**UNITED
        STATES**
 **SECURITIES
        AND EXCHANGE COMMISSION**
 **Washington,
        D.C. 20549**
  **FORM
        10-QSB**
  **ý**
              
              **QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934****FOR
                  THE QUARTERLY PERIOD ENDED June 30, 2005****OR****o**
              
              **TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934****FOR
                  THE TRANSITION PERIOD
                  FROM                                  TO****Commission
                  File Number 0-23553****IMCOR
                  PHARMACEUTICAL CO.**(Exact
                  name of small business issuer as specified in its
                  charter)**NEVADA**
              
              **62-1742885**(State
                  or other jurisdiction ofincorporation
                  or organization)
              
              (I.R.S.
                  Employer Identification No.)**4660
                  La Jolla Village Drive, Suite 540**
                **San
                  Diego, CA 92122**(Address
                  of principal executive offices) (Zip Code)**858/410-5601**(Issuer’s
                  telephone number, including area
                  code)
  Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Securities Exchange Act during the past 12 months (or for such
        shorter period that the registrant was required to file such reports), and
        (2)
        has been subject to such filing requirements for the past 90 days. Yes ý No o
  State
        the
        number of shares outstanding of each of the issuer’s classes of common equity,
        as of the latest practicable date: 4,955,703 shares of common stock, $0.001
        par
        value per share, issued and outstanding at August 18, 2005.
  Transitional
        Small Business Disclosure Format (check one):
  Yes o No ý
 
 
 **INDEX**
  PART
                  I.
              FINANCIAL
                  INFORMATION
              1ITEM
                  1.
              FINANCIAL
                  STATEMENTS
              1ITEM
                  2.
              MANAGEMENT’S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
              13ITEM
                  3.
              CONTROLS
                  AND PROCEDURES
              20PART
                  II.
              OTHER
                  INFORMATION
              22ITEM
                  1.
              LEGAL
                  PROCEEDINGS
              22ITEM
                  2.
              UNREGISTERED
                  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
              22ITEM
                  3.
              DEFAULTS
                  UPON SENIOR SECURITIES
              23ITEM
                  4.
              SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS
              23ITEM
                  5.
              OTHER
                  INFORMATION
              23ITEM
                  6.
              EXHIBITS
              27
 
 
 (i)
  IMCOR
          PHARMACEUTICAL CO. AND SUBSIDIARY
 (A
          Development Stage Company)
 CONSOLIDATED
          BALANCE SHEETS
 (Unaudited)
  December
                        31,
                    
                    June
                        30,ASSETS
                    
                    2004
                    
                    2005Current
                      AssetsCash
                        and cash equivalents
                    
                    $
                    4,721,456
                    
                    $
                    54,884Accounts
                        receivable
                    
                    
                    33,916
                    
                    
                    119,452Prepaids
                    
                    
                    442,802
                    
                    
                    397,2755,198,174
                    
                    
                    571,611Property
                      and equipment, net
                    
                    
                    4,427,043
                    
                    
                    51,220Other
                      assets:Purchased
                        technology, net
                    
                    
                    13,676,750
                    
                    
                    13,025,161Technology
                        license, net
                    
                    
                    696,408
                    
                    
                    102,500Deferred
                        royalties, net
                    
                    
                    458,333
                    
                    
                    437,500Deposits
                    
                    
                    324,750
                    
                    
                    324,00015,156,241
                    
                    
                    13,889,161Total
                        Assets
                    
                    $
                    24,781,458
                    
                    $
                    14,511,992LIABILITIES
                        AND SHAREHOLDERS' EQUITYCurrent
                      Liabilities:Notes
                        payable unsecured
                    
                    $
                    192,233
                    
                    $
                    192,233Current
                        portion of license revenue
                    
                    
                    696,307
                    
                    
                    696,307Accounts
                        payable
                    
                    
                    1,916,551
                    
                    
                    2,174,362Accrued
                        expenses and assumed acquisition liabilities
                    
                    
                    2,191,301
                    
                    
                    2,113,553Accrued
                        royalty fees
                    
                    
                    400,000
                    
                    
                    403,169Accrued
                        equipment lease obligation
                    
                    
                    492,984
                    
                    
                    492,984Total
                        current liabilities
                    
                    
                    5,889,376
                    
                    
                    6,072,608Deferred
                      license revenue
                    
                    
                    6,948,753
                    
                    
                    6,600,599Commitments
                      and contingenciesSHAREHOLDERS'
                      EQUITY:Preferred
                        stock, $.01 par value; 5,000,000 shares authorizedSeries A
                        preferred stock: 4,500 shares authorized, issued and outstanding;
                        $1,000
                        liquidation preference per share, $4,500,000 in aggregate
                    
                    
                    45
                    
                    
                    45Common
                        stock, $.001 par value; 200,000,000 shares authorized;4,000,916
                        and 4,953,356 shares issued and outstanding as of December
                        31, 2004 and
                        June 30, 2005, respectively
                    
                    
                    4,001
                    
                    
                    4,953Additional
                      paid-in capital
                    
                    
                    84,020,364
                    
                    
                    87,269,626Common
                      stock to be issued
                    
                    
                    1,120,752
                    
                    
                    659,161Unearned
                      compensation
                    
                    
                    (10,500
                    )
                    
                    —Deficit
                      accumulated during the development stage
                    
                    
                    (73,191,333
                    )
                    
                    (86,095,000
                    )11,943,329
                    
                    
                    1,838,785$
                    24,781,458
                    
                    $
                    14,511,992
 
 See
        notes
        to consolidated financial statements.
  1
 IMCOR
            PHARMACEUTICAL CO. AND SUBSIDIARY
 (A
            Development Stage Company)
 CONSOLIDATED
            STATEMENTS OF OPERATIONS
 (Unaudited)
  Period
                            fromThree
                            Months
                        
                        Three
                            Months
                        
                        Six
                            Months
                        
                        Six
                            Months
                        
                        InceptionEnded
                          June
                            30,
                        
                        Ended
                          June
                            30,
                        
                        Ended
                          June
                            30,
                        
                        Ended
                          June
                            30,
                        
                        (November
                            3,
                          1996)
                            to2004
                        
                        2005
                        
                        2004
                        
                        2005
                        
                        June
                            30, 2005License
                            revenue
                        
                        $
                        84,523
                        
                        $
                        174,077
                        
                        $
                        126,190
                        
                        $
                        348,154
                        
                        $
                        703,094Operating
                            expenses:Research
                            and development
                        
                        
                        926,076
                        
                        
                        497,976
                        
                        
                        1,886,907
                        
                        
                        1,355,726
                        
                        
                        12,036,105Sales,
                            general and administrative
                        
                        
                        4,142,655
                        
                        
                        3,632,832
                        
                        
                        7,831,761
                        
                        
                        7,804,316
                        
                        
                        54,082,968Restructuring
                            charges
                        
                        
                        —
                        
                        
                        —
                        
                        
                        —
                        
                        
                        —
                        
                        
                        1,541,455Provision
                            for future lease payments
                        
                        
                        —
                        
                        
                        —
                        
                        
                        —
                        
                        
                        —
                        
                        
                        1,264,208Loss
                            on sale of equipment
                        
                        
                        —
                        
                        
                        248,599
                        
                        
                        —
                        
                        
                        248,599
                        
                        
                        248,599Impairment
                            losses
                        
                        
                        —
                        
                        
                        3,835,813
                        
                        
                        —
                        
                        
                        3,835,813
                        
                        
                        4,110,292Total
                            operating expenses
                        
                        
                        5,068,731
                        
                        
                        8,215,220
                        
                        
                        9,718,668
                        
                        
                        13,244,454
                        
                        
                        73,283,627Operating
                            loss
                        
                        
                        (4,984,208
                        )
                        
                        (8,041,143
                        )
                        
                        (9,592,478
                        )
                        
                        (12,896,300
                        )
                        
                        (72,580,533
                        )Loss
                            from joint venture
                        
                        
                        (2,017,749
                        )
                        
                        —
                        
                        
                        (2,213,646
                        )
                        
                        —
                        
                        
                        (14,518,000
                        )Investment
                            and other income
                        
                        
                        19,236
                        
                        
                        9,340
                        
                        
                        243,472
                        
                        
                        37,169
                        
                        
                        1,489,168Interest
                            expense
                        
                        
                        (329,333
                        )
                        
                        (22,181
                        )
                        
                        (596,753
                        )
                        
                        (44,536
                        )
                        
                        (1,586,286
                        )Loss
                            from continuing operations
                        
                        
                        (7,312,054
                        )
                        
                        (8,053,984
                        )
                        
                        (12,159,405
                        )
                        
                        (12,903,667
                        )
                        
                        (87,195,651
                        )Discontinued
                            operations:Operating
                            loss from therapeutic business
                        
                        
                        —
                        
                        
                        —
                        
                        
                        —
                        
                        
                        —
                        
                        
                        (10,679,101
                        )Gain
                            from split-off of therapeutic business
                        
                        
                        —
                        
                        
                        —
                        
                        
                        —
                        
                        
                        —
                        
                        
                        11,779,752—
                        
                        
                        
                        
                        
                        
                        
                        
                        —
                        
                        
                        —
                        
                        
                        1,100,651Net
                            loss
                        
                        
                        (7,312,054
                        )
                        
                        (8,053,984
                        )
                        
                        (12,159,405
                        )
                        
                        (12,903,667
                        )
                        $
                        (86,095,000
                        )Dividends
                            on preferred stock
                        
                        
                        (221,160
                        )
                        
                        —
                        
                        
                        (498,030
                        )
                        
                        —Net
                            loss available to common shareholders
                        
                        $
                        (7,533,214
                        )
                        $
                        (8,053,984
                        )
                        $
                        (12,657,435
                        )
                        $
                        (12,903,667
                        )Basic
                            & diluted loss per commonshare
                            from continuing operations
                        
                        $
                        (5.35
                        )
                        $
                        (1.47
                        )
                        $
                        (10.20
                        )
                        $
                        (2.56
                        )Basic
                            & diluted loss per commonshare
                            from discontinued operations
                        
                        $
                        —
                        
                        $
                        —
                        
                        $
                        —
                        
                        $
                        —Basic
                            & diluted net loss per common share
                        
                        $
                        (5.35
                        )
                        $
                        (1.47
                        )
                        $
                        (10.20
                        )
                        $
                        (2.56
                        )Weighted
                            average number of commonshares
                            outstanding- basic and diluted
                        
                        
                        1,406,922
                        
                        
                        5,473,110
                        
                        
                        1,240,450
                        
                        
                        5,031,497
 See
                notes
                to consolidated financial statements
 
 
 2
 IMCOR
            PHARMACEUTICAL CO. AND SUBSIDIARY
 (A
            Development Stage Company)
 CONSOLIDATED
            STATEMENTS OF CASH FLOWS
 (Unaudited)
 Period
                    fromInceptionSix
                    Months
                
                Six
                    Months
                
                (November
                    3,Ended
                    June 30,
                
                Ended
                    June 30,
                
                1996)
                    to2004
                
                2005
                
                June
                    30, 2005CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    loss
                
                $
                (12,159,405
                )
                $
                (12,903,667
                )
                $
                (86,095,000
                )Less
                    gain from discontinued operations
                
                
                —
                
                
                —
                
                
                (1,100,651
                )Adjustments
                    to reconcile net loss to cash used
                    by operating activities:Depreciation
                    and amortization
                
                
                1,592,683
                
                
                1,269,078
                
                
                7,754,762Loss
                    on disposal of property and equipment
                
                
                2,200
                
                
                248,599
                
                
                284,823Gain
                    on sale of marketable securities
                
                
                —
                
                
                —
                
                
                (18,503
                )United
                    States Treasury Notes amortization
                
                
                —
                
                
                —
                
                
                12,586Stock
                    option compensation
                
                
                662,129
                
                
                1,077,780
                
                
                4,961,399Gain
                    from equipment lease settlement
                
                
                (126,257
                )
                
                —
                
                
                (126,257
                )License
                    revenue deferred
                
                
                2,000,000
                
                
                —
                
                
                8,000,000Recognition
                    of deferred license revenue
                
                
                (126,190
                )
                
                (348,154
                )
                
                (703,094
                )Amortization
                    of deferred royalty expense
                
                
                —
                
                
                20,833
                
                
                62,500Valuation
                    impairment allowances
                
                
                —
                
                
                3,835,812
                
                
                4,110,291Beneficial
                    inducement costs for convertible notes
                
                
                —
                
                
                —
                
                
                206,348Issuance
                    of warrants for services rendered
                
                
                —
                
                
                —
                
                
                4,345,491Issuance
                    of stock options in settlement of lawsuit
                
                
                —
                
                
                —
                
                
                806,415Issuance
                    of stock for standstill agreement
                
                
                —
                
                
                —
                
                
                1,173,750Issuance
                    of stock for services rendered
                
                
                7,688
                
                
                10,500
                
                
                445,814Issuance
                    of stock for interest payments and penalties
                
                
                314,880
                
                
                1,668,593
                
                
                3,179,411Equity
                    in loss of affiliate
                
                
                2,213,646
                
                
                —
                
                
                14,518,000Changes
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                (15,855
                )
                
                (85,536
                )
                
                (119,452
                )Prepaid
                    expenses
                
                
                (17,384
                )
                
                45,527
                
                
                (397,275
                )Deferred
                    royalty expense
                
                
                (400,000
                )
                
                —
                
                
                (500,000
                )Accounts
                    payable
                
                
                504,967
                
                
                257,811
                
                
                2,318,001Accrued
                    expenses
                
                
                478,920
                
                
                (32,329
                )
                
                (387,342
                )Accrued
                    equipment lease obligation
                
                
                —
                
                
                —
                
                
                1,050,589Other
                
                
                —
                
                
                —
                
                
                10,000Net
                    cash used in continuing operating activities
                
                
                (5,067,978
                )
                
                (4,935,153
                )
                
                (36,207,394
                )—
                
                
                —
                
                
                —Net
                    cash used in discontinued operations
                
                
                —
                
                
                —
                
                
                (10,679,101
                )
  3
 IMCOR
          PHARMACEUTICAL CO. AND SUBSIDIARY
 (A
          Development Stage Company)
 CONSOLIDATED
          STATEMENTS OF CASH FLOWS (Continued)
 (Unaudited)
 Period
                  fromInceptionSix
                  Months
              
              Six
                  Months
              
              (November
                  3,Ended
                  June 30,
              
              Ended
                  June 30,
              
              1996)
                  to2004
              
              2005
              
              June
                  30, 2005CASH
                  FLOWS FROM INVESTING ACTIVITIES:Sale
                  of marketable securities
              
              
              —
              
              
              —
              
              
              2,164,464Purchases
                  of marketable securities
              
              
              —
              
              
              —
              
              
              (2,182,967
              )Purchases
                  of United States Treasury Notes
              
              
              —
              
              
              —
              
              
              (38,656,973
              )Sale
                  of United States Treasury Notes
              
              
              —
              
              
              —
              
              
              39,778,548Purchase
                  of property and equipment
              
              
              (4,970
              )
              
              (3,040
              )
              
              (754,674
              )Proceeds
                  from sale of property and equipment
              
              
              —
              
              
              270,871
              
              
              418,622Patent
                  acquisition costs
              
              
              —
              
              
              —
              
              
              (237,335
              )Investment
                  in and advances to affiliate
              
              
              —
              
              
              —
              
              
              (15,107,468
              )Increase
                  in note receivable
              
              
              —
              
              
              —
              
              
              (1,255,000
              )Decrease
                  (increase) in deposits
              
              
              —
              
              
              750
              
              
              (763,370
              )Purchase
                  of Imagent business
              
              
              —
              
              
              —
              
              
              (5,074,761
              )Net
                  cash used in investing activities
              
              
              (4,970
              )
              
              268,581
              
              
              (21,670,914
              )Net
                  cash used in investing activities of discontinued
                  operations
              
              
              —
              
              
              —
              
              
              (1,306,676
              )CASH
                  FLOWS FROM FINANCING ACTIVITIESPrincipal
                  payments on capital leases
              
              
              —
              
              
              —
              
              
              (291,704
              )Net
                  proceeds from issuance of equity and mezzanine equity
              
              
              9,325,000
              
              
              —
              
              
              54,004,340Capital
                  contributions from shareholders
              
              
              —
              
              
              —
              
              
              1,958,364Principal
                  payments on acquisition debt
              
              
              (1,350,000
              )
              
              —
              
              
              (2,500,000
              )Principal
                  payments on other debt
              
              
              (500,000
              )
              
              —
              
              
              (3,350,641
              )Proceeds
                  from issuance of debt
              
              
              3,001,223
              
              
              —
              
              
              20,544,721Payments
                  on lease settlement obligation
              
              
              —
              
              
              —
              
              
              (75,000
              )Cost
                  of recapitalization
              
              
              —
              
              
              —
              
              
              (371,111
              )Net
                  cash provided by financing activities
              
              
              10,476,223
              
              
              —
              
              
              69,918,969NET
                  INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
              
              
              5,403,275
              
              
              (4,666,572
              )
              
              54,884CASH
                  AND CASH EQUIVALENTS, BEGINNING OF YEAR
              
              
              1,657,594
              
              
              4,721,456
              
              
              —CASH
                  AND CASH EQUIVALENTS, END OF YEAR
              
              $
              7,060,869
              
              $
              54,884
              
              $
              54,884SUPPLEMENTAL
                  SCHEDULE OF CASH FLOWS INFORMATION:Interest
                  paid
              
              $
              —
              
              $
              —
              
              $
              481,769
 
 4
  IMCOR
          PHARMACEUTICAL CO. AND SUBSIDIARY
 (A
          Development Stage Company)
 CONSOLIDATED
          STATEMENTS OF CASH FLOWS (Continued)
 (Unaudited)
  **NON-CASH
        INVESTING AND FINANCING ACTIVITIES:**
 **SIX
        MONTHS ENDED JUNE 30, 2005:**
 In
        February 2005, the Company issued modified options in further settlement
        of
        claims by a former employee. The modification of the options resulted in
        a
        $42,250 decrease of accrued expenses with a corresponding increase in additional
        paid-in capital.
 
 **SIX
        MONTHS ENDED JUNE 30, 2004:**
 In
        March
        2004, the Company issued 99,276 shares of common stock at a value of $5,043,226
        related to the purchase of *Imagent* in June
        2003. These shares had been classified in “Common Stock To Be
        Issued.”
 The
        holder of puttable shares sold a portion of the shares, thereby extinguishing
        $190,000 of the put feature. This resulted in a $190,000 decrease in puttable
        shares and a $190,000 increase in shareholder equity.
 In
        the
        quarter ended June 30, 2004, the Company recorded accrued prepaid royalties
        of
        $400,000 which relate to deferred revenues received of $4,000,000 during
        2003
        and 2004.
 In
        the
        quarter ended June 30, 2004, the mezzanine equity value of $12,015,000 was
        reclassified into shareholders’ equity upon the exchange of the Series A
        Preferred Stock for 9,763 of common stock.
 In
        the
        quarter ended June 30, 2004, an additional increase in shareholders’ equity
        totaling $146,447, attributed to the above-referenced 9,763 shares of common
        stock recorded at fair market value (and which represented the 19.9% minority
        interest in the Sentigen joint venture), together with the Company’s 80.1%
        majority interest in the Sentigen joint venture, amounting to $589,469 (after
        reflecting an additional charge off in the joint venture investment of
        $2,213,646, recorded as “Loss from Joint Venture”), were recorded and
        reclassified, respectively, as “Technology License” asset totaling $735,916,
        before amortization.
 In
        the
        quarter ended June 30, 2004, the Company issued promissory notes in part
        for
        $1,778,447 in exchange for 80,600 puttable shares of Xmark Fund Ltd. and
        Xmark
        Fund L.P. valued at $1,611,989 and the release from additional obligations
        to
        issue additional shares, valued at $166,458, representing accrued interest
        ($74,263) and late registration penalties ($92,195).
 In
        the
        quarter ended June 30, 2004, the Company issued 1,687,034 common shares in
        settlement of $13,496,269 in promissory notes and accrued interest previously
        due to Oxford Bioscience Partners IV L.P., MRNA Fund II L.P. and Mi3,
        L.P.
 
 See
        notes
        to consolidated financial statements.
 5
 **IMCOR
        Pharmaceutical Co. and Subsidiary**
 **(A
        Development Stage Company)**
 **Notes
        to Consolidated Financial Statements**
 **(Unaudited)**
 
 **1.
        Basis of Presentation:**
  The
        accompanying unaudited consolidated financial statements of IMCOR Pharmaceutical
        Co. and Subsidiary (Sentigen, Ltd., or “Sentigen”) (together, the “Company”),
        have been prepared without audit in accordance with generally accepted
        accounting principles in the United States of America for interim financial
        information. Accordingly, they do not include all of the information and
        footnotes required by generally accepted accounting principles in the United
        States of America for complete financial statements. These statements should
        be
        read in conjunction with the consolidated financial statements and notes
        thereto
        included in the Company’s Annual Report on Form 10-KSB for the year ended
        December 31, 2004, as amended, which has been filed with the SEC.
  In
        the
        opinion of management, all adjustments, consisting of normal, recurring
        adjustments considered necessary for a fair presentation of the results of
        these
        interim periods have been included. The results of operations for the three
        months and six months ended June 30, 2005 may not be indicative of the results
        that may be expected for the full fiscal year.
  The
        preparation of financial statements in conformity with accounting principles
        generally accepted in the United States of America requires management to
        make
        estimates and assumptions that affect the reported amounts of assets and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements, and the reported amounts of income and expenses
        during
        the reporting period. Actual results could differ from those estimates or
        assumptions. The more significant estimates reflected in these financial
        statements relate to the Company’s review of the fair value of its long-lived
        assets.
  **2.
        Liquidity and Basis of Presentation- Going Concern:**
 
 The
        accompanying consolidated financial statements are prepared assuming the
        Company
        is a going concern. The Company has reported
        accumulated losses since inception of $86,095,000. As previously reported,
        the
        Company lacked sufficient working
        capital at March 31, 2005 to fund operations for the entire fiscal year ending
        December 31, 2005.
 
 During
        the three month period ended June 30, 2005, the Company’s board of directors
        concluded that substantial additional capital resources required to fund
        its
        ongoing operations would not be forthcoming, and as more further described
        in
        Note 11, the Company has adopted a restructuring plan that resulted in cessation or
        suspension of
        substantially all operations, including significant employee reduction-in-force,
        sale of excess equipment, suspension of manufacturing and clinical activities,
        cessation of current selling activities, vacating its premises, and the sale
        of
        certain of its technology.
 
 To
        the
        extent that the Company has been able to estimate with reasonable certainty
        the
        fair value of certain assets as a result of its restructuring activities ,
        it has
        provided for valuation impairment allowances during the second quarter ended
        June 30, 2005 where necessary to reflect those certain assets at such estimated
        fair values, including property and equipment and technology license. However,
        the Company is not yet able to make a determination of the fair market value
        of
        the Purchased Technology (defined as the assets acquired on June 18, 2003
        from Alliance
        Pharmaceutical Corp. (“Alliance”) which relate to the medical imaging business,
        including *Imagent* ®
        (perflexane lipid microspheres), an FDA-approved product), together with the
        related deferred royalty asset and the deferred license revenue, primarily
        due
        to the uncertainty of the outcome of the litigation involving Amersham Health,
        Inc. and related matters, as more fully described in Notes 9 and
        11.
  Therefore,
        the Company is still considering its alternatives with respect to efforts
        to sell or otherwise maximize
        asset values related to the Purchased Technology, pending the lawsuit outcome,
        and will continue to consider as alternatives the sale or license of its
        remaining assets, a merger or other material transaction.
 
 The financial statements do not include any adjustment to reflect the possible
        future effects on the recoverability and classification of the Purchased
        Technology and deferred royalty assets or the amount and classification of
        liabilities and deferred license revenue that may result from the outcome
        of
        these uncertainties, or any other adjustments that might be necessary if
        the
        Company is unable to continue as a going concern.
 
 Furthermore,
        the board of directors has only authorized to date activities in support
        of the
        disposition of assets in order to maximize asset value to creditors and
        shareholders, as noted above; it has not made any determination as to the
        ultimate outcome for the Company due to the other uncertainties also noted
        above. Accordingly, the Company continues to prepare its financial statements
        assuming it is a going concern, as it is not certain at this time if the
        Company
        as an entity will be required to be liquidated.
 
 6
 **IMCOR
          Pharmaceutical Co. and Subsidiary**
 **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**
 **3.
          Reclassification:**
  Certain
        reclassifications have been made to the prior periods’ financial statements to
        conform to the current year presentation. These reclassifications had no
        effect
        on previously reported results of operations or retained earnings.
 
 **4.
        Basic and Diluted Loss Per Common Share:**
 
 Basic
        and
        diluted loss per common share is computed based on the weighted average number
        of common shares outstanding. Loss per share excludes the impact of outstanding
        options, warrants and convertible preferred stock as they are antidilutive.
        Potential common shares excluded from the calculation at June 30 of each
        year
        are as follows:
 
 2004
              
              2005Options
                  pursuant to plans
              
              
              547,700
              
              
              566,524Options
                  outside of plans, net of cashless component
              
              
              15,727
              
              
              34,977Warrants
              
              
              753,505
              
              
              819,736Issuable
                  upon conversion of preferred stock
              
              
              —
              
              
              833,334Total
              
              
              1,316,932
              
              
              2,254,571
 
 Basic
        and
        diluted loss per common share in 2005 includes approximately 2,009,000 shares
        to
        be issued.
 
 **5.
        Accounting for Stock-based Compensation** :
 
 The
        Company’s stock option plans are accounted for using the intrinsic-value method
        of Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock
        Issued to Employees”, and related interpretations. The intrinsic-value method
        requires that compensation expense, if any, be determined by calculating
        the
        difference between the fair value of the Company’s common stock and the option’s
        strike price at a measurement date. The measurement date is generally when
        the
        number of shares and the option strike price are known. The Company uses
        the
        fair-value method to account for non-employee stock-based compensation. The
        Company has also adopted the disclosure requirements of SFAS No. 148,
“Accounting for Stock-Based Compensation-Transition and Disclosure-an amendment
        to FASB Statement No. 123”. Options issued to non-employees are accounted for
        using the recognition provisions of SFAS No. 123”, “Accounting for Stock-Based
        Compensation”, using the fair value-based method.
 
 Other
        than a modification to options granted to a former employee in final settlement
        of all claims that are exercisable into 21,125 net shares of common stock
        at a
        price of zero as noted in Note 10, the Company only issued options to acquire
        95,000 common shares in the six months ended June 30, 2005.
 
 The
        Company has computed the pro forma disclosures required by SFAS No. 123,
        “Accounting for Stock-Based Compensation”, for options granted using the
        Black-Scholes option-pricing model prescribed by SFAS No. 123. The assumption
        used and weighted-average information are as follows for the six months ended
        June 30, 2005:
 
 Weighted-average
                  fair value of options granted
              
              $
              1.60Expected
                  dividend yield-
              
              $
              —Risk-free
                  interest rate at grant date
              
              
              3.44
              %Expected
                  stock price volatility
              
              
              233.16
              %Expected
                  option lives (years)
              
              
              5
 
 If
        the
        Company had elected to recognize compensation expense based on the fair value
        at
        the grant dates, consistent with the method prescribed by SFAS No. 123, net
        loss
        per basic and diluted share would have been changed to the pro forma amount
        indicated below for each of the three month and six month periods ended June
        30:
  7
 **IMCOR
          Pharmaceutical Co. and Subsidiary**
 **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**
 Three
                  Months
                Ended
                June
                  30, 2004
              
              Three
                  Months
                Ended
                June
                  30, 2005
              
              Six
                  Months
                Ended
                June
                  30, 2004
              
              Six
                  Months
                Ended
                June
                  30, 2005Applicable
                  to common stockholders:Net
                  loss, as reported
              
              $
              (7,533,214
              )
              $
              (8,053,984
              )
              $
              (12,657,435
              )
              $
              (12,903,667
              )Add
                  stock based compensation expenseincluded
                  in reported net loss
              
              
              28,478
              
              
              843,825
              
              
              662,129
              
              
              1,077,780Less
                  total stock-based employeecompensation
                  expense determined underthe
                  fair-value based method for all awards
              
              
              (451,080
              )
              
              (3,164,346
              )
              
              (983,632
              )
              
              (3,649,466
              )Pro
                  forma net loss
              
              $
              (7,955,816
              )
              $
              (10,374,505
              )
              $
              (12,978,938
              )
              $
              (15,475,353
              )Net
                  loss per common share (basic and diluted):Reported
              
              $
              (5.35
              )
              $
              (1.47
              )
              $
              (10.20
              )
              $
              (2.56
              )Pro
                  forma
              
              $
              (5.65
              )
              $
              (1.90
              )
              $
              (10.46
              )
              $
              (3.08
              )
 
 **6.
        Property and Equipment**
 
 Property
        and equipment consist of the following at:
 
 December
                  31,
              
              June
                  30,2004
              
              2005Leasehold
                  improvements
              
              $
              5,287,738
              
              $
              5,287,738Furniture,
                  fixtures and equipment
              
              
              1,824,819
              
              
              544,958Total
              
              
              7,112,557
              
              
              5,832,696Less
                  allowance for valuation impairment
              
              
              —
              
              
              (3,265,492
              )Accumulated
                  depreciation and amortization
              
              
              (2,685,514
              )
              
              (2,515,984
              )Property
                  and equipment, net
              
              $
              4,427,043
              
              $
              51,220
 
 In
        June
        2005, the Company sold excess equipment with a net book value of $519,470
        ($1,282,901 cost basis, less $763,461 accumulated depreciation) at a loss
        of
        $248,599, with proceeds totaling $270,871.
  8
 **IMCOR
          Pharmaceutical Co. and Subsidiary**
 **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**
 **7.
        Intangible Assets and Deferred Expenses:**
 
 The
        cost
        and accumulated amortization of intangible assets and deferred expenses are
        as
        follows:
 
 December
                  31,
              
              June
                  30,2004
              
              2005Purchased
                  technology:Cost
              
              $
              15,638,146
              
              $
              15,638,146Accumulated
                  amortization
              
              
              (1,961,396
              )
              
              (2,612,985
              )$
              13,676,750
              
              $
              13,025,161Patents:Cost
              
              $
              500,000
              
              $
              500,000Less
                  allowance for valuation impairment
              
              
              (274,479
              )
              
              (274,479
              )Accumulated
                  amortization
              
              
              (225,521
              )
              
              (225,521
              )$
              —
              
              $
              —Technology
                  license:Cost
              
              $
              735,916
              
              $
              735,916Less
                  allowance for valuation impairment
              
              
              —
              
              
              (570,321
              )Accumulated
                  amortization
              
              
              (39,508
              )
              
              (63,095
              )$
              696,408
              
              $
              102,500Deferred
                  royalties:Cost
              
              $
              500,000
              
              $
              500,000Accumulated
                  amortization
              
              
              (41,667
              )
              
              (62,500
              )$
              458,333
              
              $
              437,500
 
 **8.
        Accrued Expenses and Assumed Acquisition Obligations:**
 
 December
                  31,
              
              June
                  30,2004
              
              2005Assumed
                  acquisition obligations- Alliance
              
              $
              1,179,051
              
              $
              1,136,295Accrued
                  payroll, deferred bonuses and related compensation
                  expenses
              
              
              723,707
              
              
              602,175Other
                  accrued expenses
              
              
              288,543
              
              
              375,083$
              2,191,301
              
              $
              2,113,553
 
 **9.** **Litigation:** ******
 
 On
        June
        18, 2003, the Company, together with Alliance, the prior o wner
        of
        the *Imagent* Purchased Technology, filed a complaint against Amersham Health, Inc.
        (“Amersham”) and two other Amersham affiliates alleging that certain Amersham
        products infringe on claims in the pat ents
        covering *Imagent* .
        The
        complaint alleged that principally through the Optison® product, Amersham Health
        Inc. and related Amersham entities infringe on eight patents now owned by
        IMCOR.
        The Company is also seeking a declaration that the claims of fifteen Amersham
        patents are invalid and are not
        infringed by IMCOR’s *Imagent* product.
        The Company has further alleged misappropriation of trade secrets as well
        as
        other state law claims against Amersham.
 
 Amersham
        denied the material allegations of the Company’s claims and asserted certain
        affirmative defenses and counterclaims. Amersham’s counterclaims include claims
        of patent infringement of the fifteen Amersham patents, breach of contract,
        breach of good faith and fair dealing, and tortious interference with contract.
        IMCOR and Alliance, as well as Amersham, also amended their respective
        complaints to include allegations of antitrust violations by the other
        party(ies).
 
 9
 ******IMCOR
          Pharmaceutical Co. and Subsidiary** **(A
            Development Stage Company)**
 **Notes
            to Consolidated Financial Statements**
 **(Unaudited)**
 On
        May 5,
        2005, pursuant to District of New Jersey procedure, the case was stayed,
        pending
        settlement discussions. The parties have until August 31, 2005 to consummate
        settlement or move to place the case back on the court’s active docket. In the
        absence of either a settlement or a motion to place the case back on the
        court’s
        active docket, the case will be dismissed without prejudice.
  During
        this period, a dispute has arisen between the Company and Alliance as to
        the
        pending settlement terms currently being negotiated with Amersham. The Company
        filed a motion with the court on July 27, 2005 seeking a ruling to have IMCOR
        substituted for Alliance as the “real party in interest” in this litigation.
        Alliance has indicated that it intends to object to this motion. In the
        meantime, the Company is negotiating with Alliance to seek a mutually acceptable
        resolution of these differences so the settlement negotiations with Amersham
        might proceed.
 
 Therefore,
        it is not presently feasible to determine whether there is a reasonable
        possibility that the Purchased Technology assets have been impaired for purposes
        of Statement of Financial Accounting Standards No. 5, or the extent of damages
        or gain, if any, that might result depending on whether or not the Company
        prevails. In any event, the Company may continue to incur litigation costs
        if
        the settlement discussions are not successful and either party reasserts
        its
        respective claim against the other.
 
 On
        May
        11, 2005, the Company was served with an unlawful detainer lawsuit by
        EOP-Industrial Portfolio, LLC (“EOP”) regarding the Company’s default on its
        building lease to pay $84,641 of rent that was due April 1, 2005. The future
        minimum rents due on this lease were approximately $2,490,000 as of March
        31,
        2005. EOP continued to hold a $297,330 security deposit related to this lease
        at
        June 30, 2005. EOP asserted in this lawsuit it was entitled to terminate
        the
        lease, demand all outstanding amounts under the lease immediately due and
        payable, repossess the premises, demand payment for all related costs and
        expenses, and/or assert any other rights that may be available in law or
        in
        equity. As described in Notes 11 and 12, as part of a restructuring plan
        adopted
        in April and May 2005, the Company has vacated the premises.
 
 On
        July
        19, 2005, the Company concluded two concurrent, interdependent negotiations
        with
        both EOP and a new tenant, resulting in the execution of a lease termination
        agreement with EOP on that date. Pursuant to the terms of this agreement,
        the
        Company was allowed to stay in the premises until July 31, 2005, with the
        only
        consideration being the surrender of the lease deposit totaling $297,330.
        The
        Company was further released from all other obligations, including past due
        rents totaling approximately $331,292 at July 31, 2005 (approximately $248,469
        at June 30, 2005), late payment fees and any future lease payments, commitments
        and/or contingencies. (See Note 12.)
 
 **10.
        Shareholders’ Equity:**
 
 The
        following is a summary of stock transactions during the six months ended
        June
        30, 2005:
 
 The
        Company issued 105,610 shares of common stock valued at $269,865 to consultants
        and attorneys which had been classified as “Common Stock To Be Issued” as of
        December 31, 2004. In conjunction with the issuance of these shares, the
        Company
        recorded $10,500 of compensation for a consultant.
 
 One
        of
        the Company’s attorneys had originally agreed to accept shares of the Company’s
        common stock for a portion of their services rendered during the period.
        As of
        March 31, 2005, approximately 33,000 shares were recorded as “Common Stock To Be
        Issued” related to $95,135 of services, which had been expensed through that
        date. However, during the quarter ended June 30, 2005, the law firm advised
        the
        Company that it preferred to be compensated for these services in cash payment,
        to the extent the Company is ultimately able to pay. The Company agreed to
        this
        request and has accordingly reclassified the $95,135 in legal services from
        Shares-To-Be-Issued to accrued expenses at June 30, 2005.
 
 The
        Company issued 392,681 shares of common stock valued at $1,193,775 to
        shareholders for penalties and fees due to shareholders for late registration
        of
        their shares during the three months ended March 31, 2005, and an additional
        454,149 shares of common stock valued at $666,543 due to shareholders for
        late
        registration of their shares during the three months ended June 30, 2005.
  The
        Company has recorded $659,161 of additional penalties and late fees due to
        shareholders for late registration of their shares, representing approximately
        2,009,000 shares of common stock, which are classified as “Common Stock To Be
        Issued” at June 30, 2005. (As of December 31, 2004, 317,262 shares valued at
        $850,887 for penalties and fees were recorded and classified as “Common Stock To
        Be Issued.”)
 
 10
 ******IMCOR
        Pharmaceutical Co. and Subsidiary** **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**
  On
        February 10, 2005, in final settlement of further and all claims from a former
        employee, the Company modified existing options for 1,875 shares to make
        them
        effectively exercisable into 21,125 net shares at an exercise price equal
        to
        zero. The $42,250 of expense related to this modification was accrued in
        2004
        and reflected in the balance sheet as accrued expense at December 31, 2004.
 
 On
        January 24, 2005, the Company amended its Articles of Incorporation to increase
        the number of common shares authorized from 150,000,000 to 200,000,000
        shares.
 
 On
        March
        4, 2005, the Company effected a 1−for−20 reverse stock split of its common
        stock. All share and per share amounts related to common stock in the
        consolidated financial statements have been retroactively adjusted for all
        periods presented to give effect to this reverse stock split.
 
 **11.
        Restructuring Plan:**
 
 In
        April
        2005, the Company adopted an initial restructuring plan which initially included
        a reduction-in-force of a majority of the full-time employees and part-time
        employees or consultants who perform administrative support, manufacturing
        and
        related functions. In addition, a limited number of full-time employees were
        transferred to part-time positions to assist the Company with the actions
        necessary to curtail its operations. The Company also temporarily suspended
        its
        manufacturing operations.
 
 Although
        the lawsuit involving Amersham (see Note 9) was stayed on May 5, 2005, pending
        settlement negotiations between the parties, IMCOR’s board of directors
        concluded shortly thereafter that, for a variety of factors, including some
        of
        which are cited in Note 9, it
        was
        not probable that the Company would obtain additional cash funds to continue
        operating even on a limited basis in the near term. Therefore, during May
        2005
        the Company modified its restructuring plan to include the disposition of
        its
        furniture, fixtures and equipment ,
        to
        vacate its premises ,
        and
        other steps to effect an orderly cessation or suspension of operations other
        than those necessary to facilitate completion of the restructuring
        plan .
        As also
        discussed in Note 9, the Company concluded a successful negotiation with
        EOP,
        the building lessor, and executed a lease termination agreement and vacated
        the
        premises on or shortly after July 31, 2005. (Also see Note 12).
 
 The
        Company incurred approximately $34,000 in cash disbursements for severance
        pay
        associated with this restructuring plan during the quarter ended June 30, 2005,
        and also paid approximately $191,000 in previously accrued vacation obligations,
        primarily to terminated employees (which is required under California employment
        laws). The Company also terminated its vacation benefit program, and vacation
        is
        no longer accrued for remaining employees. In addition, the Company negotiated
        two cash retention bonuses totaling $80,000 with two employees deemed integral
        to the restructuring efforts of the Company as part of this restructuring
        plan;
        however, one of the employees, as consideration, also waived any further
        claim
        he had to a previously earned, accrued but unpaid bonus of $60,000 from 2003.
        Accordingly, the Company recognized on a net basis only $20,000 bonus expense
        in
        the quarter ended June 30, 2005. $30,000 in retention bonus was paid during
        the
        quarter ended June 30, 2005, and it is anticipated that the remaining $50,000,
        which is accrued at June 30, 2005, will be paid during the upcoming quarter
        ending September 30, 2005 to these two employees, when their required efforts
        will be largely concluded.
 
 As
        part
        of the employee reduction plan, the employment of the Company’s CEO and
        President was terminated effective May 31, 2005. A reserve for severance
        (equal
        to one year’s salary, as required by this individual’s employment contract),
        amounting to $275,000, was recorded as expense during the quarter ending
        June
        30, 2005, but remains unpaid and is accordingly included in accrued expenses
        at
        that date.
 
 As
        a
        result of the successful adoption of the plan to vacate the premises, the
        Company recorded a leasehold valuation impairment allowance of approximately
        $3,072,000 in the quarter ending June 30, 2005, leaving a net carrying value
        of
        leasehold improvements as of June 30, 2005 totaling $20,000.
 
 On
        June
        16, 2005, the Company sold its excess equipment at a public auction, which
        netted the Company $270,820, $175,000 of which was received by June 30, 2005.
        The balance of $95,820 was recorded as accounts receivable on that date,
        and was
        subsequently received in July 2005. The remainder of the Company’s equipment was
        subsequently sold in July 2005 for $31,220. As a result of these factors,
        the
        Company recorded an equipment valuation impairment allowance of approximately
        $193,000 in the quarter ending June 30, 2005, leaving a net carrying value
        of
        equipment as of June 30, 2005 totaling $31,220.
 
 11
 ******IMCOR
        Pharmaceutical Co. and Subsidiary** **(A
          Development Stage Company)**
 **Notes
          to Consolidated Financial Statements**
 **(Unaudited)**




During
      the quarter ending June 30, 2005, the Company solicited interest from several
      parties regarding its technology license asset, which relates to the Company’s
      N1177 compound and PH-50, the same or substantially same compound for a
      different indication. An agreement in principal was reached with a party to
      acquire these related assets for $102,500, net of third party intermediary
      compensation costs (see Note 12). Accordingly, the Company recorded a technology
      license valuation impairment allowance of approximately $570,000 in the quarter
      ending June 30, 2005, leaving a net carrying value of technology license as
      of
      June 30, 2005 of $102,500.




As
      a
      result of the above activities involving the facilities lease termination,
      sale
      of equipment and sale of the technology license, the Company recorded asset
      impairment losses totaling $3,835,813 during the quarter ending June 30,
      2005.





As
      discussed in Note 9, the litigation involving the Company’s remaining
      significant asset, the PurchasedTechnology, remains unresolved, and it is therefore not possible to
      predict the future outcome for this asset and make an estimate for changes
      in
      its fair value as of June 30, 2005. Accordingly, the Company did not make any
      adjustments in carrying value of the Purchased Technology, or the related
      deferred royalties and deferred revenue, as of June 30, 2005. The Company
      further believes that if and when the litigation with Amersham and the related
      dispute with Alliance are resolved, then it will be better able to evaluate
      and
      consider commercial alternatives for *Imagent*. If required at that time,
      the Company will make the appropriate asset carrying value adjustments for
      the
      Purchased Technology and related deferred royalties, together with the related
      deferred revenues.








**12.
      Subsequent Events:**





On
      July
      19, 2005, the Company entered into a lease termination agreement with EOP,
      the
      lessor of the Company’s facility at 6175 Lusk Boulevard, San Diego, California.
      In conformity with the terms of this agreement, the Company vacated the premises
      on or about July 31, 2005 and surrendered its lease security deposit totaling
      $297,330. The Company was released from all other obligations, including past
      due rents totaling approximately $331,292 at July 31, 2005 (approximately
      $248,469 at June 30, 2005), as well as late payment fees and any future lease
      payments, commitments and/or contingencies. Future minimum lease payments at
      June 30, 2005 eliminated as result of the lease termination agreement totaled
      approximately $2,284,000 at that date. In addition, Alliance, which was the
      lease guarantor, was also released from any and all claims, commitments and
      contingencies.





On
August4, 2005, IMCOR and NanoScan Imaging, LLC (“NanoScan”) entered into an
      asset purchase agreement for the sale by IMCOR to NanoScan of its assets
      exclusively related to N1177, an iodine-based nanoparticulate contrast agent,
      and PH-50, the same or a substantially same compound for a different indication.
      The sale includes certain patent rights related to N1177 and PH-50 and other
      intellectual property, including the Company’s technology license asset. The
      agreement calls for an aggregate purchase price, net of a third party
      intermediary fee, of $102,500, which is due in two payments, the first paid
      at
      closing and the second based on satisfactory conclusion of certain follow-on
      activities. The first payment of $71,500 was received on August 4,
      2005.








12


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




Portions
      of the discussion in this Form 10−QSB contain forward−looking statements and are
      subject to the "Risk Factors" described below. All forward−looking statements
      included in this Form 10−QSB are based on information available to the Company
      on the date hereof, and the Company assumes no obligation to update any such
      forward−looking statements. The Company's actual results could differ materially
      from those anticipated in these forward−looking statements as a result of a
      number of factors, including those set forth in the section captioned "RISK
      FACTORS" and elsewhere in this Form 10−QSB.





The
      following should be read in conjunction with the Company's unaudited financial
      statements included above. References to the "Company," "IMCOR," "we" or "our"
      are to IMCOR Pharmaceutical Co. and, where appropriate, our subsidiary,
      Sentigen, Ltd. ("Sentigen"). References to the " *Imagent* Business"
      are to the medical imaging business of Alliance Pharmaceutical Corp.
      ("Alliance") that the Company acquired on June 18, 2003. *Imagent* ®
      (perflexane lipid microspheres) is a registered trademark owned by
      IMCOR.





**LIQUIDITY
      AND CAPITAL RESOURCES**





The
      independent auditors' report dated March 19, 2005 included in our December
      31,
      2004 Annual Report on Form 10-KSB, as amended, contained the following
      explanatory paragraph:





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. As discussed in Note 1 to the financial
      statements, the Company has reported accumulated losses since inception of
      $73,191,333, which raises substantial doubt about its ability to continue as
      a
      going concern. Management's plans in regard to these matters are described
      in
      Note 1. The financial statements do not include any adjustments that might
      result from the outcome of this uncertainty.





The
      accompanying financial statements have been prepared assuming we are a going
      concern. However, we had previously reported that without obtaining additional
      debt or equity financing or funds from other sources we would not be able to
      continue to fund operations beyond May 31, 2005 without significantly curtailing
      operations or disposing of assets. (At March 31, 2005, we had cash and cash
      equivalents totaling $1,282,791.) Our goal since March 31, 2005 has been to
      maximize asset values for the benefit of creditors and
      shareholders.





During
      the three month period ended June 30, 2005, our board of directors concluded
      that substantial additional capital resources required to fund our ongoing
      operations would not be forthcoming, and we adopted a restructuring plan that
      resulted in cessation or suspension of substantially all operations, including
      significant employee reduction-in-force, sale of excess equipment, suspension
      of
      manufacturing and clinical activities, cessation of current selling activities,
      vacating our premises, and the sale of certain of our technology. To the extent
      possible, the accompanying financial statements include our estimates for
      certain asset impairment values as of June 30, 2005, most notably as
      follows:





1.
            Leasehold
                improvements - carrying value $20,000; impairment expense recognized
                during the period was approximately
                $3,072,500;


2.
            Equipment
                - carrying value $31,220; impairment expense recognized during the
                period
                was approximately $193,000; and


3.
            Technology
                license - carrying value $102,500; impairment expense recognized
                during
                the period was approximately
                $570,500.





At
      June
      30, 2005, we had cash and cash equivalents of $54,884, which is a $1,227,907
      net
      decrease from the March 31, 2005 balance of $1,282,791. This decrease was
      primarily used to fund the restructuring efforts.





Subsequent
      to June 30, 2005, we have collected an additional $218,540 from the following
      sources:





1.
            $95,820
                in proceeds from the sales of excess equipment conducted in June,
                but
                which was recorded as accounts receivable at June
                30;


2.
            $51,220
                for final equipment sales and leasehold support provided to the new
                tenant
                taking over our former facilities at 6175 Lusk Boulevard in San Diego;
                and


3.
            $71,500
                as the initial payment pursuant to an asset purchase agreement executed
                with NanoScan Imaging, LLC
                (“NanoScan”).





13


We
      expect
      to receive an additional $31,000 from NanoScan upon the satisfactory completion
      of certain interim performance obligations.





We
      do not
      expect to receive any additional significant cash infusions, other than those
      noted above, except as we might be able to generate from our primary remaining
      Purchased Technology asset, which includes and relates to our *Imagent* product.





As
      more
      fully described in the accompanying financial statements and “ ***Part
      II. Other information, Item 1. Legal Proceedings*** ,”
      we are
      currently engaged in settlement discussions related to our litigation with
      Amersham Health, Inc. Since the outcome of these settlement discussions remain
      unknown at this time, we are not currently able to predict what types of
      arrangements might ultimately be made with potential business partners for *Imagent* ,
      financial or otherwise. Accordingly, we are unable to make any estimates for
      potential changes to the fair market value of the Purchased Technology, together
      with the related deferred royalty asset and deferred revenue credits carried
      on
      our balance sheet at June 30, 2005. Furthermore, it remains uncertain as to
      whether or not any cash can be generated from the Purchased Technology by
      December 31, 2005.





Therefore,
      we have not made any adjustment to reflect the possible future effects on the
      recoverability and classification of assets or the amount and classification
      of
      liabilities that may result from this continuing uncertainty, other than those
      impairment adjustments noted above.





Among
      the
      alternatives that we may consider if and when some of the uncertainty is
      eliminated surrounding the Purchased Technology asset is the sale or license
      of
      some or all this asset, a merger or other material transaction.





**RESULTS
      OF OPERATIONS**


**Three
      Months Ended June 30, 2004 and 2005**





**As
      a result of the restructuring plans adopted in April and May of 2005, the
      results of the second quarter of 2005 are not likely to be indicative of the
      remaining quarters of the fiscal year.**





**Revenue
      and License Fees**


We
      have
      not generated significant product revenues during 2004 or 2005 due to capital
      constraints limiting our sales and marketing capability. Any sales of products
      are therefore included in our financial statements under “investment and other
      income.”





License
      revenue relates to the amortization of the deferred license revenue received
      in
      2004 and 2005. The increase in license revenue relates to the amortization
      of
      the increased license revenue deferred primarily in October 2004
      ($4,000,000).





**Research
      and Development**


Essentially
      all of our research expenses since the third quarter of 2004 until early second
      quarter 2005 have been directed toward infrastructure and expenses associated
      with regulatory compliance and continued development of *Imagent* for new
      indications and the maintenance of our manufacturing capability. During the
      second quarter of 2005 (presented below), the majority of the costs have been
      expended with a focus on patent, regulatory and clinical considerations in
      keeping with our overall objective to preserve net asset values.





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





Three
                months ended June 30,2004
            
            Three
                months ended June 30,2005
            
            ChangePersonnel
            
            $
            541,000
            
            $
            227,000
            
            $
            (314,000
            )Contract
                consultants
            
            
            169,000
            
            
            156,000
            
            
            (13,000
            )Patent
                costs
            
            
            176,000
            
            
            77,000
            
            
            (99,000
            )Production
                facilities costs
            
            
            100,000
            
            
            6,000
            
            
            (94,000
            )Supplies
            
            
            53,000
            
            
            5,000
            
            
            (48,000
            )Gain
                on equipment lease settlement
            
            
            (126,000
            )
            
            —
            
            
            126,000Other
            
            
            13,000
            
            
            27,000
            
            
            14,000Total
            
            $
            926,000
            
            $
            498,000
            
            $
            (428,000
            )





14


Personnel,
      patent, production facilities costs and supplies all decreased from the quarter
      ended June 30, 2004 to the comparable 2005 period, primarily due to our efforts
      to cut expenses. Contract consultant costs remained at a steady level between
      the years: in 2004 such costs were incurred in preparation for a new clinical
      design protocol anticipated to explore a new indication for *Imagent* ;
      in 2005
      such costs were incurred in order to preserve regulatory and clinical options
      for *Imagent* as part
      of the our restructuring efforts.





**Selling,
      General and Administrative Expense**


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





Three
                months ended June 30,2004
            
            Three
                months ended June 30,2005
            
            ChangePersonnel
            
            $
            539,000
            
            $
            490,000
            
            $
            (49,000
            )Contract
                consultants
            
            
            605,000
            
            
            176,000
            
            
            (429,000
            )Stock
                options
            
            
            28,000
            
            
            844,000
            
            
            816,000Legal
                and accounting
            
            
            654,000
            
            
            329,000
            
            
            (325,000
            )Fees
            
            
            460,000
            
            
            686,000
            
            
            226,000Facilities
                costs
            
            
            409,000
            
            
            366,000
            
            
            (43,000
            )Insurance
            
            
            185,000
            
            
            136,000
            
            
            (49,000
            )Depreciation
                and amortization
            
            
            474,000
            
            
            154,000
            
            
            (320,000
            )Amortization
                of purchase technology
            
            
            326,000
            
            
            326,000
            
            
            —Other
            
            
            463,000
            
            
            126,000
            
            
            (337,000
            )Total
            
            $
            4,143,000
            
            $
            3,633,000
            
            $
            (510,000
            )





Personnel
      expenses remained relatively the same between the quarters ended June 30, 2004
      and 2005. However, the second quarter 2004 personnel costs include a
      contractually obligated bonus of $206,250 to our then chief executive officer,
      which remains unpaid in its entirety at June 30, 2005. In addition, the second
      quarter 2005 personnel costs include approximately $329,000 in net one-time
      charges for severance and incentive retention bonuses. Gross charges totaled
      $389,000 during the second quarter 2005, but were offset by the waiver of a
      previously granted but unpaid bonus of $60,000 negotiated as part of the
      retention bonus arrangement made with our chief operating officer. Of the gross
      charges of $389,000, $34,000 represented nominal severance incentives paid
      to
      former staff to induce an orderly restructuring of our affairs as they
      transitioned from our employ, $275,000 reflects the accrual of a one year salary
      severance obligation contractually owed to our former chief executive officer
      whose employment with us ended on May 31, 2005 (and which also remains unpaid
      in
      its entirety at June 30, 2005) and $80,000 in incentive retention bonuses issued
      in favor of our chief operating officer and one other employee who are both
      deemed integral to conducting the orderly restructuring
      of our operations in a manner necessary to preserve net asset values for
      creditors and shareholders. Of this $80,000, $30,000 was paid during the quarter
      ending June 30, 2005, another $30,000 was escrowed as required by the retention
      contract arrangement (and is reflected in current prepaid assets) and the
      remainder of $20,000 is also unpaid at June 30, 2005, but will be required
      to be
      paid out of cash reserves generated in the upcoming quarter ending September
      30,
      2005.





Contract
      consultant charges decreased from the quarter ended June 30, 2004 to the
      comparable 2005 period dramatically due to the restructuring plan commenced
      in
      the second quarter of 2005. In addition, the 2004 contract consultant charges
      included product marketing costs for the *Imagent* product
      incurred with a third party, whose contract was cancelled in December
      2004.





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





15


Legal
      and
      accounting expense decreased from the quarter ended June 30, 2004 to the
      comparable 2005 period, primarily due to decreased legal fees associated with
      litigation as a result of the stay of the litigation during the pending
      settlement discussions.





Fees
      incurred in the second quarter 2005 related almost entirely to late registration
      penalties that began accruing in January 2005 for shares for which the Company
      has filed two registration statements, one of which was declared effective,
      but
      then was suspended because updated information was required, and the second
      of
      which has never been declared effective. The Company’s obligation for these
      penalties concluded at the respective dates the underlying shares had been
      held
      for at least one year, and are settled on a non-cash basis through the issuance
      of additional shares of our common stock.





Fees
      incurred in the second quarter of 2004 related primarily to carrying costs
      associated with various obligations to Xmark Fund Ltd. and Xmark Fund L.P.
      (collectively, “Xmark”), a former note holder and investor that held a secured
      blanket position in our assets, which was released when the obligations were
      extinguished in the fourth quarter of 2004.





Depreciation
      and amortization costs decreased from the second quarter 2004 to the second
      quarter 2005 by approximately two-thirds, as we terminated the recording of
      depreciation after April 2005, at which time we took equipment out of use and
      prepared it for our public auction conducted in June 2005.





**Loss
      on Sale of Equipment**


In
      the
      second quarter of 2005, we incurred a loss of $248,599 on equipment which was
      primarily sold at public auction in June 2005. Net book value for this equipment
      totaled $519,470 ($1,282,901 cost basis, less $763,461 accumulated
      depreciation), with cash proceeds totaling $270,871.





**Impairment
      Losses**


In
      the
      second quarter of 2005 we recorded impairment losses totaling $3,835,813 in
      order to reflect fair market value of certain assets for which were able to
      make
      reasonable estimations, all as a result of our restructuring
      activities:





1.
            Leasehold
                improvements - approximately $3,072,500 (reduced to carrying value
                $20,000);


2.
            Equipment
                - approximately $193,000 (reduced to a carrying value $31,220);
                and


3.
            Technology
                license - approximately $570,500 (reduced to a carrying value
                $102,500).





**Loss
      from Joint Venture**


The
      Sentigen joint venture was terminated June 10, 2004 and Sentigen became a wholly
      owned subsidiary of the Company. The loss from joint venture in 2004 totaling
      $2,017,749 consisted of the Company’s share of the joint venture’s amortization
      of its technology license costs up to the termination date, plus the write-down
      to a new implicit value derived from the then fair value of the underlying
      common shares issued in consideration of the surrender of the former joint
      venture partner’s minority 19.9% interest therein.





**Investment
      and Other Income**


Investment
      and other income in the second quarter of 2005 decreased from the comparable
      period in 2004, primarily due to reduced revenues derived from marketing of
      our *Imagent* product
      (which was curtailed in 2005).





**Interest
      Expense**


Interest
      expense in the second quarter of 2005 decreased by $307,152 compared to the
      comparable period in 2004, due to the reduction of the Company’s notes payable
      and other interest bearing obligations during the second through fourth quarters
      of 2004.





**Six
      Months Ended June 30, 2004 and 2005**





**As
      a result of the restructuring plans adopted in April and May of 2005, the
      results of the six months ending June 30, 2005 are not likely to be indicative
      of the remaining quarters of the fiscal year.**





**Revenue
      and License Fees**


We
      have
      not generated significant product revenues during 2004 or 2005 due to capital
      constraints limiting our sales and marketing capability. Any sales of products
      are therefore included in our financial statements under “investment and other
      income.”





License
      revenue relates to the amortization of the deferred license revenue received
      in
      2004 and 2005. The increase in license revenue relates to the amortization
      of
      the license revenue deferred in April 2004 ($2,000,000) and October 2004
      ($4,000,000).





16


**Research
      and Development**


Essentially
      all of our research expenses since the third quarter of 2004 until early second
      quarter 2005 have been directed toward infrastructure and expenses associated
      with regulatory compliance and continued development of *Imagent* for new
      indications and the maintenance of our manufacturing capability. Since early
      in
      the second quarter of 2005, the majority of the costs have been expended with
      a
      focus on patent, regulatory and clinical considerations in keeping with our
      overall objective to preserve net asset values.





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





Six
                months ended June 30,2004
            
            Six
                months ended June 30,2005
            
            ChangePersonnel
            
            $
            1,152,000
            
            $
            746,000
            
            $
            (406,000
            )Contract
                consultants
            
            
            304,000
            
            
            345,000
            
            
            41,000Patent
                costs
            
            
            208,000
            
            
            146,000
            
            
            (62,000
            )Production
                facilities costs
            
            
            186,000
            
            
            27,000
            
            
            (159,000
            )Supplies
            
            
            138,000
            
            
            16,000
            
            
            (122,000
            )Gain
                on equipment lease settlement
            
            
            (126,000
            )
            
            —
            
            
            126,000Other
            
            
            25,000
            
            
            76,000
            
            
            51,000Total
            
            $
            1,887,000
            
            $
            1,356,000
            
            $
            (531,000
            )





Personnel,
      patent production facilities costs and supplies all decreased from the six
      months ended June 30, 2004 to the comparable 2005 period, primarily due to
      our
      efforts to cut expenses. Contract consultant costs increased from the six months
      ended June 30, 2004 to the comparable 2005 period which related to our efforts
      to a) commence our Phase II clinical trials for a new indication for *Imagent* ,
      primarily incurred January - mid-April 2005, and b) since mid-April 2005
      converting our efforts to preserve asset values.





**Selling,
      General and Administrative Expense**


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





Six
                months ended June 30,2004
            
            Six
                months ended June 30,2005
            
            ChangePersonnel
            
            $
            910,000
            
            $
            747,000
            
            $
            (163,000
            )Contract
                consultants
            
            
            1,076,000
            
            
            447,000
            
            
            (629,000
            )Stock
                options
            
            
            662,000
            
            
            1,078,000
            
            
            416,000Legal
                and accounting
            
            
            908,000
            
            
            1,208,000
            
            
            300,000Fees
            
            
            954,000
            
            
            1,677,000
            
            
            723,000Facilities
                costs
            
            
            795,000
            
            
            786,000
            
            
            (9,000
            )Insurance
            
            
            347,000
            
            
            299,000
            
            
            (48,000
            )Depreciation
                and amortization
            
            
            928,000
            
            
            617,000
            
            
            (311,000
            )Amortization
                of purchase technology
            
            
            652,000
            
            
            652,000
            
            
            —Other
            
            
            600,000
            
            
            293,000
            
            
            (307,000
            )Total
            
            $
            7,832,000
            
            $
            7,804,000
            
            $
            (28,000
            )





Personnel
      and contract consultant expenses decreased from the six months ended June 30,
      2004 to the comparable 2005 period, primarily due to our efforts to cut
      expenses. However, the personnel costs incurred during the six months ended
      June
      30, 2004 include a contractually obligated bonus of $206,250 to our then chief
      executive officer, which remains unpaid in its entirety at June 30, 2005. In
      addition, the personnel costs incurred for the six months ended June 30, 2005
      include approximately $329,000 in net one-time charges for severance and
      incentive retention bonuses. Gross charges incurred during the six months ended
      June 30, 2005 totaled $389,000, but were offset by the waiver of a previously
      granted but unpaid bonus of $60,000 negotiated as part of the retention bonus
      arrangement made with our chief operating officer. Of the gross charges of
      $389,000, $34,000 represented nominal severance incentives paid to former staff
      in order to induce an orderly restructuring of our affairs as they transitioned from our employ, $275,000
      reflects the accrual of a one year salary severance obligation contractually
      owed to our former chief executive officer whose employment with us ended on
      May
      31, 2005 (and which also remains unpaid in its entirety at June 30, 2005) and
      $80,000 in incentive retention bonuses issued in favor of our chief operating
      officer and one other employee who are both deemed integral to conducting the
      orderly restructuring of our operations in a manner necessary to preserve net
      asset values for creditors and shareholders. Of this $80,000, $30,000 was paid
      during the quarter ending June 30, 2005, another $30,000 was escrowed as
      required by the retention contract arrangement (and is reflected in current
      prepaid assets) and the remainder of $20,000 is also unpaid at June 30, 2005,
      but will be required to be paid out of cash reserves generated in the upcoming
      quarter ending September 30, 2005.





17


Contract
      consultant charges decreased significantly from the six months ended June 30,
      2004 for the comparable 2005 period, due to the restructuring plan commenced
      in
      the second quarter of 2005 and our cancellation in December 2004 of a contract
      we had with a third party to market the *Imagent* product
      in December 2004.





Stock
      option expense increased during the six month period ended June 30, 2005 over
      the comparable 2004 period, primarily due to the accelerated expense recognition
      of approximately 88,290 option-shares which had previously been issued at then
      below market strike prices to our former chief executive officer, but which
      became 100% vested on his employment termination date of May 31, 2005. (Total
      option-shares vesting in favor of our former chief executive officer on May
      31,
      2005 totaled approximately 315,594, but the additional option-shares had been
      issued at strike prices at least equal to fair market value or had been
      previously expensed, all for no current effect.)





Legal
      and
      accounting expense increased from the six months ended June 30, 2004 for the
      comparable 2005 period, primarily due to increased legal fees associated with
      litigation and various registration statement filings with the Securities
      Exchange Commission and an increase in the audit fees for the Company’s 2004
      Annual Report on Form 10-KSB filed in March 2005, as amended.





Fees
      incurred during the six months ended June 30, 2005 related almost entirely
      to
      late registration penalties that began accruing in January 2005 for shares
      for
      which we have filed two registration statements, one of which was declared
      effective, but then was suspended because updated information was required,
      and
      the second of which has never been declared effective. Our obligation for these
      penalties concluded at the respective dates the underlying shares had been
      held
      for at least one year, and are settled on a non-cash basis through the issuance
      of additional shares of our common stock.





Fees
      incurred during the six months ended June 30, 2004 related primarily to carrying
      costs associated with various Xmark obligations, a former note holder and
      investor which held a secured blanket position in our assets, which was released
      when the obligations were extinguished in the fourth quarter of
      2004.





Depreciation
      and amortization costs decreased from the six months ended June 30, 2004 for
      the
      comparable 2005 period by approximately one-third, as we terminated the
      recording of depreciation after April 2005, at which time we took equipment
      out
      of use and prepared it for our public auction conducted in June
      2005.





**Loss
      on Sale of Equipment**


In
      the
      six months ended June 30, 2005, we incurred a loss of $248,599 on excess
      equipment which was primarily sold at public auction in June 2005. Net book
      value for this equipment totaled $519,470 ($1,282,901 cost basis, less $763,461
      accumulated depreciation), with cash proceeds totaling $270,871.





**Impairment
      Losses**


In
      the
      six months ended June 30, 2005, we recorded the impairment losses totaling
      $3,835,813 in order to reflect fair market value of certain assets for which
      were able to make reasonable estimations, all as a result of our restructuring
      activities:





1.
            Leasehold
                improvements - approximately $3, 072,500 (reduced to carrying value
                $20,000);


2.
            Equipment
                - approximately $193,000 (reduced to a carrying value $31,220);
                and


3.
            Technology
                license - approximately $570,500 (reduced to a carrying value
                $102,500).





**Loss
      from Joint Venture**


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





18


**Investment
      and Other Income**


Investment
      and other income for the six months ended June 30, 2005 decreased from the
      comparable period in 2004, primarily due to income recorded related to the
      settlement of a lease obligation in 2004 for an amount less than the original
      loss provision recorded in 2003, but also from reduced revenues derived from
      marketing of our *Imagent* product
      (which was curtailed in 2005).





**Interest
      Expense**


Interest
      expense for the six months ending June 30, 2005 decreased by $552,217 compared
      to the comparable period in 2004, due to the reduction of our notes payable
      and
      other interest bearing obligations during the second through fourth quarters
      of
      2004.





**Plan
      of Operation**


In
      April
      and May 2005, we
      adopted a restructuring plan that
      resulted in cessation or suspension of substantially all operations, including
      significant employee reduction-in-force, sale of excess equipment, suspension
      of
      manufacturing and **** clinical **** activities,
      cessation of current selling activities, vacating its premises, and the sale
      of
      certain of our technology .
      We were
      also successful in helping locate a third party to occupy our space, and
      accordingly were able to successfully negotiate a lease termination agreement
      which was concluded in July 2005. However, we had to abandon our leasehold
      improvements at our former facility, and it is no longer being made available
      to
      us by the new tenant for continuity in our manufacturing options for *Imagent* at that
      site.





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





Therefore,
      we are currently unable to operate in a manner that would allow us to further
      develop or promote the *Imagent* product.
      During the next several months our limited staff will focus their efforts
      primarily on continued settlement negotiations with Amersham and Alliance as
      to
      the litigation involving the *Imagent* asset,
      preserving the asset as best we can, and exploring various options concerning
      our business, including joint venturing, licensing or selling our Imagent
      Purchased Technology and other possible strategic transactions. The ability
      for
      some entity to resume clinical development of *Imagent* depends
      totally on the successful implementation of one or more of these transactions
      because we no longer have current capital resources available to us at this
      time
      to carry out our original business plan or fully develop and
      commercialize *Imagent* on our
      own.





**Contractual
      Obligations**


The
      following table summarizes our approximate contractual obligations as of June
      30, 2005 and the effect such obligations are expected to have on our liquidity
      and cash flow for future periods:





TotalObligations
            
            RemainderAll
                Years
            
            2005
            
            2006
            
            2007
            
            2008Operating
                lease obligations
            
            $
            2,438,000
            
            $
            492,000
            
            $
            921,000
            
            $
            878,000
            
            $
            147,000Notes
                payable
            
            
            192,000
            
            
            192,000
            
            
            —
            
            
            —
            
            
            —Other
                liabilities- past due
            
            
            1,908,000
            
            
            1,908,000
            
            
            —
            
            
            —
            
            
            —Accounts
                payable- past due
            
            
            2,030,000
            
            
            2,030,000
            
            
            —
            
            
            —
            
            
            —Total
                contractual cash obligations
            
            $
            6,568,000
            
            $
            4,622,000
            
            $
            921,000
            
            $
            878,000
            
            $
            147,000Operating
                lease obligations, included above, from which we have been released
                as of
                July 31, 2005
            
            $
            2,285,000
            
            $
            412,000
            
            $
            848,000
            
            $
            878,000
            
            $
            147,000




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





19


As
      of
      June 30, 2005, we have not entered into any purchase orders for capital
      equipment.





**Significant
      Estimates**


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





**Recent
      Accounting Pronouncements**


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





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





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




**ITEM
      3.****CONTROLS
      AND PROCEDURES**




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





20


Although
      certain material weaknesses in internal controls and procedures previously
      disclosed are not being fully remediated, we believe that changes and procedures
      that were implemented and remain in place, including (i) engagement of Larry
      D.
      Grant as a financial consultant, (ii) addition of Darlene Deptula-Hicks to
      our
      Audit Committee, (iii) requirement of the Executive Committee of the Board
      to
      ratify routine and/or recurring expenditures and approve significant commitments
      and non-routine expenditures and payments, (iv) requirement that both Larry
      D.
      Grant and our Chief Operating Officer review and approve incurring all
      significant obligations and remitting payments, (v) adoption of separate Codes
      of Ethics for all employees and for senior executives and finance personnel,
      (vi) adoption or updating of the charters of our Audit and Compensation
      Committees, and (vii) creation of a Disclosure Committee and adoption of a
      Disclosure Committee Charter, mitigate and reduce the likelihood of material
      misstatements or improper disclosures in our financial statements and
      reports.




Our
      Chief
      Operating Officer (who is our Principal Executive and Financial Officer) has
      previously consulted with Larry D. Grant and has participated in the evaluation
      of our disclosure controls (as defined in Rules 13a-15(e) and 15d-15(e) of
      the
      Securities Exchange Act of 1934, as amended (the “Exchange Act”)) required by
      paragraph (b) of Rule 13a-15 or Rule 15d-15, as of June 30, 2005 and, based
      on
      that evaluation, concluded that due to insufficient staff our disclosure
      controls and procedures were not fully effective to ensure timely collection,
      evaluation and disclosure of information relating to the Company that would
      potentially be subject to disclosure under the Exchange Act, and the rules
      and
      regulations thereunder. However, to the extent corrections and improvements
      in
      internal controls and disclosure controls and procedures cannot be implemented
      and/or maintained, management believes appropriate oversight and review is
      currently in place to prevent material misstatements in our interim financial
      reporting.




21


**PART
      II. OTHER INFORMATION**






**ITEM
      1.****LEGAL
      PROCEEDINGS**




In
      2003,
      IMCOR, together with Alliance, the prior owner of the *Imagent* technology, filed a complaint against Amersham and two other Amersham
      affiliates, alleging that certain Amersham products infringe on claims in
      patents covering *Imagent* .
      The
      case is captioned as *IMCOR
      Pharmaceutical Co. and Alliance Pharmaceutical Corp. v. Amersham Health Inc.
      et.
      al.* ,
      Civil
      Action No. 03CV2853 (SRC), in the United States District Court for the District
      of New Jersey. Our complaint alleges that principally through their Optison®
      product, Amersham and related Amersham entities infringe on eight patents now
      owned by us. We are also seeking a declaration that the claims of fifteen
      Amersham patents are invalid and are not infringed by our *Imagent* product.
      The complaint further alleged misappropriation of trade secrets as well as
      other
      state law claims against Amersham. Amersham denied the material allegations
      of
      the claims and asserted certain affirmative defenses and counterclaims.
      Amersham's counterclaims against us include claims of patent infringement of
      the
      fifteen Amersham patents, breach of contract, breach of good faith and fair
      dealing, and tortious interference with contract. IMCOR and Amersham amended
      their complaints to include allegations of antitrust violations by the other
      party.





On
      May 5,
      2005, pursuant to District of New Jersey procedure, the case was stayed, pending
      settlement discussions. The parties have until August 31, 2005 to consummate
      settlement or move to place the case back on the court’s active docket. In the
      absence of either settlement or a motion to place the case back on the court’s
      active docket, the case will be dismissed without prejudice.





During
      this period, a dispute has arisen between the Company and Alliance as to the
      pending settlement terms currently being negotiated with Amersham. The Company
      filed a motion with the court on July 27, 2005 seeking a ruling to have IMCOR
      substituted for Alliance as the “real party in interest” in this litigation.
      Alliance has indicated that it intends to object to this motion. In the
      meantime, the Company is negotiating with Alliance to seek a mutually acceptable
      resolution of the differences so the settlement negotiations with Amersham
      might
      proceed.





Therefore,
      it is not presently feasible to determine whether there is a reasonable
      possibility that the assets have been impaired for purposes of Statement of
      Financial Accounting Standards No. 5, or the extent of damages or gain, if
      any,
      that might result depending on whether or not we prevail. In any event, we
      may
      continue to incur litigation costs if the settlement discussions are not
      successful and either party reasserts its respective claim against the
      other.





On
      May
      11, 2005, we were served with an unlawful detainer lawsuit by EOP-Industrial
      Portfolio, LLC (“EOP”), the lessor of our premises, for our failure to pay
      $84,641 of rent that was due April 1, 2005. On July 19, 2005, we entered into
      a
      lease termination agreement with EOP to terminate the lease prior to the
      expiration of its term and the unlawful detainer lawsuit has been dismissed.
      Under the terms of the lease termination agreement, EOP retained our security
      deposit of $297,330, we vacated the premises and we were released from any
      further financial obligations, including future minimum rental payments
      estimated at approximately $2,284,000.







**ITEM
      2.****UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**




During
      the six months ending June 30, 2005, we issued 952,440 shares of our common
      stock as compensation for past services and to satisfy late registration
      penalties, without registration under the Securities Act. These securities
      were
      offered and sold by us in reliance upon exemptions from the registration
      requirements provided by Section 4(2) of the Securities Act and Regulation
      D
      under the Securities Act relating to sales not involving any public offering,
      and/or Rule 701 under the Securities Act relating to transactions occurring
      under compensatory benefit plans. We relied on representations and warranties
      from the purchaser of the securities that they were acquiring the securities
      for
      their own account and not with a view to, or for sale in connection with, any
      distribution of the securities in violation of the Securities Act. The following
      is a summary of the common shares issued:




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





22


As
      of
      June 30, 2005, an additional 2,008,913 shares of our common stock are
      collectively issuable to Oxford Bioscience Partners, L.P., MRNA Fund II, L.P.
      and Mi3 L.P. to satisfy additional late registration penalty obligations
      calculated through that date. In July, 2005 we negotiated an agreement with
      these three parties to cease, effective as of June 30, 2005, the accrual of
      shares of the Company’s common stock to be delivered to those investors as a
      penalty for the Company’s failure to have an effective registration statement in
      place under the terms of the registration rights agreements dated April 19,
      2004
      between the Company and those investors.





All
      of
      the shares issued in January through April 2005 were subject to pending
      registration statements.





Given
      our
      current financial circumstances and its goal to maximize the funds available
      to
      its creditors, our board of directors has determined that we will not continue
      to pursue our efforts to effect its registration statements currently on file
      with the Securities and Exchange Commission (File Nos. 333-122625 and
      333-117907). Those registration statements, which are not currently effective,
      will be withdrawn.





**Many
      of our investors have held their shares in the Company for more than a year
      and
      will be qualified to sell their shares under Rule 144, subject to the
      restrictions set forth therein;** ***however*** **,
      given our current financial situation, at some point in the fourth quarter
      of
      2005 we may elect to cease reporting under the Exchange Act, and as a result,
      investors will no longer be eligible to resell their shares of our common stock
      under Rule 144.**








**ITEM
      3.****DEFAULTS
      UPON SENIOR SECURITIES**




NONE




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




NONE




**ITEM
      5.****OTHER
      INFORMATION**





**RISK
      FACTORS**




**RISKS
      RELATED TO OUR FINANCING AND OPERATIONS AND COMMON STOCK**




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





Our
      cash
      and cash equivalents at June 30, 2005 was $54,844. At June 30, 2005, we had
      current liabilities of approximately $6,072,608, which includes the current
      portion of deferred licensing revenue of $696,307.





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





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





We
      plan
      to focus our efforts primarily on exploring various options concerning our
      business, including licensing or selling all or a portion of our remaining
      assets, namely *Imagent* ,
      or
      finding a partner with whom to pursue the clinical development and
      commercialization of *Imagent* . **** If
      we are
      not able to find a buyer or partner for these assets in a timely manner and
      at
      acceptable prices, we will continue to not have sufficient funds to meet our
      obligations to our creditors and may be forced into voluntary or involuntary
      bankruptcy proceedings .
      The
      steps to sell or otherwise dispose of our assets (including negotiating
      agreements and obtaining shareholder approval to the extent required) are costly
      and will diminish the proceeds available for other purposes .





23


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





We
      are
      currently subject to the rules of the Exchange Act and the related reporting
      requirements. Compliance with the reporting requirements of the Exchange Act
      requires the timely filing of Quarterly Reports on Form 10-QSB, Annual Reports
      on Form 10-KSB and Current Reports on Form 8-K, among other actions. Our
      compliance with the reporting requirements involves significant costs and
      expenditures of management’s time. Given our current financial position and the
      limited resources of our management, our board of directors may elect to remove
      us from the reporting obligations of the Exchange Act at some point in the
      fourth quarter of 2005 or thereafter. If we make such an election, investors
      would not be able to utilize Rule 144 in connection with the resale of their
      shares of our common stock.





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





Historically,
      companies in financial situations similar to ours have often been the target
      of
      litigation by its creditors or shareholders. We may become involved in this
      type
      of litigation as a result of the actions we have taken and/or our inability
      to
      meet our obligations to our creditors. As of August 18, 2005, no such lawsuits
      were pending. However, if such a lawsuit is filed against us, the litigation
      is
      likely to be expensive, and, even if we ultimately prevail, the process will
      divert the attention of our management away from otherwise implementing our
      current restructuring plan. If we do not prevail in such a lawsuit, we may
      be
      liable for damages. We cannot predict the amount of such damages, but they
      may
      be significant and could further reduce our limited available cash.





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




We
      have
      incurred losses since the beginning of our operations. As of June 30, 2005,
      we
      have incurred cumulative net losses (before dividends on preferred stock) of
      approximately $86,095,000. We expect our losses to increase in the future as
      our
      financial resources are used for litigation, and other related expenses. It
      is
      unlikely that we will be able to achieve or maintain profitability in the
      future.





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




**We
      filed a suit against Amersham for patent infringement and theft of trade
      secrets, and Amersham has counterclaimed for patent infringement. This case,
      if
      not resolved, could impede our ability to market** ***Imagent*** **.**




We
      filed
      a complaint against Amersham Health, Inc. and two other Amersham affiliates
      alleging that certain Amersham products infringe on claims in our patents.
      We
      have also alleged theft of trade secrets and also seek a declaration that our
      products do not infringe on Amersham's patents. Alliance joined as a plaintiff
      in this suit. Amersham filed an answer denying the material allegations of
      our
      claims and asserting certain counterclaims. Both parties amended their
      complaints to include certain antitrust claims. The case was dismissed on May
      5,
      2005 without prejudice while the parties engage in settlement discussions.
      The
      parties have until August 31, 2005 to consummate a settlement or move to place
      the case back on the court’s active docket. In the absence of either a
      settlement or a motion to place the case back on the court’s active docket, the
      case will be dismissed without prejudice. If the settlement discussions are
      not
      successful, Amersham reasserts its counterclaims and they are resolved
      unfavorably to us, it may be difficult or impossible to implement a license,
      sale or other arrangements for the commercialization of *Imagent* .




**We
      are currently in negotiations with Alliance to settle certain disputes between
      the parties, but there can be no assurance that a settlement will be
      reached.**





We
      acquired *Imagent* and its
      related assets from Alliance in June 2003. Certain disputes have arisen between
      the parties under the terms of the asset purchase agreement related to the
      purchase of *Imagent* .
      We are
      currently in discussions with Alliance to potentially settle these disputes,
      but
      there can be no assurance that a settlement will be reached. If settlement
      discussions are not successful, the parties may enter into litigation, which
      would be expensive and would divert the attention of our management away from
      the implementation of our current restructuring plan and may make it difficult
      or impossible to implement a license, sale or partnership for the
      commercialization of *Imagent* and/or
      conclude a satisfactory resolution to the Amersham litigation.





24


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




Since
      we
      have suspended manufacturing operations and vacated our leased manufacturing
      facility located in San Diego, California, we will be required to commit a
      significant amount of time and expense to move to a new facility that meets
      FDA
      requirements if we decide to maintain internal manufacturing capabilities.
      We
      cannot assure that the FDA would approve a new facility on a timely basis or
      deem any new facility to which we relocate to be compliant with FDA
      manufacturing standards. In the event that we relocate to a new manufacturing
      facility, a change to the chemistry, manufacturing, and controls section of
      our
      New Drug Application (“NDA”) would be required to be submitted to the FDA for
      approval. Timing of this event, should it occur, could affect the timeliness
      of
      the clinical trials and the supplemental New Drug Application submission. If
      we
      decide to have the product manufactured by a third party, we cannot assure
      that
      we would be successful in the contract negotiation or that a third party would
      be able to manufacture the product in a costly or timely manner. All of the
      above may make it difficult for us to fulfill certain of our contractual
      obligations to provide product, which could result in disputes or claims against
      us and/or diminished license revenue.




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




Since
      we
      have suspended manufacturing operations and vacated our leased manufacturing
      facility located in San Diego, California, we entered in to an agreement with
      Cardinal Health to maintain and conduct our stability samples. On August 17,
      2005 we terminated this agreement and consequently the testing program. This
      work determined the expiration date of the product. We are not able to support
      any clinical testing of the product beyond its current expiry date of September
      2005.





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




We
      are
      required to rely on the services of outside consultants for clinical
      and regulatory
      advise, and maintenance of the Investigation New Drug application (“IND”) and
      NDA. If we cannot maintain those contracts, the IND and NDA may have to be
      abandoned, significantly reducing the assets of the corporation.





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




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




Beginning
      in May 2004, we began to implement steps to address our internal controls and
      procedures. We have completed certain remediation steps; however, since it
      is
      unlikely that we can further rectify these material weaknesses through measures
      and improvements to our systems and procedures, management may encounter
      difficulties in timely assessing business performance and identifying incipient
      strategic and oversight issues.




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




25


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




We
      currently have one senior executive officer: our Chief Operating Officer (Mr.
      DeFranco). We also have retained Larry D. Grant, a consultant, to provide
      advisory and management services on a part-time basis on financial, operational
      and strategic matters. These individuals have entered into employment or
      consulting agreements, confidentiality and/or non-competition agreements with
      us. If an individual performing one of these executive or consulting functions
      for us terminates his association with us or breaches their agreement with
      us:





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




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





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




As
      of
      August 18, 2005, two related stockholders controlled approximately 2,738,084
      shares, or 55% of our issued and outstanding common stock at that date. In
      August 2005, these stockholders agreed to stop the accrual, as of June 30,
      2005,
      of their right to receive additional shares of the Company’s common stock as a
      penalty for the Company’s failure to timely register certain of their shares of
      common stock. Such additional common shares, which are yet to be issued, total
      1,914,885. Upon issuance, these two related stockholders will then control
      approximately 68% of our pro forma issued and outstanding common stock. This
      concentration of ownership and control may delay or prevent a change in control
      of IMCOR, and may also result in a small supply of shares available for purchase
      in the public securities markets. These factors may affect the market and the
      market price for its common stock in ways that do not reflect the intrinsic
      value of our common stock.




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





As
      of
      June 30, 2005, we had reserved **** 2,437,701
      shares of our common stock for issuance upon exercise or conversion of warrants
      or stock options (including options that have been granted and that are
      available for grant in the future). Furthermore, on October 29, 2004, we issued
      and sold 4,500 shares of our newly issued Series A Convertible Preferred Stock
      which are convertible into 833,334 shares of our common stock. As of June 30,
      2005 we have obligations to issue 2,008,913 shares of common stock for final
      tabulated late registration penalties, of which none are issued as of August
      18,
      2005.





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





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




Our
      common stock currently is quoted on the Pink Sheets. Our appeal to NASDAQ to
      reconsider its decision in 2004 to delist our shares was denied and for a
      portion of 2004 our stock was quoted on the Pink Sheets. We are not considering
      options to seek relisting of our shares on another exchange at this time. As
      such, our common stock may have fewer market makers, lower trading volumes
      and
      larger spreads between bid and asked prices than securities listed on an
      exchange such as the New York Stock Exchange or the NASDAQ Stock Market. These
      factors may result in higher price volatility and less market liquidity for
      our
      common stock.





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





26


**ITEM
      6.**  **EXHIBITS**




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




**EXHIBIT****NO.**
            
            **DESCRIPTION**+3.1
            
            Restated
                Articles of Incorporation of IMCOR Pharmaceutical Co., as amended,
                including Certificate of Designation, Preferences and Rights of Series
                A
                Convertible Preferred Stock. (Filed as Exhibit 3.1 to the Company’s Annual
                Report on Form 10-KSB for the year ended December 31, 2004 and
                incorporated herein by reference.)+3.2
            
            Amended
                and Restated Bylaws of IMCOR Pharmaceutical Co. (Filed as Exhibit C
                to the Company’s Information Statement on Form DEF 14C dated December 23,
                2002 and incorporated herein by reference.)*10.1
            
            License
              Agreement dated as of June 30, 2005 by and between Sangart, Inc. and
              IMCOR
              Pharmaceutical, Co.*10.2
            
            Letter
              Agreement dated May 17, 2005 by and between Jack DeFranco and IMCOR
              Pharmaceutical, Co.*10.3
            
            Lease
              Termination Agreement dated as of July 19, 2005 by and between
              EOP-Industrial Portfolio, L.L.C. and IMCOR Pharmaceutical,
              Co.+10.4
            
            Asset
                Purchase Agreement dated as of August 4, 2005 by and between IMCOR
                Pharmaceutical, Co. and NanoScan Imaging, LLC. (Filed as Exhibit
                10.1 to
                the Company’s current report on Form 8-K filed on August 9, 2005 and
                incorporated herein by reference.)*31.1
            
            Certification
                of Principal Executive and Financial Officer pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
                of Principal Executive and Financial Officer pursuant to 18 U.S.C.
                Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.




+
      Incorporated by Reference.


*
      Filed
      herewith.




27


**Signatures**




In
      accordance with the requirements of the Exchange Act, the registrant has caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




Date:
                August 18, 2005
            **IMCOR
                Pharmaceutical Co.**/s/
                Jack DeFrancoJack
                DeFranco, Chief Operating Officer
              (Principal
                Executive and Financial Officer)












28


**EXHIBIT
      INDEX**




**EXHIBIT****NO.**
            
            **DESCRIPTION**+3.1
            
            Restated
                Articles of Incorporation of IMCOR Pharmaceutical Co., as amended,
                including Certificate of Designation, Preferences and Rights of Series
                A
                Convertible Preferred Stock. (Filed as Exhibit 3.1 to the Company’s Annual
                Report on Form 10-KSB for the year ended December 31, 2004 and
                incorporated herein by reference.)+3.2
            
            Amended
                and Restated Bylaws of IMCOR Pharmaceutical Co. (Filed as Exhibit
                C to the
                Company’s Information Statement on Form DEF 14C dated December 23, 2002
                and incorporated herein by reference.)*10.1
            
            License Agreement
              dated
              as of June 30, 2005 by and between Sangart, Inc. and IMCOR Pharmaceutical,
              Co.*10.2
            
            Letter Agreement
              dated
              May 17, 2005 by and between Jack DeFranco and IMCOR Pharmaceutical,
              Co.*10.3
            
            Lease Termination
              Agreement dated as of July 19, 2005 by and between EOP-Industrial
              Portfolio, L.L.C. and IMCOR Pharmaceutical, Co.+10.4
            
            Asset
                Purchase Agreement dated as of August 4, 2005 by and between IMCOR
                Pharmaceutical, Co. and NanoScan Imaging, LLC. (Filed as Exhibit
                10.1 to
                the Company’s current report on Form 8-K filed on August 9, 2005 and
                incorporated herein by reference.)*31.1
            
            Certification
                of Principal Executive and Financial Officer pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002.*32.1
            
            Certification
                of Principal Executive and Financial Officer pursuant to 18 U.S.C.
                Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.




+
      Incorporated by Reference.


*
      Filed
      herewith.




29