##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K/A  Amendment No. 1
 
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2007
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the Transition Period from  to
 Commission File Number 001-33043
 
 ImaRx Therapeutics, Inc.
 (Exact Name of Registrant as Specified in Its Charter)
 
 Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    86-0974730
(I.R.S. Employer
Identification No.)1730 East River Road, Tucson, AZ
    
    85718-5893(Address of Principal Executive Offices)
    
    (Zip Code)
 (520) 770-1259
(Registrants Telephone Number, Including Area Code)
 Securities registered pursuant to Section 12(b) of the Act:
 Common Stock, $0.0001 par value
    
    NASDAQ Capital Market(Title of Each Class)
    
    (Name of Each exchange on Which Registered)
 Securities registered pursuant to Section 12(g) of the Act:
 None
 o þ
 o þ
 þ o
 o
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
  DOCUMENTS INCORPORATED BY REFERENCE




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##### 



Explanatory Note
   
 TABLE OF CONTENTS
 Page No.PART IItem 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    14Item 2. Properties
    
    
    30Item 3. Legal Proceedings
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities
    
    
    31Item 6. Selected Financial Data
    
    
    32Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    33Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    41Item 8. Financial Statements and Supplemental Data
    
    
    41Item 9A(T). Controls and Procedures
    
    
    41PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    42Item 11. Executive Compensation
    
    
    42Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    42Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    42Item 14. Principal Accountant Fees and Services
    
    
    42PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    43SIGNATURES
    
    
    47Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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PART I
 
 ITEM 1. BUSINESS
 Overview
  ®
  Market Opportunity
 Pulmonary Embolism.
 Ischemic Stroke
  3




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Our Commercial and Development Stage Products
 Kinlytic.
     SonoLysis Program.
  4




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Additional Research Stage Opportunities .
 
    
    Targeted SonoLysis Therapy.Our research team has developed MRX-802 as a potential next
generation SonoLysis microbubbles with targeting technology that causes the microbubbles to
bind to blood clots. We have demonstrated in laboratory experiments that our MRX-802
targeted microbubbles improve binding to blood clots. We believe that our MRX-802 targeted
microbubbles may have a greater ability to break-up blood clots than non-targeted
microbubbles when combined with ultrasound. We have conducted preclinical animal studies
with academic collaborators evaluating MRX-802 targeted microbubbles and ultrasound to
treat various clot disorders, including myocardial infarction. To further the research on
this technology, we have received and are near the end of our work on an approximately
$1.2 million grant from the National Institutes of Health, or NIH, to study MRX-802
targeted microbubbles to treat vascular clots. Upon conclusion of the work supported by
the NIH grant we will evaluate future research activities with this technology.
 
    
    Targeted Drug Delivery.In addition to our targeted SonoLysis technology, our research
team has demonstrated the ability to add a drug payload to our microbubbles or use a liquid
instead of a gas core to create sub-micron sized targeted droplets for drug delivery. Our
research team was previously conducting targeted drug delivery research using our MRX-803
microbubble under a subcontract with the NIH. In August of 2007, we received an
approximately $950,000 Phase I STTR grant from the National Institute of Neurological
Disorders and Stroke, a division of the National Institutes of Health (NIH) to study the
changes in the permeability of the blood-brain barrier with our proprietary MRX-809
targeted microbubbles and ultrasound. Upon conclusion of the work supported by this grant
we will evaluate future research activities with this technology.
 2
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Our Business Strategy
  
    
    Continue to sell our urokinase inventory and benefit from our commercial relationships;
    
    Leverage our commercial platform to create a portfolio of complimentary commercial
products over time; and
    
    Evaluate and enter into strategic development alternatives for our SonoLysis program.
 Industry Background
   Acute Massive Pulmonary Embolism
  Ischemic Stroke
     6




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Existing Blood Clot Therapies and Their Limitations
  Thrombolytic Drugs
   
    
    Risk of Bleeding Thrombolytic drugs dissolve blood clots, including those formed
naturally as a protective response to vessel injury, which can result in bleeding. The risk
of bleeding increases relative to the dosage and duration of treatment and differs among
the various thrombolytic drugs. Patients who are already taking other medications to
prevent formation of clots, such as anticoagulants or antiplatelets, also may not be good
candidates for the use of thrombolytic drugs, due to the increased difficulty of
controlling bleeding. As a result, thrombolytic drugs are approved by the FDA subject to
strict limitations on when, how long and in what dosages they can be administered.
 
    
    Time Window for Administration Due to the risk of bleeding, which increases over time,
tPA is only approved for administration to ischemic stroke patients within three hours
after the onset of stroke symptoms. This three-hour window is considered to be one of the
primary limiting factors in treating ischemic stroke. Approximately 28% of ischemic stroke
patients in the U.S. recognize their symptoms and reach an emergency room within the
three-hour window. However, due to other limitations, fewer than 7% of U.S. ischemic stroke
patients ultimately receive treatment with a thrombolytic drug.
 
    
    Possible Immune Response Some patients experience an immune response due to the
continued administration of thrombolytic drugs. For example, thrombolytic drugs that are
based on non-human biological material, such as streptokinase, which is produced using
streptococcus bacteria, may stimulate such an immune reaction.
 Mechanical Devices and Procedures
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Manufacturing
    Sales and Marketing
  Competition
    8




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Thrombolytic Drug Competitors
  Device Competitors
   Patents and Proprietary Rights
      9




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Government Regulation
  Categories of Regulation
  Drug and Biologics Regulation
  
    
    preclinical laboratory and animal tests;
 
    
    submission and approval of an Investigational New Drug application, or IND application;
 
    
    adequate and well-controlled human clinical trials to establish the safety and efficacy
of proposed drugs for their intended use and safety, purity and potency of biologic
products for their intended use;
 
    
    preapproval inspection of manufacturing facilities, company regulatory files and
selected clinical investigators;
 
    
    for drugs, FDA approval of a new drug application, or NDA, or FDA approval of an NDA
supplement in the case of a new indication if the product is already approved for another
indication; and
 
    
    for biologics, FDA approval of a biologics license application, or BLA, or FDA approval
of a BLA supplement in the case of a new indication if the product is already approved for
another indication.
  10




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Phase I:
 Phase II:
 Phase III:
 www.clinicaltrials.gov
   Medical Device Regulation
  
    
    product design, development and manufacture;
 
    
    product safety, testing, labeling and storage;
 
    
    preclinical testing in animals and in the laboratory; and
 
    
    clinical investigations in humans.
  11




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12




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Regulatory Enforcement
  
    
    warning letters, fines, injunctions, consent decrees and civil penalties;
 
    
    product recalls or market withdrawals;
 
    
    customer notifications, repair, replacement, refunds, recall or seizure of our products;
 
    
    operating restrictions, partial suspension or total shutdown of production;
 
    
    refusal to grant new regulatory approvals;
 
    
    withdrawing NDAs, BLAs, 510(k) clearance or PMA that have already been granted; and
 
    
    criminal prosecution.
 Employees
  Executive Officers and Directors
  Name
    
    Age
    
    PositionBradford A. Zakes
    
    
    42
    
    
    President, Chief Executive Officer and DirectorGreg Cobb
    
    
    38
    
    
    Chief Financial OfficerGaren Manvelian, MD.
    
    
    44
    
    
    Chief Medical Officer and Vice President,
Clinical DevelopmentJennifer Marshall
    
    
    44
    
    
    Vice President, Corporate DevelopmentKevin Ontiveros
    
    
    47
    
    
    Vice President, Legal Affairs, General Counsel
and SecretaryRajan Ramaswami, Ph.D.
    
    
    55
    
    
    Vice President, Product DevelopmentLynne E. Weissberger, Ph.D.
    
    
    60
    
    
    Vice President, Regulatory Affairs, Quality
Assurance and Regulatory ComplianceReena Zutshi, Ph.D.
    
    
    40
    
    
    Vice President, Operations
 Bradford A. Zakes
 Greg Cobb
 Garen Manvelian, MD
 Jennifer Marshall
  13




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Kevin Ontiveros
 Rajan Ramaswami, Ph.D.
 Lynne E. Weissberger, Ph.D.
 Reena Zutshi, Ph.D.
 Available Information
  
 ITEM 1A. RISK FACTORS
  Risks Related to Our Business and Industry
 Unless we are able to generate sufficient product or other revenue, we will continue to incur
losses from operations and may never achieve or maintain profitability.
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We incurred significant indebtedness in connection with our acquisition of urokinase assets from
Abbott Laboratories. We anticipate that we will not be able to satisfy this obligation by its March
31, 2008 due date, in which case Abbott Laboratories will have a right to reclaim our remaining
inventory of urokinase, along with a portion of the cash we have received from our sales of
urokinase.
  Our independent registered public accounting firm has expressed substantial doubt about our ability
to continue as a going concern.
  The manufacturing facilities of our suppliers must comply with applicable regulatory requirements.
If these manufacturing facilities do not maintain or receive regulatory approval, our business and
our results of operations would be harmed.
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We rely on a third party to manufacture our urokinase product. The loss of this manufacturer
relationship could prevent us from obtaining additional urokinase inventory to sell.
  Even if Microbix Biosystems is able to develop a manufacturing facility and we obtain regulatory
approval to manufacture additional urokinase, we will need to develop an infrastructure, or
contract with a third party, capable of successfully marketing and selling our products.
  The Kinlytic brand name for our urokinase product is unfamiliar to our market. We have limited
sales and marketing capabilities and depend on drug wholesalers to distribute our Kinlytic product.
   16




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We will need substantial additional capital to fund our operations. If we are unable to raise
capital when needed, we may be forced to delay, reduce or eliminate our research and development
programs or commercialization efforts, and we may be unable to timely pay our debts or may be
forced to sell or license assets or otherwise terminate further development of one or more of our
programs.
  
    
    our ability to renegotiate the payment terms of the outstanding balance on our
$15.0 million secured non-recourse note due to Abbott Laboratories on March 31, 2008;
 
    
    the timing of completing a strategic alternative for our SonoLysis program;
 
    
    the timing and amount of revenue from sales of urokinase;
 
    
    the timing and amount of revenue from grants and other sources;
 
    
    the timing, scope and results of our preclinical studies and clinical trials;
 
    
    the timing of initiation of manufacturing for urokinase;
 
    
    the timing of, and the costs involved in, obtaining regulatory approvals;
 
    
    our ability to establish and maintain collaborative relationships;
 
    
    personnel, facilities and equipment requirements; and
 
    
    the costs involved in preparing, filing, prosecuting, maintaining and enforcing patent
claims and other patent-related costs, including litigation costs, if any, and the result
of any such litigation.
  Our competitors generally are larger than we are, have greater financial resources available to
them than we do and may have a superior ability to develop and commercialize competitive products.
In addition, if our competitors have products that are approved in advance of ours, marketed more
effectively or demonstrated to be safer or more effective than ours, our commercial opportunity
will be reduced or eliminated and our business will be harmed.
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If we are unable to develop, manufacture and commercialize our product and product candidate, we
may not generate sufficient revenue to continue our business.
  We do not plan to manufacture any of our product candidates and will depend on commercial contract
manufacturers to manufacture our products.
   Our product candidates may never achieve market acceptance.
 ®
 
    
    the timing and scope of regulatory approvals of our products and market entry compared
to competitive products;
 
    
    the safety and efficacy of our products, including any inconveniences in
administration, as compared to alternative treatments;
  18




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
    
    the rate of adoption of our products by hospitals, doctors and nurses and acceptance
by the health care community;
 
    
    the product labeling and marketing claims permitted or required by regulatory agencies
for each of our products;
 
    
    the competitive features of our products, including price, as compared to competitive
products;
 
    
    the availability of sufficient third party coverage or reimbursement for our products;
 
    
    the extent and success of our sales and marketing efforts; and
 
    
    possible unfavorable publicity concerning our products or any similar products.
  Technological change and innovation in our market sector may cause our products to become obsolete
shortly after or even before such products reach the market.
  We intend to rely heavily on third parties to implement critical aspects of our business strategy,
and our failure to enter into and maintain these relationships on acceptable business terms, or at
all, would materially adversely affect our business.
  
    
    manufacturing of additional urokinase for sale;
 
    
    manufacturing of our MRX-801 and other proprietary microbubbles;
 
    
    conducting clinical trials;
  19




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
    
    conducting preclinical studies;
 
    
    performing stability and product release testing with respect to urokinase;
 
    
    preparing, submitting and maintaining regulatory records sufficient to meet the
requirements of the FDA; and
 
    
    customer logistics and distribution of our products.
  We rely on third party products, technology and intellectual property, which could negatively
affect our ability to sell our MRX-801 microbubbles or other products commercially or could
adversely affect our ability to derive revenue from such products.
  We may be unable to attract and retain management and other personnel we need to succeed.
   20




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We may be unable to manage our companys growth effectively.
  We depend on patents and other proprietary rights, some of which are uncertain and unproven.
Further, our patent portfolio and other intellectual property rights are expensive to maintain,
protect against infringement claims by third parties, and enforce against third party
infringements, and are subject to potential adverse claims.
      21




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
    
    challenge, invalidation, circumvention or expiration of issued patents already owned
by or licensed to us;
 
    
    claims by our consultants, key employees or other third parties that our products or
technologies are the result of technological advances independently developed by them
and, therefore, not owned by us;
 
    
    our failure to pay product development costs, license fees, royalties, milestone
payments or other compensation required under our technology license and technology
transfer agreements, and the subsequent termination of those agreements;
 
    
    failure by our licensors or licensees to comply with the terms of our license
agreements;
 
    
    misrepresentation by technology owners of the extent to which they have rights to the
technologies that we purport to acquire or license from them; and
 
    
    loss of rights that we have licensed due to our failure or decision not to fund
further research or failure to achieve required development or commercialization
milestones or otherwise comply with our obligations under the license and technology
transfer agreements.
  We have limited patent protection for Kinlytic, and third parties likely could develop urokinase
without a license from us, which could decrease the market opportunity for Kinlytic.
  Other companies may claim that we infringe their patents or trade secrets, which could subject us
to substantial damages.
  
    
    pay substantial damages;
 
    
    stop using infringing technologies and methods;
 
    
    stop certain research and development efforts;
 
    
    develop non-infringing products or methods; and
 
    
    obtain one or more licenses from third parties.
   22




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Our rights to develop and commercialize our SonoLysis product candidate is subject to the terms and
conditions of licenses or sublicenses granted to us by third parties, including other
pharmaceutical companies, that contain restrictions that may limit our ability to capitalize on
this product.
    We could be exposed to significant product liability claims, which could be time consuming and
costly to defend, divert management attention and adversely impact our ability to obtain and
maintain insurance coverage. The expense and potential unavailability of insurance coverage for our
company or our customers could adversely affect our ability to sell our products, which would
negatively impact our business.
   23




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If we use hazardous or biological materials in a manner that causes injury or violates applicable
law, we may be liable for damages.
  The FDA approval process for drugs involves substantial time, effort and financial resources, and
we may not receive any new approvals for our product candidates on a timely basis, or at all.
  
    
    preclinical laboratory and animal testing;
 
    
    submission of an IND application which must become effective before clinical trials
may begin;
 
    
    adequate and well-controlled human clinical trials to establish the safety and
efficacy of proposed drugs or biologics for their intended use;
 
    
    pre-approval inspection of manufacturing facilities, company regulatory files and
selected clinical investigators; and
 
    
    FDA approval of a new drug application, or NDA, or FDA approval of an NDA supplement
in the case of a new indication if the product is already approved for another
indication.
    24




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If we or our contract manufacturers fail to comply with applicable regulations, sales of our
products could be delayed and our revenue could be harmed.
   Our products will remain subject to ongoing regulatory review even if they receive marketing
approval. If we fail to comply with applicable regulations, we could lose these approvals, and the
sale of our products could be suspended.
   25




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
    
    restrictions on the products, manufacturers or manufacturing processes;
    
    warning letters;
    
    civil or criminal penalties or fines;
    
    injunctions;
    
    product seizures, detentions or import bans;
    
    voluntary or mandatory product recalls and publicity requirements;
    
    suspension or withdrawal of regulatory approvals;
    
    total or partial suspension of production; and
    
    refusal to approve pending applications of marketing approval of new drugs or
supplements to approved applications.
  Marketing and reimbursement practices and claims processing in the pharmaceutical and medical
device industries are subject to significant regulation in the U.S.
    26




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If we seek regulatory approvals for our products in foreign jurisdictions, we may not obtain any
such approvals.
  Risks Related to Our Common Stock
 Our principal stockholders and management own a significant percentage of our stock and will be
able to exercise significant influence over our affairs.
  If our stock price is volatile, purchasers of our common stock could incur substantial losses.
  
    
    results of our clinical trials;
 
    
    announcements of technological innovations or new products by us or our competitors
 
    
    delays in obtaining regulatory approvals for clinical trials or commercial marketing
efforts;
 
    
    the success rate of our discovery efforts, animal studies and clinical trials;
  27




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
    
    developments or disputes concerning patents or proprietary rights, including
announcements of infringement, interference or other litigation regarding these rights;
 
    
    the willingness of collaborators to commercialize our products and the timing of
commercialization;
 
    
    ability to manufacture our products;
 
    
    changes in our strategic relationships which adversely affect our ability to acquire
or commercialize products;
 
    
    announcements concerning our competitors or the health care industry in general;
 
    
    public concerns over the safety of our products or our competitors products;
 
    
    changes in governmental regulation of the health care industry;
 
    
    litigation or other disputes with third parties;
 
    
    actual or anticipated fluctuations in our operating results from period to period;
 
    
    variations in our quarterly results;
 
    
    changes in financial estimates or recommendations by securities analysts;
 
    
    changes in accounting principles;
 
    
    the loss of any of our key personnel;
 
    
    sales or anticipated sales of our common stock;
 
    
    investors perceptions of us;
 
    
    the loss of our ability to sell urokinase product if we are unsuccessful renegotiating
our outstanding note with Abbott; and
 
    
    general economic, industry and market conditions.
  We are at risk of securities class action litigation due to our stock price volatility.
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If there are substantial sales of common stock, our stock price could decline.
  The financial reporting obligations of being a public company and other laws and regulations
relating to corporate governance matters place significant demands on our management and cause
increased costs.
  Failure of our internal control over financial reporting could harm our business and financial
results.
  If we do not achieve our projected business goals in the time frames we announce and expect, our
stock price may decline.
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Anti-takeover defenses that we have in place could prevent or frustrate attempts to change our
direction or management.
  
    
    limit who may call a special meeting of stockholders;
    
    establish advance notice requirements for nominations for election to our Board of
Directors or for proposing matters that can be acted on at stockholder meetings;
    
    prohibit cumulative voting in the election of our directors, which would otherwise
permit holders of less than a majority of our outstanding shares to elect directors;
    
    prohibit stockholder action by written consent, thereby requiring all stockholder
actions to be taken at a meeting of our stockholders; and
    
    provide our Board of Directors the ability to designate the terms of and issue new
series of preferred stock without stockholder approval.
  Failure to satisfy NASDAQ Capital Market listing requirements may result in our common stock being
delisted from the NASDAQ Capital Market.
  We do not intend to pay cash dividends on our common stock in the foreseeable future.
  
 ITEM 2. Properties
   30




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ITEM 3. Legal Proceedings
  
 ITEM 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 ITEM 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
  High
    
    
    Low2007Fourth Quarter
    
    $
    3.45
    
    
    $
    1.51Third Quarter (beginning July 26, 2007)
    
    
    4.90
    
    
    
    3.25
   Use of Proceeds.
   
    
    to repay a portion of the Abbott Laboratories note;
    
    to fund exploration of strategic alternatives to continue the development of our SonoLysis
program;
    
    to fund urokinase commercialization activities; and
    
    working capital and other general corporate purposes.
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ITEM 6. Selected Financial Data
  Years Ended December 31,2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007(in thousands, except share data)Consolidated Statements of Operations Data:Product sales, research and development revenue
    
    $
    224
    
    
    $
    575
    
    
    $
    619
    
    
    $
    1,328
    
    
    $
    8,360Total operating expenses (1)
    
    
    3,741
    
    
    
    5,859
    
    
    
    31,915
    
    
    
    17,020
    
    
    
    17,029Operating loss
    
    
    (3,517
    )
    
    
    (5,284
    )
    
    
    (31,296
    )
    
    
    (15,692
    )
    
    
    (8,669
    )Gain on extinguishment of debt (2)
    
    
    
    
    
    
    
    
    
    
    3,835
    
    
    
    16,127
    
    
    
    219Net loss
    
    
    (3,820
    )
    
    
    (5,724
    )
    
    
    (27,926
    )
    
    
    (699
    )
    
    
    (8,764
    )Accretion of dividends on preferred stock
    
    
    (1,287
    )
    
    
    (301
    )
    
    
    (601
    )
    
    
    (1,167
    )
    
    
    (867
    )Reversal of
accretion of dividends on preferred stock not paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,919Deemed dividend from beneficial conversion feature for Series F redeemable convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,842
    )Net loss attributable to common stockholders
    
    $
    (5,107
    )
    
    $
    (6,025
    )
    
    $
    (28,527
    )
    
    $
    (1,866
    )
    
    $
    (18,554
    )Net loss attributable to common stockholders per share  Basic and diluted
    
    $
    (8.71
    )
    
    $
    (5.37
    )
    
    $
    (15.11
    )
    
    $
    (0.72
    )
    
    $
    (3.16
    )Weighted average shares outstanding  Basic and diluted
    
    
    586,396
    
    
    
    1,122,881
    
    
    
    1,888,291
    
    
    
    2,599,425
    
    
    
    5,868,131
 At December 31,2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007(in thousands, except share data)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    736
    
    
    $
    1,538
    
    
    $
    8,513
    
    
    $
    4,256
    
    
    $
    12,861Working capital (deficit)
    
    
    (1,440
    )
    
    
    739
    
    
    
    (8,111
    )
    
    
    2,657
    
    
    
    7,383Total assets
    
    
    1,298
    
    
    
    2,122
    
    
    
    9,516
    
    
    
    25,293
    
    
    
    30,707Long-term notes payable, less current portion
    
    
    4,002
    
    
    
    4,282
    
    
    
    
    
    
    
    
    
    
    
    Redeemable convertible preferred stock (3)
    
    
    20,826
    
    
    
    21,127
    
    
    
    21,727
    
    
    
    35,863
    
    
    
    Total stockholders equity (deficit)
    
    
    (26,003
    )
    
    
    (24,529
    )
    
    
    (29,327
    )
    
    
    (30,008
    )
    
    
    10,205
 
 (1)
    
    Research and development expense for the year ended December 31, 2005 includes the
purchase of in-process research and development operations valued at $24.0 million in
accordance with the Asset Purchase Agreement entered into with Abbott Laboratories in
September 2005 related to our acquisition of certain recombinant thrombolytic drug
technologies. In December 2006, our Board of Directors decided not to complete payment for
these technologies under the non-recourse debt we had issued to Abbott Laboratories, and
decided to allow the acquired technologies to be repossessed by Abbott Laboratories.(2)
    
    An extinguishment of debt payable to a development partner in a joint development
agreement entered into in 2001 resulted in a gain on extinguishment of note of $3.8 million
in March 2005. Extinguishment of the non-recourse debt issued to Abbott Laboratories as
partial payment for the 2005 purchase of recombinant thrombolytic drug technologies
resulted in a gain on extinguishment of debt of $16.1 million in December 2006. An
extinguishment of a debt payable to a third party for patent costs resulted in a gain on
extinguishment of debt of $0.2 million in May 2007.(3)
    
    Upon the completion of the initial public offering in July 2007, all of the previously
outstanding preferred shares were converted into shares of common stock.  32




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##### Table of Contents



ITEM 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis should be read in conjunction with our audited financial
statements and notes thereto that appear elsewhere in this report. This discussion contains
forward-looking statements reflecting our current expectations that involve risks and
uncertainties. Actual results may differ materially from those discussed in these forward-looking
statements due to a number of factors, including those set forth in the section entitled Risk
Factors and elsewhere in this report.
  Overview
  ®
   Product Sales, Research and Development Revenue
   33




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##### Table of Contents



Revenue
Recognition When the Right of Return Exists.
 Cost of Product Sales
  Research and Development Expenses
  General and Administrative Expenses
  Critical Accounting Policies and Significant Judgments and Estimates
    34




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##### Table of Contents



Inventory and Inventory Subject to Return
   Clinical Trial Accrued Expenses
  Revenue Recognition
 Revenue
Recognition in Financial Statements. Revenue Recognition When the Right
of Return Exists,
   Stock-Based Compensation
 Share-Based Payment Accounting for Stock-Based
Compensation Accounting for
Stock Issued to Employees.
  35




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##### Table of Contents



Results of Operations
 Twelve Months Ended December 31, 2006 Compared to 2007
 Product Sales, Research and Development Revenue.
 Cost of Product Sales.
 Research and Development Expenses.
  36




---



##### Table of Contents



General and Administrative Expenses.
 Interest and Other Income.
 Interest Expense.
 Gain on Extinguishment of Debt.
 Twelve Months Ended December 31, 2005 Compared to 2006
 Product Sales, Grant and Other Revenue.
 Cost of Product Sales.
 Research and Development Expenses.
 General and Administrative Expenses.
 Interest and Other Income.
 Interest Expense.
  37




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##### Table of Contents



Gain on Extinguishment of Debt.
 Liquidity and Capital Resources
 Sources of Liquidity
      38




---



##### Table of Contents



Cash Flows
 Net
Cash Used in or provided by Operating Activities.
 Net Cash Used in or provided by Investing Activities.
 Net Cash Provided by Financing Activities.
 Operating Capital and Capital Expenditure Requirements
    39




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##### Table of Contents



Contractual Obligations
  Payments Due By PeriodLess than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsOperating leases
    
    $
    1,119
    
    
    $
    307
    
    
    $
    600
    
    
    $
    212
    
    
    
    Secured non-recourse note(1)
    
    
    11,572
    
    
    
    11,572
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    12,691
    
    
    $
    11,879
    
    
    $
    600
    
    
    $
    212
    
    
    
    
 (1)
    
    Includes only the principal balance.  
    
    If we or our sublicensees sell products or processes that utilize the intellectual
property we license from UNEMED Corporation, we will be obligated pay a royalty to UNEMED
of 2% of such net sales.
    
    If we or our sublicensees sell products or processes that utilize the intellectual
property we license from the University of Arkansas, we will be obligated to pay, in
addition to a one-time fee of $25,000, royalties to the University of Arkansas of (i) 4% of
net sales up to $1.0 million; (ii) 3% of net sales between $1.0 million and $10.0 million;
and (iii) 2% of net sales greater than $10.0 million, subject to minimal royalty thresholds
and a maximum aggregate royalty of $20.0 million.
    
    If we or our sublicensees sell products or processes that utilize the intellectual
property that we license from Dr. Schlief, we will be obligated to pay a royalty to
Dr. Schlief of 2% of such net sales by us and 3% of any net sales by sublicensees.
 Off-Balance Sheet Transactions
  Recently Issued Accounting Pronouncements
 Fair Value Measurements
  40




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##### Table of Contents



The
Fair Value Option for Financial Assets and Financial Liabilities
 Combinations Noncontrolling Interests in Consolidated Financial
Statements, an amendment of Accounting Research Bulletin No. 51
 
 ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk
 Interest Rate Risk.
 Foreign Currency Risk.
 
 ITEM 8. Financial Statements and Supplementary Data
  
 ITEM 9A(T). Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   41




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##### Table of Contents



Managements Report on Internal Control over Financial Reporting
  
 PART III
 
 ITEM 10. Directors, Executive Officers, and Corporate Governance
   
 ITEM 11. Executive Compensation
  
 ITEM 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 ITEM 13. Certain Relationships and Related Transactions, and Director Independence
  
 ITEM 14. Principal Accountant Fees and Services
   42




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##### Table of Contents



PART IV
 
 ITEM 15. Exhibits and Financial Statement Schedules
 
 Consolidated Financial Statements:
 PageIndex to Consolidated Financial Statements
    
    
    F-1Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2006 and 2007
    
    
    F-3Consolidated Statements of Operations for the years ended
December 31, 2005, 2006, and 2007
    
    
    F-5Consolidated Statements of Stockholders Equity (Deficit)
for the years ended December 31, 2005, 2006 and 2007
    
    
    F-6Consolidated Statements of Cash Flows for the years ended
December 31, 2005, 2006 and 2007
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
   Incorporated by ReferenceExhibit
    
    
    
    Filed
    
    
    
    ExhibitNo
    
    Exhibit Title
    
    Herewith
    
    Form
    
    No.
    
    File No.
    
    Filing Date3.1
    
    
    Fourth Amended and Restated
Certificate of Incorporation of the
registrant
    
    
    
    S-1
    
    
    3.1
    
    
    333-142646
    
    5/4/20073.2
    
    
    Amendment to Certificate of
Incorporation of the registrant to
effect a six-for-ten reverse stock
split
    
    
    
    S-1
    
    
    3.2
    
    
    333-142646
    
    5/4/20073.3
    
    
    Second Amendment to Certificate of
Incorporation of the registrant to
effect a one-for-three reverse
stock split
    
    
    
    S-1
    
    
    3.3
    
    
    333-142646
    
    5/4/20073.4
    
    
    Amended and Restated Certificate of
Incorporation of the registrant
    
    
    
    S-1
    
    
    3.4
    
    
    333-142646
    
    5/4/20073.5
    
    
    Bylaws of the registrant, as amended
    
    
    
    S-1
    
    
    3.5
    
    
    333-142646
    
    5/4/20073.6
    
    
    Amended and Restated Bylaws of the
registrant
    
    
    
    S-1
    
    
    3.6
    
    
    333-142646
    
    5/4/20074.1
    
    
    Specimen certificate evidencing
shares of common stock
    
    
    
    S-1
    
    
    4.1
    
    
    333-142646
    
    5/4/200710.1
    *
    
    Form of Indemnification Agreement
entered into between the registrant
and each of its directors and
officers
    
    
    
    S-1
    
    
    10.1
    
    
    333-142646
    
    5/4/2007
  43




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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    Filed
    
    
    
    ExhibitNo
    
    Exhibit Title
    
    Herewith
    
    Form
    
    No.
    
    File No.
    
    Filing Date10.2
    
    
    Second Amended and Restated
Investors Rights Agreement, dated
April 14, 2006, by and among the
registrant and certain stockholders
    
    
    
    S-1
    
    
    10.2
    
    
    333-142646
    
    5/4/200710.3*
    
    
    2000 Stock Plan and related
agreements
    
    
    
    S-1
    
    
    10.3
    
    
    333-142646
    
    5/4/200710.4*
    
    
    2007 Performance Incentive Plan and
related agreements
    
    
    
    S-1
    
    
    10.4
    
    
    333-142646
    
    5/4/200710.5*
    
    
    Bonus Plan
    
    
    
    S-1
    
    
    10.5
    
    
    333-142646
    
    5/4/200710.6
    
    
    License Agreement, dated January 4,
2005, between the registrant and
Dr. med. Reinhard Schlief
    
    
    
    S-1
    
    
    10.6
    
    
    333-142646
    
    5/4/200710.7
    
    
    Exclusive Sublicense Agreement,
dated October 10, 2003, between the
registrant and UNEMED Corporation
    
    
    
    S-1
    
    
    10.7
    
    
    333-142646
    
    5/4/200710.8
    
    
    Assignment, Assumption and License
Agreement, dated October 7, 1999,
between the registrant and
Bristol-Myers Squibb Medical
Imaging, Inc. (as successor to
DuPont Contrast Imaging, Inc.)
dated October 7, 1999, and
amendments thereto
    
    
    
    S-1
    
    
    10.8
    
    
    333-142646
    
    5/4/200710.9
    
    
    License Agreement, dated
February 10, 2006, between the
registrant and the University of
Arkansas for Medical Sciences
    
    
    
    S-1
    
    
    10.9
    
    
    333-142646
    
    5/4/200710.10
    
    
    Asset Purchase Agreement, dated
April 10, 2006, between the
registrant and Abbott Laboratories,
and amendments thereto
    
    
    
    S-1
    
    
    10.10
    
    
    333-142646
    
    5/4/200710.11
    
    
    Escrow Agreement, dated April 14,
2006, between the registrant and
Abbott Laboratories
    
    
    
    S-1
    
    
    10.11
    
    
    333-142646
    
    5/4/200710.12
    
    
    Inventory Trademark License
Agreement, dated April 14, 2006,
between the registrant and Abbott
Laboratories
    
    
    
    S-1
    
    
    10.12
    
    
    333-142646
    
    5/4/200710.13
    
    
    Security Agreement, dated April 14,
2006, between the registrant and
Abbott Laboratories
    
    
    
    S-1
    
    
    10.13
    
    
    333-142646
    
    5/4/200710.14
    
    
    Secured Promissory Note, dated
April 14, 2006, between the
registrant and Abbott Laboratories
    
    
    
    S-1
    
    
    10.14
    
    
    333-142646
    
    5/4/200710.15
    
    
    Second Amended Executive Employment
Agreement, dated May 15, 2006,
between the registrant and Evan
C. Unger
    
    
    
    S-1
    
    
    10.15
    
    
    333-142646
    
    5/4/2007
  44




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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    Filed
    
    
    
    ExhibitNo
    
    Exhibit Title
    
    Herewith
    
    Form
    
    No.
    
    File No.
    
    Filing Date10.16
    
    
    Consulting Agreement, dated
October 20, 2006, between the
registrant and Evan C. Unger
    
    
    
    S-1
    
    
    10.16
    
    
    333-142646
    
    5/4/200710.17
    
    
    Confidential Separation Agreement
and Mutual General Release of All
Claims, dated November 28, 2006,
between the registrant and Evan C.
Unger
    
    
    
    S-1
    
    
    10.17
    
    
    333-142646
    
    5/4/200710.18*
    
    
    Consulting Agreement, dated
April 11, 2005, between the
registrant and Greg Cobb
    
    
    
    S-1
    
    
    10.18
    
    
    333-142646
    
    5/4/200710.19*
    
    
    Amended Executive Employment
Agreement, dated February 1, 2007,
between the registrant and Greg
Cobb
    
    
    
    S-1
    
    
    10.19
    
    
    333-142646
    
    5/4/200710.20*
    
    
    Amended Executive Employment
Agreement, dated February 1, 2007,
between the registrant and Bradford
A. Zakes
    
    
    
    S-1
    
    
    10.20
    
    
    333-142646
    
    5/4/200710.21
    
    
    Agreement, dated March 31, 2006, by
and among the registrant, John A.
Moore and Edson Moore Healthcare
Ventures
    
    
    
    S-1
    
    
    10.21
    
    
    333-142646
    
    5/4/200710.22
    
    
    Subscription Agreement and Investor
Questionnaire, dated March 2004,
between the registrant and each of
the signatory investors, offering
price $2.00 per share
    
    
    
    S-1
    
    
    10.22
    
    
    333-142646
    
    5/4/200710.23
    
    
    Subscription Agreement and Investor
Questionnaire, dated December 2004,
between the registrant and each of
the signatory investors, offering
price $3.00 per share
    
    
    
    S-1
    
    
    10.23
    
    
    333-142646
    
    5/4/200710.24
    
    
    Subscription Agreement and Investor
Questionnaire, dated September and
October 2004, between the
registrant and each of the
signatory investors, offering price
$4.00 per share
    
    
    
    S-1
    
    
    10.24
    
    
    333-142646
    
    5/4/200710.25
    
    
    Commercial Lease  Triple Net,
dated November 1, 2002, between the
registrant and ImaRx Investments
L.L.C.
    
    
    
    S-1
    
    
    10.25
    
    
    333-142646
    
    5/4/200710.26
    
    
    Standard Commercial  Industrial
Lease, dated December 30, 1997,
between the registrant and Tucson
Tech Park and addenda thereto
    
    
    
    S-1
    
    
    10.26
    
    
    333-142646
    
    5/4/2007
  45




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##### Table of Contents



Incorporated by ReferenceExhibit
    
    
    
    Filed
    
    
    
    ExhibitNo
    
    Exhibit Title
    
    Herewith
    
    Form
    
    No.
    
    File No.
    
    Filing Date10.27
    
    
    Note Extension and Amendment
Agreement, dated October 25, 2007, between the registrant and Abbott Laboratories
    
    
    
    8-K
    
    
    10.1
    
    
    001-33043
    
    10/26/200710.28*
    
    
    Amendment No. 2 to Executive
Employment Agreement dated as of January 1, 2008 by and between the Company and Bradford A. Zakes
    
    
    
    8-K
    
    
    10.1
    
    
    001-33043
    
    2/7/200810.29*
    
    
    Amendment No. 2 to Executive
Employment Agreement dated as of January 1, 2008 by and between the Company and Greg Cobb
    
    
    
    8-K
    
    
    10.2
    
    
    001-33043
    
    2/7/200810.30*
    
    
    Executive Employment Agreement
dated as of January 1, 2008 by and between the Company and Garen Manvelian
    
    
    
    8-K
    
    
    10.3
    
    
    001-33043
    
    2/7/200810.31*
    
    
    Executive Employment Agreement
dated as of January 1, 2008 by and between the Company and Kevin Ontiveros
    
    
    
    8-K
    
    
    10.4
    
    
    001-33043
    
    2/7/200810.32
    
    
    Commercial Lease  dated December
10, 2007, between the registrant and Cambric Partners
    
    
    
    10-K
    
    
    10.32
    
    
    001-33043
    
    3/31/200823.1
    
    
    Consent of Independent Registered
Public Accounting Firm
    
    X24.1
    
    

Power
of Attorney
    
    
    
    10-K
    
    
    24.1
    
    
    001-33043
    
    3/31/200831.1
    
    
    Certification of Chief Executive
Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
    
    X31.2
    
    
    Certification of Chief Financial
Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
    
    X32.1
    
    
    Certification of Chief Executive
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    X32.2
    
    
    Certification of Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    X
 *
    
    Denotes a compensatory plan, contract or arrangement, in which the Registrants directors or
executive officers may participate.   46




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##### Table of Contents



SIGNATURES
  IMARX THERAPEUTICS, INC.By:
    
    /s/ Bradford A. ZakesBradford A. Zakes
President and Chief Executive OfficerApril 3, 2008Date
  47




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##### Table of Contents



IMARX THERAPEUTICS, INC.
 
 INDEX TO FINANCIAL STATEMENTS
 PageIndex to Consolidated Financial Statements
    
    
    F-1Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2006 and 2007
    
    
    F-3Consolidated Statements of Operations for the years ended
December 31, 2005, 2006, and 2007
    
    
    F-5Consolidated Statements of Stockholders Equity (Deficit)
for the years ended December 31, 2005, 2006 and 2007
    
    
    F-6Consolidated Statements of Cash Flows for the years ended
December 31, 2005, 2006 and 2007
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Share-Based Payments.
  /s/ Ernst & Young LLP
 
  F-2




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##### Table of Contents



ImaRx Therapeutics, Inc.
 
 Consolidated Balance Sheets
(in thousands, except share data)
 December 312006
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    4,256
    
    
    $
    12,861Restricted cash
    
    
    
    
    
    
    388Accounts receivable
    
    
    576
    
    
    
    349Inventory
    
    
    16,060
    
    
    
    11,138Inventory subject to return
    
    
    445
    
    
    
    2,560Prepaid expenses and other
    
    
    539
    
    
    
    589Total current assets
    
    
    21,876
    
    
    
    27,885Long-term assets:Property and equipment, net
    
    
    917
    
    
    
    1,170Intangible assets, net
    
    
    2,500
    
    
    
    1,633Other
    
    
    
    
    
    
    19Total assets
    
    $
    25,293
    
    
    $
    30,707Liabilities and stockholders equity (deficit)Current liabilities:Accounts payable
    
    $
    1,413
    
    
    $
    1,277Accrued expenses
    
    
    851
    
    
    
    837Accrued chargebacks and administrative fees
    
    
    385
    
    
    
    1,317Deferred revenue
    
    
    955
    
    
    
    5,373Notes payable and accrued interest
    
    
    15,615
    
    
    
    11,698Total current liabilities
    
    
    19,219
    
    
    
    20,502Other
    
    
    219
    
    
    
    Total liabilities
    
    
    19,438
    
    
    
    20,502Redeemable convertible preferred stock:Series A 8% Redeemable Convertible Preferred Shares,
$.0001 par, at carrying value including accrued dividends,
2,302,053 shares authorized and 2,291,144 shares issued and
outstanding at December 31, 2006 and no shares authorized,
issued or outstanding at December 31, 2007
    
    
    9,329
    
    
    
    Series B 7% Mandatorily Redeemable Convertible Preferred Shares,
$.0001 par, at carrying value,
593,226 shares authorized, issued and outstanding at
December 31, 2006 and no shares authorized, issued or
outstanding at December 31, 2007
    
    
    9,492
    
    
    
    Series C Mandatorily Redeemable Convertible Preferred Shares,
$.0001 par, at carrying value,
285,714 shares authorized, issued and outstanding at
December 31, 2006 and no shares authorized, issued or
outstanding at December 31, 2007
    
    
    1,945
    
    
    
    Series D 8% Redeemable Convertible Preferred Shares,
$.0001 par, at carrying value including accrued dividends,
438,232 authorized, issued and outstanding at December 31,
2006 and no shares authorized, issued or outstanding at
December 31, 2007
    
    
    1,562
    
    
    
    Series F 8% Redeemable Convertible Preferred Shares,
$.0001 par, at carrying value including accrued dividends,
4,000,000 shares authorized and 2,835,000 shares issued and
outstanding at December 31, 2006 and no shares authorized,
issued and outstanding at December 31, 2007
    
    
    13,535
    
    
    
    Total redeemable convertible preferred stock
    
    
    35,863
    
    
    
    
  F-3




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##### Table of Contents



December 312006
    
    
    2007Stockholders equity (deficit):Series E Redeemable Convertible Preferred Shares, $.0001 par1,000,000 shares authorized, issued and outstanding at
December 31, 2006 and no shares authorized, issued and
outstanding at December 31, 2007
    
    
    4,000
    
    
    
    Common stock, $.0001 par70,000,000 shares authorized and 2,606,739 shares issued and
outstanding at December 31, 2006 and 100,000,000 shares
authorized and 10,046,683 shares issued and outstanding at
December 31, 2007
    
    
    
    
    
    
    1Additional paid-in capital
    
    
    28,620
    
    
    
    91,386Accumulated deficit
    
    
    (62,628
    )
    
    
    (81,182
    )Total stockholders equity (deficit)
    
    
    (30,008
    )
    
    
    10,205Total liabilities and stockholders equity (deficit)
    
    $
    25,293
    
    
    $
    30,707
   F-4




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##### Table of Contents



ImaRx Therapeutics, Inc.
 
 Consolidated Statements of Operations
(in thousands, except share data)
 Years Ended December 312005
    
    
    2006
    
    
    2007Revenues:Product sales, net
    
    $
    
    
    
    $
    480
    
    
    $
    7,841Research and development
    
    
    619
    
    
    
    848
    
    
    
    519Total operating revenue
    
    
    619
    
    
    
    1,328
    
    
    
    8,360Costs and expenses:Cost of product sales
    
    
    
    
    
    
    204
    
    
    
    3,518Research and development
    
    
    3,669
    
    
    
    9,067
    
    
    
    7,424General and administrative
    
    
    4,246
    
    
    
    7,749
    
    
    
    6,087Acquired in-process research and development
    
    
    24,000
    
    
    
    
    
    
    
    Total cost and expenses
    
    
    31,915
    
    
    
    17,020
    
    
    
    17,029Operating loss
    
    
    (31,296
    )
    
    
    (15,692
    )
    
    
    (8,669
    )Other income (expense):Interest and other income
    
    
    122
    
    
    
    381
    
    
    
    548Interest expense
    
    
    (587
    )
    
    
    (1,515
    )
    
    
    (862
    )Gain on extinguishment of debt
    
    
    3,835
    
    
    
    16,127
    
    
    
    219Net loss
    
    
    (27,926
    )
    
    
    (699
    )
    
    
    (8,764
    )Deemed dividend from beneficial conversion
feature for Series F redeemable convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    (13,842
    )Accretion of dividends on preferred stock
    
    
    (601
    )
    
    
    (1,167
    )
    
    
    (867
    )Reversal of accretion of dividends on
preferred stock not paid
    
    
    
    
    
    
    
    
    
    
    4,919Net loss attributed to common stockholders
    
    $
    (28,527
    )
    
    $
    (1,866
    )
    
    $
    (18,554
    )Net loss attributed to common stockholders
per share Basic and diluted
    
    $
    (15.11
    )
    
    $
    (0.72
    )
    
    $
    (3.16
    )Weighted-average shares outstanding Basic and diluted
    
    
    1,888,291
    
    
    
    2,599,425
    
    
    
    5,868,131
   F-5




---



##### Table of Contents



ImaRx Therapeutics, Inc.
 
 Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders Equity (Deficit)
(in thousands, except share data)
 Series ERedeemableRedeemable Convertible Preferred Stock

    
    
    Convertible

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalSeries A
    
    
    Series B
    
    
    Series C
    
    
    Series D
    
    
    Series F
    
    
    Preferred Shares

    
    
       Common Stock
    
    
    Additional
    
    
    
    
    
    
    StockholdersCarrying
    
    
    
    
    
    
    Carrying
    
    
    
    
    
    
    Carrying
    
    
    
    
    
    
    Carrying
    
    
    
    
    
    
    Carrying
    
    
    

    
    
    
    
    
    Paid-in
    
    
    Accumulated
    
    
    EquityShares
    
    
    Value
    
    
    Shares
    
    
    Value
    
    
    Shares
    
    
    Value
    
    
    Shares
    
    
    Value
    
    
    Shares
    
    
    Value
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Deficit)Balance at January 1, 2005
    
    
    2,291,144
    
    
    $
    8,321
    
    
    
    593,226
    
    
    $
    9,492
    
    
    
    285,714
    
    
    $
    1,945
    
    
    
    438,232
    
    
    $
    1,369
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    1,301,040
    
    
    $
    
    
    
    $
    7,707
    
    
    $
    (32,235
    )
    
    $
    (24,528
    )Issuance of Common Stock, net of issuance costs of $593,100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    277,999
    
    
    
    
    
    
    
    3,577
    
    
    
    
    
    
    
    3,577Issuance of 4,000 warrants in conjunction with patent licensing
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    36Issuance of Common Stock, net of issuance costs of $885,931
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    188,664
    
    
    
    
    
    
    
    1,944
    
    
    
    
    
    
    
    1,944Issuance of 46,664 warrants to placement agent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    415
    
    
    
    
    
    
    
    415Issuance of Preferred Stock related to acquisition of assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    4,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,000Issuance of 20,000 warrants with subordinated notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    273
    
    
    
    
    
    
    
    273Issuance of Common Stock, net of issuance costs of $1,487,527
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    531,750
    
    
    
    
    
    
    
    9,148
    
    
    
    
    
    
    
    9,148Issuance of Common Stock, net of issuance costs of $1,510,645
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218,250
    
    
    
    
    
    
    
    2,854
    
    
    
    
    
    
    
    2,854Issuance of 74,996 warrants to placement agent
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    943
    
    
    
    
    
    
    
    943Accretion of undeclared dividends on Series A and D Redeemable
Convertible Preferred Stock
    
    
    
    
    
    
    504
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (601
    )
    
    
    (601
    )Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,506
    
    
    
    
    
    
    
    35
    
    
    
    
    
    
    
    35Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,454
    
    
    
    
    
    
    
    296
    
    
    
    
    
    
    
    296Shared-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    207
    
    
    
    
    
    
    
    207Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,926
    )
    
    
    (27,926
    )Balance at December 31, 2005
    
    
    2,291,144
    
    
    
    8,825
    
    
    
    593,226
    
    
    
    9,492
    
    
    
    285,714
    
    
    
    1,945
    
    
    
    438,232
    
    
    
    1,466
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    4,000
    
    
    
    2,584,663
    
    
    
    
    
    
    
    27,435
    
    
    
    (60,762
    )
    
    
    (29,327
    )Issuance of 15,000 warrants to consultant
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    174Issuance of Series F Redeemable Convertible Preferred Stock net of
issuance costs of $1,206,441
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,835,000
    
    
    
    12,968
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accretion of undeclared dividends on Series A, D and F Redeemable
Convertible Preferred Stock
    
    
    
    
    
    
    504
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    567
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,167
    )
    
    
    (1,167
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    955
    
    
    
    
    
    
    
    955Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,076
    
    
    
    
    
    
    
    56
    
    
    
    
    
    
    
    56Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (699
    )
    
    
    (699
    )Balance at December 31, 2006
    
    
    2,291,144
    
    
    
    9,329
    
    
    
    593,226
    
    
    
    9,492
    
    
    
    285,714
    
    
    
    1,945
    
    
    
    438,232
    
    
    
    1,562
    
    
    
    2,835,000
    
    
    
    13,535
    
    
    
    1,000,000
    
    
    
    4,000
    
    
    
    2,606,739
    
    
    
    
    
    
    
    28,620
    
    
    
    (62,628
    )
    
    
    (30,008
    )Deemed dividend from beneficial conversion feature for Series F
redeemable Convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,842
    
    
    
    (13,842
    )
    
    
    Accretion of undeclared dividends on Series A, D and F Redeemable
Convertible Preferred Stock
    
    
    
    
    
    
    252
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    
    
    
    
    567
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (867
    )
    
    
    (867
    )Net proceeds from initial public offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,000,000
    
    
    
    
    
    
    
    11,233
    
    
    
    
    
    
    
    11,233Conversion of redeemable convertible preferred stock to common stock
    
    
    (2,291,144
    )
    
    
    (9,581
    )
    
    
    (593,226
    )
    
    
    (9,492
    )
    
    
    (285,714
    )
    
    
    (1,945
    )
    
    
    (438,232
    )
    
    
    (1,610
    )
    
    
    (2,835,000
    )
    
    
    (14,102
    )
    
    
    (1,000,000
    )
    
    
    (4,000
    )
    
    
    4,401,129
    
    
    
    1
    
    
    
    35,811
    
    
    
    
    
    
    
    31,812Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,179
    
    
    
    
    
    
    
    1,179Issuance of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,500
    
    
    
    
    
    
    
    193
    
    
    
    
    
    
    
    193Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Reversal of accretion of dividends on Series A, D and F preferred
stock not paid
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,919
    
    
    
    4,919Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    507
    
    
    
    
    
    
    
    507Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,764
    )
    
    
    (8,764
    )Balance at December 31, 2007
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    10,046,683
    
    
    $
    1
    
    
    $
    91,386
    
    
    $
    (81,182
    )
    
    $
    10,205
   F-6




---



##### Table of Contents



ImaRx Therapeutics, Inc.
 
 Consolidated Statements of Cash Flows
(in thousands)
 Years Ended December 312005
    
    
    2006
    
    
    2007Operating activitiesNet loss
    
    $
    (27,926
    )
    
    $
    (699
    )
    
    $
    (8,764
    )Adjustments to reconcile net loss to net cash (used in) provided by operating activities:Depreciation and amortization
    
    
    194
    
    
    
    1,049
    
    
    
    1,174Stock-based compensation
    
    
    207
    
    
    
    955
    
    
    
    700Warrant amortization expense
    
    
    36
    
    
    
    174
    
    
    
    Amortization of debt discount
    
    
    273
    
    
    
    
    
    
    
    Gain on extinguishments of debt
    
    
    (3,835
    )
    
    
    (16,127
    )
    
    
    (219
    )Note issued for acquisition of technology expensed to operations
    
    
    15,000
    
    
    
    
    
    
    
    Preferred stock issued for acquisition of technology expensed to operations
    
    
    4,000
    
    
    
    
    
    
    
    Loss on disposal of property and equipment
    
    
    
    
    
    
    3
    
    
    
    19Changes in operating assets and liabilities:Inventory
    
    
    36
    
    
    
    (3,873
    )
    
    
    4,922Inventory subject to return
    
    
    
    
    
    
    (107
    )
    
    
    (2,115
    )Accounts receivable
    
    
    
    
    
    
    (576
    )
    
    
    227Prepaid expenses and other
    
    
    (27
    )
    
    
    (266
    )
    
    
    (49
    )Other assets
    
    
    
    
    
    
    
    
    
    
    (19
    )Accounts payable
    
    
    386
    
    
    
    637
    
    
    
    (136
    )Accrued expenses and other liabilities
    
    
    541
    
    
    
    1,857
    
    
    
    1,781Deferred revenue
    
    
    
    
    
    
    955
    
    
    
    4,417Net cash (used in) provided by operating activities
    
    
    (11,115
    )
    
    
    (16,018
    )
    
    
    1,938Investing activitiesPurchase of property and equipment, net
    
    
    (564
    )
    
    
    (439
    )
    
    
    (577
    )Purchase of intangibles
    
    
    
    
    
    
    (825
    )
    
    
    Net cash used in investing activities
    
    
    (564
    )
    
    
    (1,264
    )
    
    
    (577
    )Financing activitiesDeferred financing costs
    
    
    (58
    )
    
    
    
    
    
    
    Change in restricted cash
    
    
    
    
    
    
    
    
    
    
    (388
    )Payment upon extinguishments of note
    
    
    (500
    )
    
    
    
    
    
    
    Payment on note payable
    
    
    
    
    
    
    
    
    
    
    (4,780
    )Proceeds from sale of common stock
    
    
    17,854
    
    
    
    56
    
    
    
    12,412Issuance of promissory note for acquisition of technology
    
    
    4,000
    
    
    
    
    
    
    
    Payment of promissory note for acquisition of technology
    
    
    (4,000
    )
    
    
    
    
    
    
    Issuance of warrants
    
    
    1,358
    
    
    
    
    
    
    
    Net proceeds from issuance of preferred stock
    
    
    
    
    
    
    12,969
    
    
    
    Net cash provided by financing activities
    
    
    18,654
    
    
    
    13,025
    
    
    
    7,244Net increase (decrease) in cash and cash equivalents
    
    
    6,975
    
    
    
    (4,257
    )
    
    
    8,605Cash and cash equivalents at the beginning of the year
    
    
    1,538
    
    
    
    8,513
    
    
    
    4,256Cash and cash equivalents at the end of the year
    
    $
    8,513
    
    
    $
    4,256
    
    
    $
    12,861Supplemental schedule of cash flow informationCash paid for interest
    
    $
    117
    
    
    $
    
    
    
    $
    1,351Supplemental Schedule of Noncash Investing and Financing Activities:Accretion of undeclared dividends on Series A/D/F
redeemable convertible preferred stock
    
    $
    601
    
    
    $
    1,167
    
    
    $
    867Reversal of accretion of undeclared dividends on
Series A/D/F redeemable convertible preferred stock not paid
    
    
    
    
    
    
    
    
    
    
    4,919Deemed dividend from beneficial conversion feature for Series F redeemable convertible
preferred stock
    
    
    
    
    
    
    
    
    
    
    13,842Conversion of convertible preferred stock to common stock upon initial public offering
    
    
    
    
    
    
    
    
    
    
    35,811Fair value of stock warrants issued in connection with Companys initial public offering
    
    
    
    
    
    
    
    
    
    
    1,179Fair value of stock warrants issued for consulting services and placement agreement
amendment
    
    
    
    
    
    
    174
    
    
    
    Fair value of stock warrants issued for patents
    
    
    36
    
    
    
    
    
    
    
    Fair value of stock warrants issued for bridge notes
    
    
    273
    
    
    
    
    
    
    
    Fair value of stock warrants issued in connection with private placement
    
    
    1,358
    
    
    
    
    
    
    
    Note issued for acquisition of technology and related inventory and intangibles
    
    
    15,000
    
    
    
    15,000Preferred stock issued for acquisition of technology
    
    
    4,000
    
    
    
    
    
    
    
    
   F-7




---



##### Table of Contents



ImaRx Therapeutics, Inc.
 
 Notes to Consolidated Financial Statements
 1. The Company and Significant Accounting Policies
 The Company
 ® TM
 Accounting and Reporting by Development Stage Enterprises.
 Consolidation
  Basis of Presentation
   Estimates and Assumptions
  Reclassifications
   F-8




---



##### Table of Contents



Cash Equivalents and Restricted Cash
   Fair Value of Financial Instruments
  Accounts Receivable
  Inventory and Inventory Subject to Return
        F-9




---



##### Table of Contents



Property and Equipment
  Intangible Assets
 Goodwill and Other Intangible Assets.
 Accounting for the Impairment or Disposal of Long-Lived
Assets,
 Revenue Recognition
 Revenue Recognition in Financial Statements Revenue Recognition When the Right of
Return Exists
   Stock-Based Compensation
 Accounting for Stock Issued to Employees Accounting for Stock
Based Compensation
  F-10




---



##### Table of Contents



Research and Development Expenses
  Income Taxes
 Accounting
for Income Taxes.
  F-11




---



##### Table of Contents



Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 Accounting for Income Taxes
 Net Loss Attributable to Common Stockholders per Share
   Years Ended December 31,2005
    
    
    2006
    
    
    2007Convertible preferred stock
    
    
    1,065,796
    
    
    
    3,448,189
    
    
    
    Stock options
    
    
    534,143
    
    
    
    630,351
    
    
    
    1,534,269Warrants
    
    
    337,324
    
    
    
    352,324
    
    
    
    1,023,913
 Recently Issued Accounting Pronouncements
 Fair Value Measurement .
 The
Fair Value Option for Financial Assets and Financial Liabilities
 Business
Combinations Noncontrolling Interests in Consolidated Financial
Statements, an amendment of Accounting Research Bulletin No. 51
  F-12




---



##### Table of Contents



2. Balance Sheet Data
 Property and Equipment
  December 31,2006
    
    
    2007(in thousands)Leasehold improvements
    
    $
    628
    
    
    $
    652Laboratory equipment
    
    
    1,557
    
    
    
    2,212Computer and communications equipment
    
    
    374
    
    
    
    279Office furniture and equipment
    
    
    224
    
    
    
    157Construction in progress
    
    
    
    
    
    
    432,783
    
    
    
    3,343Less accumulated depreciation
    
    
    1,866
    
    
    
    2,173$
    917
    
    
    $
    1,170
  Intangible Assets
  December 31, 2006
    
    
    December 31, 2007Weighted
    
    
    Gross carrying
    
    
    Accumulated
    
    
    Gross carrying
    
    
    Accumulatedaverage life
    
    
    amount
    
    
    amortization
    
    
    amount
    
    
    amortizationCustomer lists
    
    4 years
    
    $
    2,700
    
    
    $
    (450
    )
    
    $
    2,700
    
    
    $
    (1,125
    )Trade name
    
    1 year
    
    
    500
    
    
    
    (333
    )
    
    
    500
    
    
    
    (500
    )Cell technology
    
    4 years
    
    
    100
    
    
    
    (17
    )
    
    
    100
    
    
    
    (42
    )$
    3,300
    
    
    $
    (800
    )
    
    $
    3,300
    
    
    $
    (1,667
    )
  2008
    
    $
    7002009
    
    
    7002010
    
    
    2332011
    
    
    $
    1,633
 Accrued Expenses
  December 31,2006
    
    
    2007(in thousands)Accrued compensation
    
    $
    250
    
    
    $
    528Accrued contract services
    
    
    176
    
    
    
    181Accrued severance
    
    
    212
    
    
    
    Other accrued expenses
    
    
    213
    
    
    
    128$
    851
    
    
    $
    837
  F-13




---



##### Table of Contents



3. Income Taxes
  Years Ended December 31,2005
    
    
    2006
    
    
    2007(in thousands)Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    Total current provision
    
    
    
    
    
    
    
    
    
    
    Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    Total deferred provision
    
    
    
    
    
    
    
    
    
    
    Total tax provision
    
    $
    
    
    
    $
    
    
    
    $
    
  Years Ended December 31,2005
    
    
    2006
    
    
    2007(in thousands)Tax benefit at statutory rate
    
    $
    (9,245
    )
    
    $
    (237
    )
    
    $
    (2,980
    )State taxes (net of federal benefit)
    
    
    (1,328
    )
    
    
    57
    
    
    
    (328
    )Net benefit from research and development credits
    
    
    (129
    )
    
    
    (23
    )
    
    
    (547
    )Stock compensation
    
    
    
    
    
    
    118
    
    
    
    96Other, net
    
    
    393
    
    
    
    15
    
    
    
    184Valuation allowance
    
    
    10,309
    
    
    
    70
    
    
    
    3,575Tax benefit at statutory rate
    
    $
    
    
    
    $
    
    
    
    $
    
  December 31,2006
    
    
    2007(in thousands)Current deferred tax assets:Reserves and accrued liabilities
    
    $
    55
    
    
    $
    47Other
    
    
    5
    
    
    
    560
    
    
    
    52Noncurrent deferred tax assets:Property and equipment
    
    
    203
    
    
    
    110Deferred revenue
    
    
    257
    
    
    
    2,004Intangibles
    
    
    3,501
    
    
    
    2,301Stock compensation
    
    
    
    
    
    
    448Research and development credits
    
    
    1,324
    
    
    
    2,188Net operating loss carryforward
    
    
    12,156
    
    
    
    13,97317,441
    
    
    
    21,024Total deferred tax assets
    
    
    17,501
    
    
    
    21,076Valuation allowance
    
    
    (17,501
    )
    
    
    (21,076
    )Net deferred tax assets
    
    $
    
    
    
    $
    
    F-14




---



##### Table of Contents



Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109 Accounting for Income Taxes
     4. Investment in ImaRx Oncology, Ltd.
    F-15




---



##### Table of Contents



5. Related Party Transactions
   6. Notes Payable
 Note Payable to Development Partner
  Secured Promissory Notes Payable
  Note Payable for Technology Acquisition
  Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of
a Business.
   F-16




---



##### Table of Contents



Note Payable for Asset Acquisition
  7. Equity Transactions
 Reverse Stock Splits
  Initial Public Offering (IPO)
  Common Stock
   Restricted Stock Awards
   F-17




---



##### Table of Contents



Preferred Stock
  Application of Issue No. 98-5 to Certain Convertible Instruments
   Warrants to Purchase Common Stock
        F-18




---



##### Table of Contents



Warrants Issued
 Weighted-AverageWarrants
    
    
    Remaining Life
    
    
    WarrantsExercise Price
    
    Outstanding
    
    
    in Years
    
    
    Exercisable$   5.75
    
    
    671,589
    
    
    
    9.58
    
    
    
    671,58910.00 - 13.75
    
    
    91,050
    
    
    
    1.61
    
    
    
    91,05015.00 - 16.50
    
    
    150,664
    
    
    
    1.55
    
    
    
    150,66420.00 - 21.25
    
    
    109,996
    
    
    
    5.41
    
    
    
    109,99635.00
    
    
    614
    
    
    
    3.18
    
    
    
    6141,023,913
    
    
    
    7.24
    
    
    
    1,023,913
  Weighted-AverageWarrants
    
    
    Exercise PriceBalance at January 1, 2005
    
    
    195,169
    
    
    $
    12.63Granted
    
    
    145,660
    
    
    
    19.39Exercised
    
    
    (3,505
    )
    
    
    10.00Canceled
    
    
    
    
    
    
    Balance at December 31, 2005
    
    
    337,324
    
    
    
    15.61Granted
    
    
    15,000
    
    
    
    20.00Exercised
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    Balance at December 31, 2006
    
    
    352,324
    
    
    
    15.79Granted
    
    
    671,589
    
    
    
    5.75Exercised
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    Balance at December 31, 2007
    
    
    1,023,913
    
    
    $
    9.21
 8. Stock Options
  Accounting for Stock Issued to Employees Accounting for Stock Based Compensation
 Share Based Payment
  F-19




---



##### Table of Contents



2005Net loss attributable to common stockholders:Net loss
    
    $
    (28,527
    )Stock-based compensation included in net loss
    
    
    207Stock-based compensation expense determined under the fair value method
    
    
    (349
    )Net loss  pro forma
    
    $
    (28,669
    )Net loss attributable to common stockholders per shareBasic and diluted
    
    $
    (15.11
    )Net loss attributable to common stockholders per share pro formaBasic and diluted
    
    $
    (15.18
    )
  Years Ended December 31,20051
    
    2006
    
    2007Expected dividend yield
    
    0.00%
    
    0.00%
    
    0.00%Expected stock price volatility
    
    0.00%
    
    75.0%
    
    75.0 - 82.17%Risk free interest rate
    
    3.00%
    
    4.54 - 5.05%
    
    3.78 - 4.93%Expected life of option
    
    5 years
    
    7 years
    
    7 years
 1
    
    Prior to the adoption of SFAS 123R on January 1, 2006, we followed the minimum value
method under SFAS 123, which assumes the stock price has no volatility since the common stock was
not publicly traded.  Exercise Price
    
    
    Weighted-AverageOptions
    
    
    Per Share
    
    
    Exercise PriceBalance at January 1, 2005
    
    
    393,552
    
    
    $
    2.50-15.00
    
    
    $
    9.00Granted
    
    
    350,978
    
    
    
    15.00-20.00
    
    
    
    16.22Exercised
    
    
    (63,454
    )
    
    
    2.50-15.00
    
    
    
    4.66Canceled
    
    
    (146,933
    )
    
    
    2.50-15.00
    
    
    
    14.34Balance at December 31, 2005
    
    
    534,143
    
    
    
    2.50-20.00
    
    
    
    13.11Granted
    
    
    210,772
    
    
    
    15.00-30.00
    
    
    
    21.64Exercised
    
    
    (22,076
    )
    
    
    2.50-27.50
    
    
    
    2.53Canceled
    
    
    (92,488
    )
    
    
    2.50-30.00
    
    
    
    16.64Balance at December 31, 2006
    
    
    630,351
    
    
    
    2.50-30.00
    
    
    
    18.15Granted
    
    
    1,094,607
    
    
    
    2.10-5.00
    
    
    
    2.86Exercised
    
    
    (315
    )
    
    
    2.50
    
    
    
    2.50Canceled
    
    
    (190,374
    )
    
    
    2.50-27.50
    
    
    
    13.71Balance at December 31, 2007
    
    
    1,534,269
    
    
    $
    2.50-30.00
    
    
    $
    6.81
   F-20




---



##### Table of Contents



Options Outstanding
    
    
    Options ExercisableWeighted-AverageOptions
    
    
    Remaining Life
    
    
    Options
    
    
    Options
    
    
    Weighted-AverageRange of Exercise Prices
    
    Outstanding
    
    
    (Years)
    
    
    Vested
    
    
    Exercisable
    
    
    Exercise Price$      2.10-2.50
    
    
    834,262
    
    
    
    9.56
    
    
    
    73,475
    
    
    
    73,475
    
    
    $
    2.132.51-9.99
    
    
    285,823
    
    
    
    9.65
    
    
    
    33,334
    
    
    
    33,334
    
    
    
    5.2410.00-14.99
    
    
    50,000
    
    
    
    6.28
    
    
    
    50,000
    
    
    
    50,000
    
    
    
    10.0015.00-19.99
    
    
    210,622
    
    
    
    7.71
    
    
    
    115,409
    
    
    
    210,622
    
    
    
    15.0020.00-24.99
    
    
    70,062
    
    
    
    8.02
    
    
    
    27,756
    
    
    
    70,062
    
    
    
    20.0025.00-27.49
    
    
    80,500
    
    
    
    8.41
    
    
    
    24,500
    
    
    
    80,500
    
    
    
    25.1727.51-30.00
    
    
    3,000
    
    
    
    8.68
    
    
    
    750
    
    
    
    3,000
    
    
    
    30.00Total
    
    
    1,534,269
    
    
    
    9.08
    
    
    
    325,224
    
    
    
    520,993
    
    
    $
    6.81
   9. Benefit Plan
  10. Asset Acquisition
 Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets
or of a Business
   F-21




---



##### Table of Contents



11. Segments
 Disclosures about Segments
of an Enterprise and Related Information
 12. Commitments and Contingencies
 Lease Commitments
   Years Ending December 31,2008
    
    $
    3072009
    
    
    1942010
    
    
    2002011
    
    
    2062012
    
    
    212$
    1,119
 Clinical Research Agreement
  13. Licensing Agreements
 License Agreement with UNEMED Corporation
  License Agreement with Dr. med. Reinhard Schlief
   F-22




---



##### Table of Contents



License Agreement with University of Arkansas
  14. Selected Quarterly Financial Data (unaudited)
  Quarters EndedMarch 31
    
    
    June 30
    
    
    September 30
    
    
    December 312007Revenues
    
    $
    1,208
    
    
    $
    2,153
    
    
    $
    2,349
    
    
    $
    2,650Operating Expenses
    
    
    3,422
    
    
    
    3,723
    
    
    
    5,049
    
    
    
    4,835Net loss
    
    
    (2,398
    )
    
    
    (1,487
    )
    
    
    (2,666
    )
    
    
    (2,185
    )Net loss attributable to common stockholders
    
    $
    (2,831
    )
    
    $
    (1,921
    )
    
    $
    (11,589
    )
    
    $
    (2,213
    )Basic and diluted net loss attributable to common shareholders
    
    $
    (1.09
    )
    
    $
    (0.74
    )
    
    $
    (1.43
    )
    
    $
    (0.22
    )2006Revenues
    
    $
    177
    
    
    $
    251
    
    
    $
    193
    
    
    $
    707Operating Expenses
    
    
    3,402
    
    
    
    4,048
    
    
    
    3,827
    
    
    
    5,744Net income (loss)
    
    
    (3,345
    )
    
    
    (4,075
    )
    
    
    (3,982
    )
    
    
    10,703Net income
(loss) attributable to common stockholders
    
    $
    (3,495
    )
    
    $
    (4,225
    )
    
    $
    (4,408
    )
    
    $
    10,262Basic and
diluted net income (loss) attributable to common shareholders
    
    $
    (1.35
    )
    
    $
    (1.62
    )
    
    $
    (1.69
    )
    
    $
    3.94
  15. Subsequent Events
 SonoLysis
    F-23




---



##### Table of Contents



Urokinase
   F-24




---



##### Table of Contents



Exhibit Index
 Incorporated by ReferenceExhibit
    
    
    
    Filed
    
    
    
    ExhibitNo
    
    Exhibit Title
    
    Herewith
    
    Form
    
    No.
    
    File No.
    
    Filing Date3.1
    
    
    Fourth Amended and Restated
Certificate of Incorporation of the
registrant
    
    
    
    S-1
    
    
    3.1
    
    
    333-142646
    
    5/4/20073.2
    
    
    Amendment to Certificate of
Incorporation of the registrant to
effect a six-for-ten reverse stock
split
    
    
    
    S-1
    
    
    3.2
    
    
    333-142646
    
    5/4/20073.3
    
    
    Second Amendment to Certificate of
Incorporation of the registrant to
effect a one-for-three reverse
stock split
    
    
    
    S-1
    
    
    3.3
    
    
    333-142646
    
    5/4/20073.4
    
    
    Amended and Restated Certificate of
Incorporation of the registrant
    
    
    
    S-1
    
    
    3.4
    
    
    333-142646
    
    5/4/20073.5
    
    
    Bylaws of the registrant, as amended
    
    
    
    S-1
    
    
    3.5
    
    
    333-142646
    
    5/4/20073.6
    
    
    Amended and Restated Bylaws of the
registrant
    
    
    
    S-1
    
    
    3.6
    
    
    333-142646
    
    5/4/20074.1
    
    
    Specimen certificate evidencing
shares of common stock
    
    
    
    S-1
    
    
    4.1
    
    
    333-142646
    
    5/4/200710.1*
    
    
    Form of Indemnification Agreement
entered into between the registrant
and each of its directors and
officers
    
    
    
    S-1
    
    
    10.1
    
    
    333-142646
    
    5/4/200710.2
    
    
    Second Amended and Restated
Investors Rights Agreement, dated
April 14, 2006, by and among the
registrant and certain stockholders
    
    
    
    S-1
    
    
    10.2
    
    
    333-142646
    
    5/4/200710.3*
    
    
    2000 Stock Plan and related
agreements
    
    
    
    S-1
    
    
    10.3
    
    
    333-142646
    
    5/4/200710.4*
    
    
    2007 Performance Incentive Plan and
related agreements
    
    
    
    S-1
    
    
    10.4
    
    
    333-142646
    
    5/4/200710.5*
    
    
    Bonus Plan
    
    
    
    S-1
    
    
    10.5
    
    
    333-142646
    
    5/4/200710.6
    
    
    License Agreement, dated January 4,
2005, between the registrant and
Dr. med. Reinhard Schlief
    
    
    
    S-1
    
    
    10.6
    
    
    333-142646
    
    5/4/200710.7
    
    
    Exclusive Sublicense Agreement,
dated October 10, 2003, between the
registrant and UNEMED Corporation
    
    
    
    S-1
    
    
    10.7
    
    
    333-142646
    
    5/4/200710.8
    
    
    Assignment, Assumption and License
Agreement, dated October 7, 1999,
between the registrant and
Bristol-Myers Squibb Medical
Imaging, Inc. (as successor to
DuPont Contrast Imaging, Inc.)
dated October 7, 1999, and
amendments thereto
    
    
    
    S-1
    
    
    10.8
    
    
    333-142646
    
    5/4/2007




---



##### Table of Contents



Exhibit
Index
 Incorporated by ReferenceExhibit
    
    
    
    Filed
    
    
    
    ExhibitNo
    
    Exhibit Title
    
    Herewith
    
    Form
    
    No.
    
    File No.
    
    Filing Date10.9
    
    
    License Agreement, dated
February 10, 2006, between the
registrant and the University of
Arkansas for Medical Sciences
    
    
    
    S-1
    
    
    10.9
    
    
    333-142646
    
    5/4/200710.10
    
    
    Asset Purchase Agreement, dated
April 10, 2006, between the
registrant and Abbott Laboratories,
and amendments thereto
    
    
    
    S-1
    
    
    10.10
    
    
    333-142646
    
    5/4/200710.11
    
    
    Escrow Agreement, dated April 14,
2006, between the registrant and
Abbott Laboratories
    
    
    
    S-1
    
    
    10.11
    
    
    333-142646
    
    5/4/200710.12
    
    
    Inventory Trademark License
Agreement, dated April 14, 2006,
between the registrant and Abbott
Laboratories
    
    
    
    S-1
    
    
    10.12
    
    
    333-142646
    
    5/4/200710.13
    
    
    Security Agreement, dated April 14,
2006, between the registrant and
Abbott Laboratories
    
    
    
    S-1
    
    
    10.13
    
    
    333-142646
    
    5/4/200710.14
    
    
    Secured Promissory Note, dated
April 14, 2006, between the
registrant and Abbott Laboratories
    
    
    
    S-1
    
    
    10.14
    
    
    333-142646
    
    5/4/200710.15
    
    
    Second Amended Executive Employment
Agreement, dated May 15, 2006,
between the registrant and Evan
C. Unger
    
    
    
    S-1
    
    
    10.15
    
    
    333-142646
    
    5/4/200710.16
    
    
    Consulting Agreement, dated
October 20, 2006, between the
registrant and Evan C. Unger
    
    
    
    S-1
    
    
    10.16
    
    
    333-142646
    
    5/4/200710.17
    
    
    Confidential Separation Agreement
and Mutual General Release of All
Claims, dated November 28, 2006,
between the registrant and Evan C.
Unger
    
    
    
    S-1
    
    
    10.17
    
    
    333-142646
    
    5/4/200710.18*
    
    
    Consulting Agreement, dated
April 11, 2005, between the
registrant and Greg Cobb
    
    
    
    S-1
    
    
    10.18
    
    
    333-142646
    
    5/4/200710.19*
    
    
    Amended Executive Employment
Agreement, dated February 1, 2007,
between the registrant and Greg
Cobb
    
    
    
    S-1
    
    
    10.19
    
    
    333-142646
    
    5/4/200710.20*
    
    
    Amended Executive Employment
Agreement, dated February 1, 2007,
between the registrant and Bradford
A. Zakes
    
    
    
    S-1
    
    
    10.20
    
    
    333-142646
    
    5/4/2007




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##### Table of Contents



Exhibit
Index
 Incorporated by ReferenceExhibit
    
    
    
    Filed
    
    
    
    ExhibitNo
    
    Exhibit Title
    
    Herewith
    
    Form
    
    No.
    
    File No.
    
    Filing Date10.21
    
    
    Agreement, dated March 31, 2006, by
and among the registrant, John A.
Moore and Edson Moore Healthcare
Ventures
    
    
    
    S-1
    
    
    10.21
    
    
    333-142646
    
    5/4/200710.22
    
    
    Subscription Agreement and Investor
Questionnaire, dated March 2004,
between the registrant and each of
the signatory investors, offering
price $2.00 per share
    
    
    
    S-1
    
    
    10.22
    
    
    333-142646
    
    5/4/200710.23
    
    
    Subscription Agreement and Investor
Questionnaire, dated December 2004,
between the registrant and each of
the signatory investors, offering
price $3.00 per share
    
    
    
    S-1
    
    
    10.23
    
    
    333-142646
    
    5/4/200710.24
    
    
    Subscription Agreement and Investor
Questionnaire, dated September and
October 2004, between the
registrant and each of the
signatory investors, offering price
$4.00 per share
    
    
    
    S-1
    
    
    10.24
    
    
    333-142646
    
    5/4/200710.25
    
    
    Commercial Lease  Triple Net,
dated November 1, 2002, between the
registrant and ImaRx Investments
L.L.C.
    
    
    
    S-1
    
    
    10.25
    
    
    333-142646
    
    5/4/200710.26
    
    
    Standard Commercial  Industrial
Lease, dated December 30, 1997,
between the registrant and Tucson
Tech Park and addenda thereto
    
    
    
    S-1
    
    
    10.26
    
    
    333-142646
    
    5/4/200710.27
    
    
    Note Extension and Amendment
Agreement, dated October 25, 2007,
between the registrant and Abbott
Laboratories
    
    
    
    8-K
    
    
    10.1
    
    
    001-33043
    
    10/26/200710.28*
    
    
    Amendment No. 2 to Executive
Employment Agreement dated as of
January 1, 2008 by and between the
Company and Bradford A. Zakes
    
    
    
    8-K
    
    
    10.1
    
    
    001-33043
    
    2/7/200810.29*
    
    
    Amendment No. 2 to Executive
Employment Agreement dated as of
January 1, 2008 by and between the
Company and Greg Cobb
    
    
    
    8-K
    
    
    10.2
    
    
    001-33043
    
    2/7/200810.30*
    
    
    Executive Employment Agreement
dated as of January 1, 2008 by and
between the Company and Garen
Manvelian
    
    
    
    8-K
    
    
    10.3
    
    
    001-33043
    
    2/7/2008




---



##### Table of Contents



Exhibit Index
 Incorporated by ReferenceExhibit
    
    
    
    Filed
    
    
    
    ExhibitNo
    
    Exhibit Title
    
    Herewith
    
    Form
    
    No.
    
    File No.
    
    Filing Date10.31*
    
    
    Executive Employment Agreement
dated as of January 1, 2008 by and
between the Company and Kevin
Ontiveros
    
    
    
    8-K
    
    
    10.4
    
    
    001-33043
    
    2/7/200810.32
    
    
    Commercial Lease  dated December
10, 2007, between the registrant and Cambric Partners
    
    
    
    10-K
    
    
    10.32
    
    
    001-33043
    
    3/31/200823.1
    
    
    Consent of Independent Registered
Public Accounting Firm
    
    X24.1
    
    

Power
of Attorney
    
    
    
    10-K
    
    
    24.1
    
    
    001-33043
    
    3/31/200831.1
    
    
    Certification of Chief Executive
Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
    
    X31.2
    
    
    Certification of Chief Financial
Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as
adopted pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002
    
    X32.1
    
    
    Certification of Chief Executive
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    X32.2
    
    
    Certification of Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002
    
    X