were sold for $21.60 per share for gross proceeds of $3,028,902.
  On
        November 12, 2002, the Company effected the split-off of Photogen, Inc. and
        the assets and liabilities related to the Company’s therapeutic line of business
        to the five founding stockholders of the Company (the “Tennessee Stockholders”)
        in exchange for all of their common stock in the Company.  The Tennessee
        Stockholders owned 256,855 shares of the Company and those shares were cancelled
        prior to December 31, 2002.  The market value of the 256,855 shares on
        the date of the split-off was $12,226,319.
  Pursuant
        to a Standstill and Make Whole Agreement dated as of December 30, 2002 with Xmark
        Fund L.P. and Xmark Fund, Ltd. (collectively “ Xmark”),
        secured creditors of Alliance, the Company issued a total of 37,500 shares
        to
        Xmark in January through March 2003.  Xmark agreed to not
        exercise any rights against Alliance as a creditor.  The value of these
        shares was treated as an expense at fair market value amounting to
        $1,173,750.
 F-30
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 On
        May 2,
        2003, the Company executed a Going Forward Agreement with Xmark that provided,
        among other things, for the issuance of shares of the Company’s common stock
        upon the acquisition of the Purchased Technology as payment for interest
        owed by
        Alliance to Xmark.  On June 18, 2003, the Company issued 109,907
        shares of its common stock to certain creditors of Alliance, including 52,807
        shares to Xmark pursuant to the Going Forward Agreement, as partial
        consideration for the Technology Purchase.  Following approval by
        shareholders, the Company would issue an additional approximately 99,276
        shares
        to certain other creditors as part of the Purchased Technology.  The value
        of these shares was treated as acquisition consideration at fair market value
        (see Note 3).  Such approval was obtained at the Company’s shareholder
        meeting held on February 5, 2004.
  On
        May
        27, 2003 the Company issued 563 shares of its Common Stock to Xmark as a
        penalty
        for failure to timely register certain shares held by Xmark. The value of
        these
        shares was treated as an expense at fair market value amounting to
        $25,200.
  On
        July 31, 2003 the Company issued 4,149 shares of its Common Stock to Xmark
        for interest and penalties, including the failure to timely register certain
        shares of its Common Stock held by Xmark as of that date.  The value of
        these shares was treated as an expense at fair market value amounting to
        $158,987.
  On
        September 2, 2003, pursuant to a Letter Agreement dated as of
        August 18, 2003 with Xmark, the Company issued 1,312 shares of its Common
        Stock to Xmark for the failure to timely register certain shares of its Common
        Stock held by Xmark as of that date.  The value of these shares was treated
        as an expense at fair market value amounting to $28,085.
  Total
        shares issued to Xmark as a result of the agreements noted above was
        96,331.  In addition, an aggregate of 2,152 shares of the Company’s Common
        Stock were issuable to Xmark for payment of accrued interest.  Xmark had a
        put right for all these shares that, under certain circumstances, would have
        required the Company to purchase the shares from Xmark at a price of $20.00
        per
        share.  As a result, $1,969,668 was classified as mezzanine equity at
        December 31, 2003.
  During
        2003, in addition to the above issuances, the Company issued an aggregate
        of
        7,005 shares pursuant to several factors including cash, compensation for
        service and cashless exercise of stock options.
 
 In
        February 2004 the Company received $46,690 from Xmark as proceeds from the
        sale
        of unregistered shares in excess of their original purchase price.
  On
        March
        5, 2004, the Company issued 102,699 shares of the Company's common stock
        to
        certain creditors of Alliance. Of the total shares issued, 99,276 shares
        (valued
        at $5,043,226) related to the acquisition consideration for the *Imagent* Business
        which had been classified as Common Stock to be Issued at December 31,
        2003.
  During
        the six months ended June 30, 2004, Xmark sold 15,732 shares of common
        stock for which it held a put right. In June 2004, the Company entered into
        an agreement with Xmark whereby the Company exchanged all remaining 80,600
        puttable shares held by Xmark plus related obligations and fees for an aggregate
        of $2,128,447 of Secured Notes that were payable on or before December 1,
        2004.
  On
        April 19 and June 30, 2004, the Company sold 1,268,750 shares of its
        common stock for $8.00 per share and 735,875 warrants exercisable for $10.00
        per
        share (including 101,500 warrants issued to its two placement agents), for
        approximately $10.15 million. The net proceeds to the Company were
        approximately $9,325,000. In addition, holders of an aggregate of approximately
        $12,719,500 principal amount of the Company's Secured Promissory Notes and
        Revolving Convertible Senior Secured Promissory Notes ("Notes"), plus $713,884
        interest accrued and added to the note balance, converted these Notes into
        1,687,034 shares of the Company's common stock at $8.00 per share, 7,861
        of
        which were returned prior to year-end 2004 due to an over-issuance associated
        with an interest computation adjustment.
 F-31
  **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 In
        June 2004, the Company issued 30,829 shares of its common stock as a
        partial settlement of obligations under an equipment lease (See Note 13).
        As
        part of the terms of the settlement, the Company remains obligated to make
        an
        additional payment equal to the difference (if any) between the net proceeds
        the
        lessor receives from sales of these shares of stock during the 12 months
        after
        the Company registers the shares and $468,601 (which represents the number
        of
        issued shares valued at $15.20 per share). Accordingly, the Company has recorded
        into equity only that portion of the issued shares' par value, or $617. The
        balance of $467,984 is included in the balance of Accrued Equipment Lease
        Obligation in the balance sheet at December 31, 2004.
  During
        2004, the Company issued 11,563 shares of common stock to consultants for
        services rendered and to be rendered. The value of these shares was $43,688
        of
        which $10,500 is presented as Unearned Stock Compensation.
  During
        2004, the Company recorded $1,221,613 for penalties and fees, representing
        327,957 shares of common stock due to shareholders for late registration
        of
        their shares. In June 2004, the Company extinguished its obligation for $203,190
        (8,323 shares) of penalties and fees, which included $70,239 accrued as of
        December 31, 2003, as part of the exchange of Xmark puttable shares, noted
        previously. In December 2004, the Company issued 8,935 shares related to
        $244,469 of penalties and fees. As of December 31, 2004, the balance of shares
        to be issued which could be quantified included (a) 316,462 shares related
        to
        penalties and late registration fees totaling $812,000 and (b) 818 shares
        related to penalties and late registration fees totaling $18,587. In addition,
        an additional $20,300 in penalties and late registration fees were accrued
        but
        for which the number of shares to be issued could not be quantified as of
        December 31, 2004.
  On
        January 11, 2005, 328,053 common shares were issued in settlement of penalties
        and late registration fees totaling $893,200, including those 316,462 shares
        which were quantifiable at December 31, 2004. Accordingly, $832,300 was
        reclassified from common stock to be issued, the additional $60,900 was charged
        off to current 2005 year operations, and the combined amounts totaling $893,200
        were recorded to common stock and additional paid in capital in
        2005.
  On
        February 8, 2005, the remainder 818 shares which were quantifiable at December
        31, 2004 were issued and the corresponding value of $18,587 was reclassified
        from common stock to be issued to common stock and additional paid in
        capital.
  During
        2004 one of the Company’s law firms agreed to accept shares of the Company’s
        common stock for services rendered. As of December 31, 2004, 101,378 shares
        are
        issuable related to $247,865 of services, which were expensed.
  During
        2004 two of the Company’s consultants agreed to accept shares of the Company’s
        common stock for services rendered. As of December 31, 2004, 4,232 shares
        are
        issuable related to $22,000 of services, which were expensed. These shares
        were
        subsequently issued on February 8, 2005 and accordingly $22,000 was reclassified
        from common stock to be issued to common stock and additional paid in capital
        at
        that time.
  On
        February 10, 2005, in final settlement of further and all claims from a former
        employee, the Company modified exiting options for 1,875 shares to make them
        effectively exercisable in 21,125 net shares at an exercise price equal to
        zero.
        At December 31, 2004, the $42,250 cost associated with this contemplated
        transaction was accrued into operations. Upon completing the agreement in
        2005,
        the associated accrued expense was reclassified into additional paid in
        capital.
  During
        2005 the Company issued an additional 2,526,872 common shares to settle
        $1,607,693 of penalties and late registration fees, associated with registration
        obligations relating to 1,679,173 common shares issued in 2004 upon the
        conversion of debt and accumulated interest totaling $13,433,384. 2,008,913
        of
        these common shares were issuable at June 30, 2005, and have been accordingly
        included in the Company’s weighted average computations of weighted common
        shares outstanding for the year ending December 31, 2005. The common shares
        to
        settle these penalties and late registration fees were issued as follows:
        (a)
        63,810 common shares on February 8, 2005, (b) 454,149 common shares on April
        11,
        2005, and (c) 2,008,913 common shares on December 30, 2005.
  During
        2005 the Company recorded into expense $10,500 related to previously issued
        shares which had been recorded to unearned compensation.
 F-32
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 On
        January 24, 2005, the Company amended it Articles of Incorporation to increase
        the number of common shares authorized from 150,000,000 to 200,000,000.
  **11.
        Stock Incentive Plans, Options and Warrants**
  The
        Company maintains three long-term incentive compensation plans (“Plans”) as
        follows:
  The
        1998
        Long-Term Incentive Compensation Plan, which provides for the granting of
        up to
        25,000 stock options to key employees, directors and consultants; 2,765 options
        were outstanding as of December 31, 2005.
  The
        2000
        Long-Term Incentive Compensation Plan, which provides for the granting of
        up to
        1,500,000 stock options to key employees, directors and consultants; 151,752
        options were outstanding as of December 31, 2005.
  The
        2000
        Senior Executive Long-Term Incentive Compensation Plan, which provides for
        the
        granting of up to 50,000 stock options to senior executives. Options exercised
        under this plan contain certain registration rights 12,500 options were
        outstanding as of December 31, 2005.
  Options
        granted under these Plans may be either “incentive stock options” within the
        meaning of Section 422A of the Internal Revenue Code, or nonqualified
        options. The
        stock
        options are exercisable over a period determined by the Board of Directors
        (through its Compensation Committee), but generally no longer than 10 years
        after the date they are granted.
  The
        following summarizes the activity under the Plans combined for each of the
        years
        ended December 31,:
  2004
              
              2005Options
                  outstanding at beginning of year
              
              
              332,104
              
              
              516,670Options
                  granted
              
              
              230,071
              
              
              95,000Exercised
              
              
              --
              
              
              --Options
                  forfeited
              
              
              (45,505
              )
              
              (444,653
              )Options
                  outstanding at end of year
              
              
              516,670
              
              
              167,017Option
                  prices per share granted
              
              $
              2.80
                  - $36.20
              
              $
              8.00Weighted
                  average exercise price:Options
                  granted
              
              $
              8.96
              
              $
              8.00Options
                  granted at less than market price
              
              $
              --
              
              $
              --Options
                  granted at the market price
              
              $
              8.96
              
              $
              8.00Options
                  forfeited
              
              $
              26.96
              
              $
              123.20Options
                  outstanding at end of year
              
              $
              127.34
              
              $
              70.49Options
                  exercisable at end of year
              
              $
              445.51
              
              $
              97.80Number
                  of shares exercisable
              
              
              134,884
              
              
              116,267
 
 As
        of
        December 31, 2004, unvested options for 334,469 shares will become fully
        vested
        upon a change in control of the Company, and unvested options for 315,594
        shares
        will become fully vested upon termination of an employee. As of December
        31,
        2005, there are unvested options, issued to two individuals for 50,750 shares,
        all of which will become fully vested upon a change in control of the
        Company.
  In
        addition to the options issued as part of the Plans summarized above, in
        2002,
        the Company issued fully vested options outside of the plans that, after
        amendment in 2003, expire in February 2010. 1,875 of these options were
        exercisable at $84 per share and the balance of the options were effectively
        exercisable into 13,852 shares of the Company’s stock at an exercise price equal
        to zero, of which 500 were exercised in 2003 (the exercise price for these
        “cashless” options was originally $25.40 per share). These options were issued
        in settlement of claims from a former employee and were fully expensed in
        2002.
        On February 10, 2005, in final settlement of further and all claims, the
        Company
        modified the options for the 1,875 shares to make them effectively exercisable
        into 21,125 shares at an exercise price equal to zero. The expense related
        to
        this modification was reflected in the balance sheet as accrued expense at
        December 31, 2004.
  F-33
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 The
        following table summarizes information related to outstanding and exercisable
        options of the Plans as of December 31, 2005:
 
 Options
                  Outstanding
              
              Options
                  ExercisableWeightedWeighted
              
              Average
              
              
              
              WeightedAverage
              
              Remaining
              
              
              
              AverageRange
                  of
              
              Number
                  of
              
              Exercise
              
              Contractual
              
              Number
                  of
              
              ExerciseExercise
                  Price
              
              Shares
              
              Price
              
              Life
                  in Years
              
              Shares
              
              Price$2.80
                  - $18.40
              
              
              105,625
              
              $
              8.08
              
              
              9.61
              
              
              54,875
              
              $
              8.22$18.41
                  - $21.60
              
              
              29,627
              
              $
              21.55
              
              
              1.14
              
              
              29,627
              
              $
              21.55$21.61-
                  $91.20
              
              
              11,563
              
              $
              35.03
              
              
              7.92
              
              
              11,563
              
              $
              35.03$91.21
                  - $220.00
              
              
              7,389
              
              $
              186.44
              
              
              1.01
              
              
              7,389
              
              $
              186.44$220.01
                  - $550.00
              
              
              88
              
              $
              550.00
              
              
              5.20
              
              
              88
              
              $
              550.00$550.0
                  1- $1060.00
              
              
              12,725
              
              $
              664.07
              
              
              1.29
              
              
              12,725
              
              $
              664.07$1,060.01
                  - $1,205.00
              
              
              --
              
              $
              --
              
              
              --
              
              
              --
              
              $
              --Total
              
              
              167,017
              
              $
              70.49
              
              
              6.98
              
              
              116,267
              
              $
              97.80
 
 The
        following summarizes the activity related to warrants for each of the years
        ended December 31:
 
 2004
              
              2005Warrants
                  outstanding at beginning of year
              
              
              18,874
              
              
              820,147Warrants
                  granted
              
              
              802,548
              
              
              --Warrants
                  exercised
              
              
              --
              
              
              --Warrants
                  forfeited
              
              
              (1,275
              )
              
              (411
              )Warrants
                  outstanding at end of year
              
              
              820,147
              
              
              819,736Weighted
                  average exercise price:Warrants
                  granted
              
              $
              9.62
              
              $
              --Warrants
                  exercised
              
              $
              --
              
              $
              --Warrants
                  forfeited
              
              $
              1,678.84
              
              $
              955.60Warrants
                  outstanding at end of year
              
              $
              10.87
              
              $
              10.40Warrants
                  exercisable at end of year
              
              $
              10.50
              
              $
              10.03Number
                  of shares exercisable
              
              
              812,547
              
              
              812,136
 
 
 F-34
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 The
        following table summarizes information related to outstanding and exercisable
        warrants as of December 31, 2005:
 
 Warrants
                  Outstanding
              
              Warrants
                  ExercisableWeightedWeighted
              
              Average
              
              
              
              WeightedAverage
              
              Remaining
              
              
              
              AverageRange
                  of
              
              Number
                  of
              
              Exercise
              
              Contractual
              
              Number
                  of
              
              ExerciseExercise
                  Price
              
              Shares
              
              Price
              
              Life
                  in Years
              
              Shares
              
              Price$5.40
                  - $5.40
              
              
              66,667
              
              $
              5.40
              
              
              3.80
              
              
              66,667
              
              $
              5.40$10.00
                  - $10.00
              
              
              735,881
              
              $
              10.00
              
              
              3.50
              
              
              735,881
              
              $
              10.00$21.60
                  - $50.40
              
              
              17,000
              
              $
              37.69
              
              
              1.90
              
              
              9,400
              
              $
              27.42$884.54
                  - $884.54
              
              
              188
              
              $
              884.54
              
              
              4.10
              
              
              188
              
              $
              884.54Total
              
              
              819,736
              
              $
              10.40
              
              
              3.49
              
              
              812,136
              
              $
              10.03
  In
        2004,
        the Company issued 66,667 warrants, exercisable at $5.40, to an investment
        advisor in conjunction with the cross-license and securities purchase agreement
        described in Note 14. The value of these options under the Black-Scholes
        option
        pricing model was $60,400 of which was $28,400 was allocated to the
        cross-license agreement and charged to expense. The Company also issued 735,881
        warrants, exercisable at $10.00, to purchasers of the Company’s shares of common
        stock in April and June 2004 as described in Note 10 (c).
 
 **12.
        Dividends**
  Dividends
        for of the years ended December 31, 2004 related to the accrual of dividends
        on
        the Series A-Old Convertible Preferred stock, which was retired in 2004.
        There
        are no dividends associated with the Series A-New Convertible Preferred
        stock.
  **13.
        Restructuring Activities**
  On
        August 31, 2003, the Company closed its Pennsylvania corporate headquarters
        and transferred its headquarters to its facility in San Diego, California.
        The
        lease for the corporate headquarters expired in July 2004. As of
        December 31, 2003, the Company had accrued $236,700 as the estimate of the
        amount due for the remaining lease obligation. The Company subsequently
        determined that the landlord had leased its vacated premises and as a result
        the
        Company has reduced the estimate of the remaining lease obligation during
        2004,
        and which is included in accounts payable at December 31, 2005 at $99,764.
  The
        Company had an operating lease for laboratory equipment which expired during
        2004. During 2001, the Company determined that equipment leased by the Company
        under this operating lease would no longer be used by the Company in its
        research and discontinued making the monthly lease payments. In 2001 the
        Company
        recorded a provision for the remaining future lease payments of $1,264,208.
        At
        December 31, 2003 the balance of this obligation was $719,940. In June
        2004, the Company reached a settlement with the equipment lessor issuing
        30,829
        shares of common stock and paying $75,000 with an agreement to pay $25,000
        in
        January 2005. The settlement requires the Company to make additional payments
        to
        the lessor to the extent the lessor’s proceeds from its future sales of this
        stock are below $468,601 (30,829 shares at a guaranteed minimum price of
        $15.20
        per common share). This contingent obligation is classified in the balance
        sheet
        at both December 31, 2004 and 2005 as $467,984 accrued equipment lease
        obligation, with the remainder as $31 par value common stock and $586 additional
        paid in capital (attributed to the minor difference effected upon recording
        the
        change in the underlying shares issued upon the retroactive restatement related
        to the 1-for-20 reverse stock split - see Note 10). In addition, the scheduled
        January 2005 payment, which has not been made, is also included in accrued
        equipment lease obligation at both December 31, 2004 and 2005. The balance
        of
        the estimated obligation in June 2004 in excess of the value of the settlement
        was recorded as miscellaneous income ($126,257).
 
 In
        April
        2005, the Company, after assessing its cash resources, circumstances related
        to
        the continued patent litigation matter (see Note 8) and inability to obtain
        additional sources of cash necessary to continue the Company’s planned business
        activities, formulated and began to adopt a new restructuring plan which
        initially included a reduction-in-force of a majority of the full-time employees
        and part-time employees or consultants who perform administrative support,
        manufacturing and related functions. In addition, a limited number of full-time
        employees were transferred to part-time positions to assist the Company with
        the
        actions necessary to curtail its operations. The Company also temporarily
        suspended its manufacturing operations at that time, pending further
        developments.
 F-35
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 The
        Company’s board of directors later concluded that, for a variety of factors,
        including some of which are cited in Note 2, it was not probable that the
        Company would obtain additional cash funds to continue operating even on
        a
        limited basis in the near term. Therefore, during May 2005, the Company modified
        its restructuring plan to include the disposition of its furniture, fixtures
        and
        equipment, to vacate its premises, and other steps to effect an orderly
        cessation or suspension of operations other than those necessary to facilitate
        completion of the restructuring plan.
  The
        Company incurred approximately $34,000 in cash disbursements for severance
        pay
        associated with this restructuring plan during the year ended December 31,
        2005,
        and also paid approximately $191,000 in previously accrued vacation obligations,
        primarily to terminated employees (which is required under California employment
        laws). The Company also terminated its vacation benefit program, and vacation
        was no longer accrued for then remaining employees. In addition, the Company
        negotiated two cash retention bonuses totaling $80,000 with two employees
        deemed
        integral to the restructuring efforts of the Company as part of this
        restructuring plan; however, one of the employees, as consideration, also
        waived
        any further claim he had to a previously earned, accrued but unpaid bonus
        of
        $60,000 from 2003. Accordingly, the Company recognized on a net basis only
        $20,000 bonus expense in the quarter ended June 30, 2005. The retention bonus
        obligations were paid as follows: $30,000 during the quarter ended June 30,
        2005, $35,000 during the quarter ended September 30, 2005 and the remainder
        of
        $15,000, owed to one individual and accrued as of September 30, 2005, was
        subsequently paid in November 2005. All efforts required of these two
        individuals were largely concluded by September 30, 2005.
  As
        part
        of the employee reduction plan, the employment of the Company’s CEO and
        President was terminated effective May 31, 2005. A reserve for severance
        (equal
        to one year’s salary, as required by this individual’s employment contract),
        amounting to $275,000, was recorded as expense during the quarter ending
        June
        30, 2005, but remains unpaid and is accordingly included in accrued expenses
        at
        December 31, 2005.
  As
        also
        discussed in Note 8, the Company concluded a successful negotiation with
        EOP,
        the lessor of the Company’s facility at 6175 Lusk Boulevard, San Diego,
        California. In conformity with the terms of this agreement, the Company vacated
        the premises on or about July 31, 2005 and surrendered its lease security
        deposit totaling $297,000. The Company was released from all other obligations,
        including past due rents totaling approximately $331,292 at July 31, 2005
        (approximately $248,469 at June 30, 2005), as well as late payment fees and
        any
        future lease payments, commitments and/or contingencies. Future minimum lease
        payments at June 30, 2005 eliminated as result of the lease termination
        agreement totaled $2,244,113 at that date. In addition, Alliance, which was
        the
        lease guarantor, was also released from any and all claims, commitments and
        contingencies.
  As
        a
        result of the successful adoption of the plan to vacate the premises, the
        Company recorded a leasehold valuation impairment allowance of approximately
        $3,072,000 in the quarter ending June 30, 2005, leaving a net carrying value
        of
        leasehold improvements as of June 30, 2005 totaling $20,000.
  On
        June
        16, 2005, the Company sold the majority of its excess equipment at a public
        auction, which netted the Company $270,820, $175,000 of which was received
        by
        June 30, 2005. The balance of $95,820 was recorded as accounts receivable
        on
        that date, and was subsequently received during the quarter ended September
        30,
        2005. At June 30, 2005 the Company recorded an equipment valuation impairment
        allowance of approximately $193,000, leaving a net carrying value of $31,220
        for
        unsold equipment remaining as of that date.
  The
        remainder of the Company’s equipment and leasehold interest was subsequently
        sold subsequent to June 30, 2005 for $51,220 and, accordingly, all carrying
        values of related assets, accumulated depreciation and amortization, and
        valuation impairment allowances have been adjusted to zero as of December
        31,
        2005.
  In
        addition to the impairment losses charged to operations, the Company recognized
        $248,599 as a “Loss on sale of equipment” as of June 30, 2005 for those certain
        asset sales which were concluded by that date; however, the Company has since
        collected $1,500 in miscellaneous collections attributed to assets whose
        book
        value had previously been written off, and also collected a net payment of
        $20,794 from its property and liability insurance carrier as a result of
        a
        submitted claim for stolen property which occurred during the period the
        Company
        was vacating the premise in favor of the new tenant. As a result, the actual
        “Loss on sale of equipment” has been reduced to $226,305 at December 31, 2005.
  During
        the quarter ending June 30, 2005, the Company solicited interest from several
        parties regarding its technology license asset, which relates to the Company’s
        N1177 compound and PH-50, the same or substantially same compound for a
        different indication. An agreement in principle was reached with a party
        to
        acquire these related assets for $102,500, net of third party intermediary
        compensation costs. Accordingly, the Company recorded a technology license
        valuation impairment allowance of approximately $570,000 in the quarter ending
        June 30, 2005, leaving a net carrying value of technology license as of June
        30,
        2005 of $102,500.
 F-36
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 During
        the quarter ended September 30, 2005, the Company and the third party completed
        the asset purchase agreement for the sale of the Company’s assets exclusively
        related to N1177 and PH-50. The sale includes certain patent rights related
        to
        N1177 and PH-50 and other intellectual property, including the Company’s
        technology license asset. The agreement called for an aggregate purchase
        price
        (net of a third party intermediary fee, of $102,500) which was due in two
        payments, the first of which was $71,500 and was paid at closing and the
        balance
        of $31,000 was paid prior to year end upon satisfactory conclusion of certain
        required follow-on activities. Accordingly, all carrying values of this
        technology license related to its cost, accumulated amortization and valuation
        allowance have been adjusted to zero as of December 31, 2005.
  As
        discussed in Note 8, the Company entered into the Amersham Settlement dated
        as
        of September 19, 2005 with Amersham, Alliance and Molecular Biosystems, Inc.
        The
        Amersham Settlement resolved the parties’ claims arising under the case
        described above. Under the terms of the Amersham Settlement, the Company’s
        technology cross-license was valued at $1,200,000 in favor of the Company,
        for
        which the Company received $1,000,000 directly from Amersham. The balance,
        or
        $200,000, was paid directly by Amersham to Alliance which served as the cash
        consideration to Alliance under the separate but concurrent Alliance Settlement
        discussed below. The parties dismissed their litigation and granted each
        other
        fully paid-up, irrevocable, royalty-free, non-exclusive cross-licenses, with
        the
        right to sublicense, and mutual releases.
  In
        addition, the Company entered into the Alliance Settlement with Alliance
        dated
        as of September 19, 2005 pursuant to which: (i) each party’s respective ongoing
        obligations to one another under the Asset Purchase Agreement dated June
        10,
        2003 between the Company and Alliance were terminated, (ii) each party granted
        the other a mutual general release (which resolved, among other things, the
        parties’ claims against one another for various accumulated post-closing
        payments), and (iii) the parties agreed to share in the proceeds of future
        transactions involving the disposition of the Company’s *Imagent* asset.
  As
        the
        Company’s 2005 restructuring activities continued during the second, third and
        fourth quarters of 2005, the efforts have continually focused on seeking
        alternatives as to how best maximize the value in the Company’s significant
        remaining asset the Purchased Technology, while at the same time minimizing
        and
        eliminating additional significant contingent claims, including those which
        might have been made had the Company not been able to negotiate to satisfactory
        conclusions matters related to (a) the ongoing patent litigation, (b) the
        related disputes with Alliance and (c) the facilities lease
        termination.
  The
        Company continues to evaluate its alternatives with respect to efforts to
        sell
        or otherwise maximize asset values related to the Purchased Technology, for
        the
        benefit of its creditors and shareholders, and will continue to consider
        as
        alternatives the sale or license of its remaining assets, a merger or other
        material transaction. Such a transaction may include selling the Purchased
        Technology, a license or sale of the patent portfolio underlying the Purchased
        Technology, a manufacturing rights agreement, or another form of transaction.
        To
        date, efforts to complete such an arrangement have not been successful.
        However, the Company is still contacting interested or potentially interested
        parties, and there remains some potential for a sale, license, development
        agreement or comparable transaction.
  Prior
        to
        December 31, 2005, the Company was not able to predict what types of
        arrangements might ultimately be made with potential business partners
        for *Imagent* ,
        financial or otherwise. Accordingly, the Company prior to this date was not
        able
        to make any estimates for potential changes to the fair market value of the
        Purchased Technology, together with the related deferred royalties asset
        and
        deferred revenue credits carried on the Company’s balance sheet at September 30,
        2005.
  When
        the
        Purchased Technology was initially acquired in June 2003, the Company not
        only
        acquired the underlying technology of the FDA approved product *Imagent* ,
        but
        ongoing operation which held out the possibility at the time that the Company
        could generate at least two strategic sources of revenue: (a) from direct
        product sales and (b) from product licensing and/or technology cross-licensing
        activities. For those reasons, the accounting policy was then established
        that
        the value of the Purchased Technology should be amortized on a straight-line
        basis into expense over the estimated useful remaining life of the underlying
        intellectual property, including the patent estate, which was 12 years from
        the
        date of the acquisition.
 F-37
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 Notwithstanding
        the difficulties associated with the ongoing litigation with Amersham, the
        Company nevertheless has been able to execute to a significant extent on
        the
        second part of the strategic revenue plan so far, that of obtaining cash-based
        revenues from product licensing and/or technology cross-licensing activities,
        including:
  §
              $4,000,000
                  paid by Kyosei Pharmaceutical Co., Ltd. (“Kyosei”), a unit of the Sakai
                  Group in Japan, in December 2003 and April 2004 pursuant to a product
                  license, which was potentially worth as much as $10,000,000 to
                  the Company
                  if the future milestone obligations could be
                  met;
  §
              $4,000,000
                  paid by BMSMI in October 2004 for a technology cross-license;
                  and
  §
              $1,200,000
                  paid by Amersham in September 2005 for a technology cross-license,
                  pursuant to reaching the Amersham Settlement and the related Alliance
                  Settlement.
  The
        Kyosei product license agreement contemplated certain ongoing collaborative
        activities between the Company and Kyosei, enabling the Company to achieve
        future payments upon the fulfillment of prospective performance obligations
        by
        each party, but there is no ongoing performance obligation as such related
        to
        prior amounts received. The two technology cross-license agreements with
        BMSMI
        and Amersham likewise do not contemplate any future performance obligations
        in
        the furtherance of the respective agreements.
  Furthermore,
        because the Purchased Technology and the follow-on transactions for the
        above-described strategic revenues collected so far, as well as the derivative
        royalties obligation owed to Schering AG pursuant to the Kyosei product license
        agreement, are inextricably related to one another, the accounting policies
        have
        been implemented with the primary objective being to match the recognition
        of
        license/cross-license revenue and royalties expense to the amortization of
        the
        Purchased Technology. Therefore, up to December 31, 2005, the related license
        fees and royalties have been deferred and only partially recognized on a
        straight-line basis into license revenue and royalties expense, based on
        schedules which commence on the dates the respective transactions were
        concluded, and over the remaining estimated useful lives of the underlying
        technology.
  The
        Company also faces certain continuing challenges to preserve and optimize
        the
        value of its Purchased Technology for the benefits of creditors and
        shareholders, not the least of which is the current lack of a full-time staff
        and reduced financial resources. For example, without an immediate capability
        to
        manufacturing the *Imagent* product,
        the Company can no longer support the prospective aspects of the Kyosei product
        license agreement as currently constructed, therefore putting out of practical
        reach, at least for the time being, any portion of the future potential payments
        totaling $6 million which might have otherwise flowed from this contract.
        In
        addition, it is similarly unlikely that the Company could readily restart
        the
        production of *Imagent* without
        first commencing a lengthy and costly process to reestablish manufacturing
        capabilities, which also puts out of reach for the time being the additional
        possibility of *Imagent* product
        sales. Continued protection of the value of the Company’s patent portfolio may
        represent another potential source of revenues for the Company, if factors
        warrant and the underlying cost-benefit analysis supports such action(s).
        And
        while the Company’s history of enforcing its rights in patents indicates that
        there is merit in this approach, patent protection, enforcement and/or possible
        litigation activities can be costly, time consuming and the results are
        inherently uncertain, so there can be no assurance that this business strategy
        will result in net benefits to the Company.
  Based
        on
        potential transaction values which might be concluded in the near term, we
        have
        determined that the carrying value of the *Imagent*assets should be
        written down as of December 31, 2005 through the establishment of an allowance
        for valuation impairment to its currently estimated fair value of $1,000,000.
        Furthermore, since the lack of adequate capital and a full-time staff make
        it
        impracticable to continue normal operating activities due to the likelihood
        that additional value will most readily be created only through opportunistic
        circumstances related to strategic technology transactions with others, the
        Company has concluded that the remaining deferred revenues and related deferred
        royalties assets, should be recognized currently, rather than amortized into
        future operations, and that correspondingly the Purchased Technology asset
        should be written down to zero rather than amortized into future
        operations.
 F-38
 **IMCOR
            Pharmaceutical Co. and Subsidiaries**
 **(formerly
            Photogen Technologies, Inc.)**
 **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements (Continued)**
 As
        a
        result of those adjustments and other asset impairment transactions described
        elsewhere in these “Notes to Consolidated Financial Statements,” the Company has
        recorded net impairment losses for each of the years ending December 31,
        2004
        and 2005 as summarized below:
 
 2004
              
              2005Impairment
                losses:Purchased
                  Technology write down
              
              $
              --
              
              $
              11,373,572Add
                  recognition of remaining deferred royalties
              
              
              --
              
              
              416,666Less
                  recognition of remaining deferred revenues
              
              
              --
              
              
              (8,119,485
              )Net
                  impairment attributed to Purchased Technology and related deferred
                  license
                  revenues and royalties
              
              
              --
              
              
              3,670,753Patents
              
              
              274,479
              
              
              --Technology
                  license
              
              
              --
              
              
              570,321Leasehold
                  improvement
              
              
              --
              
              
              3,072,315Furniture,
                  fixtures and equipment
              
              
              --
              
              
              193,177$
              274,479
              
              $
              7,506,566
 
 The
        Company and its board of directors intend to reassess from time to time the
        remaining carrying cost of the Purchased Technology as the Company continues
        to
        explore various alternatives as to a possible sale, license, development
        agreement and/or comparable transaction(s).
  The
        Company’s subsidiary, Sentigen, Ltd., a Bermuda entity, currently has no
        operations. It is likely to be administratively dissolved by the Bermuda
        authorities.
  **14.
        Deferred Revenue:**
 
 In
        December 2003, the Company entered into a product license agreement with
        Kyosei
        for the development and marketing of *Imagent* in Japan
        for all radiology and cardiology indications. Terms of the agreement call
        for
        the payment to the Company of up to $10,000,000 in fees and development
        milestone payments plus royalties on commercial sales. Kyosei will also pay
        the
        Company to manufacture *Imagent* for
        Kyosei’s clinical and commercial requirements. The Company received gross
        payments of $2,000,000 each in December 2003 and April 2004. These milestone
        payments have been amortized into income through December 31, 2005 over the
        remaining life of the related patents at the time each payment is received,
        which was approximately 12 years. The Company has recognized cumulative license
        revenue related to this agreement totaling $633,333, including $295,238 and
        $338,095 for 2004 and 2005, respectively, prior to considering the additional
        adjustment made in accordance with the Purchased Technology valuation assessment
        more fully discussed in Note 13.
 
 The
        remaining potential milestone payments in the Kyosei agreement total up to
 $6,000,000, and become due as follows: $1,000,000 upon commencement of a
        Phase 1 clinical study; $1,000,000 is due at the earlier of the initiation
        of a
        Phase 3 clinical study or December 2007, unless a Phase 2 clinical study
        was
        required, in which case date is December 2008, $2,000,000 on the earlier
        of the
        filing of a New Drug Application for Licensed Products in Japan (“NDA”), or the
        one year anniversary of the completion of the Phase 3 clinical study; $2,000,000
        upon approval of the NDA.
 
 As
        of
        December 31, 2005, and as previously discussed, the Company is not able to
        provide the *Imagent* product
        to Kyosei due to the restructuring activities of the Company which included
        the
        closure of the Company’s manufacturing facility, and therefore cannot
        prospectively support the further development of *Imagent* as
        contemplated by the remaining Kyosei agreement milestones for the time being,
        if
        at all.
 
 On
        October 29, 2004, the Company received $4,000,000 related to the cross-licensing
        provisions of a technology cross-licensing and securities purchase agreement
        with Bristol-Meyers
        Squibb Medical Imaging, Inc. (“BMSMI”) covering
        ultrasound contrast agent patents. The agreement provides both BMSMI and
        the
        Company the right to further develop and commercialize their respective
        ultrasound contrast imaging agents without risk of infringing upon the other
        company’s patent rights. This payment has been amortized into income through
        December 31, 2005 over the remaining life of the related patents, which was
        approximately 11 years at the time of the agreement. The Company has recognized
        cumulative license revenue related to this agreement totaling $417,914,
        including $59,702 and $358,212 for 2004 and 2005, respectively, prior to
        considering the additional adjustment made in accordance with the Purchased
        Technology valuation assessment more fully discussed in Note 13.
 F-39
 **IMCOR
          Pharmaceutical Co. and Subsidiaries**
 **(formerly
          Photogen Technologies, Inc.)**
 **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements (Continued)**
 On
        September 19, 2005 the Company entered into a Settlement Agreement and License
        with Amersham, Alliance and Molecular Biosystems, Inc. The Amersham Settlement
        resolved the parties’ claims arising under the litigation - see Note 8. Under
        the terms of the Amersham Settlement, the Company received a technology
        cross-license which was valued at $1,200,000 in favor of the Company, for
        which
        the Company received $1,000,000 directly from Amersham. The balance, or
        $200,000, was paid directly by Amersham to Alliance which served as the cash
        consideration to Alliance under the separate but concurrent Alliance Settlement
        more fully discussed in Note 3. The parties dismissed their litigation and
        granted each other fully paid-up, irrevocable, royalty-free, non-exclusive
        cross-licenses, with the right to sub-license, and mutual releases.
 
 The
        Company recorded $1,200,000 attributed to the Amersham technology cross-license
        to deferred revenue, which it then began to amortize into income through
        December 31, 2005 over the remaining life of the related patents, which was
        approximately 101⁄4 years at the time of the agreement. The Company has recognized
        cumulative license revenue related to this agreement totaling $29,268, all
        of
        which is attributable to 2005, prior to considering the additional adjustment
        made in accordance with the Purchased Technology valuation assessment more
        fully
        discussed in Note 13.
  As
        more
        fully discussed in Note 13, the Company has recognized the balance of the
        deferred revenue at December 31, 2005, totaling $8,119,485 ($3,366,667 related
        to the Kyosei product license, $3,582,086 related to the BMSMI technology
        cross-license and $1,170,732 related to the Amersham technology cross-license),
        taken into operations as a reduction of “Impairment losses” recorded in
        connection with its restructuring activities.
 
 **15.
        Income Taxes**
  As
        of
        December 31, 2004 and 2005, the Company has net operating loss (“NOL”)
        carryforwards for federal income tax purposes of approximately $40,372,000
        and
        $52,373,000, respectively, that expire from 2018 through 2025, and $18,854,000
        and $30,855,000, respectively, for California state income tax purposes that
        expire in 2013, 2014 and 2015. The Tax Reform Act of 1996 contains provisions
        that may limit the utilization of NOL carryforwards available to be used
        in any
        given year in the event of significant changes in ownership interests as
        defined
        in the act. In addition, a portion of the NOL carryforward may be lost as
        a
        result of the disposition of the Company’s therapeutic business in 2002. The
        amount of this adjustment has not yet been determined.
 The
          expected income tax provision, computed based on the Company’s pre-tax income
          and the statutory Federal income tax rate, is reconciled to the actual
          tax
          provision reflected in the accompanying consolidated financial statements
          as
          follows:
  2004
                  
                  2005Expected
                      federal income tax benefit
                  
                  $
                  (7,369,000
                  )
                  $
                  (6,017,000
                  )Expected
                      state income tax benefit, net of federal benefit
                  
                  
                  (1,264,000
                  )
                  
                  (1,033,000
                  )Increase
                      in valuation allowance
                  
                  
                  8,239,000
                  
                  
                  6,622,000Losses
                      for which no benefit recognized
                  
                  
                  394,000
                  
                  
                  429,000Other
                  
                  
                  --
                  
                  
                  (1,000
                  )Provision
                      for income tax expense
                  
                  $
                  --
                  
                  $
                  --
  The following is a schedule of the significant components
            of
            the Company’s deferred tax assets as of each of the years ended December
            31:
  2004
                  
                  
                  2005Net
                      operating loss carryforwards
                  
                  $
                  14,826,000
                  
                  $
                  19,607,000Deferred
                      revenue
                  
                  
                  2,862,000
                  
                  
                  --Amortization
                      of intangible assets
                  
                  
                  155,000
                  
                  
                  242,000Impairment
                      in asset valuations
                  
                  
                  109,000
                  
                  
                  4,640,000Equity
                      in loss of affiliate
                  
                  
                  5,081,000
                  
                  
                  5,081,000Other
                      temporary timing differences
                  
                  
                  167,000
                  
                  
                  251,000Deferred
                      tax asset
                  
                  
                  23,200,000
                  
                  
                  29,821,000Less
                      valuation allowance
                  
                  
                  (23,200,000
                  )
                  
                  (29,821,000
                  )$
                  --
                  
                  $
                  --


F-40




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




Matters
      related to our auditors' decisions not to stand for re-election during the
      past
      two fiscal years are described in our Current Reports on Form 8-K that we
      previously filed.




**ITEM
      8A. CONTROLS AND PROCEDURES.**




In
      September 2004, our management concluded that there were certain reportable
      conditions and material weaknesses in our internal controls and procedures.
      As
      noted in our Annual Report on Form 10-KSB for the year ended December 31, 2004,
      as amended, we had taken steps and had started to implement remediation
      procedures to address the identified reportable conditions and material
      weaknesses. However, based on our limited capital resources and the adoption
      of
      a restructuring plan in April 2005, which included a reduction-in-force of
      our
      full-time employees and part-time employees or consultants who perform
      administrative support, manufacturing and related functions, we have been unable
      to complete the previously identified remediation plans. As a result, certain
      of
      the previously identified reportable conditions and material weaknesses,
      particularly those related to the small size of our accounting staff and the
      limited number of our financial and accounting personnel, still
      exist.




Although
      certain material weaknesses in internal controls and procedures previously
      disclosed have not been fully remediated, we believe that changes and procedures
      that were implemented and remain in place, mitigate and reduce the likelihood
      of
      material misstatements or improper disclosures in our financial statements
      and
      reports. These changes and procedures include (i) engaging of Larry D. Grant
      as
      a financial consultant, (ii) adding Darlene Deptula-Hicks to our Audit
      Committee, (iii) requiring the Executive Committee of the Board to ratify
      routine and/or recurring expenditures and approve significant commitments and
      non-routine expenditures and payments, (iv) requiring both Larry D. Grant and
      our other seniour executives review and approve incurring all significant
      obligations and remitting payments, (v) adopting separate Codes of Ethics for
      all employees and for senior executives and finance personnel, (vi) adopting
      or
      updating the charters of our Audit and Compensation Committees, and (vii)
      creating a Disclosure Committee and adopting a Disclosure Committee
      Charter. In
      addition, the cessation of operations and discharge of employees simplifies
      the
      complexity and reduces the number of transactions we must monitor, thereby
      significantly simplifying the internal control process.




Our
      senior executive officers have previously
      consulted with Larry D. Grant and have participated in the evaluation of our
      disclosure controls (as defined in Rules 13a-15(e) and 15d-15(e) of the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”)) required by
      paragraph (b) of Rule 13a-15 or Rule 15d-15, as of December 31, 2005 and, based
      on that evaluation, concluded that due to insufficient staff our disclosure
      controls and procedures were not fully effective to ensure timely collection,
      evaluation and disclosure of information relating to the Company that would
      potentially be subject to disclosure under the Exchange Act, and the rules
      and
      regulations thereunder. However, to the extent corrections and improvements
      in
      internal controls and disclosure controls and procedures cannot be implemented
      and/or maintained, management believes appropriate oversight and review is
      currently in place in light of the minimal transactions conducted during
      this fiscal year to prevent material misstatements in our annual
      financial reporting.


31




**ITEM
      8B. OTHER INFORMATION.**





None.





**PART
      III.**




**ITEM
      9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
      WITH
      SECTION 16(A) OF THE EXCHANGE ACT.**




**Directors.** The
      table
      below sets forth our seven directors and information concerning their age and
      position with the company as of March 31, 2006. Except for Mr. Fleming (who
      is a
      director of Memory Pharmaceuticals Corp.) and Ms. Deptula-Hicks (who is a
      director of Technest Holdings Inc.), none of these individuals is a director
      of
      any other company subject to the reporting requirements under the federal
      securities laws.






**Name**
            
            **Age**
            
            **Position**Brian
                M. Gallagher, Ph.D.(1)
            
            58
            
            Director,
                Chairman of the BoardTaffy
                J. Williams, Ph.D.(1)
            
            56
            
            DirectorRobert
                A. Ashley(2)
            
            48
            
            DirectorRichard
                T. Dean, Ph.D.(2)(3)
            
            58
            
            DirectorDarlene
                M. Deptula-Hicks, M.B.A.(2)
            
            48
            
            DirectorJonathan
                J. Fleming(1)(3)
            
            48
            
            DirectorAlan
                D. Watson, Ph.D., M.B.A.(3)
            
            53
            
            Director




*(1)*
            Member
                of the Executive Committee


*(2)*
            Member
                of the Audit Committee


*(3)*
            Member
                of the Compensation Committee




Ms.
      Deptula-Hicks is the Chairperson of our Audit Committee. Our Board has
      determined that she is an “audit committee financial expert” and is
“independent” as contemplated by SEC rules.




Each
      director of the company holds office until the next annual meeting of
      stockholders and until his or her successor has been elected and qualified.
      Each
      executive officer holds office at the pleasure of the Board of Directors and
      until his or her successor has been elected and qualified. A brief discussion
      of
      the business experience of each director is set forth below.




**Brian
      M. Gallagher, Ph.D.** is
      Chairman of the Board and has served as a director since July 22, 2004. Dr.
      Gallagher received his B.S. is biology from St. Louis University, his M.S.
      in
      marine sciences from Long Island University, and his Ph.D. in biology from
      St.
      John’s University. Dr. Gallagher currently serves as a Director of CollaGenex
      Pharmaceuticals, Inc. and ImaRx Therapeutics, Inc., a privately held,
      drug delivery/specialty pharmaceutical company with a focus on cardiovascular
      diseases. From 1994 to 2003, he was the Chairman, President and Chief Executive
      Officer of CollaGenex Pharmaceuticals, Inc.


32




**Taffy
      J. Williams, Ph.D.** served
      as
      our President, Chief Executive Officer and a director between May 17, 2000
      and May 31, 2005, when his employment as our President and CEO terminated as
      part of our employee reduction plan. Prior to joining the company, Dr. Williams
      served as CEO and President of PANAX Pharmaceuticals for two and half years
      and
      President of InKine Pharmaceuticals for two years. He received his Bachelor
      of
      Science in Chemistry from the University of Notre Dame and his Ph.D. in
      Chemistry from the University of South Carolina.




**Robert
      A. Ashley** began
      serving **** as
      a
      director following his election at the annual stockholders’ meeting held on
      January 20, 2005. Mr. Ashley received his MA in Biochemistry from St. Peter’s
      College, Oxford University. Since 2004, he has served as President, Chief
      Executive Officer and Chairman of the Board of Amplimed Corporation. From 1994
      to 2003, he served in various capacities with CollaGenex
      Pharmaceuticals Inc., including as Senior Vice President, Vice President of
      Commercial Development and Managing Director of CollaGenex
      International Ltd.




**Richard
      T. Dean, Ph.D.** has
      served as a director since October 27, 2003. Dr. Dean received his B.S.
      from Cornell University, his M.S. from the University of Michigan and his Ph.D.
      from the University of California at Berkeley. Since 2004, Dr. Dean has served
      as the Chief Executive Officer of Xanthus Life Sciences, Inc., a company
      founded to develop novel oncology drugs. From 1999 to 2003, Dr. Dean served
      in
      various capacities with Schering AG, including as Head of Strategic Business
      Development, Diagnostics and Radiopharmaceuticals. Dr. Dean has over
      25 years experience in the pharmaceutical and biotechnology
      field.




**Darlene
      M. Deptula-Hicks, M.B.A.** has
      served as a director since July 22, 2004. Ms. Deptula-Hicks received her
      B.S. in accounting from New Hampshire College and her M.B.A. from Rivier
      College. Since 2002, she has served as Executive Vice President and Chief
      Financial Officer of ONI Medical Systems, Inc. Prior to that, she was the
      Executive Vice President, Chief Financial Officer and Treasurer of Implant
      Sciences Corporation from 1998 to 2001. Ms. Deptula-Hicks has over 20 years
      of experience in financial management positions, primarily in the life sciences
      sector.




**Jonathan
      J. Fleming** has
      served as a director since August 15, 2003. Mr. Fleming has been a Partner
      of Oxford Bioscience Partners since 1996 and its Managing Partner since 2001.
      Oxford Bioscience Partners is an international venture capital firm with
      committed capital of more than $800 million specializing in life science
      technology based investments. Mr. Fleming holds a Master’s degree in Public
      Administration from Princeton University and a Bachelor of Arts degree from
      the
      University of California, Berkeley. Mr. Fleming is a co-founder and is Chairman
      of the Board of Memory Pharmaceuticals. He is also Chairman of the Board of
      BioProcessors Corporation and Dynogen Corporation, and is a director of several
      private companies, including Leerink Swann. Mr. Fleming is a Trustee of the
      Museum of Science in Boston and is a Senior Lecturer at MIT’s Sloan School of
      Management.




**Alan
      D. Watson, Ph.D., M.B.A.** has
      served as a director since November 12, 2002. Dr. Watson received his B.S.
      from the University of N.S.W., his Ph.D. in Chemistry from Australian National
      University, and his M.B.A. from Northeastern University. Since 2002, Dr. Watson
      has served as Executive Vice President and Chief Business Officer of Elixir
      Pharmaceuticals, Inc. Prior to that, he was the Senior Vice President,
      Corporate Development of Cubist Pharmaceuticals, Inc. from 1999 to 2002.




**Executive
      Officers and Significant Employees.** The
      recent business experience of our other executive officers and significant
      employees or consultants follows.




**Jack
      DeFranco** ,
      age 60,
      has served as Chief Operating Officer since January 20, 2005 and is currently
      providing services to the company as a consultant. From June 18, 2003 until
      January 20, 2005, he served as our Senior Vice President of Business Development
      and Marketing. For the ten years prior to joining the company, Mr. DeFranco
      served as Vice President of Marketing and Business Development for Alliance
      Pharmaceutical Corp., and he is currently employed with Alliance. 
 Mr. DeFranco received his B.S. from Stephen F. Austin University and an
      M.B.A. and M.A. from Fairleigh Dickenson University.


33


**Larry
      D. Grant** ,
      age 54,
      has served as a financial consultant to the company since May 11, 2004. Mr.
      Grant is an independent consultant who provides concentrated interim chief
      financial officer services, generally to technology companies, for extended
      periods of time. From May 2003 to May 2004, Mr. Grant represented the Investors
      and Board of Directors of Molecular Reflections, Inc. From April 2003 to
      December 2003, Mr. Grant represented the Investors and Board of Directors of
      QED
      Solutions, Inc. From July 2002 to April 2003, Mr. Grant served as acting Chief
      Financial Officer with Voxiva, Inc. From February 2001 to July 2002, Mr. Grant
      served as Executive Vice President and Chief Financial Officer with SymRx,
      Inc.
      From August 1999 to February 2001, Mr. Grant served as Executive Vice President
      and Chief Financial Officer with JFX Software, Inc. Mr. Grant is a certified
      public accountant and has 31 years of experience in providing accounting and
      financial services.




**Section
      16(a) Beneficial Ownership Reporting Compliance.** Section 16(a)
      of the Securities Exchange Act of 1934, as amended, requires our executive
      officers, directors and persons who beneficially own more than 10% of our common
      stock to file initial reports of ownership and changes in ownership with the
      SEC. Those persons are required by SEC regulations to furnish us with copies
      of
      all Section 16(a) forms that they file. To our knowledge, based solely on a
      review of the copies of those reports furnished to us during the fiscal year
      ended December 31, 2004, we believe that our executive officers, directors
      and beneficial owners of more than 10% of our common stock complied with all
      Section 16(a) filing requirements, except Oxford Bioscience Partners IV
      L.P. and Jonathan Fleming filed late Form 4’s reflecting late registration
      shares Oxford received in January 2005 (they each filed their Form 4’s on
      February 17, 2005). These late filings were due in part to a lack of resources
      by the company to assist the reporting persons with these filings; however,
      the
      obligation to file these reports rests with the person obligated to make the
      filing.




**Code
      of Ethics** .
      As of
      December 31, 2004, we have adopted a code of ethics for principal executives
      and
      senior financial officers, which includes our principal executive officer,
      principal financial officer, principal accounting officer or controller, or
      persons performing similar functions, as required by sections 406 and 407 of
      the
      Sarbanes-Oxley Act of 2002. Our Code of Ethics for Senior Executives and
      Financial Personnel is referenced as Exhibit 14 and a copy will be provided
      without charge following the receipt of a written request to Larry D. Grant,
      IMCOR Pharmaceutical Co., P.O. Box 2389, La Jolla, CA 92037.




**ITEM
      10. EXECUTIVE COMPENSATION.**




**Executive
      Compensation.** The
      following executive compensation disclosure reflects all compensation awarded
      to, earned by or paid to the Named Executive Officers (as defined below) for
      the
      fiscal years ended December 31, 2003, 2004 and 2005. The named executive
      officers (“Named Executive Officers”) are the company’s Principal Executive
      Officer and the other executive officers of the company who each received in
      excess of $100,000 in total salary and bonus for the fiscal year 2005.
      Compensation is shown in the following table:


34





**SUMMARY
      COMPENSATION TABLE**




**Long
                Term Compensation****Annual
                Compensation**
            
            
            **Awards**
            
            
            
            **Payouts****Name
                and**
              **Principal
                Position**
            
            **Year**
            
            
            **Salary**
            
            
            **Bonus**
            
            
            
            **Other**
              **Annual**
              **Compen-**
              **sation
                ($)**
            
            
            
            **Restricted**
              **Stock**
              **Award(s)**
              **($)**
            
            
            **Securities**
              **Underlying**
              **Options**
              **(#)(3)**
            
            
            
            **LTIP**
              **Payouts**
              **($)**
            
            
            **All
                Other**
              **Compen-**
              **sation
                ($)**Taffy
                J. Williams,Ph.D(1)
              Director,
                former Presidentand
                Chief ExecutiveOfficer
            
            2005
              2004
              2003
            
            $
            132,815
              275,000
              275,000
            (4)
            $
            0
              206,250
              60,000
            (6)
            
            $
            275,000
              0
              0
            (5)
            
            $
            0
              0
              0
            
            
            0
              201,421
              52,500
            (7)
            
            $
            0
              0
              0
            
            $
            0
              0
              0Jack
                DeFranco(1)(2)
              former
                Chief OperatingOfficer
            
            2005
              2004
              2003
            
            $
            237,238
              183,000
              107,145
            (8)
            $
            60,000
              60,000
              60,000
            (9)
              (6)
            
            $
            0
              0
              0
            
            
            $
            0
              0
              0
            
            
            0
              12,500
              8,500
            
            
            $
            0
              0
              0
            
            $
            0
              0
              0Larry
                D. Grant
              financial
                consultant and Assistant Secretary
            
            2005
              2004
              2003
            
            $
            177,600
              156,900
              0
            (10)
            $
            0
              0
              0
            
            
            $
            0
              0
              0
            
            
            $
            0
              0
              0
            
            
            0
              0
              0
            
            
            $
            0
              0
              0
            
            $
            0
              0
              0




*(1)*
            Dr.
                Williams and Mr. DeFranco are entitled to severance if their employment
                is
                terminated without cause, as discussed below.  As part of the
                employee reduction plan, Dr. Williams was terminated effective May
                31,
                2005.


*(2)*
            Mr.
                DeFranco joined the company on June 18, 2003 as part of the
                acquisition of the*Imagent*Business.
                He has served as Chief Operating Officer since January 20, 2005 and
                served
                as our Senior Vice President of Business Development and Marketing
                from
                June 18, 2003 until January 20,
                2005.


*(3)*
            Reflects
                a one-for-twenty reverse split which occurred in March,
                2005.


*(4)*
            Includes
                $12,666 of previously unpaid but accrued
                vacation.


*(5)*
            Reflects
                accrual of severance obligation that has not been paid at year
                end.


*(6)*
            Dr.
                Williams and Mr. DeFranco elected to defer payment of their bonuses
                through the year ending 2004. In 2005, Dr. Williams’ bonus remains
                deferred and Mr. DeFranco waived the 2004 bonus upon receipt of his
                2005
                bonus.


*(7)*
            Reflects
                (i) 52,500 options granted in 2003 pursuant to that certain Letter
                Agreement dated July 23, 2003 and (ii) 201,421 options issued on
                June 30,
                2004, both of which were subject to stockholder approval, which was
                received at the Annual Meeting held on January 20,
                2005.


*(8)*
            Includes
                $44,424 of previously unpaid but accrued
                vacation.


*(9)*
            Reflects
                a retention bonus which was paid as an inducement to retain his services
                as an employee (See Note (6)).


*(10)*
            Reflects
                consulting fees totaling $122,900 directly and another $34,000 paid
                by a
                stockholder on behalf of the
                company.




**Stock
      Options.** We
      did
      not grant any stock
      options during the 2005 fiscal year under our 2000 Long Term Incentive
      Compensation Plan.





The
      following table sets forth information about the Named Executive Officers
      concerning the exercise of options during the last fiscal year and unexercised
      options held as of the end of the 2005 fiscal year.


35





**2005
      Option Exercises and Year-End Values**




**Shares**
              **Acquired**
              **On**
            
            
            **Value**
            
            
            **Number
                of Securities**
              **Underlying
                Unexercised**
              **Options
                at Year End 2005**
              **(#)**
            
            
            **Fair
                Value of Unexercised**
              **In-the-Money
                Options**
              **at
                Year End 2005 ($)(1)****Name**
            
            
            **Exercise**
              **(#)**
            
            
            **Realized**
              **($)**
            
            
            **Exercisable**
            
            
            **Unexercisable**
            
            
            **Exercisable**
            
            
            **Unexercisable**Taffy
                J. Williams, Ph.D.
            
            
            0
            
            $
            0
            
            
            0
            
            
            0
            
            $
            0
            
            $
            0Jack
                DeFranco
            
            
            0
            
            
            0
            
            
            7,375
            
            
            0
            (2)
            
            737.50
            
            
            0Larry
                D. Grant
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0
            
            
            0




*(1)*
            For
                purposes of this table, the “value” of stock options was determined by the
                difference between the exercise price and $0.10, the closing price
                for
                common stock on the last business day of the fiscal year. Shares
                acquired
                on exercise of these options are not registered under the Securities
                Act
                of 1933 and are not freely saleable except in compliance with exemptions
                from registration, including the holding period and other requirements
                of
                Rule 144 thereunder. Consequently, the values set forth in the table
                are only theoretical values and may not accurately represent actual
                market
                value.


*(2)*
            Mr.
                DeFranco owns options that expired in January 2006 and became
                unexercisable at that time.




Mr.
      DeFranco is currently a consultant to the company. Mr. DeFranco is bound by
      his
      Employee Confidentiality, Inventions and Noncompetition Agreements, as amended
      (the “Confidentiality Agreement”). The Confidentiality Agreement provides that
      while we employ Mr. DeFranco and for a period of two years after termination
      he
      will not engage in activities that compete with our business. The
      Confidentiality Agreement also requires Mr. DeFranco to disclose to our board
      of
      directors all inventions or other intellectual property discovered or made
      by
      him during his employment and twelve months thereafter, if those inventions
      are
      related to or useful in our business, or result from duties assigned to that
      individual or from the use of any of our assets or facilities.




Mr.
      DeFranco was eligible to receive typical health, life and disability insurance
      benefits that are available to our other salaried employees and to defer a
      portion of their salary through our 401(k) plan, but we did not match or make
      any contributions to the 401(k) plan during the 2005 fiscal year. We do not
      maintain a pension plan other than our 401(k) plan, and all of our employee
      benefit plans were terminated as part of our restructuring plan.




Through
      May, 2005, Mr. Grant provided services to us under a consulting agreement that
      required us to pay him consulting fees at a rate of $925 per day, plus pay
      for
      his reasonable out-of-pocket expenses, and certain transportation expenses
      between San Diego and the East Coast, and to provide modest interim living
      accommodations in San Diego. For the balance of the year, Mr. Grant continued
      to
      provide services to us under the consulting agreement but worked from the East
      Coast. During 2005, we paid Mr. Grant consulting fees totaling $177,600. In
      return, during 2005 Mr. Grant provided us with financial and accounting advisory
      services and spent an average of at least five days per week and at least eight
      hours per day devoted to our business through May, 2005. For the balance of
      the
      year, Mr. Grant continued to advise the company on average of two days per
      week.




Officers
      generally serve at the discretion of the board of directors. We do not have
      any
      compensatory plans or arrangements resulting from resignation, retirement or
      any
      other termination of an executive officer’s employment with us.





As
      part
      of the employee reduction plan, the employment of our CEO and President was
      terminated effective May 31, 2005. We recorded a reserve for severance (equal
      to
      one year’s salary, as required by this individual’s employment contract),
      amounting to $275,000, as expense during the quarter ending June 30, 2005.
      This
      obligation remains unpaid and is accordingly included in accrued expenses at
      December 31, 2005.


36


We
      have
      entered into letter agreements with certain of our directors relating to their
      compensation as directors and members of various committees. Mr. Gallagher,
      our
      Chairman of the Board has received an option award to purchase 100,000 shares
      of
      common stock subject to vesting over a four year period. In addition, Mr.
      Gallagher receives $10,000 per month. On each anniversary of Mr. Gallagher’s
      continued election as the Chairman of the Board he will receive a new option
      grant to purchase 100,000 shares of common stock at the market price on the
      date
      of the grant. The additional options will vest over a four year period. Ms.
      Deptula-Hicks, Dr. Dean and Mr. Watson are each entitled to receive an annual
      fee of $20,000 and an additional annual fee of $5,000 for membership on the
      Audit Committee and $3,000 for membership on any other committee. Ms.
      Deptula-Hicks, Dr. Dean and Mr. Watson are each also entitled to a bi-annual
      option grant to acquire 3,000 shares of common stock, subject to quarterly
      vesting. Each of Mr. Gallagher, Ms. Deptula-Hicks, Dr. Dean and Mr. Watson
      are
      reimbursed for normal and necessary out-of-pocket business expenses. Mr. Ashley
      is entitled to receive 3,000 options vesting over two years, and 250 options
      for
      his Audit Committee membership; however, these options have not been issued
      to
      date.




Mr.
      Fleming has declined to receive any compensation for his participation on the
      Board or any of its committees. Dr. Williams does not receive any separate
      compensation for his Board membership or for his Executive Committee
      membership.




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




**Security
      Ownership of Certain Beneficial Owners and Management.** The
      following table sets forth the approximate beneficial ownership of our common
      stock as of **** on
      March
      31, 2006 by directors and executive officers of the Company and any person
      or
      group known to us to be the owner of more than five percent of our common stock.
      Shares beneficially owned by the individuals below through family partnerships
      or other entities they control are included in the number of shares listed
      in
      the table below for that individual.






**Name
                and Address**
              **of
                Beneficial Owner(1)**
            
            **Shares
                of**
              **Common**
              **Stock**
              **Beneficially**
              **Owned(2)**
            
            **Percent
                of**
              **Class**
              **Outstanding(3)****EXECUTIVE
                OFFICERS AND DIRECTORS:**Robert
                A. Ashley
            
            
            0
            
            
            *Richard
                T. Dean
            
            
            3,000
            (4)
            
            *Jack
                DeFranco
            
            
            0
            
            
            *Darlene
                M. Deptula-Hicks, M.B.A.
            
            
            3,000
            (5)
            
            *Jonathan
                Fleming/Oxford Bioscience
              Partners
                IV L.P.
              225
                Berkeley St., Suite 1650
              Boston,
                MA 02216
            
            
            4,790,470
            (6)
            
            66.4Brian
                M. Gallagher, Ph.D.
            
            
            50,000
            (7)
            
            *Alan
                D. Watson, Ph.D.
              One
                Kendall Square
              Building
                1000, Fifth Floor
              Cambridge,
                MA 02139
            
            
            4,750
            (8)
            
            *Taffy
                J. Williams, Ph.D.
            
            
            0
            
            
            *All
                directors and executive officers as a group—2005 fiscal year
                (8 persons)
            
            
            4,851,220
            
            
            67.3




37




**OTHER
                SHAREHOLDERS:**Oxford
                Bioscience Partners IV L.P.
              225
                Berkeley Street, Suite 1650
              Boston,
                MA 02216
            
            
            See
                above.




***
            Constitutes
                one percent or less of the percent of class
                outstanding.


*(1)*
            Unless
                otherwise indicated, the address of each person named in the table
                is c/o:
                IMCOR Pharmaceutical Co., P.O. Box 2389, La Jolla, California
                92037.


*(2)*
            With
                respect to directors and executive officers, based on information
                furnished by the director or executive officer
                listed.


*(3)*
            The
                percent of class outstanding includes common stock outstanding as
                of March
                31, 2006, and the shares of common stock issuable upon exercise of
                warrants and options or conversion of other securities within 60
                days of
                March 31, 2006.


*(4)*
            Includes
                3,000 options exercisable within 60 days of March 31,
                2006.


*(5)*
            Includes
                3,000 options exercisable within 60 days of March 31,
                2006.


*(6)*
            Includes
                46,223 shares and 1,366 warrants held by MRNA Fund II L.P. and 4,606,746
                shares and 136,135 warrants held by Oxford Bioscience Partners IV
                L.P.,
                which Mr. Fleming may be deemed to control. Mr. Fleming disclaims
                beneficial ownership of these shares for all other purposes.


*(7)*
            Includes
                50,000 options exercisable within 60 days of March 31,
                2006.


*(8)*
            Includes
                1,250 shares of common stock and options to acquire 3,500 shares
                of common
                stock exercisable within 60 days of March 31,
                2006.




**Change
      in Control Agreements.** We
      know
      of no arrangements which could result in a change of control of the
      company.




**Securities
      Authorized for Issuance Under Equity Compensation Plans.**





The
      information provided in the following table is as of December 31, 2005.




**Plan
                Category**
            
            **Number
                of**
              **securities
                to be**
              **issued
                upon**
              **exercise
                of**
              **outstanding**
              **options,
                warrants**
              **and
                rights (a)**
            
            **Weighted-average
                exercise price of outstanding**
              **options,
                warrants**
              **and
                rights (b)**
            
            **Number
                of**
              **securities**
              **remaining
                available**
              **for
                future issuance**
              **under
                equity**
              **compensation
                plans (excluding**
              **securities**
              **reflected
                in column**
              **(a))
                (c)**Equity
                compensation plansapproved
                by security holders
            
            
            167,017
            
            $
            70.49
            
            
            1,407,926Equity
                compensation plans notapproved
                by security holders
            
            
            0
            
            $
            0
            
            
            0TOTAL
            
            
            167,017
            
            $
            70.49
            
            
            1,407,926




38


We
      have
      issued the following warrants to purchase shares of our common stock without
      the
      prior approval of our stockholders:





·
            A
                warrant to purchase 7,500 shares at $21.60 per share to Broadmark
                Capital,
                LLC in connection with a Settlement Agreement and Mutual Release
                dated as
                of September 23, 2002 which related to our engagement of Broadmark
                Capital, LLC as a placement agent,





·
            A
                warrant to purchase 9,500 shares at $50.40 per share to Clinical
                Regulatory Strategies, LLC in connection with our August 12, 2002
                engagement of Clinical Regulatory Strategies, LLC to provide us with
                certain clinical, regulatory and new product development services,
                of
                which only 1,900 are exercisable,





·
            A
                warrant to purchase 188 shares at $884.54 per share to a consultant
                as of
                January 24, 2000 in connection with certain consulting services
                provided by the consultant,





·
            Options
                to purchase on a cashless basis a net aggregate of 34,977 shares
                issued to
                Gerald Wolf, M.D. to settle certain intellectual property and related
                disputes; a portion of these options were previously granted but
                were
                amended in 2005, which such amendment is reflected
                herein,




·
            Warrants
                to purchase an aggregate of 735,881 shares issued to investors and
                placement agents in our April/June 2004 financing,
                and





·
            A
                warrant to purchase 66,667 shares of our common stock with an exercise
                price of $5.40 per share to First Albany Capital, Inc. in connection
                with
                certain investment banking services provided to us by First Albany
                Capital, Inc. in October, 2004.




**ITEM
      12.**  **CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS.**




**Certain
      Relationships and Related Transactions.** We
      were involved in a joint venture transaction with units of Élan Corporation,
      plc. That joint venture, called Sentigen Ltd., was involved in the
      development of lymphography diagnostic products and is described under the
      heading “Investment in and Advances to Affiliate” in Note 4 to our Financial
      Statements.




Mi3,
      Oxford and MRNA purchased shares in the institutional financing which closed
      in
      April and June 2004. Jonathan Fleming (a director) is General Partner of OBP
      Management IV L.P. which is the general partner of Oxford and MRNA. William
      McPhee (a director at that time) was president of Mi3 Services L.L.C., the
      general partner of Mi3. These investors also provided capital to us evidenced
      by
      secured notes, which were converted into shares of our common stock at $8.00
      per
      share in connection with the April/June 2004 financing. We have filed
      registration statements covering the resale of shares held by these stockholders
      (which have terminated since then), and we issued additional late registration
      shares to them as required by the applicable registration rights
      agreements.




We
      owed
      Oxford and MRNA $192,233 as of December 31, 2005 pursuant to unsecured notes.
      The notes bear interest at eight percent annually.




**ITEM
      13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.**




**(a)**
            **Exhibits**




The
      following is a list of exhibits filed as part of this Form 10-KSB. Exhibits
      that were previously filed are incorporated by reference. For exhibits
      incorporated by reference, the location of the exhibit in the previous filings
      is indicated in parentheses.


39




**EXHIBIT**
              **NO.**
            
            **DESCRIPTION**+2.1
            
            Asset
                Purchase Agreement dated as of June 10, 2003 by and between IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.) and Alliance
                Pharmaceutical Corp. (Filed as Exhibit 2.1 to the company’s
                Form 8-K dated June 20, 2003 and incorporated herein by
                reference.)+3.1
            
            Articles
                of Incorporation of IMCOR Pharmaceutical Co., as amended. (Filed
                as
                Exhibit 3.1 to the company’s Form 10-KSB dated March 31, 2005 and
                incorporated herein by reference.)+3.2
            
            Certificate
                of Designation, Preferences and Rights of Series A Preferred Stock.
                (Filed as part of Exhibit 3.1 to the company’s 8-K filed on November
                11, 2004 and incorporated herein by reference.)+3.3
            
            Amended
                and Restated Bylaws of IMCOR Pharmaceutical Co. (Filed as Exhibit C
                to the company’s Information Statement on Form DEF 14C dated
                December 23, 2002 and incorporated herein by
                reference.)




+4.1
            
            Form
                of Registration Rights Agreement entered into by and between IMCOR
                Pharmaceutical Co. and each purchaser signatory thereto dated April
                14,
                2004. (Filed as Exhibit 4.13 to the company’s 10-QSB for the quarter ended
                March 31, 2004 and incorporated herein by reference.)+4.2
            
            Form
                of Warrant Agreement entered into by and between IMCOR Pharmaceutical
                Co.
                and each purchaser signatory thereto dated as of April 14, 2004.
                (Filed as
                Exhibit 4.12 to the company’s 10-QSB for the quarter ended March 31, 2004
                and incorporated herein by reference.)+4.3
            
            Form
                of Registration Rights Agreement entered into by and among IMCOR
                Pharmaceutical Co. Oxford Bioscience Partners IV L.P., MRNA Fund
                II L.P.
                and Mi3 LP dated April 19, 2004. (Filed as Exhibit 4.15 to the company’s
                10-QSB for the quarter ended March 31, 2004 and incorporated herein
                by
                reference.)+4.4
            
            Form
                of Registration Rights Agreement entered into by and between IMCOR
                Pharmaceutical Co. and Bristol-Myers Squibb Medical Imaging, Inc.
                dated as
                of October 29, 2004. (Filed as Exhibit 10.3 to the company’s 8-K filed on
                November 4, 2004 and incorporated herein by reference.)+4.5
            
            Registration
                Rights Agreement entered into as of November 12, 2002 by and among
                IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.), Mi3
                L.P.,
                Oxford Bioscience Partners IV L.P., MRNA Fund II L.P. and Tannebaum,
                LLC. (Filed as Exhibit D to the company’s Proxy Statement on
                Form DEFM 14A dated September 12, 2002 and incorporated
                herein by reference.)+4.6
            
            Form
                of Registration Rights Agreement dated as of December 30, 2002
                entered into by and between IMCOR Pharmaceutical Co. (f/k/a Photogen
                Technologies, Inc.) and each of Oxford Bioscience Partners IV
                L.P., MRNA Fund II L.P., DMG Legacy Institutional Fund LLC, DMG
                Legacy Fund LLC, and DMG Legacy International Ltd. (Filed as
                Exhibit 10.7 to the company’s Annual Report on Form 10-K for
                dated December 31, 2002 and incorporated herein by
                reference.)+4.7
            
            Incentive
                Stock Option Award Agreement entered into by and between IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.) and
                Taffy J. Williams, Ph.D. dated May 17, 2000. (Filed as
                Exhibit 10.4 to the company’s Current Report on Form 8-K dated
                May 17, 2001 and incorporated herein by
                reference.)




40




+4.8
            
            Incentive
                Stock Option Award Agreement entered into by IMCOR Pharmaceutical
                Co.
                (f/k/a Photogen Technologies, Inc.) and Brooks Boveroux dated
                August 1, 2000. (Filed as Exhibit 10.13 to the company’s Annual
                Report on Form 10-K dated December 31, 2000 and incorporated
                herein by reference.)+4.9
            
            Warrant
                to Purchase Shares of Common Stock dated October 20, 1999 between
                IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.) and
Élan
                International Services, Ltd. (Filed as Exhibit 10.9 to the company’s
                Quarterly Report on Form 10-QSB for the quarter ended
                September 30, 1999 and incorporated herein by
                reference.)




+4.10
            
            Warrant
                Agreement dated as of November 12, 2002 between Broadmark Capital LLC
                and IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.).
                (Filed as Exhibit 10.27 to the company’s Annual Report on
                Form 10-K for the year ended December 31, 2002 and incorporated
                herein by reference.)+4.11
            
            Non-Qualified
                Stock Option Award Agreement dated as of January 14, 2004 by and
                between IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.)
                and
                Taffy J. Williams, Ph.D. (Filed as Exhibit 4.11 to the company’s
                Annual Report on Form 10-KSB for the year ended December 31, 2003
                and
                incorporated herein by reference.)+4.12
            
            Form
                of Senior Secured Promissory Note dated June 4, 2004 between IMCOR
                Pharmaceutical Co. and Xmark Fund, L.P. (Filed as Exhibit 4.12 to
                the
                company’s registration statement on Form SB-2 filed on August 3, 2004 and
                incorporated herein by reference.)+4.13
            
            Form
                of Senior Secured Promissory Note dated June 4, 2004 between IMCOR
                Pharmaceutical Co. and Xmark Fund, Ltd. (Filed as Exhibit 4.13 to
                the
                company’s registration statement on Form SB-2 filed on August 3, 2004 and
                incorporated herein by reference.)+9.1
            
            Voting,
                Drag-Along and Right of First Refusal Agreement entered into as of
                November 12, 2002 by and among Robert J. Weinstein, M.D.,
                Stuart P. Levine, Tannebaum, LLC, Mi3 L.P., Oxford Bioscience
                Partners IV L.P. and MRNA Fund II L.P. (Filed as Exhibit G
                to the company’s Proxy Statement on Form DEFM 14A dated
                September 12, 2002 and incorporated herein by
                reference.)+10.1
            
            Letter
                Agreement entered into as of August 29, 2002 by and between IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.) and Clinical
                Regulatory Strategies, LLC (Filed as Exhibit 10.2 to the company’s
                quarterly report on Form 10-Q for the quarter ended
                September 30, 2002 and incorporated herein by
                reference.)+10.3
            
            Form
                of Indemnification Agreement entered into by and between IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.) and each
                Director and Senior Vice President of the company. (Filed as
                Exhibit 10.13 to the company’s Annual Report on Form 10-K for
                dated December 31, 2002 and incorporated herein by
                reference.)




41




+10.5
            
            License
                Agreement effective as of September 30, 1999 between The General
                Hospital Corporation and Photogen, Inc. (Filed as Exhibit 10.7
                to the company’s Quarterly Report on Form 10-QSB for the quarter
                ended September 30, 1999 and incorporated herein by reference.)
                Confidential portions of this exhibit were redacted.+10.6
            
            Forbearance
                Agreement dated June, 2004 by and between IMCOR Pharmaceutical Co.
                and
                Philips Medical Capital, LLC. (Filed as Exhibit 10.22 to the company’s
                registration statement on Form SB-2 filed on August 3, 2004 and
                incorporated herein by reference.)+10.7
            
            Exchange
                Agreement dated as of June 4, 2004 by and among IMCOR Pharmaceutical
                Co.,
                Xmark Fund, L.P., Xmark Fund Ltd., Oxford Bioscience Partners IV
                L.P.,
                MRNA Fund II, L.P. and Mi3 L.P. (Filed as Exhibit 10.23 to the company’s
                registration statement on Form SB-2 filed on August 3, 2004 and
                incorporated herein by reference.)




+10.8
            
            Single-Tenant
                Industrial Lease dated November 7, 1997 by and between WHAMC Real
                Estate
                Limited Partnership and Alliance Pharmaceutical Co. (Filed as Exhibit
                10.1
                to the company’s quarterly report on Form 10-QSB for the quarter ended
                September 30, 2004 and incorporated herein by
                reference.)+10.9
            
            Landlord
                Consent to Assignment and Assumption dated as of June 18, 2003 by
                and
                among IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.),
                EOP-Industrial Portfolio, L.L.C. and Alliance Pharmaceutical Corp.
                (Filed
                as Exhibit 10.2 to the company’s quarterly report on Form 10-QSB for the
                quarter ended September 30, 2004 and incorporated herein by
                reference.)+10.10
            
            Equipment
                Lease between Picker Financial Group, L.L.C. and Photogen, Inc. dated
                October 25, 1999. (Filed as Exhibit 10.37 to the company’s
                Annual Report on Form 10-KSB for the year ended December 31,
                1999 and incorporated herein by reference.)+10.11
            
            Going
                Forward Agreement dated as of May 2, 2003 by and among IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.), Xmark Fund,
                L.P., and Xmark Fund, Ltd. (Filed as Exhibit 10.1 to the company’s
                8-K filed on June 20, 2003 and incorporated herein by
                reference.)+10.12
            
            Security
                Agreement dated as of June 18, 2003 by and among IMCOR Pharmaceutical
                Co. (f/k/a Photogen Technologies, Inc.), Xmark Fund, L.P. and Xmark
                Fund, Ltd. (Filed as Exhibit 10.2 to the company’s 8-K filed on
                June 20, 2003 and incorporated herein by
                reference.)+10.13
            
            Patent
                and Trademark Security Agreement dated as of June 18, 2003 by and
                among IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.),
                Xmark Fund, L.P., and Xmark Fund, Ltd. (Filed as Exhibit 10.3 to the
                company’s 8-K filed on June 20, 2003 and incorporated herein by
                reference.)+10.14
            
            Security
                Agreement dated as of June 18, 2003 by and among IMCOR Pharmaceutical
                Co. (f/k/a Photogen Technologies, Inc.), Oxford Bioscience
                Partners IV L.P., MRNA Fund II L.P. and Mi3 LP. (Filed as
                Exhibit 10.5 to the company’s 8-K filed on June 20, 2003
                and incorporated herein by reference.)+10.15
            
            Patent
                and Trademark Security Agreement dated as of as of June 18, 2003 by
                and among IMCOR Pharmaceutical Co. (f/k/a Photogen
                Technologies, Inc.), Oxford Bioscience Partners IV L.P., MRNA
                Fund II L.P. and Mi3 LP. (Filed as Exhibit 10.6 to the company’s
                8-K filed on June 20, 2003 and incorporated herein by
                reference.)




42




+10.16
            
            Equipment
                Lease dated as of June 18, 2003 by and between IMCOR Pharmaceutical
                Co. (f/k/a Photogen Technologies, Inc.) and Baxter Healthcare
                Corporation. (Filed as Exhibit 10.8 to the company’s 8-K filed on
                June 20, 2003 and incorporated herein by
                reference.)+10.17
            
            Letter
                Agreement dated as of August 18, 2003 by and among IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.), Xmark Fund,
                Ltd. and Xmark Fund, L.P. (Filed as Exhibit 10.1 to the company’s
                Form 8-K filed on August 20, 2003 and incorporated herein by
                reference.)+10.18
            
            Amended
                and Restated Letter Agreement dated February 8, 2005 by and between
                IMCOR
                Pharmaceutical Co. and Jack DeFranco. (Filed as Exhibit 10.18 to
                the
                company’s Form 10-KSB dated March 31, 2005 and incorporated herein by
                reference.)+10.19
            
            Letter
                Agreement dated July 23, 2003 by and between IMCOR Pharmaceutical Co.
                (f/k/a Photogen Technologies, Inc.) and Taffy J. Williams, Ph.D.
                (Filed as Exhibit 10.5 to the company’s Form 10-QSB for the
                quarter ended September 30, 2003 and incorporated herein by
                reference).+10.20
            
            Form
                of Letter Agreement by and between IMCOR Pharmaceutical Co. (f/k/a
                Photogen Technologies, Inc.) and each outside director. (Filed as
                Exhibit 10.20 to the Company’s Form 10-KSB for the year ended December 31,
                2003 and incorporated herein by reference.)+10.21
            
            License
                Agreement dated December 16, 2003 by and between IMCOR Pharmaceutical
                Co. (f/k/a Photogen Technologies, Inc.) and Kyosei Pharmaceutical
                Co. Ltd.
                Confidential portions of this exhibit were redacted. (Filed as
                Exhibit 10.1 to the company’s report on Form 8-K filed on
                December 18, 2003 and incorporated herein by
                reference.)+10.22
            
            Termination
                Agreement dated June 9, 2004 by and among IMCOR Pharmaceutical Co.
                (f/k/a/
                Photogen Technologies, Inc.), Élan Corporation, plc, Élan Pharma
                International Ltd., Élan International Services, Ltd., and Sentigen, Ltd.
                Confidential portions of this exhibit were redacted. (Filed as Exhibit
                10.11 to the company’s quarterly report on Form 10-QSB for the quarter
                ended September 30, 2004 and incorporated herein by
                reference.)+10.23
            
            License
                Agreement dated June 9, 2004 between IMCOR Pharmaceutical Co. (f/k/a
                Photogen Technologies, Inc.) and Élan Pharma International Ltd.
                Confidential portions of this exhibit were redacted. (Filed as Exhibit
                10.12 to the company’s quarterly report on Form 10-QSB for the quarter
                ended September 30, 2004 and incorporated herein by
                reference.)+10.24
            
            Letter
                Agreement dated June 9, 2004 by and among IMCOR Pharmaceutical Co.
                (f/k/a
                Photogen Technologies, Inc.), Élan Drug Delivery, Inc. and Élan Pharma
                International Ltd. Confidential Portions of this exhibit were redacted.
                (Filed as Exhibit 10.13 to the company’s quarterly report on Form 10-QSB
                for the quarter ended September 30, 2004 and incorporated herein
                by
                reference.)+10.25
            
            Letter
                Agreement dated June 27, 2004 by and between IMCOR Pharmaceutical
                Co. and
                Brian M. Gallagher. (Filed as Exhibit 10.14 to the company’s quarterly
                report on Form 10-QSB for the quarter ended June 30,
                2004.)+10.26
            
            Cross
                License Agreement dated as of October 29, 2004 by and between
                Bristol-Myers Squibb Medical Imaging, Inc. and IMCOR Pharmaceutical
                Co.
                Confidential portions of this exhibit were redacted. (Filed as Exhibit
                10.1 to the company’s 8-K filed on November 4, 2004 and incorporated
                herein by reference.)




43




+10.27
            
            License
                Agreement originally dated as of September 23, 1997 amended and restated
                in its entirety as of February 22, 2002 by and between Alliance
                Pharmaceutical Corp. and Schering Aktiengesellschaft. Confidential
                portions of this exhibit were redacted. (Filed as Exhibit 10.1 to
                the
                company’s quarterly report on Form 10-QSB for the quarter ended September
                30, 2004 and incorporated herein by reference.)+10.28
            
            Settlement
                and Worldwide License Agreement dated as of January 31, 2001 by and
                among
                Bracco International B.V., Schering Aktiengesellschaft and Alliance
                Pharmaceutical Corp. Confidential portions of this exhibit were redacted.
                (Filed as Exhibit 10.2 to the company’s quarterly report on Form 10-QSB
                for the quarter ended September 30, 2004 and incorporated herein
                by
                reference.)+10.29
            
            Amended
                and Restated Supply Agreement dated as of October 8, 2003 by and
                between
                Genzyme Corporation and IMCOR Pharmaceutical Co. (f/k/a Photogen
                Technologies, Inc.). (Filed as Exhibit 10.29 to the company’s report on
                Form 10-KSB/A for the year ended December 31, 2004 and incorporated
                herein
                by reference.)+10.30
            
            Amendment
                and Assignment Agreement dated as of August 18, 2003 by and among
                IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.), Cardinal
                Health
                411, Inc., Cardinal Health 105, Inc. (f/k/a CORD Logistics, Inc.,
                n/k/a
                Cardinal Specialty Pharmacy Distribution) and Alliance Pharmaceutical
                Co.
                Confidential portions of this exhibit were redacted. (Filed as Exhibit
                10.4 to the Company’s 10-QSB filed on November 20,
                2003.)+10.31
            
            Exclusive
                Distribution Agreement dated as of April 1, 2002 by and between Alliance
                Pharmaceutical Co. and CORD Logistics, Inc. (n/k/a Cardinal Specialty
                Pharmacy Distribution). (Filed as Exhibit 10.31 to the company’s report on
                Form 10-KSB/A for the year ended December 31, 2004 and incorporated
                herein
                by reference.)+14
            
            Code
                of Ethics for Principal Executive and Senior Financial Officers effective
                as of December 31, 2004. (Filed as Exhibit 14 to the company’s Form 10-KSB
                dated March 31, 2005 and incorporated herein by
                reference.)+21
            
            List
                of subsidiaries of the company (Filed as Exhibit 21 to the company’s
                Form 10-K for the year ended December 31, 2002 and incorporated
                herein by reference.)*31.1
            
            Certification
                of Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.*31.2
            
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
                of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*32.2
            
            Certification
                of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*+*Incorporated
                by Reference.***Filed
                herewith.




44


***(b)***
            **Reports
                On Form 8-K.**




During
      the quarter ended December 31, 2005, we did not file any reports on
      Form 8-K.




**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.**




**Independent
      Auditors’ Fees**




The
        aggregate fees billed for professional services rendered by the principal
        accountant for each of the fiscal years ended December 31, 2004 and 2005
        for the
        audit of the Company’s annual financial statements and review of the financial
        statements included in our quarterly reports on Form 10-QSB, and services
        that
        are normally provided by the accountant in connection with statutory and
        regulatory filings (including review of registration statements under "Audit
        Related Fees") or engagements for these fiscal periods, were as
        follows:
 
 Year
                  ended December 31, 2004
              Year
                  ended December 31, 2005Audit
                  Fees
              $175,670
              $183,795Audit
                  Related Fees
              $56,350
              $7,050Tax
                  Fees
              $6,998
              NoneAll
                  Other Fees
              None
              NoneTotal
              $239,018
              $190,845


**Audit
      Committee Pre-Approval Policy.** Pursuant
      to the terms of our Audit Committee’s charter, our Audit Committee pre-approves
      all auditing services (which may entail providing comfort letters in connection
      with securities underwritings) and non-audit services proposed to be provided
      by
      the Company’s independent certified public accountant, except for non-audit
      services within the de minimus exception under Section 10A(i)(B) of the Exchange
      Act. In this connection, the Audit Committee has the authority to appoint one
      or
      more of its members to approve services, provided that the decisions made by
      such designees between meetings of the Audit Committee shall be presented to
      the
      full Audit Committee at the next meeting thereof. All of the services provided
      to the Company by Moss Adams LLP and Peterson & Co., LLP during the fiscal
      years ended December 31, 2004 and December 31, 2005 were pre-approved by the
      Audit Committee.




45










**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the registrant
      caused this report to be signed on its behalf by the undersigned, thereunto
      duly
      authorized.




**IMCOR
                PHARMACEUTICALS CO.**Date: April
                17, 2006
            By:
            /s/ 
                BRIAN GALLAGHERBrian
                Gallagher*(Chairman
                of the Board and Acting Principal Financial Officer)*














46




In
      accordance with the Exchange Act, 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**By:
            
            /s/  TAFFY
                J. WILLIAMS
            
            Director
            
            April
                  17, 2006Taffy
                J. Williams, Ph.D.By:
            
            /s/  DARLENE
                M. DEPTULA - HICKS
            
            Director
            
            April
                17, 2006Darlene
                M. Deptula - HicksBy:
            
            /s/  ALAN
                D. WATSON
            
            Director
            
            April
                17, 2006Alan
                D. Watson, Ph.D.By:
            
            /s/  JONATHAN
                FLEMING
            
            Director
            
            April
                17, 2006Jonathan
                FlemingBy:
            
            /s/  RICHARD
                T. DEAN
            
            Director
            
            April
                17, 2006Richard
                Dean, Ph.D.By:
            
            /s/  ROBERT
                A. ASHLEY
            
            Director
            
            April
                17, 2006Robert
                A. AshleyBy:
            
            /s/
                BRIAN M. GALLAGHER
            
            Director
            
            April
                17, 2006Brian
                M. Gallagher, Ph.D.






47







**EXHIBIT
      INDEX**







**EXHIBIT**
              **NO.**
            
            **DESCRIPTION**+2.1
            
            Asset
                Purchase Agreement dated as of June 10, 2003 by and between IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.) and Alliance
                Pharmaceutical Corp. (Filed as Exhibit 2.1 to the company’s
                Form 8-K dated June 20, 2003 and incorporated herein by
                reference.)+3.1
            
            Articles
                of Incorporation of IMCOR Pharmaceutical Co., as amended. (Filed
                as
                Exhibit 3.1 to the company’s Form 10-KSB dated March 31, 2005 and
                incorporated herein by reference.)+3.2
            
            Certificate
                of Designation, Preferences and Rights of Series A Preferred Stock.
                (Filed as part of Exhibit 3.1 to the company’s 8-K filed on November
                11, 2004 and incorporated herein by reference.)+3.3
            
            Amended
                and Restated Bylaws of IMCOR Pharmaceutical Co. (Filed as Exhibit C
                to the company’s Information Statement on Form DEF 14C dated
                December 23, 2002 and incorporated herein by
                reference.)




+4.1
            
            Form
                of Registration Rights Agreement entered into by and between IMCOR
                Pharmaceutical Co. and each purchaser signatory thereto dated April
                14,
                2004. (Filed as Exhibit 4.13 to the company’s 10-QSB for the quarter ended
                March 31, 2004 and incorporated herein by reference.)+4.2
            
            Form
                of Warrant Agreement entered into by and between IMCOR Pharmaceutical
                Co.
                and each purchaser signatory thereto dated as of April 14, 2004.
                (Filed as
                Exhibit 4.12 to the company’s 10-QSB for the quarter ended March 31, 2004
                and incorporated herein by reference.)+4.3
            
            Form
                of Registration Rights Agreement entered into by and among IMCOR
                Pharmaceutical Co. Oxford Bioscience Partners IV L.P., MRNA Fund
                II L.P.
                and Mi3 LP dated April 19, 2004. (Filed as Exhibit 4.15 to the company’s
                10-QSB for the quarter ended March 31, 2004 and incorporated herein
                by
                reference.)+4.4
            
            Form
                of Registration Rights Agreement entered into by and between IMCOR
                Pharmaceutical Co. and Bristol-Myers Squibb Medical Imaging, Inc.
                dated as
                of October 29, 2004. (Filed as Exhibit 10.3 to the company’s 8-K filed on
                November 4, 2004 and incorporated herein by reference.)+4.5
            
            Registration
                Rights Agreement entered into as of November 12, 2002 by and among
                IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.), Mi3
                L.P.,
                Oxford Bioscience Partners IV L.P., MRNA Fund II L.P. and Tannebaum,
                LLC. (Filed as Exhibit D to the company’s Proxy Statement on
                Form DEFM 14A dated September 12, 2002 and incorporated
                herein by reference.)+4.6
            
            Form
                of Registration Rights Agreement dated as of December 30, 2002
                entered into by and between IMCOR Pharmaceutical Co. (f/k/a Photogen
                Technologies, Inc.) and each of Oxford Bioscience Partners IV
                L.P., MRNA Fund II L.P., DMG Legacy Institutional Fund LLC, DMG
                Legacy Fund LLC, and DMG Legacy International Ltd. (Filed as
                Exhibit 10.7 to the company’s Annual Report on Form 10-K for
                dated December 31, 2002 and incorporated herein by
                reference.)




48




+4.7
            
            Incentive
                Stock Option Award Agreement entered into by and between IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.) and
                Taffy J. Williams, Ph.D. dated May 17, 2000. (Filed as
                Exhibit 10.4 to the company’s Current Report on Form 8-K dated
                May 17, 2001 and incorporated herein by
                reference.)+4.8
            
            Incentive
                Stock Option Award Agreement entered into by IMCOR Pharmaceutical
                Co.
                (f/k/a Photogen Technologies, Inc.) and Brooks Boveroux dated
                August 1, 2000. (Filed as Exhibit 10.13 to the company’s Annual
                Report on Form 10-K dated December 31, 2000 and incorporated
                herein by reference.)+4.9
            
            Warrant
                to Purchase Shares of Common Stock dated October 20, 1999 between
                IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.) and
Élan
                International Services, Ltd. (Filed as Exhibit 10.9 to the company’s
                Quarterly Report on Form 10-QSB for the quarter ended
                September 30, 1999 and incorporated herein by
                reference.)+4.10
            
            Warrant
                Agreement dated as of November 12, 2002 between Broadmark Capital LLC
                and IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.).
                (Filed as Exhibit 10.27 to the company’s Annual Report on
                Form 10-K for the year ended December 31, 2002 and incorporated
                herein by reference.)+4.11
            
            Non-Qualified
                Stock Option Award Agreement dated as of January 14, 2004 by and
                between IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.)
                and
                Taffy J. Williams, Ph.D. (Filed as Exhibit 4.11 to the company’s
                Annual Report on Form 10-KSB for the year ended December 31, 2003
                and
                incorporated herein by reference.)+4.12
            
            Form
                of Senior Secured Promissory Note dated June 4, 2004 between IMCOR
                Pharmaceutical Co. and Xmark Fund, L.P. (Filed as Exhibit 4.12 to
                the
                company’s registration statement on Form SB-2 filed on August 3, 2004 and
                incorporated herein by reference.)+4.13
            
            Form
                of Senior Secured Promissory Note dated June 4, 2004 between IMCOR
                Pharmaceutical Co. and Xmark Fund, Ltd. (Filed as Exhibit 4.13 to
                the
                company’s registration statement on Form SB-2 filed on August 3, 2004 and
                incorporated herein by reference.)+9.1
            
            Voting,
                Drag-Along and Right of First Refusal Agreement entered into as of
                November 12, 2002 by and among Robert J. Weinstein, M.D.,
                Stuart P. Levine, Tannebaum, LLC, Mi3 L.P., Oxford Bioscience
                Partners IV L.P. and MRNA Fund II L.P. (Filed as Exhibit G
                to the company’s Proxy Statement on Form DEFM 14A dated
                September 12, 2002 and incorporated herein by
                reference.)+10.1
            
            Letter
                Agreement entered into as of August 29, 2002 by and between IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.) and Clinical
                Regulatory Strategies, LLC (Filed as Exhibit 10.2 to the company’s
                quarterly report on Form 10-Q for the quarter ended
                September 30, 2002 and incorporated herein by
                reference.)+10.3
            
            Form
                of Indemnification Agreement entered into by and between IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.) and each
                Director and Senior Vice President of the company. (Filed as
                Exhibit 10.13 to the company’s Annual Report on Form 10-K for
                dated December 31, 2002 and incorporated herein by
                reference.)




49




+10.5
            
            License
                Agreement effective as of September 30, 1999 between The General
                Hospital Corporation and Photogen, Inc. (Filed as Exhibit 10.7
                to the company’s Quarterly Report on Form 10-QSB for the quarter
                ended September 30, 1999 and incorporated herein by reference.)
                Confidential portions of this exhibit were redacted.+10.6
            
            Forbearance
                Agreement dated June, 2004 by and between IMCOR Pharmaceutical Co.
                and
                Philips Medical Capital, LLC. (Filed as Exhibit 10.22 to the company’s
                registration statement on Form SB-2 filed on August 3, 2004 and
                incorporated herein by reference.)+10.7
            
            Exchange
                Agreement dated as of June 4, 2004 by and among IMCOR Pharmaceutical
                Co.,
                Xmark Fund, L.P., Xmark Fund Ltd., Oxford Bioscience Partners IV
                L.P.,
                MRNA Fund II, L.P. and Mi3 L.P. (Filed as Exhibit 10.23 to the company’s
                registration statement on Form SB-2 filed on August 3, 2004 and
                incorporated herein by reference.)+10.8
            
            Single-Tenant
                Industrial Lease dated November 7, 1997 by and between WHAMC Real
                Estate
                Limited Partnership and Alliance Pharmaceutical Co. (Filed as Exhibit
                10.1
                to the company’s quarterly report on Form 10-QSB for the quarter ended
                September 30, 2004 and incorporated herein by
                reference.)+10.9
            
            Landlord
                Consent to Assignment and Assumption dated as of June 18, 2003 by
                and
                among IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.),
                EOP-Industrial Portfolio, L.L.C. and Alliance Pharmaceutical Corp.
                (Filed
                as Exhibit 10.2 to the company’s quarterly report on Form 10-QSB for the
                quarter ended September 30, 2004 and incorporated herein by
                reference.)+10.10
            
            Equipment
                Lease between Picker Financial Group, L.L.C. and Photogen, Inc. dated
                October 25, 1999. (Filed as Exhibit 10.37 to the company’s
                Annual Report on Form 10-KSB for the year ended December 31,
                1999 and incorporated herein by reference.)+10.11
            
            Going
                Forward Agreement dated as of May 2, 2003 by and among IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.), Xmark Fund,
                L.P., and Xmark Fund, Ltd. (Filed as Exhibit 10.1 to the company’s
                8-K filed on June 20, 2003 and incorporated herein by
                reference.)+10.12
            
            Security
                Agreement dated as of June 18, 2003 by and among IMCOR Pharmaceutical
                Co. (f/k/a Photogen Technologies, Inc.), Xmark Fund, L.P. and Xmark
                Fund, Ltd. (Filed as Exhibit 10.2 to the company’s 8-K filed on
                June 20, 2003 and incorporated herein by
                reference.)+10.13
            
            Patent
                and Trademark Security Agreement dated as of June 18, 2003 by and
                among IMCOR Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.),
                Xmark Fund, L.P., and Xmark Fund, Ltd. (Filed as Exhibit 10.3 to the
                company’s 8-K filed on June 20, 2003 and incorporated herein by
                reference.)+10.14
            
            Security
                Agreement dated as of June 18, 2003 by and among IMCOR Pharmaceutical
                Co. (f/k/a Photogen Technologies, Inc.), Oxford Bioscience
                Partners IV L.P., MRNA Fund II L.P. and Mi3 LP. (Filed as
                Exhibit 10.5 to the company’s 8-K filed on June 20, 2003
                and incorporated herein by reference.)+10.15
            
            Patent
                and Trademark Security Agreement dated as of as of June 18, 2003 by
                and among IMCOR Pharmaceutical Co. (f/k/a Photogen
                Technologies, Inc.), Oxford Bioscience Partners IV L.P., MRNA
                Fund II L.P. and Mi3 LP. (Filed as Exhibit 10.6 to the company’s
                8-K filed on June 20, 2003 and incorporated herein by
                reference.)




50




+10.16
            
            Equipment
                Lease dated as of June 18, 2003 by and between IMCOR Pharmaceutical
                Co. (f/k/a Photogen Technologies, Inc.) and Baxter Healthcare
                Corporation. (Filed as Exhibit 10.8 to the company’s 8-K filed on
                June 20, 2003 and incorporated herein by
                reference.)+10.17
            
            Letter
                Agreement dated as of August 18, 2003 by and among IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.), Xmark Fund,
                Ltd. and Xmark Fund, L.P. (Filed as Exhibit 10.1 to the company’s
                Form 8-K filed on August 20, 2003 and incorporated herein by
                reference.)+10.18
            
            Amended
                and Restated Letter Agreement dated February 8, 2005 by and between
                IMCOR
                Pharmaceutical Co. and Jack DeFranco. (Filed as Exhibit 10.18 to
                the
                company’s Form 10-KSB dated March 31, 2005 and incorporated herein by
                reference.)+10.19
            
            Letter
                Agreement dated July 23, 2003 by and between IMCOR Pharmaceutical Co.
                (f/k/a Photogen Technologies, Inc.) and Taffy J. Williams, Ph.D.
                (Filed as Exhibit 10.5 to the company’s Form 10-QSB for the
                quarter ended September 30, 2003 and incorporated herein by
                reference).+10.20
            
            Form
                of Letter Agreement by and between IMCOR Pharmaceutical Co. (f/k/a
                Photogen Technologies, Inc.) and each outside director. (Filed as
                Exhibit 10.20 to the Company’s Form 10-KSB for the year ended December 31,
                2003 and incorporated herein by reference.)+10.21
            
            License
                Agreement dated December 16, 2003 by and between IMCOR Pharmaceutical
                Co. (f/k/a Photogen Technologies, Inc.) and Kyosei Pharmaceutical
                Co. Ltd.
                Confidential portions of this exhibit were redacted. (Filed as
                Exhibit 10.1 to the company’s report on Form 8-K filed on
                December 18, 2003 and incorporated herein by
                reference.)+10.22
            
            Termination
                Agreement dated June 9, 2004 by and among IMCOR Pharmaceutical Co.
                (f/k/a/
                Photogen Technologies, Inc.), Élan Corporation, plc, Élan Pharma
                International Ltd., Élan International Services, Ltd., and Sentigen, Ltd.
                Confidential portions of this exhibit were redacted. (Filed as Exhibit
                10.11 to the company’s quarterly report on Form 10-QSB for the quarter
                ended September 30, 2004 and incorporated herein by
                reference.)+10.23
            
            License
                Agreement dated June 9, 2004 between IMCOR Pharmaceutical Co. (f/k/a
                Photogen Technologies, Inc.) and Élan Pharma International Ltd.
                Confidential portions of this exhibit were redacted. (Filed as Exhibit
                10.12 to the company’s quarterly report on Form 10-QSB for the quarter
                ended September 30, 2004 and incorporated herein by
                reference.)+10.24
            
            Letter
                Agreement dated June 9, 2004 by and among IMCOR Pharmaceutical Co.
                (f/k/a
                Photogen Technologies, Inc.), Élan Drug Delivery, Inc. and Élan Pharma
                International Ltd. Confidential Portions of this exhibit were redacted.
                (Filed as Exhibit 10.13 to the company’s quarterly report on Form 10-QSB
                for the quarter ended September 30, 2004 and incorporated herein
                by
                reference.)+10.25
            
            Letter
                Agreement dated June 27, 2004 by and between IMCOR Pharmaceutical
                Co. and
                Brian M. Gallagher. (Filed as Exhibit 10.14 to the company’s quarterly
                report on Form 10-QSB for the quarter ended June 30,
                2004.)




51




+10.26
            
            Cross
                License Agreement dated as of October 29, 2004 by and between
                Bristol-Myers Squibb Medical Imaging, Inc. and IMCOR Pharmaceutical
                Co.
                Confidential portions of this exhibit were redacted. (Filed as Exhibit
                10.1 to the company’s 8-K filed on November 4, 2004 and incorporated
                herein by reference.)+10.27
            
            License
                Agreement originally dated as of September 23, 1997 amended and restated
                in its entirety as of February 22, 2002 by and between Alliance
                Pharmaceutical Corp. and Schering Aktiengesellschaft. Confidential
                portions of this exhibit were redacted. (Filed as Exhibit 10.1 to
                the
                company’s quarterly report on Form 10-QSB for the quarter ended September
                30, 2004 and incorporated herein by reference.)+10.28
            
            Settlement
                and Worldwide License Agreement dated as of January 31, 2001 by and
                among
                Bracco International B.V., Schering Aktiengesellschaft and Alliance
                Pharmaceutical Corp. Confidential portions of this exhibit were redacted.
                (Filed as Exhibit 10.2 to the company’s quarterly report on Form 10-QSB
                for the quarter ended September 30, 2004 and incorporated herein
                by
                reference.)+10.29
            
            Amended
                and Restated Supply Agreement dated as of October 8, 2003 by and
                between
                Genzyme Corporation and IMCOR Pharmaceutical Co. (f/k/a Photogen
                Technologies, Inc.). (Filed as Exhibit 10.29 to the company’s report on
                Form 10-KSB/A for the year ended December 31, 2004 and incorporated
                herein
                by reference.)+10.30
            
            Amendment
                and Assignment Agreement dated as of August 18, 2003 by and among
                IMCOR
                Pharmaceutical Co. (f/k/a Photogen Technologies, Inc.), Cardinal
                Health
                411, Inc., Cardinal Health 105, Inc. (f/k/a CORD Logistics, Inc.,
                n/k/a
                Cardinal Specialty Pharmacy Distribution) and Alliance Pharmaceutical
                Co.
                Confidential portions of this exhibit were redacted. (Filed as Exhibit
                10.4 to the Company’s 10-QSB filed on November 20,
                2003.)+10.31
            
            Exclusive
                Distribution Agreement dated as of April 1, 2002 by and between Alliance
                Pharmaceutical Co. and CORD Logistics, Inc. (n/k/a Cardinal Specialty
                Pharmacy Distribution). (Filed as Exhibit 10.31 to the company’s report on
                Form 10-KSB/A for the year ended December 31, 2004 and incorporated
                herein
                by reference.)+14
            
            Code
                of Ethics for Principal Executive and Senior Financial Officers effective
                as of December 31, 2004. (Filed as Exhibit 14 to the company’s Form 10-KSB
                dated March 31, 2005 and incorporated herein by
                reference.)+21
            
            List
                of subsidiaries of the company (Filed as Exhibit 21 to the company’s
                Form 10-K for the year ended December 31, 2002 and incorporated
                herein by reference.)*31.1
            
            Certification
                of Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.*31.2
            
            Certification
                of Principal Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
                of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*32.2
            
            Certification
                of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as
                adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.





*+*Incorporated
                by Reference.***Filed
                herewith.




52