UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549





FORM 10-K







|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended September 30, 2010

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to
.

Commission File Number 0-11480





BIOVEST INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 41-1412084                          
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer Identification No.)

324 South Hyde Park Avenue, Suite
350

Tampa, Florida 33606

(Address of principal executive offices) (Zip Code)

(813) 864-2554

(Registrants telephone number, including area code)





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

Common Stock, par value $0.01 per share

(Title of class)





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

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

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

Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post
such files).    Yes   ̈    No   ̈



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

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer, and smaller reporting company in
Rule 12b-2 of the Exchange Act. (Check one):



|                        |  |   |  |                           |  |  
|----------------------- |  | - |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈ |  | Accelerated filer         |  |  ̈
|                        |  |   | 
|Non-accelerated filer   |  |  ̈ |  | Smaller reporting company |  | x

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

Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a Bankruptcy Plan confirmed by
the Bankruptcy Court:    Yes  x    No   ̈

As of March 31, 2010, the aggregate market value of the voting common stock held by nonaffiliates of the registrant, computed by reference to
the last sale price of such stock as of such date on the Pink Sheets, was approximately $45,203,000.

As of November 30, 2010, there were
136,656,619 shares of the registrants Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE:

The information required by Part III of Form 10-K, to the extent not set forth herein, is incorporated herein by reference to the registrants Proxy
Statement for the 2011 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the registrants fiscal year.









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Forward-Looking Statements

Statements in this Annual Report on Form 10-K that are not strictly historical in nature are forward-looking statements. These statements may include, but are not limited to, statements about: the timing
of the commencement, enrollment, and completion of our clinical trials for our product candidates; the progress or success of our product development programs; the status of regulatory approvals for our product candidates; the timing of product
launches; our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; and our estimates for future performance, anticipated operating losses, future revenues, capital
requirements, and our needs for additional financing. In some cases, you can identify forward-looking statements by terms such as anticipates, believes, could, estimates, expects,
intends, may, plans, potential, predicts, projects, should, will, would, goal, or other variations of these terms (including
their use in the negative) or by discussions of strategies, plans or intentions. These statements are only predictions based on current information and expectations and involve a number of risks and uncertainties. The underlying information and
expectations are likely to change over time. Actual events or results may differ materially from those projected in the forward-looking statements due to various factors, including, but not limited to, those set forth under the caption Risk
Factors in ITEM 1A. RISK FACTORS in this Annual Report on Form 10-K and those set forth in our other filings with the Securities and Exchange Commission. Except as required by law, we undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or otherwise.



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PART I



|ITEM 1. | BUSINESS
|------- | --------

In this annual report on Form
10-K, unless the context indicates otherwise, references to Biovest, the Company, our company, we, us, and similar references refer to Biovest International, Inc. and its subsidiaries. All
references to years in this Form 10-K, unless otherwise noted, refer to our fiscal years, which end on September 30. For example, a reference to 2010 or fiscal 2010 means the 12-month period ended September 30,
2010.

General

As a result of our collaboration with the National Cancer Institute (NCI), Biovest International, Inc. (other OTC: BVTI) is developing
BiovaxID® as a personalized therapeutic cancer vaccine for the treatment of non-Hodgkins lymphoma,
specifically follicular lymphoma (FL), mantle cell lymphoma (MCL) and potentially other B-cell blood cancers. Both FL and MCL are generally considered to be incurable with currently approved therapies. These generally fatal diseases arise from the
lymphoid tissue and are characterized by an uncontrolled proliferation and spread throughout the body of mature B-cells, which are a type of white blood cell.

Three clinical trials conducted under our Investigational New Drug Application (IND) have studied BiovaxID in non-Hodgkins lymphoma. These studies include a Phase 2 clinical trial and a Phase 3
clinical trial in patients with FL, as well as, a Phase 2 clinical trial in MCL patients. We believe that these clinical trials have demonstrated that BiovaxID, which is personalized and autologous (derived from a patients own tumor cells),
has an excellent safety profile and is effective in the treatment of these life-threatening diseases.

To support our planned
commercialization of BiovaxID, we developed an automated cell culture instrument called AutovaxID. We believe that AutovaxID has significant potential application in the production of a broad range of patient-specific medicines, such as
BiovaxID as well as other monoclonal antibodies. We are collaborating with the U.S. Department of Defense to further develop AutovaxID and to explore potential production of additional vaccines, including vaccines for viral indications such as
influenza. AutovaxID is automated and computer controlled to improve cell production reliability and to maximize cell production. AutovaxID uses a disposable production unit which we anticipate will minimize the need for FDA required clean
rooms in the production process and provides for robust and dependable manufacturing while complying with the industry cGMP standards. AutovaxID has a small footprint and supports scalable production.

We also manufacture instruments and disposables used in the hollow-fiber production of cell culture products. Our hollow-fiber cell culture products and
instruments are used by biopharmaceutical and biotech companies, medical schools, universities, research facilities, hospitals and public and private laboratories. We also produce mammalian and insect cells, monoclonal antibodies, recombinant and
secreted proteins and other cell culture products using our unique capability, expertise and proprietary advancements in the cell production process known as hollow fiber perfusion.

Our business consists of three primary business segments: development of BiovaxID and potentially other B-cell blood cancer vaccines; the manufacture and sale of AutovaxID and other instruments and
consumables; and commercial production of cell culture products and services.

Corporate Overview

We were incorporated in Minnesota in 1981, under the name Endotronics, Inc. In 1993, our name was changed to Cellex Biosciences, Inc. In 2001, we
changed our corporate name to Biovest International, Inc. and changed our state of incorporation from Minnesota to Delaware.

In April 2003,
we entered into an Investment Agreement with Accentia Biopharmaceuticals, Inc. (Accentia). As a result of this agreement, in June 2003, we became a subsidiary of Accentia through the sale of shares of our authorized but un-issued common
and preferred stock then representing approximately 81% of our equity outstanding immediately after the investment. The aggregate investment commitment received from Accentia was $20 million. We continued to be a reporting company under
Section 12G of the Securities Exchange Act of 1933 following the investment of Accentia.



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Filing of Voluntary Petitions in Chapter 11

On November 10, 2008, we, and our wholly-owned subsidiaries filed voluntary petitions for reorganization under Chapter 11. The reorganization cases
were being jointly administered with our parent company, Accentia under Case No. 8:08-bk-17795-KRM (the Chapter 11). On August 16, 2010, we filed our First Amended Joint Plan of Reorganization, and, on October 25, 2010, we
filed the First Modification to the First Amended Joint Plan of Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010, the U.S. Bankruptcy Court for the Middle District of Florida, Tampa
Division (the Bankruptcy Court) held a Confirmation hearing and confirmed the Plan, and, on November 2, 2010, the Bankruptcy Court entered an Order Confirming Debtors First Amended Joint Plan of Reorganization Under Chapter 11
of the Bankruptcy Code (the Confirmation Order), which approved and confirmed the Plan, as modified by the Confirmation Order. We emerged from Chapter 11 protection, and the Plan became effective, on November 17, 2010
(the Effective Date).

PRODUCTS

Therapeutic Cancer Vaccine  BIOVAXID®

The Human Immune System

The immune system functions as the bodys natural defense mechanism for identifying and killing or eliminating disease-causing pathogens, such as
bacteria, viruses, or other foreign microorganisms. However, with regard to cancer, including lymphomas, the immune systems natural defense mechanism is believed to be largely thwarted by natural immune system mechanisms which seek to protect
self-cells from attack. In humans, the primary disease fighting function of the immune system is carried out by white blood cells (leukocytes), which mediate two types of immune responses: innate immunity and adaptive immunity. Innate
immunity refers to the broad first-line immune defense that recognizes and eliminates certain pathogens prior to the initiation of a more specific adaptive immune response. While the cells of the innate immune system provide a first line of defense,
they cannot always eliminate or recognize infectious organisms. In some cases, new infections may not always be recognized or detected by the innate immune system. In these cases, the adaptive immune response has evolved to provide a highly-specific
and versatile means of defense which also provides long-lasting protection (immune memory) against subsequent re-infection by the same pathogen. This adaptive immune response facilitates the use of preventative vaccines that protect against viral
and bacterial infections such as measles, polio, diphtheria, and tetanus. We believe that BiovaxID creates an adaptive immune response to cancerous B-cells.

Adaptive immunity is mediated by a subset of white blood cells called lymphocytes, which are divided into two types: B-cells and T-cells. In the bloodstream, B-cells and T-cells recognize antigens, which
are molecules that are capable of triggering a response in the immune system. Antigens are molecules from bacterial, viral, or fungal origin, foreign (non-self) proteins, and in some cases, tumor-derived proteins that can stimulate an immune
response. The human body makes millions of different types of B-cells that circulate in the blood and lymphatic systems and perform immune surveillance. Each B-cell has a unique receptor protein (immunoglobulin) on its surface that binds to one
particular antigen. Once a B-cell recognizes its specific antigen and receives additional signals from a T-helper cell, it can proliferate and become activated in order to secrete antibodies (immunoglobulins; Ig) which can neutralize the antigen and
target it for destruction. T-cells may also recognize antigens on foreign cells, whereby they can promote the activation of other white blood cells or initiate destruction of the targeted cells directly. A persons B-cells and T-cells can
collectively recognize a wide variety of antigens, but each individual B-cell or T-cell will recognize only one specific antigen. Consequently, in each persons bloodstream, only a relatively few lymphocytes will recognize the same antigen.

Since B-cell cancers such as non-Hodgkins lymphoma (NHL) are tumors arising from a single malignant transformed B-cell, the tumor cells
in NHL maintain on their surface the original malignant B-cells immunoglobulin (collectively referred to as, the tumor idiotype) that is distinct from those found on normal B cells. The idiotype maintained on the surface of each
B-cell lymphoma serves as the tumor-specific antigen for the BiovaxID cancer vaccine.



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In many cases, including in NHL, cancer cells produce molecules known as tumor-associated antigens, which
may or may not be present in normal cells but may be over-produced in cancer cells. T-cells and B-cells have receptors on their surfaces that enable them to recognize the tumor associated antigens. While cancer cells may naturally trigger a B- or
T-cell-based immune response during the initial appearance of the disease, this response may be only weakly specific or attenuated in such a way that it does not fully eradicate all tumor cells. Subsequently, tumor cells gradually evolve and escape
from this weak immune response and are able to grow into larger tumors. In addition, because cancer cells arise from normal tissue cells, they are often able to exploit or increase existing immune tolerance mechanisms to suppress the bodys
immune response which would normally destroy them. In other cases, chemotherapy or other treatment regimens used to treat the cancer may themselves weaken the immune response and render it unable to reject and kill tumor cells. Even with an
activated immune system; however, the number and size of tumors can often overwhelm the immune system.

In the case of cancer and other
diseases, immunotherapies are designed to activate a persons immune system in an attempt to combat the disease. There are two forms of immunotherapy used to treat diseases: passive and active. Passive immunotherapy is exemplified by the
intravenous infusion into a patient of antibodies specific to the particular antigen. While passive immunotherapies have shown clinical benefits in some cancers, they require repeated infusions and can cause the destruction of normal cells in
addition to cancer cells. An example of passive immunotherapy to treat lymphoma is monoclonal antibodies such as rituximab. An active immunotherapy, on the other hand, seeks to generate a durable adaptive immune response by introducing an antigen
into a patient, often in combination with other components that can enhance an immune response to the antigen. BiovaxID is an example of active specific immunotherapy. Although active immunotherapies have been successful in preventing many
infectious diseases, their ability to combat cancers of various types has been limited by a variety of factors, including the inability of tumor antigens to elicit an effective immune response, difficulty in identifying suitable target tumor
antigens, inability to manufacture tumor antigens in sufficiently pure form, and inability to manufacture sufficient quantities of tumor antigens.

Nevertheless, in 2010 one active immunotherapy, Provenge® developed
by Dendreon Corporation, received marketing approval from the FDA. This represents the first case of an active immunotherapy to successfully gain marketing approval in the U.S. In addition to BiovaxID, there are a number of other active
immunotherapeutics for cancer in various stages of clinical trials that have demonstrated promising results.

A number of features of the
non-Hodgkins lymphomas make these tumors particularly suitable for treatment with a therapeutic cancer vaccine. The malignant B-cell lymphocytes of NHL express a unique, identifiable tumor-specific antigen which is not expressed by other
(healthy) cells in the body. In contrast, the majority of human cancers typically lack strong ubiquitous expression of tumor-specific antigens to distinguish them from normal cells, or they express a potentially widely-varying mix of antigens which
can be difficult to identify and formulate into a successful therapeutic vaccine.

Non-Hodgkins Lymphoma (NHL)

NHL is a heterogeneous group of malignancies of the lymphatic system with differing clinical behaviors and responses to treatment. BiovaxID has been
studied in two distinct forms of non-Hodgkins lymphoma, namely, FL and MCL. NHL is the fifth most common type of cancer in the U.S., with an estimated prevalence of 438,325 cases in 2007 in the U.S. NHL accounts for 5% of all cancer
deaths in the U.S. NHL is one of the few malignancies in which there continues to be a rise in incidence. Since the early 1970s, incidence rates for NHL have nearly doubled. Moreover, in spite of recent advances in the standard of care,
the overall five-year survival rate remains at approximately 63%. According to the NCI, in 2009 it is estimated that 65,980 new cases of NHL will be diagnosed and 19,500 Americans will die from the disease, with a comparable number
estimated in Europe.

NHL is usually classified for clinical purposes as being either indolent or aggressive,
depending on how quickly the cancer cells are likely to grow and spread. The indolent, or slow-growing, form of NHL has a very slow growth rate and may need little or no treatment for months or possibly years. Aggressive, or fast-growing, NHL tends
to grow and spread quickly and cause severe symptoms, and patients with aggressive NHL have shorter overall survival.

Follicular Lymphoma

Indolent (slow growing) and aggressive NHL each constitute approximately half of all newly diagnosed B-cell NHL, and roughly half of the
indolent B-cell NHL is FL. Accordingly, approximately 22% of new cases of NHL fall into the category of disease known as indolent FL. The U.S. prevalence (number of cases) for FL is estimated to be 100,603 cases in 2006. We have conducted a
Phase 2 clinical trial followed by a Phase 3 clinical trial in FL under our IND. FL is a form of NHL that is derived from a type of cell known as a follicle center cell. Despite its slow progression, FL is almost invariably fatal. The median
survival reported for FL patients ranges between 8 and 10 years, although these figures may have become slightly higher within the last decade as a result of improvements in the standard of care for FL.



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The current standard of care for treatment of advanced, bulky follicular lymphoma (bulky Stage II, Stage
III-IV) as specified by the National Comprehensive Cancer Network includes initial treatment of newly-diagnosed patients with rituximab-containing chemotherapy. Rituximab is a monoclonal antibody (an immune protein capable of selectively recognizing
and binding to a molecule) which targets a protein primarily found on the surface of both healthy and cancerous B cells, known as CD20. Accordingly, rituximab seeks to bind and destroy all B-cells, including healthy B-cells, as a means of
controlling the progression of FL in treated patients.

Rituximab and other biologics currently approved for lymphoma are characterized as
passive immunotherapies. Following administration, rituximab exerts its effects primarily through an unselective and near total destruction of a patients B-cells, including malignant as well as healthy B-cells. Rituximab and other
passive immunotherapies are often administered in sequential, repeated doses to achieve their effect, and following cessation of administration are over time eliminated from the patients circulation by normal bodily functions. Rituximab is
characterized as a targeted therapy since it targets CD20, which is present on both healthy and tumor cells. Rituximab is manufactured in bulk and is not considered to be a personalized therapy.

By comparison, BiovaxID is characterized as an active immunotherapy. Active immunotherapies attempt to stimulate the patients immune
system to respond to a disease. Specific active immunotherapies such as BiovaxID specifically seek to induce cellular and/or humoral immune responses focused on specific antigens present on a diseased cell (such as a tumor cell). As a
specific, active immunotherapy, BiovaxID targets only the cancerous B-cells while sparing healthy B-cells. Accordingly, BiovaxID is highly targeted. BiovaxID is manufactured specifically and entirely for each patient and is considered to be a highly
personalized therapy. If approved, BiovaxID will represent the only specific active immunotherapeutic approved for the treatment of FL and therefore will represent a new class of drugs that provide a new therapeutic option for patients
with lymphoma.

The EMEA has recently approved the use of two years of rituximab maintenance therapy in FL patients responding to first line
chemo-immunotherapy. In this context, patients receive rituximab repeatedly over a period of two years, during which the agent seeks to deplete all B-cells in the body in an attempt to extend tumor remission. BiovaxID, if approved, would likewise be
considered to be a maintenance or remission consolidation therapy. However, BiovaxID differs from rituximab maintenance therapy in that BiovaxID is administered for a 6-month period during which it seeks to establish a targeted and
persistent immune response to the patients tumor. BiovaxID seeks to establish an adaptive immune response which be can come into play and destroy the tumor cells every time the patients trained immune system encounters the specific tumor
target.

Figure 1

LOGO

Figure 1: BiovaxID targets tumor-specific idiotype, a protein unique to the tumor and
not found on healthy (non-malignant) B-cells. In contrast, current monoclonal antibody-based therapies for NHL, including rituximab (Rituxan®), tositumomab (Bexxar®), and
ibritumomab tiuxetan (Zevalin®) target CD20, a cell-surface protein expressed by both tumor and healthy B-cells.
As such, through its unique mode of action, BiovaxID represents a new therapeutic approach to treating FL.



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Mantle Cell Lymphoma (MCL)

MCL is a rare, aggressive subtype of NHL characterized by short remissions and rapid progression similar to aggressive lymphomas and successive relapses, reflecting incurability similar to indolent
lymphomas. The median overall survival for MCL has been cited as 3 to 5 years and the disease currently lacks a consensus standard of care. MCL represents approximately 6% of all NHL cases and worldwide there are approximately 7,800 new cases each
year of which approximately one half are in the U.S.

The majority of MCL patients have disseminated disease and bone marrow involvement at
diagnosis. Patients clinical outcomes from currently available therapies are poor. Although many therapeutic regimens are capable of rendering high initial response rates, these responses are of short duration (i.e., about 20 months) and the
relative survival rates of MCL patients are among the lowest compared to other types of NHL. The prognostic after the first relapse is very poor, with an expected median overall survival of about 1-2 years. No currently available therapeutic
regimens are curative.

While several therapeutic regimens are available to treat MCL patients, there currently exists no consensus standard
of care for treatment of first-line relapsed MCL. As such, MCL remains incurable and it is generally considered that additional treatment options are required given this significant unmet medical need.

Currently upon first diagnosis of MCL patients are often evaluated for eligibility for autologous stem cell transplantation (autoSCT). Stem cell
transplantation, an aggressive treatment protocol consisting of high-dose chemotherapy, immunotherapy and full-body radiation, aims to treat the patients tumor and purge the bone marrow of lymphoma cells. MCL patients who are eligible for
autoSCT receive either R-CHOP (rituximab, cyclophophamide, doxorubicin, vincristine, prednisone) followed by autoSCT or R-HyperCVAD (rituximab, cyclophosphamide, vincristine, doxorubicin, and dexamethasone alternating with rituximab plus high dose
methotrexate and cytarabine) followed by observation. Although these therapeutic approaches do yield high response rates, they are associated with high rates of treatment discontinuation, high risk of myelodysplastic syndrome, and high mortality
rates. Consequently, the considerable toxicity associated with these regimens largely limits these options primarily to a select subset of the MCL patients who are younger and better fit to tolerate these high-intensity treatments. However, even
this subset ultimately gains only modest benefits from existing treatment options. Moreover, the use of these more aggressive regimens appears not to result in superior overall survival as compared to standard therapies. Given that the median age
for newly diagnosed mantle cell lymphoma patients is 60 years, less aggressive therapeutic approaches are needed.

Development Status of
BiovaxID

Introduction

Preliminary studies demonstrated that treatment of patients with NHL with an active immunotherapy could allow a patients immune system to produce
B-cells and/or T-cells that recognized numerous portions of their tumor antigen and generate clinically significant immune responses. These studies provided the rationale for large-scale trials of active specific immunotherapy of this disease. These
studies have been published in The New England Journal of Medicine(October 1992), Blood(May 1997), and Nature Medicine (October 1999).In the treatment of cancer, residual tumor cells remaining in the patient after
completion of surgery or anti-tumor therapy are often the cause of tumor relapse. These residual tumor cells cannot always be detected by standard imaging techniques but their destruction may be feasible by active immunotherapy. The use of such
vaccines differs from traditional cancer treatment in that the ultimate mechanism of action against the tumor is indirect: the anti-tumor immunity induced by vaccination, rather than the vaccine itself, is ultimately responsible for treatment
benefit.

In 1994, the NCI filed for initiation of an IND for the purpose of conducting clinical trial(s) investigating the use of BiovaxID in
NHL. Under this IND, the NCI began in 1994 a Phase 2 clinical trial in FL; in 1999, the Phase 3 clinical trial in FL; and in 2000 a Phase 2 clinical trial in MCL. The NCI selected our Company to produce the vaccine for the initial Phase 2 clinical
trial in FL. In 2001, we entered into a formal cooperative research and development agreement (CRADA) with the NCI which formalized our collaboration with the NCI. The IND filed by the NCI was formally transferred to us in April 2004, which made our
Company the exclusive sponsor of the IND with full rights to complete the NCI-initiated Phase 3 clinical trial in FL and the NCI-initiated Phase 2 clinical trial in MCL, to communicate and negotiate with the FDA relating to marketing approval for
BiovaxID and to conduct other clinical studies in NHL under the IND.



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BiovaxID Clinical Trials

Phase 2 Clinical Trial of BiovaxID for Treatment of Follicular Lymphoma (FL)

In 1994, the
Phase 2 clinical trial was commenced by the NCI to evaluate the ability of BiovaxID to eradicate residual lymphoma cells in 20 patients with FL who were in chemotherapy-induced first clinical complete remission. All 11 patients with a
detectable lymphoma gene sequence (translocation) in their primary tumors had cells from the malignant clone detectable in their blood by DNA polymerase chain reaction (PCR) analysis both at diagnosis and after chemotherapy, despite being in
complete remission. In this clinical trial, molecular remission was defined as patients lacking any detectable residual cancer cells bearing the translocation as determined by a very sensitive PCR technique. After vaccination, 8 of 11 patients
converted to lacking cells in their blood from the malignant lymphoma clone detectable by PCR. Anti-tumor T-cell responses were found in the vast majority of the patients (19 of 20 patients), whereas anti-tumor antibodies were detected, but
apparently were not required for molecular remission. Vaccination was thus associated with clearance of residual tumor cells from the blood and long-term disease-free survival. The demonstration of molecular remissions and uniform, specific T-cell
responses against lymphoma tumor targets, as well as the addition of granulocytemonocyte colony-stimulating factor (GM-CSF) to the vaccine formulation provided the rationale for the initiation of a larger Phase 3 clinical trial at the NCI in
2000. These results were published in Nature Medicine(October 1999).

Phase 2 Clinical Trial of BiovaxID for Treatment of Mantle
Cell Lymphoma (MCL)

In 2000, the NCI initiated a Phase 2 open-label clinical trial (NCT00020215) of BiovaxID for the treatment of MCL.
This Phase 2 clinical trial was based upon the NCIs Phase 2 clinical trial in FL. The primary objective of this Phase 2 clinical trial was to study BiovaxID in treatment-naïve patients with MCL and to determine the safety and efficacy of
BiovaxID following a rituximab-based immunotherapy. Twenty-six patients with untreated, mostly (92%) stage IV MCL, were enrolled. All patients received six cycles of EPOCH-R (which is an chemo-immunotherapy consisting of etoposide, prednisone,
vincristine, cyclophosphamide, doxorubicin, rituximab); 92% of the patients achieved complete response (CR) and 8% achieved partial response (PR). All but 3 patients (i.e., due to disease progression or inability to manufacture the vaccine) received
BiovaxID together with KLH on day 1, along with GM-CSF (100 μg/m2/day) on days 1-4 at 1, 2, 3, 4, and 6 months starting at least 3 months post-chemotherapy.

The results of our MCL Phase 2 clinical trial were reported in Nature Medicine (August 2005). As reported in Nature Medicine, after a median follow-up of 46 months, the OS was 89%, the median
event-free survival (EFS) was 22 months, and five patients remained in continuous first CR. Antibody responses to immunization were detected in 30% of the patients, following a delayed pattern (i.e., detected mostly after the 4-5th vaccination)
which paralleled the peripheral blood B-cell recovery. Most importantly, specific CD4+ and CD8+ T-cell responses were detected in 87% of patients post-vaccine, and in 7 of 9 patients tested these responses were detected after the 3rd vaccination
when peripheral B-cells were by and large undetectable. The detected cytokine release response included GM-CSF, INF-g, and TNF-a (type I). In this study, BiovaxID induced both humoral and cellular immune responses following almost complete depletion
of B-cells following rituximab-containing chemotherapy. The adverse events observed in this trial were minimal and comparable to the toxicities observed in the FL studies. These were limited mostly to injection site reactions, similar to those
reported in the Phase 2 and Phase 3 FL clinical trials.

Phase 3 Clinical Trial of BiovaxID for Treatment of Follicular Lymphoma (FL)

Overview and Objectives.In January 2000, the Phase 3 clinical trial in FL was initiated by the NCI. The Phase 3 clinical trial was
a multi-center, double-blind, randomized, controlled clinical trial that was designed to confirm the results reported in the NCIs Phase 2 clinical trial.

As studied in the Phase 3 clinical trial, BiovaxID consisted of the patient-specific idiotype protein (Id) derived from the patients cancer cells conjugated or combined with keyhole limpet
hemocyanin (KLH immunogenic carrier protein) and administered with granulocyte-monocyte colony stimulating factor (which is known as GM-CSF and which is a biological response enhancer). The comparator studied in the Phase 3 clinical trial was a
control vaccine consisting of keyhole limpet hemocyanin (KLH) and administered with granulocyte-monocyte colony stimulating factor (GM-CSF; a biological response enhancer). Accordingly, the only difference between BiovaxID and the control vaccine
was the inclusion of the idiotype protein from the patients own tumor in BiovaxID. BiovaxID or control vaccine were administered following chemotherapy (also referred to as induction therapy) with a drug combination referred to as PACE.
Induction therapy represents the first-line treatment for FL patients and attempts to induce complete tumor remission as defined by radiological evidence (CT scans). In FL, patients treated with the current standard of care often
achieve complete remission but these remissions



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almost always are of limited duration and most treated patients must eventually be re-treated for their disease. In the majority of cases, however, even with re-treatment, the disease often
relapses and develops resistance to therapy, leading to a need for bone marrow transplant and eventually resulting in the death of the patient. In the Phase 3 clinical trial, patients who achieved complete response following induction therapy were
assigned to a limited waiting period prior to vaccination to allow for immune reconstitution following the induction chemotherapy. Patients who relapsed during this immune reconstitution period did not receive either BiovaxID or control treatment.
Patients who maintained their complete remission following this immune recovery period received either BiovaxID or control administered as five subcutaneous injections monthly over a six month period (one month was skipped).

The primary objectives of the Phase 3 clinical trial were to confirm the safety and efficacy of BiovaxID in two predefined groups:



| | (1) | All Randomized Patients: all randomized patients (the Randomized Patients) including patients who completed initial chemotherapy but relapsed and did not
receive either BiovaxID or control.
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| | (2) | All Treated Patients: the Randomized Patients who were disease-free at the time of vaccination and consequently received at least one dose of BiovaxID or control.
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The secondary objectives of the Phase 3 clinical trial included: (1) to determine the ability of BiovaxID to produce a
molecular complete response in subjects in clinical complete response, but with polymerase chain reaction (PCR) evidence of residual disease after standard chemotherapy; (2) to determine the impact of BiovaxID on molecular remission in FL
patients; (3) to evaluate the ability of BiovaxID to generate an immune response against autologous tumor; (4) to determine and compare the overall survival (OS) of subjects randomized to receive either treatment assignment; and
(5) to evaluate the safety of BiovaxID administered with GM-CSF.

Biopsy, Chemotherapy, and Immune Recovery.Prior to
chemotherapy, a small tumor biopsy was performed to obtain tissue for tumor classification and characterization, and to provide starting material necessary to manufacture BiovaxID. Following this biopsy patients were initially treated with PACE
chemotherapy (a combination of prednisone, doxorubicin, cyclophosphamide, etoposide) in order to induce a complete response (CR) or a complete response unconfirmed (CRu) as measured by CT radiological scans.

The trial protocol stipulated that for all patients, an Immune Recovery Period of approximately 6 months following completion of chemotherapy was
required to be completed without relapse before vaccination. The Immune Recovery Period was required in order to maximize the potential for immune response to vaccine and to avoid confounding factors from any potential lingering immunosuppressive
effects of chemotherapy.

Randomization to Immune Recovery Followed by BiovaxID or Control.When the NCI designed the Phase 3 clinical
trial protocol, a decision was made to randomize patients immediately after completion of chemotherapy and to not wait for the completion of the Immune Recovery Period in an effort to avoid expending NCI resources to manufacture patient-specific
vaccines for patients who were not anticipated to receive the vaccine (e.g., control patients). In the Phase 3 clinical trial, of 234 patients initially enrolled into the clinical trial, 177 patients completed chemotherapy successfully and were
randomized.

As per the design of the study, patients who relapsed during the Immune Recovery Period were excluded from treatment with
BiovaxID or control notwithstanding the fact that they had been randomized. In the clinical trial, of the 177 initially randomized patients, 117 remained eligible to be treated with either BiovaxID (76 patients) or control (41 patients) at the end
of the Immune Recovery Period. Sixty patients of the 177 randomized patients relapsed during the Immune Recovery Period and were not treated with either BiovaxID or control (Figure 2).



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LOGO

Figure 2: Flow Diagram of Phase 3, double-blind, randomized clinical trial of patient-specific vaccination
with BiovaxID + GM-CSF in first complete remission. 234 patients were enrolled at 14 centers and assessed for eligibility. Of those enrolled, 57 were excluded from randomization for reasons indicated. 177 patients were randomized (ITT
population), of which 118 were allocated to the BiovaxID (Id-KLH + GM-CSF) arm (treatment) and 59 were allocated to the KLH + GM-CSF arm (control). Patients that failed to remain in CR/CRu (60 total) did not receive either vaccine. As a result, 76
patients were vaccinated with Id-KLH + GM-CSF and 41 were vaccinated with KLH + GM-CSF, comprising the modified ITT (mITT) population. Patients receiving less than 5 immunizations either withdrew from the study or relapsed before completion.

Trial Enrollment and the Use of Rituximab-Containing Induction Chemotherapy. During the course of the Phase 3 clinical trial, the
standard of care for induction chemotherapy in FL changed to include rituximab, which reduced the ability to recruit and enroll patients into the study. In order to facilitate enrollment in the clinical trial, we amended the study protocol in 2007
to permit the use of a rituximab-containing chemotherapy regimen (CHOP-R), as induction therapy. However, the FDA requested that we abstain from vaccinating any patients who received CHOP-R and we did not vaccinate any of the patients who received
CHOP-R chemotherapy under the clinical trial protocol.

Due to the protracted enrollment, the clinical trials Independent Data
Monitoring Committee (DMC; a committee responsible for reviewing the available unblinded clinical trial data in the study and responsible for recommendations to the sponsor and the FDA) recommended an interim analysis of the clinical trials
endpoints and overall safety profile which resulted in the termination and halting of the trial in 2008.



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As of April 15, 2008, when the clinical trial was officially closed, a total of 234 subjects had been
enrolled and 177 subjects had been randomized in the Phase 3 clinical trial, which was less than the original clinical trial plan which called for 629 subjects to be enrolled and 540 to be randomized. While the termination of the clinical
trial before completion of the planned accrual resulted in a smaller sample size than was originally intended, we believe that the randomized nature of our clinical trial yields a valid conclusion because the baseline characteristics of the patients
in the two groups were balanced, the allocation to treatment arms was concealed, and the study was double-blinded.

Results of Phase 3
Clinical Trial

As reported at the plenary session of the Annual Meeting of the American Society of Clinical Oncology (ASCO 2009, Orlando,
FL), the patient cohort of the 177 All Randomized patients (which included 117 (66%) Treated Patients and 60 (35%) patients who were not treated) did not demonstrate statistically significant difference in median DFS from randomization
between treatment and control arms.

LOGO

Figure 3. Disease-free survival (DFS) according to study group for all randomized patients (N = 177).Kaplan-Meier actuarial curves for DFS for all randomized patients are shown according to their study group of Id-KLH+GM-CSF (N = 118) or KLH+GM-CSF (N = 59). The number of events, median, and 95% confidence intervals for each group are also
presented.



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At ASCO, we further reported the median DFS data for the patients who received at least one vaccination
either with BiovaxID or control. In this cohort of 117 patients, which represents a modified intent-to-treat population, median DFS was 13.6 months longer in patients who received BiovaxID compared to patients who received control. This analysis
reflects the prospectively defined primary clinical trial objective. Accordingly, there were 60 patients who were randomized but who did not receive either BiovaxID or control and who are not included in this analysis. Of these 117 treated patients,
76 patients received at least one dose of BiovaxID (referred to as the BiovaxID Arm) and 41 patients received at least one dose of control (referred to as the Control Arm). No serious adverse events were reported in either the BiovaxID Arm or the
Control Arm. At the median follow-up of 56.6 mo (range 12.6-89.3 mo), a statistically significant improvement of 13.6 months was observed in DFS between patients in the BiovaxID Arm (44.2 mo), versus the Control Arm (30.6 mo) (log-rank p-value
= 0.045; HR = 1.6). Using a Cox proportional-hazard model, a statistically significant hazard ratio (HR) of 0.62 was achieved (p=0.048; 95% CI: 0.39, 0.99). This means that patients receiving BiovaxID experienced an approximately 61%
(1/0.62) lower risk of cancer recurrence compared to patients who received the control vaccine. The Phase 3 clinical trials secondary endpoint of overall survival (OS) has not yet been reached for either group due to the length of
follow-up to date.

LOGO

Figure 4. Disease-free survival (DFS) according to study group for the randomized patients who received
blinded vaccinations (N = 117). Kaplan-Meier actuarial curves for DFS for the randomized patients who received at least one dose of the Id-KLH+GM-CSF (N = 76) or KLH+GM-CSF (N = 41) are shown. The number of events, median, and 95% confidence
intervals for each group are also presented.



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Analysis of Patients by Isotype. A typical antibody (immunoglobulin), including the lymphoma idiotype
expressed on the surface of each cancerous lymphoma cell, is composed of protein heavy chains and light chains. In humans, the heavy chains are classified as IgG, IgM, IgA, IgD and IgE, and the light chains are classified as
either kappa or lambda. The Id protein expressed on the surface of FL cells is an immunoglobulin protein characteristic of the single B-cell from which the tumor arose. The immunoglobulin protein contains a region known as the heavy
chain and a region known as the light chain (Figure 5). Almost always in FL, the heavy chain region is characterized as either an IgM-isotype or an IgG-isotype. Figure 5 below illustrates the dramatic differences in the structure
of immunoglobulin protein characterized as an IgM-isotype as opposed that characterized as an IgG-isotype. Accordingly, an antibody may be referred to as IgG-isotype or IgM-isotype depending on its heavy-chain classification. In the normal immune
response, antibody isotypes may have different roles and may help direct the appropriate immune response. The small region at the tip of the antibody is known as the variable region, or antibody binding site, and the balance of the
isotype is known as the constant region. When we manufacture BiovaxID, we screen each patients tumor cells obtained by biopsy for the isotype. Approximately 60% of patients with FL are diagnosed with tumors expressing an IgM
isotype and approximately 40% of patients bear tumors expressing an IgG isotype. In rare cases (<1%), patients are diagnosed with another isotype (e.g. IgA). Infrequently, the patients tumor also contains cells with one or more isotype (a
heterogenous or mixed isotype); in these patients we select either an IgG or IgM isotype for manufacture of BiovaxID. Each patients tumor isotype can be readily determined by standard analytical techniques (flow cytometry) at the
time of the patients tumor biopsy. In both the Phase 2 and Phase 3 clinical trials, the determination of tumor heavy-chain isotype determined the specific manufacturing and purification process used to make that patients vaccine. For
patients who have tumors expressing an IgG (or an IgG-containing mixed isotype), we manufacture an IgG isotype vaccine and for patients determined to have tumors expressing an IgM (or an IgM-containing mixed isotype), we
manufacture an IgM vaccine. Due to our manufacturing process (rescue fusion hybridoma), the isotype (IgG or IgM) of the tumor is directly reproduced in each patients vaccine so that each patients BiovaxID vaccine matches the
patients original tumor isotype (IgG or IgM).

LOGO

Figure 5: The Id protein expressed on the surface of FL cells is an immunoglobulin protein characteristic
of the single B-cell from which the tumor arose. The immunoglobulin protein contains a region known as the heavy chain and a region known as the light chain. Almost always in FL, the heavy chain region is characterized as
either an IgM-isotype or an IgG-isotype. The figure illustrates the dramatic differences in the structure of immunoglobulin protein characterized as an IgM-isotype as opposed that characterized as an IgG-isotype.



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Preclinical data indicates that the ability to develop an immune response differs between IgM-isotype and
IgG-isotype idiotypes. The IgG-isotype idiotype was reported to be tolerogenic, meaning that the immune response against the specific tumor target is suppressed. On the other hand, the IgM-isotype idiotype was reported to be highly immunogenic,
meaning that it induces an ample, persistent immune response against the specific tumor target. The unique feature of our trial- the manufacturing and administration of tumor-matched isotype idiotype vaccines- allowed us to investigate whether these
preclinical data translate into differential clinical efficacy of the two isotype vaccines in our clinical trial.

LOGO

Figure 6. The vaccines produced for each individual patient consist of the tumor idiotype with the same
isotype as the tumor cells from which the vaccine was produced. Therefore, patients with IgM isotype tumors received IgM vaccine, and patients with IgG isotype tumors received IgG vaccine manufactured from their own tumor cells.

We analyzed differences in median DFS in vaccinated patients in our Phase 3 clinical trial separately by tumor isotype. There were 35 IgM isotype
patients who received BiovaxID and 25 IgM isotype patients who received control. There were 40 IgG isotype patients who received BiovaxID and 15 IgG isotype patients who received control. Two patients had mixed IgM/IgG biopsy isotypes and were
excluded from this analysis. The baseline characteristics of the patients who received either IgM or IgG vaccine were balanced between each respective BiovaxID and control group.

In the IgM isotype group we observed that patients who were treated with isotype-matched BiovaxID had significantly longer DFS (52.9 months, versus 28.7 months) than patients with IgM isotype tumors who
received control vaccine (Figure 7). In contrast, in the IgG isotype group, there was no difference in median DFS between the patients who received isotype-matched BiovaxID and the patients with IgG isotype tumors who received control vaccine
(Figure 8). Although a separate manufacturing process is prescribed for the IgM isotype and for the IgG isotype, the trial protocol did not include planned analyses to address a subset efficacy analysis by isotype.



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LOGO

Figure 7: Disease-free survival (DFS) for the randomized patients with tumor IgM heavy chain isotype who
received blinded vaccinations. Kaplan-Meier actuarial curves for DFS for the Id vaccinated [igM-id-KLH + GM-CSF] and control [KLH+GM-CSF] groups for the IgM isotype are shown. The number of events, median, and 95% confidence intervals for each group
are also presented.



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LOGO

Figure 8: Disease-free survival (DFS) for the randomized patients with tumor IgG heavy chain isotype who
received blinded vaccinations. Kaplan-Meier actuarial curves for DFS for the Id vaccinated [igM-id-KLH + GM-CSF] and control [KLH+GM-CSF] groups for the IgG isotype are shown. The number of events, median, and 95% confidence intervals for each group
are also presented.



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LOGO

Figure 9: Shown is a standard statistical analysis (Kaplan-Meier survival curves) used to measure the
fraction of patients free of disease for a certain amount of time after treatment. In this Figure, IgM-isotype patients who receive an IgM-isotype vaccine are compared with IgG-isotype patients who received an IgG-isotype vaccine compared with all
control patients (patients with both IgM-isotype and IgG-isotype).



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Our clinical trial has two unique manufacturing features, where (1) the vaccine consists of the full
structure of the idiotype protein (that is, both the variable and the constant regions of the immunoglobulin), and (2) the idiotype of the vaccine matches the idiotype of the patients own tumor. These unique features allowed us to be the
first to investigate the clinical efficacy implications of the two tumor isotypes. The prior Phase 3 clinical trials of FL idiotype vaccines conducted by Genitope Corporation and Favrille, Inc. used a manufacturing process known as recombinant
manufacturing that universally linked the patients variable region of the idiotype into an IgG isotype without regard to the actual isotype of each patients tumor. We believe that the use of an IgG isotype was due to the comparative ease
of manufacture and purification of IgG proteins as well as to their relatively long half-life. There are two implications of the manufacturing processes used by these prior trials: (1) clinical efficacy cannot be compared by isotype group; and
(2) the lack of clinical efficacy observed in these trials may be due to the tolerogenic effect of the universal IgG isotype used in the vaccine manufacturing. As such, we believe that our analysis by tumor isotype may provide profound insight
into the efficacy of BiovaxID and may also suggest methods by which cancer vaccines in general could be developed in the future.

BiovaxID® Regulatory Status

We are currently preparing to discuss with the FDA and potentially international regulatory agencies the next steps required to achieve potential
marketing approval of BiovaxID. In preparation for these anticipated discussions, we are continuing to analyze data available from the Phase 3 clinical trial so that we can have as comprehensive as possible discussions regarding the safety and
efficacy results of our Phase 3 clinical trial. In addition, we continue to advance our efforts to comply with various regulatory validation and comparability requirements related to our manufacturing process and facility. We anticipate conducting
additional regulatory discussions with the FDA in 2011.

BiovaxID® Manufacturing Process and Facility

Manufacturing
Process

The BiovaxID manufacturing production process begins when a sample of the patients tumor is extracted by a biopsy and the
sample is shipped refrigerated to our facility in Minneapolis, Minnesota. At our facility, we identify the idiotype that is expressed on the surface of the patients tumor cells through laboratory analysis. Additionally, we identify whether the
isotype is IgM or IgG. In NHL, the tumor B-cells bear the surface idiotype (immunoglobulin or antibody) derived from the original transformed malignant B-cell, but do not typically secrete it in an amount suitable for vaccine production. In order to
make sufficient quantities of idiotype for vaccination, the patients tumor cells are then fused with an exclusively licensed cell line (mouse/human heterohybridoma cell line K6H6) from Stanford to create a hybridoma or hybrid cell.

After the creation of the hybridoma, we determine which hybridoma cells display the same antigen idiotype as the patients tumor cells, and those
cells are selected to produce the vaccine. The selected hybridoma cells are then seeded into our proprietary hollow-fiber bioreactors, where they are cultured and where they secrete or produce idiotype antigen. The secreted idiotype is then
collected from the cells growing in the hollow-fiber reactor. After a sufficient amount of idiotype is collected for the production of an appropriate amount of the vaccine, the patients idiotype is purified using multi-step purification
processes.



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LOGO





LOGO

Figure 10: Individualized Manufacturing Process for BiovaxID immunotherapy: (Clockwise) Beginning with an
excisional (>2cm) lymph node biopsy, tumor cells are fused with our proprietary mouse/human heterohybridoma in order to induce secretion of normally surface-bound tumor immunoglobulin (idiotype). Id-secreting clones are identified by comparing
their unique idiotype sequence to the tumors after which they are cultured (expanded) in a proprietary hollow-fiber bioreactor system (not shown). During culture, supernatant (containing idiotype) is collected until sufficient amounts have
been produced to yield adequate dosage of vaccine. This supernatant is purified by affinity chromatography and conjugated (bonded) to KLH carrier protein, resulting in a finished vaccine that can be shipped and administered to patients. In the Phase
3 clinical trial, manufacturing success was approximately 95% of treated patients. (Fig. reprinted from Neelapu, et al. Exp. Opin Biol Ther2007).



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We use a method known as hollow-fiber perfusion to produce the cell cultures used in the
manufacture of BiovaxID. Hollow-fiber perfusion, as compared to other cell culture methods, seeks to grow cells to higher densities more closely approaching the density of cells naturally occurring in body tissue. The hollow-fiber perfusion method
involves using hair-like plastic fibers with hollow centers which are intended to simulate human capillaries. Thousands of these fibers are inserted in a cartridge, which we refer to as a bioreactor. The cells are grown on the outside of the hollow
fibers while nutrient media used to support cell growth is delivered through the hollow centers of the fibers. The fiber walls have small pores, allowing nutrients to pass from the hollow center to the cells. The fibers act as filters and yield
concentrated secreted products. Because the cells are immobilized in the bioreactor, the concentrated product can be harvested during the ongoing cell growth process. We believe that hollow-fiber technology permits the harvest of cell culture
products with generally higher purities than stirred-tank fermentation, a common alternative cell culture method, thereby reducing the cost of purification as compared to stirred tank fermentation. Additionally, the technology associated with the
hollow-fiber process generally minimizes the amount of costly nutrient media required for cell growth as opposed to other cell culturing techniques.

After manufacture and purification, the resulting purified idiotype is then conjugated, or joined together, with KLH, to create the vaccine. KLH is a foreign carrier protein that is used to improve the
immunogenicity, or ability to evoke an immune response, of the tumor-specific idiotype. The vaccine is then frozen and shipped to the treating physician. At the treating physicians office, the vaccine is thawed and injected into the patient.

The vaccine is administered in conjunction with granulocyte macrophage colony- stimulating factor (GM-CSF), a natural immune system growth
factor that is administered with the idiotype vaccine to stimulate the immune system and increase the response to the idiotype vaccine. In the clinical trials patients were administered five monthly BiovaxID injections in the amount of 0.5 milligram
of idiotype per injection, with the injections being given over a six-month period of time in which the fifth month is skipped. Through this process, the patient-specific idiotype is used to stimulate the patients immune system into targeting
and destroying malignant B-cells bearing the same idiotype.

We estimate that an average of three (3) months is required to manufacture each
vaccine, which for most patients may overlap the time period when induction chemotherapy is being administered. While the manufacturing process for the BiovaxID vaccine is highly personalized to each patient we consider it to be highly controlled
and predictable. During the Phase 3 clinical trial we experienced approximately 95% success rate in manufacturing vaccines. The most common reason for a failure to successfully produce a patients vaccine were the presence of rare idiotype
variants as opposed to the failure of a step in the manufacturing process.

Manufacturing Facility

BiovaxID is a personalized medicine which is produced separately for each individual patient through a laboratory process based on the
patients own tumor cells derived by biopsy. Following regulatory approval of BiovaxID, we plan to produce BiovaxID in our existing leasehold space located in Minneapolis, Minnesota. In order to facilitate the regulatory process, we are
preparing a dedicated suite of laboratory clean rooms especially designed to produce BiovaxID. As the regulatory process advances toward completion, we anticipate expanding our lease hold space and the dedicated manufacturing facility as required to
meet anticipated commercial requirements. During the Phase 3 clinical trial, BiovaxID was produced at our facility in Worcester, Massachusetts. Because we have relocated the site of the manufacturing process to our Minneapolis facility following the
clinical trials and because we are expanding that facility, we are currently in the process of attempting to demonstrate to the FDA that the product under these new conditions is comparable to the product that was the subject of earlier clinical
testing. This requirement will also apply to future expansions of the manufacturing facility, such as the possible expansion to additional facilities that may be required for successful commercialization of the vaccine. There is also a requirement
for validation of the manufacturing process for BiovaxID utilizing our AutovaxID instrument. A showing of
comparability requires data demonstrating that the product continues to be safe, pure, and potent and may be based on chemical, physical, and biological assays and, in some cases, other non-clinical data.



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Instruments and Disposables

We sell hollow-fiber perfusion instruments used for the production of significant quantities of cell culture products. Our product line includes:

AUTOVAXID

AutovaxID is a fully automated, reusable instrument that employs a fully
disposable, closed-system cell-growth chamber incorporating a hollow-fiber cell-growth cartridge. Since it is fully enclosed, computer controlled and automated, AutovaxID requires limited supervision and manpower to operate compared to manual
instruments. AutovaxID is suitable for growing antibody-secreting cell lines, including hybridomas and Chinese hamster ovary (CHO) cells which are among the leading kinds of cell lines used for commercial therapeutic protein manufacture. We plan to
utilize the AutovaxID technology to streamline commercial manufacture of our proprietary anti-cancer vaccine, BiovaxID. AutovaxID is the first cell culture system that enables production of personalized cell-based treatments economically and in
compliance with U.S. Food and Drug Administration Good Manufacturing Practices (GMPs). In September 2009, we entered into a contract with the U.S. Department of Defense (DoD) to further develop and modify the AutovaxID instrument including for
purposes of applying this technology to applications of potential military interest, including research and production of antiviral vaccines such as those targeting influenzas.

PRIMER
HF®

The Primer HF is a low cost hollow-fiber cell culture system capable of producing small quantities of monoclonal antibody. This system also provides a
relatively inexpensive option to evaluate the efficacy of new cell lines in perfusion technology.

MINI MAX®

The
miniMax provides the flexibility and technology needed to support optimization studies and research scale production of mammalian cell secreted proteins. This automated cell culture system is a table-top unit complete with microprocessor controller,
self-contained incubator, and pump panel. The miniMax is an economical tool for researching scale-up processes and producing small quantities of protein of up to 10 grams per month.

MAXIMIZER®

The Maximizer provides maximum flexibility to support optimization studies and pilot scale production of mammalian cell secreted
proteins. This automated cell culture system is a table-top unit complete with validated microprocessor controller, self-contained incubator, and pump panel. With production rates up to one gram a day, the Maximizer is a tool for process development
and production.

XCELLERATOR

The XCellerator is a self-standing floor system containing an incubator and refrigerator section, control fixtures and pump panel. Each Xcellerator supports two independent flowpaths, is controlled by a
process control computer and has the capability of remote monitoring. The combined features of the XCellerator support production of 60-500 grams of protein per month, per XCellerator unit.

In addition to instruments sales, we have recurring revenue from the sale of hollow-fiber bioreactors, cultureware, tubing sets and other disposable products and supplies for use with our instruments.
Revenues from such disposable products represented approximately 36% and 45% of our total revenue from this business segment for the fiscal years ended September 30, 2010 and 2009 respectively.

Currently we assemble, validate and package the instruments and disposables which we sell. Customers for our instruments and disposables are the same
potential customers targeted for our contract production services which include biopharmaceutical and biotech companies, medical schools, universities, research facilities, hospitals and public and private laboratories.



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Cell Culture Products and Services

We manufacture mammalian cell culture products such as, whole cells, recombinant and secreted proteins, and monoclonal antibodies. Additionally, we provide related services as a contract resource to
assist our customers in developing cell production process protocols, cell line optimization, cell culture production optimization, media evaluation and other related services. This segment of our business represented approximately $1.2 million
(approximately 22%) and $1.5 million (approximately 41%) in revenues for the fiscal years ended September 30, 2010, and 2009 respectively.

Our customers include biopharmaceutical and biotech companies, medical schools, universities, research facilities, hospitals and public and private
laboratories. We generally produce cell culture products pursuant to contracts which specify the customers requirements for the cell culture products to be produced or the services to be performed.

There are various processes commonly used to produce mammalian cells generally used in the production of antibodies. These may include hollow-fiber
bioreactor perfusion, stirred tank fermentation, roller bottle and other processes. We primarily use hollow-fiber bioreactor technology to expand customer provided cell lines and produce the respective monoclonal antibodies. This technology grows
cells to higher densities which more closely mimics mammalian physiology. We have significant expertise with in vitro (outside the living body) cell culture methods for a wide variety of mammalian cells. Mammalian cells are complicated and dynamic,
with constantly changing needs. A primary component of hollow-fiber bioreactors is fibers made of plastic polymers. The fibers are hair-like with hollow centers which simulate human capillaries. Thousands of these fibers are inserted in a cartridge,
which we refer to as a bioreactor. The cells are grown on the outside of the hollow fibers while nutrient media used to support cell growth is perfused through the lumen of the fibers. The fiber walls have small pores, allowing nutrients to pass
from the hollow center to the cells. The fibers act as filters and yield concentrated secreted products. Because the cells are immobilized in the bioreactor, the concentrated product can be harvested during the on-going cell growth process.
Hollow-fiber technology permits harvests of cell culture products with generally higher purities thereby reducing the cost of downstream purification processes. This technology generally minimizes the amount of costly nutrient media required for
cell growth.

The most generally used process for mammalian cell production is stirred tank fermentation. Hollow-fiber bioreactor technology
can be contrasted with the competitive stirred tank fermentation process which takes place in tanks of various sizes. Cells are grown inside the tanks in culture medium which is maintained under controlled conditions and continuously stirred to
stimulate growth. At the end of the growing process, as opposed to incrementally during the growth process, cells are separated from the medium and the protein of interest is isolated through a series of complex purification processes. The size of
the tanks generally result in stirred tank fermentation facilities requiring significantly more start-up costs, space and infrastructure than comparable production facilities using hollow-fiber technology. While stirred tank fermentation and hollow
fiber technology are both used for cell production of various quantities, we believe that the stirred tank fermentation process is currently more commonly used for larger scale commercial production requirements. We believe that hollow-fiber
technology has advantages in scalability, start-up time and cost in the early development of antibody production. In the expanding field of personalized medicine where patient specific drugs and therapeutics are frequently envisioned, such as the
therapeutic vaccine which we are developing, we believe that hollow-fiber technology may be the appropriate cell culture production technology.

COMPETITION FOR BIOVAXID

If approved, BiovaxID® will be required to compete with currently
approved therapies, as well as therapies which may be approved in the future. There are currently no approved active immunotherapeutic drugs which seek to induce an adaptive, specific and durable immune response to identify and eradicate the
residual lymphoma cells remaining after a patient achieves remission in an effort to extend that remission or avoid relapse. BiovaxID is a therapy designed to be administered to lymphoma patients who have achieved complete remission after initial
chemotherapy treatment. If approved, BiovaxID would represent a new class of drugs available to treat FL potentially offering a new treatment option for FL patients.

BiovaxID is the only personalized cancer vaccine for treatment of FL that has demonstrated significant clinical benefit in a Phase 3 clinical trial. Two other vaccines (MyVaxTMdeveloped by Genitope Corporation and Specifid developed by
Favrille, Inc.) which were studied in Phase 3 trials in FL patients did not report statistically significant clinical benefit and we believe are no longer under development. There are fundamental structural differences between BiovaxID and the
personalized cancer vaccines developed by Genitope Corporation and Favrille, Inc.; Genitope and Favrille manufactured their respective vaccines with IgG isotypes without regard to the patients actual isotype and the clinical trial designs
under which the clinical efficacy of these vaccines were tested were different, which we believe explain why BiovaxID achieved significant clinical benefit while the other vaccines did not.



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Chemotherapy and monoclonal antibodies are widely used for the treatment of FL. Although chemotherapy and
monoclonal antibodies can substantially reduce the tumor mass and in most instances achieve clinical remission, the remission is generally of limited duration. FL patients generally relapse and the cancer usually becomes increasingly resistant to
further chemotherapy treatments. The patients response to therapy becomes briefer and weaker with each additional course of therapy, that eventually further chemotherapy would offer no clinical benefit.

A number of passive immunotherapies, such as rituximab and radioimmunotherapeutic agents (radioisotopes linked to monoclonal antibodies), are approved by
the FDA for the treatment of FL. A monoclonal antibody is a type of antibody produced in large quantity that is specific to an antigen that is expressed by tumor cells but may also be expressed by at least some normal cells. These therapies have
been used as primary treatment and also as part of combination induction therapy including chemotherapy and rituximab based therapy is considered to be the standard of care to treat FL. In an effort to prolong the duration of the clinical remission
monoclonal antibodies have increasingly been used as maintenance therapies; however, such treatments are off-label and no maintenance therapy is currently FDA approved to treat FL. Supplemental marketing applications have been filed with
the FDA and EMEA in 2010 to expand the indication for rituximab to include its use as a maintenance therapy for NHL, and it is anticipated that such approvals will be granted. However, the prolonged use of rituximab results in a substantial
proportion of patients becoming non-responsive to rituximab-based therapy over time.

If approved to treat FL, BiovaxID will face competition
from the then current standard of care recognized to treat FL. Today, the standard of care to treat FL generally includes therapies that contain rituximab. Penetrating a market and achieving usage by physicians and patients in the face of an
established standard of care is anticipated to represent a significant challenge.

If BiovaxID is approved for treatment
of MCL, it will be required to compete with other approved and/or development therapies for the treatment of MCL. There are currently no FDA-approved therapies for the first line treatment of MCL and the only approved therapy, bortezomib (Velcade®) is indicated for patients in relapse.

PATENTS, TRADEMARKS AND PROTECTION OF PROPRIETARY TECHNOLOGY

We own several patents
covering various aspects of our hollow-fiber perfusion process, instruments and proprietary cell culturing methods. Our patents also cover aspects of our therapeutic vaccine production process. We plan to continue pursuing patent and other
proprietary protection for our cancer vaccine technology and instrumentation. Currently, we have four (4) issued U.S. patents. Additionally, we have filed several patent applications that are pending. The expiration dates of our presently
issued U.S. patents range from October 2011 to November 2017. A list of our active U.S. patents and published U.S. and foreign patent applications are as follows:



|           |  |                                                            |  |                        |                             |  |                 |  |               | 
|---------- |  | ---------------------------------------------------------- |  | ---------------------- | --------------------------- |  | --------------- |  | ------------- | 
|Patent No. |  | Title and Inventor(s)                                      |  | Filing Date/Issue Date |                             |  | Expiration Date | 
|           |  |                                                            | 
|5,330,915  |  | PRESSURE CONTROL SYSTEM FOR A BIOREACTOR by John R. Wilson |  |                        | Oct. 18, 1991/Jul. 19, 1994 |  |                 |  | Oct. 18, 2011 | 
|           |  |                                                            | 
|5,541,105  |  | METHOD OF CULTURING LEUKOCYTES by Georgiann B. Melink      |  |                        | Apr. 26, 1994/Jul. 30, 1996 |  |                 |  | July 30, 2013 | 
|           |  |                                                            | 
|5,998,184  |  | BASKET-TYPE BIOREACTOR by Yuan Shi                         |  |                        | Oct. 8, 1997/Dec. 7, 1999   |  |                 |  | Oct. 8, 2017  | 
|           |  |                                                            | 
|6,001,585  |  | MICRO HOLLOW FIBER BIOREACTOR by Michael J. Gramer         |  |                        | Nov. 14, 1997/Dec 14, 1999  |  |                 |  | Nov. 14, 2017 | 



21



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|                            |  |                                                                                                                                                   |  |                             
|--------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------
|Application Publication No. |  | Title and Inventor(s)                                                                                                                             |  | Filing Date/Publication Date
|US 2009/0215022             |  | EXTRA-CAPILLARY FLUID CYCLING SYSTEM AND METHOD FOR A CELL CULTURE DEVICE by Darrell P. Page et al.                                               |  | Nov. 20, 2008/Aug. 27, 2009 
|                            |  |                                                                                                                                                  
|US 2009/0269841             |  | METHOD AND SYSTEM FOR THE PRODUCTION OF CELLS AND CELL PRODUCTS AND APPLICATIONS THEREOF by Robert J. Wojciechowski et al.                        |  | Nov. 20, 2008/Oct. 29, 2009 
|                            |  |                                                                                                                                                  
|EP 2027247                  |  | EXTRA-CAPILLARY FLUID CYCLING SYSTEM AND METHOD FOR A CELL CULTURE DEVICE by Darrell P. Page et al.                                               |  | May 21, 2007/Feb. 25, 2009  
|                            |  |                                                                                                                                                  
|EP 2029722                  |  | METHOD AND SYSTEM FOR THE PRODUCTION OF CELLS AND CELL PRODUCTS AND APPLICATIONS THEREOF by Robert J. Wojciechowski et al.                        |  | May 21, 2007/Mar. 4, 2009   
|                            |  |                                                                                                                                                  
|WO 2010/042644              |  | METHODS FOR INDUCING A SUSTAINED IMMUNE RESPONSE AGAINST A B-CELL IDIOTYPE USING AUTOLOGOUS ANTI-IDIOTYPIC VACCINES by Angelos M. Stergiou et al. |  | Oct. 7, 2009/Apr. 15, 2010  
|                            |  |                                                                                                                                                  
|WO 2010/048417              |  | PERFUSION BIOREACTORS, CELL CULTURE SYSTEMS, AND METHODS FOR PRODUCTION OF CELLS AND CELL PRODUCTS by Mark Hirschel et al.                        |  | Oct. 22, 2009/Apr. 29, 2010 

We have
recently filed a number of provisional patent applications asserting claims largely based on or related to various aspects of our analysis of clinical benefit based on isotype.

We also possess licensed intellectual property used in the development and manufacture of the BiovaxID vaccine. The BiovaxID vaccine is manufactured with a proprietary cell line, which we have
licensed on a world-wide exclusive basis from Stanford University. This is significant, because we believe that the use of any cell line other than our exclusively licensed cell line, in the production of a similar idiotype vaccine, would
require filing a separate IND application and undergoing clinical testing evaluation by the FDA.

Additionally, we
consider trademarks to be important to our business. We have established trademarks covering various aspects of our hollow-fiber perfusion process, instruments and proprietary cell culturing methods. We have registered the trademark BiovaxID®in connection with our therapeutic cancer vaccine. We plan to continue aggressively pursuing trademark and other
proprietary protection for our therapeutic vaccine technology and instrumentation, including seeking protection of our trademarks internationally.

GOVERNMENT REGULATION

The FDA has extensive regulatory authority over
biopharmaceutical products (drugs and diagnostic products produced from biologic processes). The principal FDA regulations that pertain to our cell production activity include, but are not limited to 21CFR Parts 600 and 610  General Biological
Products and Standards; 21 CFR Parts 210 and 211  current Good Manufacturing Practices for Finished Pharmaceuticals; 21 CFR Part 820  Quality System Regulations (medical devices); and 21 CFR Part 58  Good Laboratory Practice for
Non-Clinical Laboratory Studies. FDAs guidelines include controls over procedures and systems related to the production of mammalian proteins and quality control testing of any new biological drug or product intended for use in humans
(including, to a somewhat lesser degree, in vivo biodiagnostic products). FDA guidelines are intended to assure that the biological drug or product meets the requirements through rigorous testing with respect to safety, efficacy, and meet the purity
characteristics for identity and strength. FDA approvals for the use of new biological drugs or products (that can never be assured) require several rounds of extensive preclinical testing and clinical investigations conducted by the sponsoring
pharmaceutical company prior to sale and use of the product. At each stage, the approvals granted by the FDA include the manufacturing process utilized to produce the product. Accordingly, our cell culture systems used for the production of
therapeutic or biotherapeutic products (biological drug or product) are subject to significant regulation by the FDA under the Federal Food, Drug and Cosmetic Act, as amended (the FD&C Act).



22



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Our cell culture systems used to produce cells for diagnostic uses are regulated under the FD&C Act as
Class I medical devices. Medical devices are classified by the FDA into three classes (Class I, Class II and Class III) based upon the potential risk to the consumer posed by the medical device (Class I devices pose the least amount of risk, while
Class III devices and new devices are presumed to inherently pose the greatest amount of risk). As Class I devices, our systems must be manufactured in accordance with Good Manufacturing Practices guidelines. Sales of such systems to
customers using them to manufacture materials for clinical studies and licensure do not require prior FDA approval.

The process of complying
with FDA guidelines and obtaining approvals from the FDA of applications to market biopharmaceutical drugs and products is costly, time consuming and subject to unanticipated delays. There is no assurance that our customers will be able to obtain
FDA approval for biological drugs and products produced with our systems, and failure to receive such approvals may adversely affect the demand for our services.

Under the FD&C Act, our customers must establish and validate Standard Operating Procedures (SOPs) utilizing our cell culture technologies in their Drug Master Files. We provide assistance in
operational, validation, calibration and preventive maintenance SOPs to customers, as needed, to support their product development and commercialization processes. For example, we will typically provide existing and prospective customers who are
utilizing our contract production services or constructing production facilities based on our cell culture technologies with information to enable such customers to comply with the FDAs guidelines required for facility layout and design. This
information may be provided either in a drug/biologic Master File that we give permission to customers to cross reference in their submission to the FDA, or provided to customers to include in their FDA submissions.

As we currently do business in a significant number of countries, in addition to the requirements of the FDA, we are subject to the regulations of other
countries and governmental agencies which apply to our goods and services when sold in their jurisdiction.

We are subject to various
regulations regarding handling and disposal of potentially hazardous materials, wastes and chemicals such as cells and their secreted waste products, including those enforced by the Environmental Protection Agency and various state and local
agencies.

INSURANCE

We may be exposed to potential product liability claims by users of our products. We presently maintain product liability insurance coverage, in
connection with our systems and other products and services, in amounts which we believe to be adequate and on acceptable terms.

Although, we
believe that our current level of coverage is adequate to protect our business from foreseeable product liability and clinical trial claims, we may seek to increase our insurance coverage in the future in the event that we significantly increase our
level of contract production services. There can be no assurance; however, that we will be able to maintain our existing coverage or obtain additional coverage on acceptable terms, or that such insurance will provide adequate coverage against all
potential claims to which we may be exposed. A successful partially or completely uninsured claim against us could have a material adverse effect on our operations. Our cell culture production services may expose us to potential risk of liability.
We seek to obtain agreements from contract production customers to mitigate such potential liability and to indemnify us under certain circumstances. There can be no assurance, however, that we will be successful in obtaining such agreements or that
such indemnification, if obtained, will adequately protect us against potential claims.

The terms and conditions of our sales and instruments
include provisions which are intended to limit our liability for indirect, special, incidental or consequential damages.



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EXECUTIVE OFFICERS OF THE REGISTRANT



|                                |  |     |  |                                                     
|------------------------------- |  | --- |  | ----------------------------------------------------
|Name                            |  | Age |  | Position                                            
|Francis E. ODonnell, Jr., M.D. |  | 60  |  | Chief Executive Officer (CEO), Chairman & Director
|                                |  |    
|Samuel S. Duffey, Esq.          |  | 65  |  | President and General Counsel                       
|                                |  |    
|Alan M. Pearce                  |  | 61  |  | Chief Financial Officer (CFO)                     

Francis E.
ODonnell, Jr., M.D.was appointed our Chief Executive Officer and Chairman in February 2009. Since 2003, Dr. ODonnell had been a Director and Vice-Chairman (non-executive) of our Company. Dr. ODonnell is the Chairman,
CEO and a director of Accentia, our parent corporation since its inception in 2002. He is also the Chairman and a Director of BioDelivery Sciences International, Inc. (BDSI). Dr. ODonnell was the founder and for more than the
last five years has served as manager of The Hopkins Capital Group (HCG), an affiliation of limited liability companies which engage in business development of disruptive healthcare technologies. Included in companies in which HCG
entities are significant stockholders include Accentia and BDSI. Dr. ODonnell is a 1975, summa cum laude graduate of the Johns Hopkins School of Medicine. He received his specialty training at the Wilmer Ophthalmological Institute, Johns
Hopkins Hospital. He is the former Professor and Chairman, Department of Ophthalmology, St Louis University School of Medicine. Dr. ODonnell has published over 30 peer-reviewed scientific articles and he has been awarded over 34 U.S.
Patents. He is the recipient of the 2000 Jules Stein Award from Retinitis Pigmentosa International. He is a Trustee for St. Louis University. We believe that Dr. ODonnells experience and skills make him a qualified and valuable
member of our Board of Directors.

Samuel S. Duffey, Esq.was appointed our President and General Counsel in February 2009.
Mr. Duffey has been General Counsel of Accentia since April 2003 and on December 2, 2008 was also appointed President of Accentia. Prior to that, Mr. Duffey practiced business law with Duffey and Dolan P.A. beginning in 1992. From
February 2000 to September 2003, Mr. Duffey served as the non-executive chairman and as a member of the Board of Directors of Invisa, Inc., a small publicly held safety company, and from October 2001 to May 2004, Mr. Duffey also served as
the non-executive chairman and as a member of the Board of Directors of FlashPoint International, Inc., a publicly held automotive parts company which is currently named Navitrak International Corporation. Mr. Duffey received his B.A. and
J.D. degrees from Drake University. We believe that Mr. Duffeys experience and skills make him a qualified and valuable member of our management team. Mr. Duffey has been instrumental in facilitating our capital raises and was
instrumental in managing our Company through the very complex Chapter 11 process

Alan M. Pearcehas been our CFO since
December 2007. Mr. Pearce has served as a director and CFO of Accentia since August 2004. Prior to serving as Accentias CFO, Mr. Pearce served as Senior Vice President, Financial Services for McKesson Corporation, a large
publicly traded healthcare company, from April 1999 to March 2004. He also previously served as a director and a member of the finance committee of XL Insurance Company. From September 2002 to September 2005, Mr. Pearce served as a
director of BioDelivery Sciences International, Inc. Mr. Pearce is a graduate of Georgia Tech, where he earned a B.S. degree in Industrial Management, and the University of Texas, where he earned an MBA degree in finance. We believe that
Mr. Pearces experience and background make him a qualified and valuable member of our management team. Specifically, Mr. Pearces background in pharmaceuticals and finance make him a valuable resource.



24



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EMPLOYEES

As of September 30, 2010, we had 28 employees (four of which are part-time employees), including five in research and development, six in manufacturing and quality control, seven in contract
production services, one in marketing and sales, four in management, and five in finance, accounting, administrative, and clerical positions. We supplement our staff with temporary employees and consultants as required. We believe that our relations
with employees are satisfactory. None of our employees is covered by a collective bargaining agreement.

Our ability to continue to develop
and improve marketable products and to establish and maintain our competitive position in light of technological developments will depend, in part, upon our ability to attract and retain qualified technical personnel.



|ITEM 1A. | RISK FACTORS
|-------- | ------------

Risk Factors

Statements in this Annual Report on Form 10-K not strictly historical in nature are forward-looking statements. These statements may
include, but are not limited to, statements about: the timing of the commencement, enrollment, and completion of our clinical trials for our product candidates; the progress or success of our product development programs; the status of regulatory
approvals for our product candidates; the timing of product launches; our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; and our estimates for future
performance, anticipated operating losses, future revenues, capital requirements, and our needs for additional financing. In some cases, you can identify forward-looking statements by terms such as anticipates, believes,
could, estimates, expects, intends, may, plans, potential, predicts, projects, should, will, would,
goal, or other variations of these terms (including their use in the negative) or by discussions of strategies, plans or intentions. These statements are only predictions based on current information and expectations and involve a number
of risks and uncertainties. The underlying information and expectations are likely to change over time.

Factors that could cause actual
results to differ materially from what is expressed or forecasted in our forward-looking statements include, but are not limited to, the following:

We have a history of operating losses and expect to incur further losses.

We have never been profitable and we have incurred significant losses and cash flow deficits. For the fiscal years ended September 30, 2010 and 2009, we reported net losses of $8.2 million and $14.7
million, respectively and negative cash flow from operating activities of $0.8 million and $1.9 million, respectively. As of September 30, 2010, we have an aggregate accumulated deficit of $149 million. We anticipate that operations may
continue to show losses and negative cash flow, particularly with the anticipated expenses associated with the interim analysis for BiovaxID®. There is no assurance that the additional required funds can be obtained on terms acceptable or favorable to us, if at all. The audit opinion issued by our
independent auditors with respect to our financial statements for the 2010 fiscal year indicated that there is substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty. We expect to receive a similar audit opinion from our independent auditors with respect to our financial statements for the 2011 fiscal year.

Our ability to achieve and sustain profitability is to a large degree dependent on obtaining regulatory approval to market BiovaxID. We may not be successful in our efforts to develop and commercialize
BiovaxID. Moreover, our operations may not be profitable even if BiovaxID is commercialized.



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Our independent registered public accountants have expressed substantial doubt as to our
ability to continue as a going concern.

As of September 30, 2010, we had a working capital deficit
of $79.6 million, including those liabilities subject to compromise through our Chapter 11 proceedings. We expect to continue to incur substantial net operating losses at least until BiovaxID® receives marketing approval, which may never occur, and market acceptance. Continued operating losses would impair our ability to continue operations. We may not be
able to generate sufficient product revenue to become profitable on a sustained basis, or at all. We have operating and liquidity concerns due to our significant net losses and negative cash flows from operations. As a result of these and other
factors, our independent registered public accountants, Cherry, Bekaert and Holland, LLP, have indicated, in their report to our 2010 financial statements, that there is substantial doubt about our ability to continue as a going concern. Our ability
to continue as a going concern is dependent upon generating sufficient cash flow to conduct operations and obtaining additional capital and financing. Any financing activity is likely to result in significant dilution to current shareholders.

Our financial statements have been prepared assuming we will continue as a going concern and do not include any adjustments that might result
from the outcome of this uncertainty. We incurred net losses of $8.2 million and $14.7 million in 2010 and 2009, respectively. We have also experienced negative cash flows from operations for the past three fiscal years. In addition, our projected
cash receipts from operations for fiscal 2011 are anticipated to be insufficient to finance operations without funding from other sources. Historically, we have had difficulty in meeting our cash requirements. We have, in part, met our cash
requirements through proceeds from our cell culture and instrument manufacturing activities, various financing transactions, the use of cash on hand, short-term borrowings (primarily from affiliates), and by trade-vendor credit. There can be no
assurances that management will obtain the necessary funding, reduce the level of historical losses and achieve successful commercialization of the vaccine. Continuation as a going concern is ultimately dependent upon achieving profitable operations
and positive operating cash flows sufficient to pay all obligations as they come due.

We will need substantial additional financing but
our access to capital funding is uncertain.

On October 19, 2010, as part of our then pending reorganization, we closed a $7.0
million financing which provides the funds that were required for us to exit our Chapter 11 proceeding and also provide our current working capital. During prior years, we met our cash requirements through the use of cash on hand, the sale of common
stock, and short-term loans from affiliates. We have outstanding indebtedness which as of November 17, 2010, the effective date of our Bankruptcy Plan, aggregates to approximately $40.0 million. Our debt is secured by our assets and may make
procuring additional debt or equity financing more difficult or uncertain. Furthermore, our creditors may be able to foreclose on our assets if we are unable to meet our obligations as they become due. In addition, we are obligated to pay royalties
which will reduce any future potential profit.

Our ability to continue present operations is dependent upon our ability to obtain significant
external funding. Additional sources of funding have not been established; however, we anticipate that in the future we will seek additional financing from a number of sources , including, but not limited to, the sale of equity or debt securities,
strategic collaborations, recognized research funding programs and domestic and/or foreign licensing of our vaccine and our AutovaxID equipment line. There can be no assurance that we will be successful in securing needed financing at
acceptable terms, if at all. If adequate funds are not available, or if we determine it to otherwise be in our best interests, we may consider additional strategic financing options, including sales of assets or business units that are non-essential
to the ongoing development or future commercialization of BiovaxID and AutovaxID, or we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or curtail some of our commercialization
efforts.

There is a high risk of failure because we are trying to develop a new anti-cancer vaccine.

We are pursuing a novel patient specific cancer therapy. Commercialization requires governmental approval, establishment of cost effective production
capability, distribution capability and market acceptance. Our vaccine is subject to all of the risks of failure that are inherent in developing products based on new technologies and the risks associated with drug development generally. These risks
include the possibility that:



| |  |  | our technology or the product based on our technology will be ineffective or toxic, or otherwise fail to receive necessary regulatory approvals;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | future products based on our technology will be difficult to manufacture on a large scale or at all or will prove to be uneconomical to produce or
market;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | proprietary rights of third parties will prevent us or our collaborators from marketing products;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | third parties will market superior or equivalent products;
| | - |  | ----------------------------------------------------------



26



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| |  |  | technology advances which render our technology or product outdate or less attractive; and
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | the products will not attain market acceptance.
| | - |  | -----------------------------------------------

Drug development, including clinical trials required for governmental approval, is expensive and new drugs have a high risk of failure. Based on results at any stage of development, including later-stage
clinical trials and our inability to bear the related costs associated with product development or product production or marketing, we may decide to discontinue development or clinical trial at any time.

Preparing for and processing the Biologics License Application (BLA) for BiovaxID will be expensive and time consuming. The FDA response to any
application is uncertain and the FDA may reject or deny the application, or may impose additional requirements. Such additional requirements may be expensive and/or time consuming, and meeting these additional requirements may be difficult or
impossible.

Our clinical trials for BiovaxID® may not be regarded by the FDA or other regulatory authorities as conclusive, and we may decide, or regulators may require us, to conduct additional clinical testing
for this product candidate or cease our trials.

In April 2008, we closed our only Phase 3 clinical trial of
BiovaxID® with 234 patients enrolled instead of the 563 patients anticipated to be enrolled pursuant to our
clinical trial protocol. We announced clinical results based upon a relatively smaller number of patients compared to that planned. Additionally, our only Phase 3 clinical trial randomized patients early into the trial, after the complete remission
from chemotherapy was ascertained. Because of failure to maintain complete remission, which was a protocol requirement, about a third of the randomized patients were not vaccinated. We do not know whether the sample size of our Phase 3 clinical
trial or the significant clinical benefit demonstrated only in patients who received at least one dose of BiovaxID or control, will be acceptable to the FDA to demonstrate efficacy and safety required to obtain marketing approval.

While the difference in median DFS between patients treated with BiovaxID and patients treated with control in our Phase 3 clinical trial was
statistically significant (p value= 0.045), this level of statistical significance did not reach the protocol projected value of 0.01 or better. This analysis of treated patients excludes patients who were randomized but not treated and therefore
constitutes a modified intent to treat analysis. An analysis of the intent to treat population, which consists of all randomized patients including those not treated with BiovaxID or control, did not report statistical significance. We do not know
the weight the FDA and the other regulatory agencies will give to our modified intent to treat population analysis as compared to the intent to treat population analysis.

The high statistical significance of the clinical benefit observed in patients whose tumor and vaccine had an IgM isotype (p= 0.001) and the lack of clinical benefit in patients whose tumor and vaccine
had an IgG isotype bear unequivocal scientific merit. However, we do not know how these results will affect the FDAs overall review process.

While not universal, it is not uncommon for the FDA to require a second confirming Phase 3 clinical trial, particularly when high statistical significance has not been demonstrated. We do not
know whether our existing or future clinical trials will be considered by the FDA and/or other regulatory authorities to sufficiently demonstrate safety and efficacy to result in marketing approval without the requirement of additional clinical
trials. Because our clinical trials for BiovaxID may be considered to be inconclusive, we may decide, or regulators may require us, to conduct additional clinical trials for this product candidate or cease our clinical trials. If such additional
trials are required, they are likely to be highly expensive and time consuming.

The FDA may not permit us to file or process our planned
Biologics Licensing Application (BLA) seeking marketing approval. Additionally, we may be permitted to file a BLA but the FDA may ultimately reject or deny marketing approval. The FDA may impose requirements as part of the BLA process, which may
frustrate, delay, or render impossible marketing approval or commercialization. In any such event, we might experience significant additional costs and delay. We may also be required to undertake additional clinical testing if we change or expand
the indications for our product candidate.

We may experience difficulties in manufacturing BiovaxID® or in obtaining approval of the change in manufacturing site or process from the FDA or international regulatory
agencies, which could prevent or delay us in the commercialization of BiovaxID.

Manufacturing BiovaxID is complex and requires
coordination internally among our employees, as well as, externally with physicians, hospitals and third-party suppliers and carriers. This process involves several risks that may lead to failures or delays in manufacturing BiovaxID, including:



| |  |  | difficulties in obtaining adequate tumor samples from physicians;
| | - |  | -----------------------------------------------------------------



27



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| |  |  | difficulties in timely shipping of tumor samples to us or in the shipping of BiovaxID to the treating physicians due to errors by third-party carriers,
transportation restrictions, or other reasons;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | destruction of, or damage to, tumor samples or BiovaxID during the shipping process due to the improper handling by third-party carriers, hospitals,
physicians or us;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | destruction of, or damage to, tumor samples or BiovaxID during storage at our facility; and
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | difficulties in ensuring the availability, quality, and consistency of materials provided by our suppliers.
| | - |  | -----------------------------------------------------------------------------------------------------------

If we experience any difficulties in manufacturing BiovaxID, the commercialization of BiovaxID may be delayed, resulting in delays in generating revenue
and increased costs.

In addition, because we have relocated the site of the manufacturing process to our Minneapolis facility following the
clinical trials we are required to demonstrate to the FDA that the product developed under new conditions is comparable to the product that was the subject of earlier clinical testing. This requirement applies to the relocation at the Minneapolis
facility as well as future expansions of the manufacturing facilities, such as the possible expansion to additional facilities that may be required for successful regulatory approvals or commercialization of the vaccine, resulting in increased
costs. There is also a requirement for validation of the manufacturing process for BiovaxID utilizing our AutovaxID instrument.

Comparability
demonstration requires evidence that the product is consistent with that produced for the clinical trial and continues to be safe, pure, and potent. This demonstration is based on various methods, as recommended in the FDA and ICH regulatory
guidelines. If we demonstrate CMC comparability, additional clinical safety and/or efficacy trials with the new product may not be needed. The FDA will determine if comparability data are sufficient to demonstrate that additional clinical studies
are unnecessary. If the FDA requires additional clinical safety or efficacy trials to demonstrate comparability, our clinical trials or FDA approval of BiovaxID may be delayed, which would cause delays in generating revenue and increased costs.

Because the product development and the regulatory approval process for BiovaxID® will be expensive and its outcome is uncertain, we must incur substantial expenses that might not result in any
viable product, and the process could take longer than expected.

Regulatory approval of a pharmaceutical product is a lengthy,
time-consuming and expensive process. Before obtaining regulatory approvals for the commercial sale of our vaccine, we must demonstrate to the satisfaction of the applicable regulatory agencies that BiovaxID is safe and effective for use in humans.
This is expected to result in substantial expense and require significant time.

Historically, the results from pre-clinical testing and early
clinical trials often have not been predictive of results obtained in later clinical trials. A number of new drugs have shown promising results in clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain
necessary regulatory approvals. Data obtained from pre-clinical and clinical activities are susceptible to varying interpretations, which could delay, limit or prevent regulatory approval. In addition, regulatory delays or rejections could be
encountered as a result of many factors, including changes in regulatory policy during the period of product development.

Clinical trials
conducted by us or by third parties on our behalf might not be accepted by the FDA or other regulatory agencies as being a sufficient demonstration of safety, efficacy or statistical significance to support the acceptance, processing or approval of
our applications to obtain the requisite regulatory approval to market for our products. In such an event, regulatory authorities might require us to conduct additional clinical trials which would be both expensive and time consuming or in the
alternative might not permit us to undertake any additional clinical trials for our product candidates.

We have completed a single Phase 3
clinical trial for BiovaxID and the FDA frequently requires a second confirming Phase 3 trial as a condition for approval. Our drug candidate is considered highly personalized because it is manufactured for each patient using material obtained by
biopsy from that patient. Personalized drugs are considered unique which may create regulatory uncertainty. We do not have an understanding or agreement with the FDA or international regulatory agencies as to the need for a second confirming trial,
the adequacy of our personalized manufacturing process, or the sufficiency, design or size of our clinical trial. Further, we do not know the ultimate impact on the regulatory process which may result from the early stoppage of our clinical trial
before all planned patients were enrolled, the appropriateness of analyzing only patients treated with our drug candidate or control which is considered a modified intent to treat population, the impact of analyzing sub-populations of the treated
patients such as patients based on the characteristics of the patients tumor isotype or any other factor of our trial. Accordingly, we do not know if the FDA will require additional clinical trials, either prior to or in conjunction with
approval of BiovaxID. Our initial Phase 3 clinical trial spanned approximately eight years and the completion of any required additional clinical trials or potentially a different trial design would likely take a significant number of years and
funding which we currently do not have.



28



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The length of time for a clinical trial generally varies substantially according to the type, complexity, novelty and intended use of the product candidate. Although for planning purposes we
forecast the commencement and completion of clinical development, and have included many of those forecasts in reports filed with the Securities and Exchange Commission and in other public disclosures, the actual timing of these
events can vary dramatically. For example, we have experienced delays in our clinical development program in the past as a result of slower than anticipated patient enrollment and as a result of our reorganization under Chapter 11 of the Bankruptcy
Code. Additional delays may occur. Our rate of completion of development efforts could be delayed by many factors. The timing of meetings with regulatory agencies; the requirements, cost and time necessary to prepare for regulatory meetings; and the
time, expense and ability to satisfy requests or requirements made by regulatory agencies is uncertain and may vary depending on numerous circumstances and as a result of the analysis of available data. In addition, we may need to delay or suspend
this regulatory process if we are unable to obtain additional funding when needed. Moreover, we have limited experience in vaccine development and the regulatory process.

Because we have limited experience, we might be unsuccessful in our efforts to develop, obtain approval for, commercially produce or successfully market BiovaxID®.

The extent to which we develop and commercialize BiovaxID will depend on our ability to:



| |  |  | complete required clinical trials;
| | - |  | ----------------------------------



| |  |  | obtain necessary regulatory approvals;
| | - |  | --------------------------------------



| |  |  | Establish, or contract for, required manufacturing capacity; and
| | - |  | ----------------------------------------------------------------



| |  |  | Establish, or contract for, sales and marketing resources.
| | - |  | ----------------------------------------------------------

We have limited experience with these activities and might not be successful in the trials, product development or commercialization.

We might be unable to manufacture our vaccine on a commercial scale.

Assuming FDA approval of BiovaxID®, manufacturing, supply and
quality control problems could arise as we, either alone or with subcontractors, attempt to scale-up manufacturing capabilities for products under development. We might be unable to scale-up in a timely manner or at a commercially reasonable cost.
Problems could lead to delays or pose a threat to the ultimate commercialization of our product and cause us to fail.

Manufacturing
facilities, and those of any future contract manufacturers, are or will be subject to periodic regulatory inspections by the FDA and other federal and state regulatory agencies and these facilities are subject to Quality System Regulation (QSR),
requirements of the FDA. If we or our third-party manufacturers fail to maintain facilities in accordance with QSR regulations, other international quality standards, or other regulatory requirements, then the manufacture process could be suspended
or terminated, which would harm us.

Competing technologies may adversely affect us.

Rituximab is currently part of the standard of care for the treatment of FL. We believe that rituximab containing therapies are well accepted by both
physicians and patients and may constitute a significant competitive challenge for our drug candidate if approved.

Biotechnology has experienced, and is expected to continue to experience, rapid and significant change. The use of monoclonal
antibodies as initial or induction therapy, and increasingly for maintenance therapy, has become well-established and generally accepted. Products that are well-established or accepted, including monoclonal antibodies such as Rituxan®, including its anticipated pending expanded approval as a NHL maintenance therapy, may constitute significant
barriers to market penetration and regulatory approval which may be expensive, difficult or even impossible to overcome. New developments in biotechnological processes are expected to continue at a rapid pace in both industry and academia, and these
developments are likely to result in commercial applications competitive with our proposed vaccine. We expect to encounter intense competition from a number of companies that offer products in our targeted application area. We anticipate that our
competitors in these areas will consist of both well-established and development-stage companies and will include:



| |  |  | healthcare companies;
| | - |  | ---------------------



| |  |  | chemical and biotechnology companies;
| | - |  | -------------------------------------



| |  |  | biopharmaceutical companies; and
| | - |  | --------------------------------



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| |  |  | companies developing drug discovery technologies.
| | - |  | -------------------------------------------------

The cell culture production and technology business is also intensely competitive and is in many areas dominated by large service providers. In many instances, our competitors have substantially greater
financial, technical, research and other resources and larger, more established marketing, sales, distribution and service organizations than us. Moreover, these competitors may offer broader product lines and have greater name recognition than us
and may offer discounts as a competitive tactic.

Competitors might succeed in developing, marketing, or obtaining FDA approval for
technologies, products, or services that are more effective or commercially attractive than those we offer or are developing, or that render our products or services obsolete. As these companies develop their technologies, they might develop
proprietary positions, which might prevent us from successfully commercializing products. Also, we might not have the financial resources, technical expertise or marketing, distribution or support capabilities to compete successfully in the future.

The ongoing detailed analysis being performed in our clinical trials for BiovaxID® may produce negative or inconclusive results and may delay our efforts to obtain approval for this product.

We are currently engaged in performing additional detailed analyses of the safety and efficacy data generated by our Phase 3 clinical
trial of BiovaxID in FL and our Phase 2 clinical trial in MCL. We cannot predict with certainty the results of the analyses, and if the results are negative or inconclusive we may decide, or regulators may require us, to conduct additional clinical
and/or preclinical testing for this product candidate or cease our clinical trials. If this happens, we may not be able to obtain approval for BiovaxID for FL, MCL or both, or the anticipated time to market for this product may be substantially
delayed, and we may also experience significant additional development costs.

The clinical trials for BiovaxID® have demonstrated that certain side effects may be associated with this treatment and ongoing or future clinical
trials may reveal additional unexpected or unanticipated side effects.

We cannot guarantee that our current or future trials for
BiovaxID will not demonstrate additional adverse side effects that may delay or even preclude regulatory approval. Even if BiovaxID receives regulatory approval, if we or others identify previously unknown side effects following approval, regulatory
approval could be withdrawn and sales of BiovaxID could be significantly reduced.

Inability to obtain regulatory approval for our
manufacturing facility or to manufacture on a commercial scale may delay or disrupt our commercialization efforts.

Before we can obtain FDA approval for any new drug, the manufacturing facility for the drug must be inspected and approved by the
FDA. We plan to establish a dedicated BiovaxID manufacturing facility within our existing Minnesota leasehold space. Therefore, before we can obtain the FDA approval necessary to allow us to begin commercially manufacturing BiovaxID®, we must pass a pre-approval inspection of our BiovaxID manufacturing facility by the FDA. In order to obtain
approval, we will need to ensure that all of our processes, methods, and equipment are compliant with the current Good Manufacturing Practices, or cGMP, and perform extensive audits of vendors, contract laboratories, and suppliers. The cGMP
requirements govern quality control of the manufacturing process and documentation policies and procedures. We have undertaken steps towards achieving compliance with these regulatory requirements required for commercialization. In complying with
cGMP, we will be obligated to expend time, money, and effort in production, record keeping, and quality control to assure that the product meets applicable specifications and other requirements. If we fail to comply with these requirements, we could
experience product liability claims from patients receiving our vaccines, we might be subject to possible regulatory action and we may be limited in the jurisdictions in which we are permitted to sell BiovaxID.

In order to commercialize BiovaxID, we will need to develop and qualify one or more additional manufacturing facilities. Preparing a facility for
commercial manufacturing may involve unanticipated delays, and the costs of complying with state, local, and FDA regulations may be higher than we anticipate. In addition, any material changes we make to the manufacturing process may require
approval by the FDA and state or foreign regulatory authorities. Obtaining these approvals is a lengthy, involved process, and we may experience delays. Such delays could increase costs and adversely affect our business. In general, the FDA views
cGMP standards as being more rigorously applied as products move forward in development and commercialization. In seeking to comply with these standards, we may encounter problems with, among other things, controlling costs and quality control and
assurance. It may be difficult to maintain compliance with cGMP standards as the development and commercialization of BiovaxID progresses, if it progresses.



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In addition, because we relocated the site of the manufacturing process for BiovaxID to our Minneapolis
facility following the clinical trials we are required to demonstrate to the FDA that the product that will be manufactured under the new conditions is comparable to the product that was the subject of prior clinical testing. This requirement
applies to the relocation at the Minneapolis facility as well as future expansions of the manufacturing facilities, such as the possible expansion to additional facilities that may be required for successful regulatory approvals or commercialization
of the vaccine, resulting in increased costs. There is also a requirement for validation of the manufacturing process for BiovaxID utilizing our AutovaxID instrument.

We and our products are subject to comprehensive regulation by the FDA in the U.S. and by comparable authorities in other countries. These national agencies and other federal, state and local entities
regulate, among other things, the preclinical and clinical testing, safety, approval, manufacture, labeling, marketing, export, storage, record keeping, advertising and promotion of our products. If we violate regulatory requirements at any stage,
whether before or after marketing approval is obtained, we may be subject to forced removal of a product from the market, product seizure, civil and criminal penalties and other adverse consequences.

We are not able to prevent third parties, including potential competitors, from developing and selling an anti-cancer vaccine
for NHL having the same composition of matter as BiovaxID®.

Our BiovaxID vaccine is based on research and studies conducted at Stanford and the NCI. As a result of published studies, the concept of the vaccine and
its composition are in the public domain and cannot be patented by us, the NCI, or any other party. We have filed a PCT patent application on the type of cell media that is used to grow cell cultures in the production of our vaccine, and we have
filed a PCT patent application on certain features of the integrated production and purification system used to produce and purify the vaccine in an automated closed system. We have obtained and exclusive world-wide license for use of a proprietary
cell line which we use to manufacture BiovaxID, but we cannot be certain that we will be successful in preventing others from utilizing this cell line or will be able to maintain and enforce the exclusive license in all jurisdictions. We cannot
prevent other companies using different manufacturing processes from developing active immunotherapies that directly compete with BiovaxID. For example, Bayer Innovation GmbH has commenced a Phase 1 clinical trial for its autologous anti-idiotype
lymphoma vaccine produced in a tobacco plant cell line.

Several companies, such as Genentech, Inc., Corixa Corporation,
Biogen Idec, and Immunomedics, Inc., are involved in the development of passive immunotherapies for NHL. These passive immunotherapies include Rituxan®, a monoclonal antibody, and
Zevalin® and Bexxar®, which are passive radioimmunotherapy products. Passive immunotherapies, particularly the monoclonal antibody Rituxan, are well accepted and established in the
treatment of NHL and as such will impact both regulatory considerations and market penetration.

We currently depend
on a sole-source supplier for KLH, a critical raw material used in the manufacture of BiovaxID®, and physicians
who administer BiovaxID depend on a sole-source supplier for GM-CSF, an immune system stimulant administered with BiovaxID.

We
currently depend on single source suppliers for critical raw materials used in BiovaxID and other components used in the manufacturing process and required for the administration of BiovaxID. In particular, manufacturing of BiovaxID requires keyhole
limpet hemocyanin, or KLH, a foreign carrier protein. We purchase KLH from BioSyn Arzneimittel GmbH, or BioSyn, a single source supplier. We have entered into a supply agreement with BioSyn, pursuant to which BioSyn has agreed to supply us with KLH.
The supply agreement has an initial term of three years and is renewable for indefinite additional terms of five (5) years each at our discretion, so long as we are not in default of our obligations pursuant to this agreement. Either party may
terminate the supply agreement earlier upon a breach that is not cured within 60 days or other events relating to insolvency or bankruptcy. Under this agreement, BioSyn is not contractually obligated to supply us with the amounts of KLH necessary
for commercialization. We have become aware of additional suppliers who now market KLH, but we have not yet established a relationship with these suppliers and have not performed testing to insure that the KLH supplied by them is suitable for use in
the BiovaxID production process.

When BiovaxID is administered, the administering physician uses a cytokine to enhance
the patients immune response, and this cytokine is administered concurrently with BiovaxID. The cytokine used by physicians for this purpose is Leukine® sargramostim, a commercially available recombinant human granulocyte-macrophage colony stimulating factor known as GM-CSF. This cytokine is a substance that is
purchased by the administering physician and is administered with an antigen to enhance or increase the immune response to that antigen. The physicians who administer BiovaxID will rely on Berlex Inc., or Berlex, as a supplier of GM-CSF, and these
physicians will generally not have the benefit of a long-term supply contract with Berlex. Currently, GM-CSF is not commercially available from other sources in the United States or Canada.



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Establishing additional or replacement suppliers for these materials or components may take a substantial
amount of time. In addition, we may have difficulty obtaining similar components from other suppliers that are acceptable to the FDA.

If we
have to switch to a replacement supplier, we may face additional regulatory delays and the manufacture and delivery of BiovaxID could be interrupted for an extended period of time, which may delay commercialization of BiovaxID. If, we are unable to
obtain adequate amounts of these components, we may be required to obtain regulatory clearance from the FDA to use different components that may not be as safe or as effective. As a result, regulatory approval of BiovaxID may be suspended or delayed
or may not be received at all. All these delays could cause delays in commercialization of BiovaxID, delays in our ability to generate revenue from BiovaxID, and increased costs.

Other than BioSyn and Berlex, we are not dependent on any sole-source suppliers.

The NCI is not precluded from working with other companies on developing products that are competitive with BiovaxID®.

Our BiovaxID vaccine is based on research and
studies conducted at Stanford and the NCI. The concept of producing a patient-specific anti-cancer vaccine through the hybridoma method from a patients own cancer cells has been discussed in a variety of publications over a period of many
years, and, accordingly, the general method and concept of such a vaccine is not eligible to be patented by us, the NCI, or any other party. Until November 2006, we were a party to a Cooperative Research and Development Agreement, or CRADA, with the
NCI for the development of a hybridoma-based patient-specific idiotypic vaccine for the treatment of indolent FL. We gave notice of termination of the CRADA in September 2006. Although the NCI transferred sponsorship of the IND for BiovaxID to us in
2004, and although there are certain confidentiality protections for information generated pursuant to the CRADA, the CRADA does not prevent the NCI from working with other companies on other hybridoma-based idiotypic vaccines for indolent FL or
other forms of cancer, and the NCI or its future partners may be able to utilize certain technology developed under our prior CRADA. If the NCI chooses to work with other companies in connection with the development of such a vaccine, such other
companies may also develop technology and know-how that may ultimately enable such companies to develop products that compete with BiovaxID.

Additionally, through their partnership with the NCI, these companies could develop immunotherapies for other forms of cancer that may serve as barriers
to any future products that we may develop for such indications.

The uncertainty of patent and proprietary technology protection and
our potential inability to license technology from third parties may adversely affect us.

Our success will depend in part on
obtaining and maintaining meaningful patent protection on our inventions, technologies and discoveries. The patent position of biotechnology and pharmaceutical firms is highly uncertain and involves many complex legal and technical issues. There is
no clear policy involving the breadth of claims allowed, or the degree of protection afforded, under patents in this area. Our ability to compete effectively will depend on our ability to develop and maintain proprietary aspects of our technology,
as well as to operate without infringing, or, if necessary, to obtain rights to, the proprietary rights of others. Our pending patent applications might not result in the issuance of patents. Our patent applications might not have priority over
others applications and, even if issued, our patents might not offer protection against competitors with similar technologies. Any patents issued to us might be challenged, invalidated or circumvented and the rights created thereunder may not
afford us a competitive advantage. Furthermore, patents that we own or license may not enable us to preclude competitors from commercializing drugs, and consequently may not provide us with any meaningful competitive advantage.

Our commercial success also depends in part on our neither infringing patents or proprietary rights of third parties nor breaching any licenses that we
have obtained from third parties permitting us to incorporate technology into our products. It is possible that we might infringe these patents or other patents or proprietary rights of third parties. In the future we might receive notices claiming
infringement from third parties. Any legal action against us or our collaborative partners claiming infringement and damages or seeking to enjoin commercial activities relating to our products and processes may require us or our collaborative
partners to alter our products, cease certain activities and/or obtain licenses in order to continue to manufacture or market the affected products and processes. In addition, these actions may subject us to potential liability for damages. We or
our collaborative partners might not prevail in an action, and any license required under a patent might not be made available on commercially acceptable terms, or at all.



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There are many U.S. and foreign patents and patent applications held by third parties in our areas of
interest, and we believe that there may be significant litigation in the industry regarding patent and other intellectual property rights. Potential future litigation could result in substantial costs and the diversion of managements efforts
regardless of the merits or result of the litigation. Additionally, from time to time we may engage in the defense and prosecution of interference proceedings before the U.S. Patent and Trademark Office, and related administrative proceedings that
can result in our patent position being limited or in substantial expense to us and significant diversion of effort by our technical and management personnel. In addition, laws of some foreign countries do not protect intellectual property to the
same extent as do laws in the U.S., which could subject us to additional difficulties in protecting our intellectual property in those countries.

We also rely on unpatented technology, trade secrets, technical know-how, confidential information and continuing inventions to develop and maintain our competitive position. Others might independently
develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology, and we may not be able to protect our rights to our trade secrets. We seek to protect our technology
and patents, in part, by confidentiality agreements with our employees and contractors. Our employees might breach their existing proprietary information, inventions and dispute resolution agreements. Accordingly, these agreements may not protect
our intellectual property, and our employees breaches of those agreements could have a material adverse effect on us.

Our
operating results may fluctuate widely between reporting periods.

Our operating results may vary significantly from quarter to
quarter or year to year, depending on factors such as timing of biopharmaceutical development and commercialization of products by our customers, the timing of increased research and development and sales and marketing expenditures, the timing and
size of contracts and whether we introduce to the market new products or processes. Consequently, revenues, profits or losses may vary significantly from quarter-to-quarter or year-to- year, and revenue, profits or losses in any period will not
necessarily be indicative of results in subsequent periods. These period-to-period fluctuations in financial results may have a significant impact on the market price, if any, of our securities.

Our contract cell production services are subject to the potential of product liability claims.

The contract production services for therapeutic products that we offer expose us to a potential risk of liability as the proteins or other substances
manufactured by us, at the request of and to the specifications of our customers, could potentially cause adverse effects. We generally obtain agreements from our contract production customers indemnifying and defending us from any potential
liability arising from such risk.

There can be no assurance, however, that we will be successful in obtaining such agreements in the future
or that such indemnification agreements will adequately protect us against potential claims relating to such contract production services. We may also be exposed to potential product liability claims by users of our products. We may seek to increase
our insurance coverage in the future in the event of any significant increases in our level of contract production services. There can be no assurance that we will be able to maintain our existing coverage or obtain additional coverage on
commercially reasonable terms, or at all, or that such insurance will provide adequate coverage against all potential claims to which we might be exposed. A successful partially or completely uninsured claim against us would have a material adverse
effect on our operations.

Our contract cell production business is subject to intense competition.

The contract cell production business is highly competitive. Customers can select other cell production facilities, other cell production methods and
other cell production instruments. We consider our business environment to be competitive. Many of our competitors are better established with greater capital resources. Historically, our cell production facilities, method and equipment have been
primarily used to produce relatively small batches, such as those used in research and development. While we are seeking broader acceptance of our cell production facilities, method and equipment for larger and commercial scale production, we may
not be successful in cost effectively penetrating these larger markets.

If we lose our key personnel or are unable to attract and
retain additional personnel, our efforts would be hindered and we might be unable to develop our own products or pursue collaborations.

Our success will depend on our ability to attract and retain key employees and scientific advisors. Competition among biotechnology and biopharmaceutical
companies, as well as, among other organizations and companies, academic institutions and government entities, for highly skilled scientific and management personnel is intense. There is no guarantee that we will be successful in retaining our
existing personnel or advisors, or in attracting additional qualified employees. If we fail to attract personnel or if we lose existing personnel, our business could be seriously interrupted.



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We do not expect to pay any dividends.

We have not declared or paid cash dividends since our inception. We currently intend to retain all of our earnings to finance future growth and therefore
do not expect to declare or pay cash dividends in the foreseeable future.

Our tax-loss carryforwards are subject to restrictions.

As of September 30, 2010, we had substantial net operating loss carry-forwards (NOLS) for federal income tax
purposes of approximately $70.7 million (which will begin to expire in 2021) which will be available to offset future taxable income. As a result of certain changes in ownership and pursuant to Section 382 of the Internal Revenue Code of 1986,
as amended, utilization of NOLS is limited after an ownership change, as defined in Section 392, to an annual amount equal to the value of the loss corporations outstanding stock immediately before the date of the ownership change
multiplied by the federal long-term exempt tax rate. Due to the various changes in our ownership, and as a result of our Chapter 11 bankruptcy proceeding, a significant portion of these carry-forwards are subject to significant restrictions with
respect to our ability to use those amounts to offset future taxable income. Use of our NOLS may be further limited as a result of future equity transactions.

We are subject to various government regulations.

The cell culture systems and
services that we sell are subject to significant regulation by the FDA under the FD&C Act. Our cell culture bioprocessing systems are regulated as Class I medical devices and must be manufactured in accordance with the FDAs QSR
requirements. Our cell culture instruments must comply with a variety of safety regulations to be sold in Europe, including, but not limited, to CE. Our customers who use these cell culture bioprocessing systems must also comply with more extensive
and rigorous FDA regulation. The process of complying with FDA regulations and obtaining approvals from the FDA is costly and time consuming. The process from investigational stage until approval to market can take a minimum of seven and up to as
many as ten to twelve years currently and is subject to unanticipated delays. Furthermore, there is no assurance that our customers will be able to obtain FDA approval for bioproducts produced with their systems.

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

Our manufacturing, clinical laboratory, and research and development processes involve the storage, use and disposal
of hazardous substances, including hazardous chemicals and biological hazardous materials. Because we handle biohazardous waste with respect to our contract production services, we are required to conform to our customers procedures and
processes to the standards set by the EPA, as well as those of local environmental protection authorities. Accordingly, we are subject to federal, state and local regulations governing the use, manufacture, storage, handling and disposal of
materials and waste products. Although we believe that our safety and environmental management practices and procedures for handling and disposing of these hazardous materials are in accordance with good industry practice and comply with applicable
laws, permits, licenses and regulations, the risk of accidental environmental or human contamination or injury from the release or exposure of hazardous materials cannot be completely eliminated. In the event of an accident, we could be held liable
for any damages that result, including environmental clean-up or decontamination costs, and any such liability could exceed the limits of, or fall outside the coverage of, our insurance. We may not be able to maintain insurance on acceptable terms,
or at all. We could be required to incur significant costs to comply with current or future environmental and public and workplace safety and health laws and regulations.

The availability and amount of reimbursement for BiovaxID and the manner in which government and private payers may reimburse for BiovaxID is uncertain.

In many of the markets where we may do business in the future, the prices of pharmaceutical products are subject to direct price controls pursuant to
applicable law or regulation and to drug reimbursement programs with varying price control mechanisms.

We expect that many of the patients
who seek treatment with BiovaxID if approved for marketing will be eligible for Medicare benefits. Other patients may be covered by private health plans or uninsured. The Medicare program is administered by the Centers for
Medicare & Medicaid Services (CMS), an agency within the U.S. Department of Health and Human Services. Coverage and reimbursement for products and services under Medicare are determined pursuant to regulations promulgated
by CMS and pursuant to CMSs subregulatory coverage and reimbursement determinations. It is difficult to predict how CMS may apply those regulations and subregulatory determinations to newly approved products, especially novel products such as
ours, and those regulations and interpretive determinations are subject to change.



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Moreover, the methodology under which CMS makes coverage and reimbursement determinations is subject to
change, particularly because of budgetary pressures facing the Medicare program. For example, the Medicare Prescription Drug, Improvement, and Modernization Act (the Medicare Modernization Act), enacted in December 2003, provides for a
change in reimbursement methodology that reduces the Medicare reimbursement rates for many drugs, including oncology therapeutics, which may adversely affect reimbursement for BiovaxID, if it is approved for sale. If we are unable to obtain or
retain adequate levels of reimbursement from Medicare or from private health plans, our ability to profitably sell BiovaxID will be adversely affected. Medicare regulations and interpretive determinations also may determine who may be
reimbursed for certain services. This may adversely affect our ability to profitably market or sell BiovaxID, if approved.

We do not
know the ultimate impact of the Patient Protection and Affordable Care Act (PPACC) which was enacted into law on March 23, 2010 on BiovaxID, if it is approved by the FDA. The enacting regulations under the PPACC may have material impact on us
and our market opportunity for BiovaxID. Additionally, federal, state and foreign governments continue to propose legislation designed to contain or reduce health care costs. Legislation and regulations affecting the pricing of products like our
potential products may change further or be adopted before BiovaxID is potentially approved for marketing. It is difficult to predict which, if any, of these proposals will be enacted, and, if so, when. Cost control initiatives by
governments or third party payers could decrease the price that we receive for any one or all of our potential products or increase patient coinsurance to a level that makes BiovaxID unaffordable.

In addition, government and private health plans persistently challenge the price and cost-effectiveness of therapeutic products. Accordingly, these
third parties may ultimately not consider BiovaxID to be cost-effective, which could result in products not being covered under their health plans or covered only at a lower price. Any of these initiatives or developments could prevent us from
successfully marketing and selling any of our potential products on a profitable basis. We are unable to predict what impact the Medicare Modernization Act or other future regulation or third party payer initiatives, if any, relating to
reimbursement for BiovaxID will have on sales of BiovaxID, if approved for sale.

In the European Union, governments influence the
price of pharmaceutical products through their pricing and reimbursement rules and control of national health care systems that fund a large part of the cost of such products to consumers. The approach taken varies from member state to member state.
Some jurisdictions operate positive and/or negative list systems under which products may only be marketed once a reimbursement price has been agreed. Other member states allow companies to fix their own prices for medicines, but monitor and control
company profits. The downward pressure on health care costs in general, particularly prescription drugs, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products, as exemplified by the role of
the National Institute for Health and Clinical Excellence in the United Kingdom which evaluates the data supporting new medicines and passes reimbursement recommendations to the government. In addition, in some countries cross-border imports from
low-priced markets (parallel imports) exert commercial pressure on pricing within a country. All of these factors could adversely impact our ability to successfully commercialize BiovaxID in these jurisdictions.

Even if approved, BiovaxID may be subject to promotional limitations.

We may not be able to obtain the labeling claims necessary or desirable for the promotion of our products. The FDA has the authority to impose significant restrictions on an approved product through the
product label and allowed advertising, promotional and distribution activities. The FDA also may approve a product for fewer indications than are requested or may condition approval on the performance of post-approval clinical studies. We may also
be required to undertake post-marketing clinical trials. There may be monetary penalties if post-approval requirements are not fulfilled. If the results of such post-marketing studies are not satisfactory, the FDA may withdraw marketing
authorization or may condition continued marketing on commitments from us that may be expensive and/or time consuming to fulfill. Even if we receive FDA and other regulatory approvals, if we or others identify adverse side effects after any of our
products are on the market, or if manufacturing problems occur, regulatory approval may be withdrawn and reformulation of our products, additional clinical trials, changes in labeling of our products and additional marketing applications may be
required.



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Our common stock is quoted on the Over-the-Counter Market.

As opposed to a larger or better accepted market, our common stock is quoted on the OTCQB, which is the middle tier of the OTC Market, reserved for
companies that are registered and reporting with the SEC or a U.S. banking regulator. Thus, an investor might find it more difficult than it would be on a national exchange to dispose of, or to obtain accurate quotations as to the market value of,
our securities. We cannot be certain that an active trading market will develop or, if developed, be sustained. We also cannot be certain that purchasers of our common stock will be able to resell their common stock at prices equal to or greater
than their purchase price. The development of a public market having the desirable characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace of a sufficient number of willing buyers and sellers at any given
time. We do not have any control over whether there will be sufficient numbers of buyers and sellers. Accordingly, we cannot be certain that an established and liquid market for our common stock will develop or be maintained. The market price of the
common stock could experience significant fluctuations in response to our operating results and other factors. In addition, the stock market in recent years has experienced extreme price and volume fluctuations that often have been unrelated or
disproportionate to the operating performance of individual companies. These fluctuations, and general economic and market conditions, may hurt the market price of our common stock.

We are also subject to a Securities and Exchange Commission rule that, if we fail to meet certain criteria set forth in such rule, the rule imposes various sales practice requirements on broker-dealers
who sell securities governed by the rule to persons other than established customers and accredited investors. For these types of transactions, the broker-dealer must make a special suitability determination for the purchaser and have received the
purchasers written consent to the transaction prior to sale. Consequently, the rule may have an adverse effect on the ability of broker-dealers to sell our securities and may affect the ability of our stockholders to buy and sell our
securities in the secondary market. The additional burdens imposed upon broker-dealers may discourage broker-dealers from effecting transactions in penny stocks, which could reduce the liquidity of our common stock and have a material adverse effect
on the trading market for our securities.

We believe we are eligible to upgrade our stock listing to the OTCQX, which is the top tier of the
OTC market. The OTCQX is reserved exclusively for companies that meet the highest financial standards and undergo a qualitative review, as determined by the Pink OTC Markets, Inc. However, there can be no assurance that an OTCQX application, if
submitted, will be approved.

The price of our stock may be highly volatile.

The market price for our common stock is likely to fluctuate due to factors unique to us or arising out of the highly volatile market prices of
securities of biotechnology companies. Our shareholders may not be able to resell shares of our common stock following periods of volatility. In addition, our shareholders may not be able to resell shares at or above their purchase price.

Our stock price may be affected by many factors, many of which are outside of our control, which may include:



| |  |  | actual or anticipated variations in quarterly operating results;
| | - |  | ----------------------------------------------------------------



| |  |  | the results of clinical trials and preclinical studies involving our products or those of our competitors;
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | changes in the status of any of our drug development programs, including delays in clinical trials or program terminations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | developments in our relationships with other collaborative partners;
| | - |  | --------------------------------------------------------------------



| |  |  | developments in patent or other proprietary rights;
| | - |  | ---------------------------------------------------



| |  |  | governmental regulation;
| | - |  | ------------------------



| |  |  | public concern as to the safety and efficacy of products developed by us, our collaborators or our competitors;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | our ability to fund on-going operations;
| | - |  | ----------------------------------------



| |  |  | announcements of technological innovations or new products or services by us or our competitors;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | changes in financial estimates by securities analysts;
| | - |  | ------------------------------------------------------



| |  |  | conditions or trends in the biotechnology industry; and
| | - |  | -------------------------------------------------------



| |  |  | changes in the economic performance or market valuations of other biotechnology companies.
| | - |  | ------------------------------------------------------------------------------------------



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Our principal stockholder is able to exert significant influence over matters submitted to
stockholders for approval.

As of September 30, 2010, Accentia owned a majority of our outstanding shares of common stock.
Accentia exerts significant influence in determining the outcome of corporate actions requiring stockholder approval and that otherwise control our business. This control could have the effect of delaying or preventing a change in control of us and,
consequently, could adversely affect the market price of our common stock.

We may be unable to obtain necessary additional financing.

The capital requirements for our operations have been and will continue to be significant. Our ability to generate cash from
operations is dependent upon, among other things, increased demand for our products and services and the successful development of direct marketing and product distribution capabilities. There can be no assurance that we will have sufficient capital
resources to implement our business plan and we may need additional external debt and/or equity financing to fund our future operations. In addition, there can be no assurance that we will be able to obtain the funds necessary to conduct future
operations.

There may not be a market for our common stock.

Our shares are listed on the OTCQB. OTCQB is the middle tier of the OTC market. OTCQB companies are registered and reporting with the SEC or a U.S. banking regulator, making it easier for investors
to identify companies that are current in their reporting obligations. There are no financial or qualitative standards to be in this tier. The OTCQB marketplace was launched in April 2010, by Pink OTC Markets, Inc. to better distinguish
OTC securities that are registered and reporting with U.S. regulators. However, no assurance can be given that a holder of our common stock will be able to sell such securities in the future or as to the price at which such securities might
trade. The liquidity of the market for such securities and the prices at which such securities trade will depend upon the number of holders thereof, the interest of securities dealers in maintaining a market in such securities and other factors
beyond our control.

We have not been the subject of an independent valuation.

No investment banker or underwriter has been retained to value our common stock. We have not attempted to make any estimate of the prices at which our
common stock may trade in the market. Moreover, there can be no assurance given as to the market prices that will prevail.

Our
stockholders could suffer significant dilution upon the issuance of additional securities.

It is possible that we will need to issue
additional shares of common stock or securities or warrants convertible into such shares in order to raise additional equity. In such event, our stockholders could suffer significant dilution.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------

None.



|ITEM 2. | PROPERTIES
|------- | ----------

We lease approximately 35,000
square feet in Minneapolis, Minnesota, which we use for offices, a laboratory, manufacturing, and warehousing areas to support the production of perfusion cell culture equipment, and contract cell culture services. On December 2, 2010, we
entered into a new long-term lease for this facility, wherein our landlord (in conjunction with the City of Coon Rapids and the State of Minnesota) has agreed to fund and amortize improvements to the facility to provide a dedicated laboratory space
for the production of BiovaxID and potential future expansion to the facility to permit additional BiovaxID production capacity when required.

We share office space with our parent company, Accentia, and utilize the space as our principal executive and administrative offices. Accentia leases
approximately 7,400 square feet of office space in Tampa, Florida. The lease expires on September 30, 2011.

We anticipate that our
administrative offices will meet our needs during fiscal 2011. We anticipate that as our development of the BiovaxID vaccine advances and as we prepare for the future commercialization of our products, our facilities requirements will increase.



37



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|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------

Bankruptcy
proceedings:

On November 10, 2008, we, along with our subsidiaries, filed a voluntary petition for reorganization under Chapter
11 of the United States Bankruptcy Code (Chapter 11) in the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division (the Bankruptcy Court). During the pendency of the Chapter 11 proceedings, we operated our
business as a debtor-in-possession in accordance with the provisions of Chapter 11 and subject to the jurisdiction of the Bankruptcy Court. On August 16, 2010, we filed our First Amended Joint Plan of Reorganization, and, on October 25,
2010, we filed the First Modification to the First Amended Joint Plan of Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010, the Bankruptcy Court held a confirmation hearing and confirmed
the Plan, and, on November 2, 2010, the Bankruptcy Court entered an Order Confirming Debtors First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Confirmation Order), which approved and
confirmed the Plan, as modified by the Confirmation Order. We emerged from Chapter 11 protection, and the Plan became effective, on November 17, 2010 (the Effective Date).

Notwithstanding the effectiveness of our Plan, the Bankruptcy Court retains jurisdiction to adjudicate any remaining issues regarding, inter alia, the validity, amount, and method of payment of
claims filed in connection with our Chapter 11 proceeding. Accordingly, we anticipate that there may be ongoing proceedings before the Bankruptcy Court to resolve any filed objections or disputes as to claims filed in the Chapter 11 proceeding.

Other proceedings:

On August 4, 2008, we were served with a summons and complaint filed in California Superior Court on behalf of Clinstar LLC for breach of contract
for non-payment of certain fees for clinical trial studies and pass-through expenses in the amount of $385,000. We intend to seek to dismiss this litigation and plan to defend these claims vigorously. Upon the filing of our Chapter 11 petition on
November 10, 2008, this litigation was automatically stayed pursuant to provisions of federal bankruptcy law. We anticipate that the claims involved in this litigation will be contested and resolved by the Bankruptcy Court as part of an
objection to claim which we expect to file shortly.

Except for the foregoing, we are not party to any material legal proceedings, and
management is not aware of any threatened legal proceedings that could cause a material adverse impact on our business, assets, or results of operations.



|ITEM 4. | (Removed and Reserved)
|------- | ----------------------



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PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------

Market for Registrants Common Stock

From February 18, 2009 until July 12, 2010, our stock traded on the Pink Sheets under the symbol, BVTI. On July 12, 2010, our
common stock opened for trading on the OTCQB Market under the symbol, BVTI

Number of Common Shareholders

As of November 30, 2010, we had approximately 136.7 million shares of common stock outstanding which were held by approximately 400 stockholders
of record.

Quarterly High / Low Company Stock Price  BVTI

The following table sets forth the range of high and low bid quotations for our common stock for each of the quarterly periods indicated as reported by the Pink Sheets and OTCQB Market. Bid
quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.



|                               |  |      |      |  |     |   |      | 
|------------------------------ |  | ---- | ---- |  | --- | - | ---- | 
|                               |  | High |      |  | Low |  
|Year Ended September 30, 2009: |  |      |      |  |     |   |      | 
|First Quarter                  |  | $    | 0.40 |  |     | $ | 0.03 | 
|Second Quarter                 |  | $    | 0.13 |  |     | $ | 0.04 | 
|Third Quarter                  |  | $    | 1.50 |  |     | $ | 0.10 | 
|Fourth Quarter                 |  | $    | 0.75 |  |     | $ | 0.26 | 
|                               |  |     
|Year Ended September 30, 2010: |  |      |      |  |     |   |      | 
|First Quarter                  |  | $    | 0.50 |  |     | $ | 0.32 | 
|Second Quarter                 |  | $    | 2.11 |  |     | $ | 0.36 | 
|Third Quarter                  |  | $    | 2.00 |  |     | $ | 0.92 | 
|Fourth Quarter                 |  | $    | 1.70 |  |     | $ | 0.83 | 

As of the November 30, 2010, our
closing sale price for our common stock was $ 1.14.

Dividends

We have never declared or paid any cash dividends and do not anticipate paying cash dividends in the foreseeable future. We currently anticipate that all future earnings will be retained for use in our
business. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our financial condition, operating results and other factors.

Equity Compensation Plan Information

See Part III, Item 12 for information on our equity compensation plans.

Recent Sales of Unregistered Securities

During the fiscal year ended September 30,
2010, we did not issue any securities that were not registered under the Securities Act of 1933, as amended (the Securities Act), except as disclosed in previous SEC filings.



|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

Not Applicable.



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|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------

When you read this section of this annual report, it is important that you also read the financial statements and related notes included elsewhere in this annual report. This section of this annual
report contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. We use words such as anticipate, estimate, plan,
project, continuing, ongoing, expect, believe, intend, may, will, should, could, and similar expressions to identify
forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including the factors described below and in the Risk Factors section of this
Form 10-K.

Overview

As a result of our collaboration with the National Cancer Institute (NCI), Biovest International, Inc. (Other OTC: BVTI) is developing
BiovaxID® as a personalized therapeutic cancer vaccine for the treatment of non-Hodgkins lymphoma,
specifically follicular lymphoma (FL), mantle cell lymphoma (MCL) and potentially other B-cell blood cancers. Both FL and MCL are generally considered to be incurable with currently approved therapies. These generally fatal diseases arise from the
lymphoid tissue and are characterized by an uncontrolled proliferation and spread throughout the body of mature B-cells, which are a type of white blood cell.

Three clinical trials conducted under our Investigational New Drug Application (IND) have studied BiovaxID in non-Hodgkins lymphoma. These studies include a Phase 2 clinical trial and a Phase 3
clinical trial in patients with FL, as well as, a Phase 2 clinical trial in MCL patients. We believe that these clinical trials have demonstrated that BiovaxID, which is personalized and autologous (derived from a patients own tumor cells),
has an excellent safety profile and is effective in the treatment of these life-threatening diseases.

To support our planned
commercialization of BiovaxID, we developed an automated cell culture instrument called AutovaxID. We believe that AutovaxID has significant potential application in the production of a broad range of patient-specific medicines, such as
BiovaxID as well as other monoclonal antibodies. We are collaborating with the U.S. Department of Defense to further develop AutovaxID and to explore potential production of additional vaccines, including vaccines for viral indications such as
influenza. AutovaxID is automated and computer controlled to improve cell production reliability and to maximize cell production. AutovaxID uses a disposable production unit which we anticipate will minimize the need for FDA required clean
rooms in the production process and provides for robust and dependable manufacturing while complying with the industry cGMP standards. AutovaxID has a small footprint and supports scalable production.

We also manufacture instruments and disposables used in the hollow-fiber production of cell culture products. Our hollow-fiber cell culture products and
instruments are used by biopharmaceutical and biotech companies, medical schools, universities, research facilities, hospitals and public and private laboratories. We also produce mammalian and insect cells, monoclonal antibodies, recombinant and
secreted proteins and other cell culture products using our unique capability, expertise and proprietary advancements in the cell production process known as hollow fiber perfusion.

Our business consists of three primary business segments: development of BiovaxID and potentially other B-cell blood cancer vaccines; the manufacture and sale of AutovaxID and other instruments and
consumables; and commercial production of cell culture products and services.

Background

The following describes our recent history:

We
were incorporated in Minnesota in 1981, under the name Endotronics, Inc. In 1993, our name was changed to Cellex Biosciences, Inc. In 2001, we changed our corporate name to Biovest International, Inc. and changed our state of incorporation from
Minnesota to Delaware.

In April 2003, we entered into an Investment Agreement with Accentia Biopharmaceuticals, Inc., (Accentia).
As a result of this agreement, in June 2003, we became a subsidiary of Accentia through the sale of shares of our authorized but un-issued common and preferred stock then representing approximately 81% of our equity outstanding immediately after the
investment. The aggregate investment commitment received from Accentia was $20 million. We continued to be a reporting company under Section 12G of the Securities Exchange Act of 1933 following the investment of Accentia.



40



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On November 10, 2008, we and our subsidiaries, filed a voluntary petition for reorganization under
Chapter 11. Our reorganization case was jointly administered with the reorganization case of our parent company, Accentia, under Case No. 8:08-bk-17795-KRM (the Chapter 11). On August 16, 2010, we filed our First Amended Joint
Plan of Reorganization, and, on October 25, 2010, we filed the First Modification to the First Amended Joint Plan of Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010, the U.S.
Bankruptcy Court for the Middle District of Florida, Tampa Division (the Bankruptcy Court) held a confirmation hearing and confirmed the Plan, and, on November 2, 2010, the Bankruptcy Court entered an Order Confirming Debtors
First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Confirmation Order), which approved and confirmed the Plan, as modified by the Confirmation Order. We emerged from Chapter 11 protection, and
the Plan became effective, on November 17, 2010 (the Effective Date). The accompanying audited consolidated financial statements have been prepared assuming we will continue as a going concern as we emerge from Chapter 11.

Our 2010 consolidated financial statements include our wholly-owned subsidiaries Biovax, Inc., AutovaxID, Inc., Biolender, LLC and Biolender
II, LLC, and due to our controlling financial interest, certain variable interest entities, Biovax Investment LLC, Telesis CDE Two LLC, AutovaxID Investment, LLC, and St. Louis New Markets Tax Credit Fund-II, LLC. Pursuant to our Plan, our
wholly-owned subsidiaries will be dissolved and all relationships with our variable interest entities will be terminated.

Results of
Operations

Year Ended September 30, 2010 Compared to the Year Ended September 30, 2009

Revenue. Total revenues for the year ended September 30, 2010 were $5.4 million, compared to revenues of $3.7
million for the year ended September 30, 2009. Sales from our instrumentation segment experienced an increase of $2.0 million year over year. In September 2009, we entered into a $1.5 million contract with the U.S. Department of Defense
Naval Health Research Center (NHRC) to supply AutovaxID bioreactors and to evaluate the
instruments suitability to produce cell-culture based anti-viral vaccines. As a result of this contract, we have recorded $1.2 million in instrumentation revenue in the current fiscal year, with no comparable revenue in the prior year. Service
revenue decreased $0.3 million compared to the previous fiscal year due to three significant cell culture contracts that were ongoing in fiscal 2009. These projects were run to completion during the fiscal year ended September 30, 2010.

Gross Margin. The overall gross margin as a percentage of sales for the year ended September 30, 2010 increased from 33%
to 46% when compared to fiscal 2009. While revenues have increased year over year, as discussed above, there was not a corresponding increase in cost of sales as a relatively high percentage of costs are of a fixed nature.

Operating Costs and Expenses. Research and development expenses decreased by $245,000 or 23% for the year ended September 30, 2010
compared to fiscal 2009. Prior to the commencement of fiscal 2010, we completed the initial Phase 3 clinical trial in our cancer vaccine, BiovaxID. We are not currently conducting a clinical trial and our research and development effort is largely
focused on analyzing data available from our completed trial and preparing for anticipated discussions with regulatory agencies regarding next steps in the regulatory process. Accordingly, our research and development spending levels have declined
over the prior year even though we increased the number of technical and scientific employees in fiscal 2010. General and administrative expenses decreased $0.5 million or 18% in the current fiscal year due, in large to a decrease in compensation
expense and professional fees other than those incurred as a result of our reorganization proceedings and discussed below under Reorganization Items.

Other Income and Expense. Other expense for the year ended September 30, 2010, includes contractual interest charges and amortization of discounts regarding the Laurus and the Valens Funds
financings, interest on our debtor-in-possession loan from Corps Real, interest on our demand notes to Accentia, interest on our unsecured promissory notes to Pulaski Bank and Southwest Bank, and interest on other long-term debt, as well as interest
on short-term loans from affiliates. Total interest expense for the years ended September 30, 2010 and 2009 was $7.2 million and $6.9 million, respectively. We have continued to accrue interest on all our outstanding obligations while in
Chapter 11. Furthermore, our voluntary petition for bankruptcy on November 10, 2008, triggered default provisions on certain of our pre-petition debt, which allow for the accrual of additional interest and fees above the contractual rate. We
have accrued interest at the applicable default rates while in Chapter 11. On November 2, 2010, the Bankruptcy Court confirmed our Plan, setting November 17, 2010 as our effective date for emergence from Chapter 11 reorganization. The Plan
sets forth the interest each class of creditors shall receive as part of their allowed claim. See Subsequent Events for further information on our Plan.



41



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Other expense for fiscal 2010 and 2009 also includes a loss of $2.5 million and $1.0 million, respectively,
on derivative liabilities. Some of our outstanding debt as well as some of our outstanding warrants contain contingent conversion and exercise provisions which we are required to record as liabilities, at fair value. The values of these liabilities
vary directly with the trading price of our common stock. The trading price of our common shares increased by approximately 140% and 60% for the years ended September 30, 2010 and 2009 resulting in a corresponding increase in these liabilities.
The warrants and conversion rights granted arise from our pre-petition obligations and are thus subject to compromise through our reorganization proceedings.

Reorganization Items

Professional Fees:$535,000 and $380,000 were incurred for the
years ending September 30, 2010 and 2009, respectively, for legal and other professional fees as a result of our Chapter 11 proceedings.

Provision for indemnity agreements:The unsecured promissory notes we issued to Pulaski Bank and Trust Company (Pulaski Bank) and
Southwest Bank of St. Louis (Southwest Bank) are guaranteed by individuals affiliated with us or our parent company, Accentia. We agreed to indemnify and hold harmless each guarantor should their guarantees be called by the lenders. In
addition, in the event we default, resulting in a payment to the lenders by the guarantors, we agreed to compensate each affected guarantor by issuing a number of shares of our restricted common stock determined by dividing 700% of the amount
guaranteed by $1.10. On December 29, 2008, Pulaski Bank called its guarantees resulting in an aggregate payment of $1.0 million by the guarantors. In January 2009, Southwest Bank called its guarantee resulting in an aggregate payment of $0.2
million by the guarantor. As a result of their indemnification agreements, we originally recorded a provision for approximately 7.6 million shares of our common stock valued using the trading price of our stock at each reporting date. For the
quarter ended March 31, 2010, we reached an agreement with the guarantors whereby the indemnities will be valued using a price of $0.24 per share, which represents the closing price of our stock on November 9, 2008, the day prior to filing
our petition for reorganization, and represents the amount that will be allowed as an unsecured claim of the guarantors in our reorganization proceedings (approximately $1.8 million). We have recorded this amount as a provision in liabilities
subject to compromise on the accompanying balance sheet as of September 30, 2010. On Effective Date and under the Plan, the guarantors of the Pulaski Bank and Southwest Bank notes agreed to accept 1.04 million shares of our common stock in
full satisfaction of the aggregate $1.8 million unsecured claim.

Non-Controlling interest in earnings from variable interest entities:
Our statement of operations for the fiscal years 2010 and 2009 includes a $412,000 and $455,000 non-controlling interest in the losses of the variable interest entities resulting from the consolidation of a number of variable interests formed as a
result of the NMTC transactions further discussed below.

Liquidity and Capital Resources

We have historically had significant losses from operations, and these losses continued during the year ended September 30, 2010, resulting in a net
operating cash flow deficit of $0.8 million. At September 30, 2010, we had an accumulated deficit of approximately $149 million and working capital deficit of approximately $79.6 million including those liabilities subject to compromise through
our Chapter 11 proceedings. We will attempt to meet our cash requirements through proceeds from our exit financing, proceeds from our cell culture and instrument manufacturing activities, trade-vendor credit, restructuring of our outstanding debt
obligations through the Chapter 11 reorganization proceedings, and short-term borrowings. Additionally, as our regulatory and product development activities advance, we may seek public or private equity investment, short or long term debt financing
or strategic relationships such as investments or licensees. See below with regard to our discussion of our debtor-in-possession financing transactions.

Accordingly, our ability to continue present operations, pay our existing liabilities as they become due, and continue our ongoing product development is dependent upon our cash on hand, revenues, and our
ability to obtain significant external funding. Because such additional financing has not been arranged, our auditors have noted that there is substantial doubt about our ability to continue as a going concern. The need for funds is expected to grow
as we prepare to commercialize BiovaxID®.



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Corps Real, LLC

On December 22, 2008, we completed the closing of a debtor-in-possession financing transaction (the DIP Transaction) with Corps Real, LLC, a Illinois limited liability company
(Corps Real), the members of which are our directors, or affiliated with our directors (the DIP Lender). Pursuant to the DIP Transaction, the DIP Lender provided to us a secured line of credit in an amount of up to
$3.0 million in accordance with an order entered by the Bankruptcy Court. As of September 30, 2010, the DIP Lender has advanced us approximately $1.89 million.

On
November 17, 2010, in accordance with the terms of the Plan, we executed and delivered in favor of Corps Real a secured convertible promissory note (the DIP Lender Plan Note) in an original principal amount of $ 2,291,560. The
DIP Lender Plan Note replaces the $3.0 million secured line of credit promissory note dated December 22, 2008, which we previously executed in favor of the DIP Lender. The DIP Lender Plan Note matures on November 17, 2012 and all principal
and accrued but unpaid interest is due on such date. Interest accrues and is payable on the outstanding principal amount of the DIP Lender Plan Note at a fixed rate of sixteen percent (16%) per annum, with interest in the amount of ten percent
(10%) to be paid monthly and interest in the amount of six percent (6%) to accrue and be paid on the maturity date. We may prepay the DIP Lender Plan Note in full, without penalty, at any time, and the DIP Lender may convert all or a
portion of the outstanding balance of the DIP Lender Plan Note into shares of our common stock at a conversion rate of $0.75 per share of our common stock.

The DIP Lender Plan Note is secured by a first priority lien on all of our property.

Convertible Note Transaction

On
October 19, 2010, we entered into a debtor-in-possession financing transaction (the Convertible Note Financing) pursuant to which we issued an aggregate of $7.0 million in principal amount of Debtor-In-Possession Secured Convertible
Notes (the Initial Notes) and warrants to purchase shares of our common stock (the Initial Warrants) to a total of twelve accredited investors (the Buyers). In connection with the Convertible Note
Financing, we entered into a Securities Purchase Agreement, dated October 19, 2010 (the Purchase Agreement), pursuant to which we sold and issued the Initial Notes and the Initial Warrants to the Buyers. Pursuant to the Purchase
Agreement, we issued two separate Initial Warrants to the Buyers, Series A Warrants (the Initial Series A Warrants) and Series B Warrants (the Initial Series B Warrants).

Pursuant to the Purchase Agreement and the Plan, on November 17, 2010 (the Effective Date of the Plan), (a) the Initial Notes were exchanged
pursuant to the terms of the Plan for new unsecured notes (the Exchange Notes) in the aggregate principal amount of $7.04 million, (b) the Initial Series A Warrants were exchanged pursuant to the terms of the Plan for new warrants
to purchase a like number of shares of our common stock (the Series A Exchange Warrants), and (c) the Initial Series B Warrants were exchanged pursuant to the terms of the Plan for new warrants to purchase a like number of shares of
our common stock (the Series B Exchange Warrants).

The following are the material terms and conditions of the Exchange
Notes:



| |  |  | the Exchange Notes mature on November 17, 2012, and all principal and accrued but unpaid interest is due on such date;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | interest accrues and is payable on the outstanding principal amount of the Exchange Notes at a fixed rate of seven percent (7%) per annum (with a
fifteen percent (15%) per annum default rate), and is payable monthly in arrears, with the first date for an interest payment being December 1, 2010;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest payments under the Exchange Notes are payable in either cash or, at our election and subject to certain specified conditions, in shares of our
common stock;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may from time to time, subject to certain conditions, redeem all or any portion of the outstanding principal amount of the Exchange Notes for an
amount, in cash, equal to 110% of the sum of the principal amount being redeemed and certain make-whole interest payments;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of the Exchange Notes may convert all or a portion of the outstanding balance of the Exchange Notes into shares of our common stock (the
Exchange Note Shares) at a conversion rate of $0.91 per share of our common stock, subject to anti-dilution adjustments in certain circumstances; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | in the event that the average of the daily volume weighted average price of our common stock is at least 150% of the then-effective conversion price
for any ten (10) consecutive trading days, at our option, may upon written notice to the holders of the Exchange Notes, convert the then outstanding balance of the Exchange Notes into shares of our common stock (also, the Exchange Note
Shares) at the conversion price then in effect under the Exchange Notes.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following are the material terms and
conditions of the Series A Exchange Warrants:



| |  |  | the Series A Exchange Warrants give each Buyer the right to purchase that number of shares of our common stock (the Series A Warrant
Shares) equal to the amount loaned by such Buyer to us under such our Initial Note divided by $0.91;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Series A Exchange Warrants have an initial exercise price of $1.45 per share (subject to anti-dilution adjustments in certain circumstances) and a
term of seven (7) years from November 17, 2010; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event that the average weighted-average price of our common stock during the period beginning on (and including) December 1, 2010 and
ending on (and including) December 21, 2010 is less than the then existing exercise price of the Series A Exchange Warrants, the exercise price of the Series A Exchange Warrants will be reduced to 120% of the weighted average price during such
period, but no lower than $0.60 per share.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following are the material terms and conditions of the Series B Exchange
Warrants:



| |  |  | the Series B Exchange Warrants give each Buyer the right to purchase that number of shares of our common stock (the Series B Warrant
Shares) equal to the difference between (a) the original principal amount of such Buyers Exchange Note divided by $0.50, and (b) the original principal amount of such Buyers Exchange Note divided by $0.91, provided that
the number of shares of Biovests common stock issuable upon exercise of a Series B Exchange Warrant may not exceed the Maximum Eligibility Number (as set forth below);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | for purposes of the Series B Exchange Warrants, the Maximum Eligibility Number will initially be an amount equal to zero, provided that if
on December 22, 2010, 80% of the average of the weighted average price for our common stock during the preceding 21 days is less than $0.91, the Maximum Eligibility Number will be equal to the difference between (a) the quotient determined
by dividing (i) the aggregate principal amount of the Buyers Exchange Note by (ii) the greater of (A) $0.50 (subject to adjustment for stock splits, stock adjustments and the like), and (B) 80% of such average of the
weighted average price, and (b) the quotient determined by dividing the aggregate principal amount of the Buyers Exchange Note by $0.91; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Series B Exchange Warrants have an exercise price of $0.01 per share and an expiration date of December 23, 2010;. if, on December 22,
2010, the Maximum Eligibility Number exceeds zero, then the Series B Exchange Warrants will be deemed to be exercised by a cashless exercise on December 22, 2010 and, if the Maximum Eligibility Number does not exceed zero, then the Series B
Exchange Warrants will automatically expire.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Credit Facility with Laurus Master Fund, Ltd. and with the Valens Funds.

On March 31, 2006, we closed a financing transaction with Laurus Master Fund, Ltd. (Laurus), pursuant to which Laurus
purchased from us a secured promissory note in the principal amount of $7.799 million and a warrant to purchase up to 18,087,889 shares of our common stock at an exercise price of $0.01 per share.

On October 30, 2007, we completed a financing transaction with Valens U.S. SPV I, LLC, Valens Offshore SPV I, Ltd., Valens Offshore SPV II,
Corp., PSource Structured Debt Limited (PSource), and LV Administrative Services, Inc. (collectively, the Valens Funds), all of which are affiliates of Laurus. Pursuant to this transaction, the Valens Funds purchased from us
two secured promissory notes in the aggregate principal amount of $0.5 million and entered into two royalty agreements whereby the Valens Funds have been granted 2.0% royalty interests in the worldwide net sales and license revenues from commercial
sales of our biologic products. The notes are non-amortizing and accrue interest at prime plus 2%, with a minimum of 9% interest. Interest is payable monthly in arrears, commencing November 1, 2007. The principal balance of both notes is due
upon maturity on March 31, 2009.



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Effective as of May 30, 2008, we entered into an agreement with Laurus and the Valens Funds whereby the
Valens Funds agreed to extend the maturity date of their Secured Promissory Notes dated December 10, 2007 (the Notes) from their initial maturity date of June 10, 2008 to October 31, 2008 (the Extension). In
consideration for the Extension, we entered into an amendment to the existing royalty agreements with the Valens Funds (the Royalty Amendment) whereby the royalty percentage due to the Valens Funds on sales of our biologic products
including BiovaxID was increased from 9.0% to 15.5% (the Royalty Percentage). In connection with the closing of the Amendment Agreement, our majority shareholder, Accentia executed a Guaranty Side Letter with Laurus confirming that the
portion of our existing indebtedness to Laurus which is guaranteed by Accentia shall be changed from 64% of our all presently due and outstanding debts and liabilities to a fixed principal amount of $5.0 million together with all other obligations
covered by and as defined under the Guaranty between Accentia and Laurus dated March 31, 2006. Subsequent to June 30, 2008, our debt to the Valens Funds has been amended and the maturity dates of the secured promissory notes to the Valens
Funds have been extended through July 31, 2009, and will carry no amortizing payments until maturity. Interest on all principal outstanding was amended to 30% per annum, with 10% payable monthly and 20% accruing and payable at
maturity. We also agreed to pay an additional $4.4 million fee on the notes, payable at maturity.

On September 22, 2008, as part of our
secured convertible debenture transaction described herein, we issued to Valens U.S. SPV I, LLC a secured convertible debenture in the principal amount of $0.65 million. The debentures accrue interest at 15% per annum, payable monthly, in
cash, or at our option, in shares of our common stock. The debentures are secured by all of our assets and are subordinate to our existing notes outstanding to Laurus and the Valens Funds. As a result of the foregoing transactions, the aggregate
outstanding indebtedness due to Laurus/Valens as of September 30, 2010 totaled $37.0 million.

As of the Effective Date of the Plan,
which occurred on November 17, 2010, Laurus and the Valens Funds (LV and together with Laurus, PSource, Valens, and each of their respective affiliates, Laurus/Valens), have an allowed secured claim against us in the
amount of $24.9 million. On November 17, 2010, pursuant to a Term Loan and Security Agreement, we executed and delivered to Laurus/Valens term notes (the Laurus/Valens Term A Notes) evidencing such allowed secured claim in the
original principal amount of $24.9 million but reduced by $1.4 million to $23.6 million on the Effective Date. The following are the material terms and conditions of the Laurus/Valens Term A Notes:



| |  |  | the Laurus/Valens Term A Notes mature on November 17, 2012;
| | - |  | -----------------------------------------------------------



| |  |  | interest accrues on the Laurus/Valens Term A Notes at the rate of eight percent (8%) per annum (with a twelve percent (12%) per annum default
rate), and is payable at the time of any principal payment or prepayment of principal;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may prepay the Laurus/Valens Term A Notes, without penalty, at any time;
| | - |  | ---------------------------------------------------------------------------



| |  |  | we are required to make mandatory prepayments under the Laurus/Valens Term A Notes as follows:
| | - |  | ----------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to thirty percent (30%) of the net proceeds (i.e., the gross proceeds received less any investment banking or similar fees and
commissions and legal costs and expenses incurred by Biovest) of certain capital raising transactions (with certain exclusions), but only up to the then outstanding principal and accrued interest under the Laurus/Valens Term A Notes;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to thirty percent (30%) of the net proceeds (i.e., the gross proceeds received less any investment banking or similar fees and
commissions and legal costs and expenses incurred by Biovest) from any intercompany funding by Accentia to us (with certain exceptions and conditions); and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to fifty percent (50%) of positive net cash flow of our for each fiscal quarter after November 17, 2010, less the amount
of certain capital expenditures on certain of our biopharmaceutical products made during such fiscal quarter or during any prior fiscal quarter ending after the Effective Date; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | on the Effective Date, we prepaid the Laurus/Valens Term A Notes in an amount equal to $1.4 million from the proceeds received in the Convertible Note
Financing (discussed above).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



45



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Further, pursuant to the Plan, Laurus/Valens has an additional allowed secured claim against us in the
amount of $4.160 million. On the Effective Date, we executed and delivered to Laurus/Valens term notes (the Laurus/Valens Term B Notes) evidencing such additional allowed secured claim in the original principal amount of $4.160
million. The following are the material terms and conditions of the Laurus/Valens Term B Notes:



| |  |  | the Laurus/Valens Term B Notes mature on November 17, 2013;
| | - |  | -----------------------------------------------------------



| |  |  | interest accrues on the Laurus/Valens Term B Notes at the rate of eight percent (8%) per annum (with a twelve percent (12%) per annum default
rate), and is payable at the time of any principal payment or prepayment of principal;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may prepay the Laurus/Valens Term B Notes, without penalty, at any time; and
| | - |  | -------------------------------------------------------------------------------



| |  |  | provided that the Laurus/Valens Term A Notes have been paid in full, we are required to make mandatory prepayments under the Laurus/Valens Term B Notes
from any intercompany funding by Accentia to us (with certain exceptions and conditions), but only up to the outstanding principal and accrued interest under the Laurus/Valens Term B Notes.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

With the prior written consent of Laurus/Valens, we may convert all or any portion of the outstanding principal and accrued interest under either the
Laurus/Valens Term A Notes or the Laurus/Valens Term B Notes into shares of our common stock. The number of shares of our common stock issuable on such a conversion (the Laurus/Valens Conversion Shares) is equal to (a) an amount
equal to the aggregate portion of the principal and accrued and unpaid interest thereon outstanding under the applicable Laurus/Valens Term A Note or the Laurus/Valens Term B Note being converted, divided by (b) ninety percent (90%) of the
average closing price publicly reported (or reported by Pink Sheets, LLC) for our common stock for the ten (10) trading days immediately preceding the date of the notice of conversion.

The Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes will be secured by a first lien in all of our assets junior only to the lien granted to the DIP Lender and to certain permitted liens. The
Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes will also be guaranteed by Accentia (the Accentia Guaranty), up to a maximum amount of $4,991,360.00. The Accentia Guaranty will be secured by Accentias pledge of
20,115,818 shares of our common stock owned by Accentia and by the assets of Accentias subsidiary, Analytica International, Inc.

Additional Future Funding Sources.

Additional sources of funding have not been established; however, additional financing may be sought by us from time to time, or if we perceive market
opportunity, from a number of sources, including the sale of equity or debt securities, strategic collaborations, recognized research funding programs, as well as domestic and/or foreign licensing of our vaccine. Management is currently in the
process of exploring various financing alternatives. There can be no assurance that we will be successful in securing such financing upon acceptable terms, if at all. If adequate funds are not available from the foregoing sources when needed, or if
we determine it to otherwise be in our best interest, we may consider additional strategic financing options, including sales of assets or business units that are non-essential to the ongoing development or future commercialization of BiovaxID
and AutovaxID, or we may be required to delay, reduce the scope of, or eliminate one or more of our research or development programs or curtail some or all of our commercialization efforts.

Net Cash Flows from Operating Activities. During the year ended September 30, 2010, we incurred a net loss of $8.2 million. Included in this loss are several non-cash transactions,
described as follows:



| |  |  | Interest charges resulting from amortization of discounts on outstanding debt in the amount of $1.2 million
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Income of $2.1 million was recorded relating to indemnity agreements outstanding with guarantors of our debt with Pulaski Bank and Southwest Bank
further discussed under reorganization items above.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | An increase of $5.8 million in the balance of accounts payable and accrued liabilities, predominantly due to an increase in accrued interest on
outstanding debt. Although all interest payments on our prepetition debt have been stayed through our Chapter 11 proceedings, we have continued to accrue interest at the contractual rate on our obligations. These amounts may be subject to compromise
through our plan for reorganization.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A charge in the amount of $2.5 million was recorded relating to the change in fair value on certain of our outstanding debt and warrant agreements
further discussed under other income and expense above.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Adjusting our net loss for these and other non-cash
items resulted in a net cash deficit from operating activities in the amount of $0.8 million for the year ended September 30, 2010.



46



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Net Cash Flows from Investing Activities. For the year ended September 30, 2010 we purchased
equipment for the purpose of manufacturing our vaccine in our Minneapolis, MN facility for approximately $49,000.

Net Cash Flows from
Financing Activities. In December 2008, we closed a Debtor in Possession Note (DIP Note) as discussed above. Draws on the DIP Note amounted to $0.64 million and $1.25 million for fiscal 2010 and 2009 respectively. Our parent company,
Accentia also advanced us a net of approximately $0.57 million and $0.43 million for the fiscal years ended September 30, 2010 and 2009, predominantly in the form of accrued interest on prepetition indebtedness to Accentia which is subject to
compromise through our reorganization proceedings.

New Market Tax Credit Transactions.

April 2006 NMTC Transaction:

On April 25, 2006, our wholly owned subsidiary, Biovax, Inc. (Biovax) closed a financing transaction (Transaction I) that was
structured in an effort to obtain certain perceived advantages and enhancements from the New Markets Tax Credit (NMTC) regulations adopted under the auspices of the United States Department of the Treasury in 2002 to provide incentive
for investing in businesses located in qualifying census tracts, or areas with a median income below the poverty line. The NMTC was provided for in the Community Renewal Relief Act of 2000 (the Act) and permits taxpayers
(whether companies or individuals) to claim credits against their Federal income taxes for up to 39% of qualified investments in the equity of Community Development Entities (CDE). CDE are privately managed investment institutions that
are certified to make Qualified Low-Income Community Investments (QLICI). The following parties were involved in Transaction I: Accentia, our majority shareholder, Biolender, LLC (Biolender), Biovax Investment Corp.,
Biovax Investment, LLC (Fund), U.S. Bancorp Community Investment Corporation (US Bancorp), Telesis CDE Two, LLC (CDE), Telesis CDE Corporation, Biovax, and Laurus. Biovax is a qualified, active low-income
business and is eligible to receive investment capital under the NMTC regulations.

In July 2010, we and certain of our affiliates entered
into an agreement (the Worcester Restructuring Agreement) with Telesis CDE Corporation and Telesis CDE Two, LLC (collectively, Telesis), contingent upon submission to and approval by the Bankruptcy Court. The Worcester
Restructuring Agreement effectively terminates all agreements and obligations of all parties pursuant to Transaction I, in consideration of retention by Telesis of an unsecured claim in our Chapter 11 proceeding in the amount of $0.3 million
along with a settlement payment in the amount of $85,000 to defray certain legal and administrative expenses incurred by Telesis. This Worcester Restructuring Agreement and the compromise of the outstanding claims against us and our affiliates in
connection with Transaction I was approved by the Bankruptcy Court in an Order entered on December 1, 2010. As a result, our Guaranty, Accentias, and all of our subsidiary guaranties from affiliates and third parties and all other
obligations to all parties to Transaction I were terminated.

December 2006 NMTC Transaction:

On December 8, 2006, through our wholly owned subsidiary, AutovaxID, Inc. (AutovaxID), we closed a second NMTC financing transaction (Transaction II). The following parties
were involved in Transaction II: AutovaxID, Accentia, Biolender II, LLC (Biolender II), St. Louis New Market Tax Credit Fund II, LLC (CDE II), St. Louis Development Corp., AutovaxID Investment LLC (Fund II),
U.S. Bancorp, and Laurus.

On December 8, 2006, Accentia loaned to us $3.1 million pursuant to a Secured Promissory Note (the
Accentia Note). Under the terms of the Accentia Note, interest accrues at a rate equal to prime rate, and is convertible, at Accentias option, to shares of our common stock at a conversion price of $0.32 per share. Upon closing of
Transaction II, we repaid Accentia $1.1 million. The remaining $2.0 million of principal and all accrued and unpaid interest is included in notes payable, related parties in the accompanying September 30, 2010 consolidated balance sheet,
and is due upon 30 days advance written notice by Accentia. On November 17, 2010 pursuant to our Plan, the outstanding balance due under the Accentia Note was converted into our common stock issued to Accentia at a conversion rate equal to
$0.75 per share.

In July 2010, we and certain of our affiliates entered into an agreement (the St. Louis Restructuring Agreement)
with St. Louis Development Corporation and Saint Louis New Markets Tax Credit Fund II, LLC (collectively SLDC), contingent upon submission to and approval by the Bankruptcy Court. The St. Louis Restructuring Agreement effectively
terminates all agreements and obligations of all parties pursuant to Transaction II, in consideration of retention by SLDC of an unsecured claim in our Chapter 11 proceeding in the amount of $160,000 along with a settlement payment in the amount of
$62,000, to defray certain legal and administrative expenses incurred by SLDC.



47



---

This St. Louis Restructuring Agreement and the compromise of the outstanding claims against Biovest in connection with Transaction II was approved by the Bankruptcy Court in an Order entered on
December 1, 2010. As a result, our Guaranty, Accentias, and all of our subsidiary Guaranties from affiliates and third parties and all other obligations to all parties to Transaction II were terminated.

Critical Accounting Policies and Estimates

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements require us to make significant
estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those related to bad debts, inventories, intangible
assets, contingencies and litigation on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies, among others, involve the more significant judgments and estimates used in the preparation of our
financial statements.

Revenue Recognition:

Revenues from contract cell production services are recognized using the percentage-of-completion method, measured by the percentage of contract costs incurred to date to an estimate of total contract
costs for each contract. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change in the near term. Contract costs related to cell culture production include all direct
material, subcontract and labor costs and those indirect costs related to contract performance, such as indirect labor, insurance, supplies and tools. We believe that actual costs incurred in contract cell production services is the best indicator
of the performance of the contractual obligations, because the costs relate primarily to the amount of labor incurred to perform such services. The deliverables inherent in each of our cell culture production contracts are not output driven, but
rather driven by a pre-determined production run. The duration of our cell culture production contracts range typically from 2 to 14 months.

Allowance for doubtful accounts:

We
maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the condition of our customers were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.

Inventory Valuation:

Inventories are recorded at the lower of cost or market. Write-downs of inventories to market value are based upon contractual provisions and obsolescence, as well as assumptions about future demand and
market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by management, additional write-downs of inventories may be required.

Impairment assessments of long-lived assets:

In assessing the recoverability of our amounts recorded as intangible assets, significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of the
respective assets must be made, as well as the related estimated useful lives. If these estimates or their related assumptions change in the future as a result of changes in strategy and/or market conditions, we may be required to record impairment
charges.

Valuation of share-based payments:

We account for stock-based compensation based on ASC Topic 718-Stock Compensation which requires expensing of stock options and other share-based payments based on the fair value of each option awarded.
The fair value of each option is estimated on the date of grant using the Black-Scholes valuation model. This model requires management to estimate the expected volatility, expected dividends, and expected term as inputs to the valuation model.



48



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Evaluation of variable interest entities:

The consolidated financial statements represent the consolidation of wholly-owned companies and interests in joint ventures where we have a controlling financial interest or we have been determined to be
the primary beneficiary under applicable accounting standards. All significant inter-company balances and transactions have been eliminated.

Valuation and determination of derivative instruments:

We estimate fair values of derivative financial instruments using various techniques (and combinations thereof) that are considered to be consistent with the objective of measuring fair values. In
selecting the appropriate technique(s), management considers, among other factors, the nature of the instrument, the market risks that it embodies and the expected means of settlement. For less complex derivative instruments, such as free-standing
warrants, we generally use the Black-Scholes-Merton option valuation technique because it embodies all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to fair value these instruments. For
forward contracts that contingently require net-cash settlement as the principal means of settlement, management projects and discounts future cash flows applying probability-weighted averages to multiple possible outcomes. Estimating fair values of
derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. In addition,
option-based techniques are highly volatile and sensitive to changes in our trading market price which has high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair values, our income will
reflect the volatility in these estimate and assumption changes.

Voluntary Petition for Bankruptcy:

On November 10, 2008, we, along with our subsidiaries, Biovax, Inc., AutovaxID, Inc., Biolender LLC and Biolender II LLC filed voluntary petitions
for relief under Chapter 11, Bankruptcy Court. On August 16, 2010, we filed our First Amended Joint Plan of Reorganization, and, on October 25, 2010, we filed the First Modification to the First Amended Joint Plan of Reorganization
(collectively and as amended and supplemented, the Plan). On October 27, 2010, the Bankruptcy Court held a Confirmation hearing and confirmed the Plan, and, on November 2, 2010, the Bankruptcy Court entered an Order Confirming
Debtors First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Confirmation Order), which approved and confirmed the Plan, as modified by the Confirmation Order. We emerged from Chapter 11
protection, and the Plan became effective, on November 17, 2010 (the Effective Date).

Financial Accounting Standards Board
Codification Topic 852 (FASB ASC 852), which is applicable to companies in Chapter 11, generally does not change the manner in which financial statements are prepared. However, it does require that the financial statements for
periods subsequent to the filing of the Chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Revenues, expenses, realized gains and losses, and
provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization items in the statements of operations beginning in the quarter ending December 31,
2008. The balance sheet must distinguish prepetition liabilities subject to compromise from both those prepetition liabilities that are not subject to compromise and from post-petition liabilities. Liabilities that may be affected by a plan of
reorganization must be reported at the amounts expected to be allowed, even if they may be settled for lesser amounts. In addition, cash provided by reorganization items must be disclosed separately in the statement of cash flows. We adopted FASB
ASC 852 effective on November 10, 2008 and will segregate those items as outlined above for all reporting periods subsequent to such date, until our emergence from Chapter 11 bankruptcy protection.



49



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Fluctuations in Operating Results

Our operating results may vary significantly from quarter to quarter or year to year, depending on factors such as timing of
biopharmaceutical development and commercialization of products by our customers, the timing and size of orders for instrumentation and cultureware, the timing of increased research and development of BiovaxID®, and will be impacted by our planned marketing launch of the AutovaxID instrument. Consequently, revenues,
profits or losses may vary significantly from quarter to quarter or year to year, and revenue or profits or losses in any period will not necessarily be indicative of results in subsequent periods.

Impact of Foreign Sales

A significant
amount of our operating revenue has historically been derived from export sales. Our export sales were 29%, and 28% of total revenue for fiscal years ended September 30, 2010, and 2009, respectively. While we invoice our customers in U.S.
dollars, we will be subject to risks associated with foreign sales, including the difficulty of maintaining cross-cultural distribution relationships, economic or political instability, shipping delays, fluctuations in foreign currency exchange
ratios and foreign patent infringement claims, all of which could have a significant impact on our ability to deliver products on a timely and competitive basis. This has not been a significant factor in prior years. In addition, future imposition
of, or significant increases in, the level of customs duties, export quotas or other trade restrictions could have an adverse effect on our business.

Tax Loss Carryforwards

FASB Codification Topic 740 requires that a deferred tax amount be
reduced by a valuation allowance if, based on the weight of available evidence it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. The valuation allowance should
be sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. As a result, we recorded a valuation allowance with respect to all our deferred tax assets.

For the tax periods June 17, 2003, through September 30, 2005, we were part of a consolidated federal income tax return that included Accentia.
As of December 7, 2005, we became deconsolidated from the Accentia group as a result of Accentias ownership in us being reduced below 80% and have filed a separate return for the interim period of December 8, 2005 through
September 30, 2006, and will continue to file separate returns thereafter.

We have a federal net operating loss of approximately $70.7
million as of September 30, 2010 (expiring 2020). Under Section 382 and 383 of the Internal Revenue Code, if an ownership change occurs with respect to a loss corporation, as defined, there are annual limitations on the amount
of the net operating loss and other deductions which are available to us. The portion of the NOLs incurred prior to June 17, 2003 ($3.4 million), are subject to these limitations. As such, these NOLs are limited to approximately
$0.2 million per year. NOLs incurred after June 17, 2003 may also be subject to restriction.

Recent Accounting
Pronouncements

See Footnote 3 to our consolidated financial statements in Item 15 of this filing.

Off-Balance Sheet Arrangements

We do
not maintain any off-balance sheet financing arrangements.

Effects of Inflation

Our assets are primarily liquid in nature and are not significantly affected by inflation. However, the rate of inflation affects our expenses, including
employee compensation, raw materials and occupancy, which may not be readily recoverable through charges for services provided by us.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
|-------- | ---------------------------------------------------------

Not Applicable.



50



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|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

Financial Statements: See Index to Financial Statements on Page F-1 immediately following the signature page of this report.



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

None.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------

Managements Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our internal control over
financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Internal control over financial reporting includes those policies and procedures that:



| |  |  | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control  Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation under the Internal Control  Integrated Framework, management concluded that our internal control over financial reporting was effective as of
September 30, 2010.

This annual report does not include an attestation report of our registered public accounting firm regarding
internal control over financial reporting. Managements report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit non-accelerated filers like us to
provide only managements report.

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer (principal executive officer) and
chief financial officer (principal financial officer), we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended
(the Exchange Act). Based on this evaluation, our chief executive officer (principal executive officer) and chief financial officer (principal financial officer) concluded that our disclosure controls and procedures
were effective as of the end of the period covered by this Annual Report on Form 10-K to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and
reported, within the time periods specified in the SECs rules and forms. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed by us in the reports we file or
submit is accumulated and communicated to management, including our chief executive officer (principal executive officer) and chief financial officer (principal financial officer), as appropriate to allow timely decisions regarding required
disclosure.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting identified in connection with this evaluation that occurred during the quarter ended September 30, 2010 that
have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------

None.



51



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PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------

Code of Business Conduct and Ethics

Our Board of Directors has adopted a Code of
Business Conduct and Ethics that is applicable to all of our employees and directors and our subsidiaries. The text of the Code of Business Conduct and Ethics is posted on the website at www.biovest.comin the Investor Relations
section of our website.

The information required by this Item regarding executive officers is set forth under Executive Officers of the
Registrant in Part I, Item 1 of this Annual Report. The other information required by this Item is incorporated by reference to the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The information
required by this Item is incorporated by reference to the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by
this Form 10-K.



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

Information about security ownership is incorporated by reference to the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders to be
filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K.

Equity
Compensation Plan Information

Securities authorized for issuance under equity compensation plans as of September 30, 2010:



|                                                       |  |                                                                     |            |  |                                                       |   |      |                                                               |  |  |         | 
|------------------------------------------------------ |  | ------------------------------------------------------------------- | ---------- |  | ----------------------------------------------------- | - | ---- | ------------------------------------------------------------- |  |  | ------- | 
|Plan category                                          |  | Number ofsecurities tobe
issueduponexercise
ofoutstandingoptions(a) |            |  | Weighted-averageexerciseprice ofoutstandingoptions(b) |   |      | Number ofsecuritiesremaining availablefor future 
issuance(c) | 
|Equity compensation plans approved by security holders |  |                                                                     | 26,812,486 |  |                                                       | $ | 0.57 |                                                               |  |  | 187,514 | 
|                                                       |  |                                                                     |            |  |                                                       |   |      |                                                               |  |  |         | 
|Total                                                  |  |                                                                     | 26,812,486 |  |                                                       |   |      |                                                               |  |  | 187,514 | 
|                                                       |  |                                                                     |            |  |                                                       |   |      |                                                               |  |  |         | 



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

The information required by this Item is incorporated by reference to the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission
within 120 days after the end of the fiscal year covered by this Form 10-K.



|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES
|-------- | --------------------------------------

The information required by this Item is incorporated by reference to the Companys Proxy Statement for the 2011 Annual Meeting of Shareholders to be
filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this report.



52



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PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|-------- | ------------------------------------------

(a) The following documents are filed as part of this Annual Report:

(1)
Financial Statements

See Index to Financial Statements on page F-1.

(2) Supplemental Schedules

Schedule II  Valuation and Qualifying Accounts (see last page of Consolidated Financial Statements)

All other schedules have been omitted because the required information is not present in amounts sufficient to require submission of the schedule, or because the required information is included in the
consolidated financial statements or notes thereto.

(3) Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this annual report on Form 10-K:



|              |  |                                                                                                                                                                                                                                                                                                                
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                    
|              | 
|3.1           |  | Amended Certificate of Incorporation of the Company (filed in Biovests Form 8-K filed November 23, 2010 and incorporated herein by reference)                                                                                                                                                                 
|              | 
|3.2           |  | Amended Bylaws of the Company (filed in Biovests Form 8-K filed November 23, 2010 and incorporated herein by reference)                                                                                                                                                                                       
|              | 
|4.1           |  | Reference is made to Exhibits 3.1 and 3.2.                                                                                                                                                                                                                                                                     
|              | 
|4.2           |  | First Amended Joint Plan of Reorganization of Biovest International, Inc., Biovax, Inc., AutovaxID, Inc., Biolender, LLC and Biolender II, LLC Under Chapter 11 of Title 11, United
States Code (filed in Biovests Form 8-K filed November 2, 2010 and incorporated herein by reference)                      
|              | 
|4.3           |  | First Modification to First Amended Joint Plan of Reorganization of Biovest International, Inc., Biovax, Inc., AutovaxID, Inc., Biolender, LLC and Biolender II, LLC Under Chapter 11
of Title 11, United States Code (filed in Biovests Form 8-K filed November 2, 2010 and incorporated herein by reference)
|              | 
|10.1          |  | Biovest International, Inc. 2000 Stock Option Plan (filed in Biovests Form 10-QSB for the period ended March 31, 2001, filed on May 21, 2001 and incorporated herein
by reference)                                                                                                                            
|              | 
|10.2          |  | Investment Agreement dated April 10, 2003 (filed in Biovests Form 8-K filed June 23, 2003 and incorporated herein by reference)                                                                                                                                                                               
|              | 
|10.3          |  | Amendment to Investment Agreement dated June 16, 2003 (filed in Biovests Form 8-K filed June 23, 2003 and incorporated herein by reference)                                                                                                                                                                   
|              | 
|10.4          |  | Promissory Note in principal amount of $2,500,000 payable to the Company (filed in Biovests Form 8-K filed June 23, 2003 and incorporated herein by
reference)                                                                                                                                                
|              | 
|10.5          |  | Promissory Note in principal amount of $15,000,000 payable to the Company (filed in Biovests Form 8-K filed June 23, 2003 and incorporated herein by
reference)                                                                                                                                               
|              | 
|10.6          |  | Agreement regarding first right of refusal (filed in Biovests Form 8-K filed June 23, 2003 and incorporated herein by reference)                                                                                                                                                                              
|              | 
|10.7          |  | Security Agreement (filed in Biovests Form 8-K filed June 23, 2003 and incorporated herein by reference)                                                                                                                                                                                                      
|              | 
|10.8          |  | Amendment to Promissory Note in the principal amount of $2,500,000 dated June 16, 2003 (filed in Biovests Form 8-K filed September 22, 2003 and incorporated herein
by reference)                                                                                                                             
|              | 
|10.9          |  | Amended and Restated Amendment to Promissory Note (filed in Biovests Form 8-K filed September 22, 2003 and incorporated herein by reference)                                                                                                                                                                  



53



---



|              |  |                                                                                                                                                                                                                                                                        
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                            
|              | 
|10.10         |  | Amended and Restated Amendment to Escrow Agreement (filed in Biovests Form 8-K filed September 22, 2003 and incorporated herein by reference)                                                                                                                         
|              | 
|10.11         |  | Amendment to Escrow Agreement (filed in Biovests Form 8-K filed September 22, 2003 and incorporated herein by reference)                                                                                                                                              
|              | 
|10.12         |  | Second Amendment to Investment Agreement (filed in Biovests Form 10-QSB for the period ended June 30, 2004, filed on August 23, 2004 and incorporated herein by
reference)                                                                                            
|              | 
|10.13         |  | Incentive Stock Option Grant dated February 10, 2006 from the Company to Angelos Stergiou M.D (filed in Biovests Form 10-QSB for the period ended December 31, 2005,
filed on February 21, 2006 and incorporated herein by reference)                                 
|              | 
|10.14         |  | Secured Promissory Note Dated December 1, 2005 from the Company to Accentia Biopharmaceuticals, Inc. (Accentia) (filed in Biovests Form 10-QSB for the
period ended December 31, 2005, filed on February 21, 2006 and incorporated herein by reference)             
|              | 
|10.15         |  | Secured Promissory Note Dated December 31, 2005 from the Company to Accentia (filed in Biovests Form 10-QSB for the period ended December 31, 2005, filed on
February 21, 2006 and incorporated herein by reference)                                                  
|              | 
|10.16         |  | Note and Warrant Purchase Agreement, dated March 31, 2006, between the Company and Laurus Master Fund, Ltd. (Laurus) (filed in Biovests Form 8-K filed
April 6, 2006 and incorporated herein by reference)                                                          
|              | 
|10.17         |  | Secured Promissory Note, dated March 31, 2006, issued by the Company to Laurus (filed in Biovests Form 8-K filed April 6, 2006 and incorporated herein by
reference)                                                                                                  
|              | 
|10.18         |  | Common Stock Purchase Warrant, dated March 31, 2006, issued by the Company to Laurus (filed in Biovests Form 8-K filed April 6, 2006 and incorporated herein by
reference)                                                                                            
|              | 
|10.19         |  | Restricted Account Agreement, dated March 31, 2006, among the Company, Laurus, and North Fork Bank (filed in Biovests Form 8-K filed April 6, 2006 and incorporated
herein by reference)                                                                              
|              | 
|10.20         |  | Restricted Account Letter Agreement, dated March 31, 2006, the Company and Laurus (filed in Biovests Form 8-K filed April 6, 2006 and incorporated herein by
reference)                                                                                               
|              | 
|10.21         |  | Registration Rights Agreement, dated March 31, 2006, between the Company and Laurus (filed in Biovests Form 8-K filed April 6, 2006 and incorporated herein by
reference)                                                                                             
|              | 
|10.22         |  | Master Security Agreement, dated March 31, 2006, among Laurus, the Company, and Biovax (filed in Biovests Form 8-K filed April 6, 2006 and incorporated herein by
reference)                                                                                          
|              | 
|10.23         |  | Stock Pledge Agreement, dated March 31, 2006, between Laurus and Accentia (filed in Biovests Form 8-K filed April 6, 2006 and incorporated herein by
reference)                                                                                                       
|              | 
|10.24         |  | Guaranty, dated March 31, 2006, made by Accentia in favor of Laurus (filed in Biovests Form 8-K filed April 6, 2006 and incorporated herein by
reference)                                                                                                             
|              | 
|10.25         |  | Amended and Restated Stock Pledge Agreement, dated as of April 29, 2005 and amended and restated as of April 25, 2006, among Laurus, Accentia and each other Pledgor party
thereto (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by reference)
|              | 
|10.26         |  | Demand Note, dated April 21, 2006, issued by the Company to Laurus (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by
reference)                                                                                                                
|              | 
|10.27         |  | First Bank Subordination Agreement, dated as of April 25, 2006, by and among Laurus, First Bank (First Bank) and Accentia(filed in Biovests Form 8-K filed
May 2, 2006 and incorporated herein by reference)                                                        
|              | 
|10.28         |  | Telesis Subordination Agreement, dated as of April 25, 2006, by and among Laurus, Telesis CDE Two, LLC (Telesis CDE), Biovax, the Company and Accentia. (filed in
Biovests Form 8-K filed May 2, 2006 and incorporated herein by reference)                         



54



---



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|              | 
|10.29         |  | Promissory Note, dated April 25, 2006, issued by Biovax Investment LLC (Leverage Fund) to Biolender, LLC (Biolender) (filed in Biovests Form 8-K
filed May 2, 2006 and incorporated herein by reference)                                                                                                                                                                                                                                                                                              
|              | 
|10.30         |  | Loan and Security Agreement, dated as of April 25, 2006, between Leverage Fund and Biolender (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                          
|              | 
|10.31         |  | Subordinated Convertible Promissory Note, dated April 25, 2006, from Biovax to Telesis CDE (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                            
|              | 
|10.32         |  | Convertible Loan Agreement, dated as of April 25, 2006, by and among Biovax, Telesis CDE and the Company (filed in Biovests Form 8-K filed May 2, 2006 and
incorporated herein by reference)                                                                                                                                                                                                                                                                                                              
|              | 
|10.33         |  | Guaranty, dated April 25, 2006, made by Frances E. ODonnell, Jr., Kathleen M. ODonnell (as Trustee of the Frances E. ODonnell, Jr. Irrevocable Trust), Dennis
L. Ryll, Ronald Osman, Steven J. Stogel, Donald L. Ferguson, Donald L. Ferguson (as trustee of the Donald L. Ferguson Revocable Trust), the Company and Accentia in favor of U.S. Bancorp Community Investment Corporation (USBCIC) and
Telesis CDE (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by reference)
|              | 
|10.34         |  | Limited Liability Company Agreement of Biolender, dated April 25, 2006, between the Company and Accentia (filed in Biovests Form 8-K filed May 2, 2006 and
incorporated herein by reference)                                                                                                                                                                                                                                                                                                              
|              | 
|10.35         |  | Put Option Agreement dated April 25, 2006, between Biovax, Leverage Fund, USBCIC and Biolender (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein
by reference)                                                                                                                                                                                                                                                                                                                        
|              | 
|10.36         |  | Purchase Option Agreement dated April 25, 2006, between Biovax, Leverage Fund, USBCIC and Biolender (filed in Biovests Form 8-K filed May 2, 2006 and incorporated
herein by reference)                                                                                                                                                                                                                                                                                                                   
|              | 
|10.37         |  | Common Stock Purchase Warrant, dated April 25, 2006, issued by the Company to Telesis CDE (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                             
|              | 
|10.38         |  | Common Stock Purchase Warrant, dated April 25, 2006, issued by Accentia to Telesis CDE (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                                
|              | 
|10.39         |  | Tax Credit Reimbursement and Indemnity Agreement, dated as of April 25, 2006, between Biovax and USBCIC (filed in Biovests Form 8-K filed May 2, 2006 and
incorporated herein by reference)                                                                                                                                                                                                                                                                                                               
|              | 
|10.40         |  | Asset Purchase Agreement dated April 18, 2006 between the Company and Biovax (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                                          
|              | 
|10.41         |  | Vaccine Purchase and Sale Agreement, dated as of April 28, 2006, between Biovax and the Company (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein
by reference)                                                                                                                                                                                                                                                                                                                       
|              | 
|10.42         |  | Indemnification Agreement, dated as of April 25, 2006, from the Company to Dennis Ryll (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                                
|              | 
|10.43         |  | Indemnification Agreement, dated as of April 25, 2006, from the Company to Steven Stogel (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                              
|              | 
|10.44         |  | Indemnification Agreement, dated as of April 25, 2006, from the Company to Donald Ferguson (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                            
|              | 
|10.45         |  | Indemnification Agreement, dated as of April 25, 2006, from the Company to Ronald Osman (filed in Biovests Form 8-K filed May 2, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                               
|              | 
|10.46         |  | Indemnification Agreement, dated as of April 25, 2006, from the Company to Francis ODonnell (filed in Biovests Form 8-K filed May 2, 2006 and incorporated
herein by reference)                                                                                                                                                                                                                                                                                                                          
|              | 
|10.47         |  | Common Stock Purchase Warrant, dated April 25, 2006, issued by the Company to Ronald Osman (filed in Biovests Form 10-QSB for the period ended March 31, 2006, filed
on May 22, 2006 and incorporated herein by reference)                                                                                                                                                                                                                                                                                
|              | 
|10.48         |  | Common Stock Purchase Warrant, dated April 25, 2006, issued by the Company to Dennis Ryll (filed in Biovests Form 10-QSB for the period ended March 31, 2006, filed
on May 22, 2006 and incorporated herein by reference)                                                                                                                                                                                                                                                                                 



55



---



|              |  |                                                                                                                                                                                                                                                                                                                
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                    
|              | 
|10.49         |  | Common Stock Purchase Warrant, dated April 25, 2006, issued by the Company to Steven Stogel (filed in Biovests Form 10-QSB for the period ended March 31, 2006, filed
on May 22, 2006 and incorporated herein by reference)                                                                                   
|              | 
|10.50         |  | Common Stock Purchase Warrant, dated April 25, 2006, issued by the Company to Donald Ferguson (filed in Biovests Form 10-QSB for the period ended March 31, 2006,
filed on May 22, 2006 and incorporated herein by reference)                                                                                 
|              | 
|10.51         |  | Amendment and Consent to Release dated August 2, 2006 (filed in Biovests Form 8-K filed August 8, 2006 and incorporated herein by reference and incorporated herein
by reference)                                                                                                                             
|              | 
|10.52         |  | Promissory Note dated September 5, 2006, between the Company and Pulaski Bank and Trust Company (Pulaski) (filed in Biovests Form 8-K filed September 11,
2006 and incorporated herein by reference)                                                                                                        
|              | 
|10.53         |  | Common Stock Purchase Warrant, dated September 5, 2006, issued by the Company to Pulaski (filed in Biovests Form 8-K filed September 11, 2006 and incorporated herein
by reference)                                                                                                                           
|              | 
|10.55         |  | Letter Terminating CRADA from the Company to National Cancer Institute dated September 25, 2006 (filed in Biovests Form 8-K filed September 26, 2006 and incorporated
herein by reference)                                                                                                                    
|              | 
|10.56         |  | Registration Rights Agreement, dated September 29, 2006, among the Company and the Purchasers identified therein (filed in Biovests Form 8-K filed October 11, 2006
and incorporated herein by reference)                                                                                                     
|              | 
|10.57         |  | Royalty Agreement Between the Company and Accentia, dated October 31, 2006 (filed in Biovests Form 10-KSB for the period ended September 30, 2006, filed on
December 29, 2006 and incorporated herein by reference)                                                                                           
|              | 
|10.58         |  | Termination Agreement Between the Company and Accentia, dated October 31, 2006 (filed in Biovests Form 10-KSB for the period ended September 30, 2006, filed on
December 29, 2006 and incorporated herein by reference)                                                                                       
|              | 
|10.59         |  | Biolender Purchase Agreement, dated October 31, 2006, between the Company and Accentia (filed in Biovests Form 10-KSB for the period ended September 30, 2006, filed
on December 29, 2006 and incorporated herein by reference)                                                                               
|              | 
|10.60         |  | Consent, dated October 31, 2006, among the Company, Biolender, AutovaxID and Laurus (filed in Biovests Form 10-KSB for the period ended September 30, 2006, filed on
December 29, 2006 and incorporated herein by reference)                                                                                  
|              | 
|10.61         |  | Biovest International, Inc. 2006 Stock Option Plan (filed in Biovests Form 8-K filed on November 2006 and incorporated herein by reference)                                                                                                                                                                   
|              | 
|10.62         |  | License and Asset Purchase Agreement, dated as of December 8, 2006, between the Company and AutovaxID (filed in Biovests Form 8-K filed December 14, 2006 and
incorporated herein by reference)                                                                                                               
|              | 
|10.63         |  | License Agreement, dated as of December 8, 2006, between the Company and AutovaxID (filed in Biovests Form 8-K filed December 14, 2006 and incorporated herein by
reference)                                                                                                                                  
|              | 
|10.64         |  | Secured Promissory Note, dated as of December 8, 2006, made by the Company for the benefit of Accentia (filed in Biovests Form 8-K filed December 14, 2006 and
incorporated herein by reference)                                                                                                              
|              | 
|10.65         |  | Loan and Security Agreement, dated as of December 8, 2006, between Leverage Fund and Biolender II, LLC (Biolender II) (filed in Biovests Form 8-K filed
December 14, 2006 and incorporated herein by reference)                                                                                             
|              | 
|10.66         |  | Promissory Note, dated December 8, 2006, issued by AutovaxID Investment LLC (Leverage Fund) to Biolender (filed in Biovests Form 8-K filed December 14,
2006 and incorporated herein by reference)                                                                                                          
|              | 
|10.67         |  | Subordinated Promissory Note, dated December 8, 2006, from AutovaxID to the CDE (filed in Biovests Form 8-K filed December 14, 2006 and incorporated herein by
reference)                                                                                                                                     
|              | 
|10.68         |  | QLICI Loan Agreement, dated as of December 8, 2006, by and among AutovaxID, the CDE and Biovest (filed in Biovests Form 8-K filed December 14, 2006 and incorporated
herein by reference)                                                                                                                     
|              | 
|10.69         |  | Subordination Agreement, dated as of December 8, 2006, by and among Laurus, St. Louis New Markets Tax Credit Fund-II, LLC (CDE), US Bancorp Community Investment
Corporation (USBCIC), AutovaxID and the Company (filed in Biovests Form 8-K filed December 14, 2006 and incorporated herein by reference)



56



---



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|              | 
|10.70         |  | Second Lien Security Agreement, dated December 8, 2006, from AutovaxID to the CDE (filed in Biovests Form 8-K filed December 14, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                                         
|              | 
|10.71         |  | Tax Credit Reimbursement and Indemnity Agreement, dated as of December 8, 2006, between AutovaxID and USBCIC (filed in Biovests Form 8-K filed December 14, 2006
and incorporated herein by reference)                                                                                                                                                                                                                                                                                                              
|              | 
|10.72         |  | Guaranty, dated December 8, 2006, made by Hopkins Capital Group II, LLC, Frances E. ODonnell, Jr., Kathleen M. ODonnell (as Trustee of the Frances E.
ODonnell, Jr. Irrevocable Trust), Dennis L. Ryll, Ronald E. Osman, Alan M. Pearce, Steven R. Arikian, Steven J. Stogel, Donald L. Ferguson, Donald L. Ferguson (as trustee of the Donald L. Ferguson Revocable Trust)] and Biovest in favor of
USBCIC and the CDE (filed in Biovests Form 8-K filed December 14, 2006 and incorporated herein by reference)
|              | 
|10.73         |  | Limited Liability Company Agreement of Biolender II, dated December 8, 2006 (filed in Biovests Form 8-K filed December 14, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                                               
|              | 
|10.74         |  | Put Option Agreement dated December 8, 2006, between AutovaxID, Leverage Fund, USBCIC and Biolender II (filed in Biovests Form 8-K filed December 14, 2006 and
incorporated herein by reference)                                                                                                                                                                                                                                                                                                                    
|              | 
|10.75         |  | Purchase Option Agreement dated December 8, 2006, between AutovaxID, Leverage Fund, USBCIC and Biolender II (filed in Biovests Form 8-K filed December 14, 2006 and
incorporated herein by reference)                                                                                                                                                                                                                                                                                                               
|              | 
|10.76         |  | Indemnification Agreement, dated as of December 8, 2006, from the Company to Dennis Ryll (filed in Biovests Form 8-K filed December 14, 2006 and incorporated herein
by reference)                                                                                                                                                                                                                                                                                                                                  
|              | 
|10.77         |  | Indemnification Agreement, dated as of December 8, 2006, from the Company to Steven Stogel (filed in Biovests Form 8-K filed December 14, 2006 and incorporated
herein by reference)                                                                                                                                                                                                                                                                                                                                
|              | 
|10.78         |  | Indemnification Agreement, dated as of December 8, 2006, from the Company to Donald Ferguson (filed in Biovests Form 8-K filed December 14, 2006 and incorporated
herein by reference)                                                                                                                                                                                                                                                                                                                              
|              | 
|10.79         |  | Indemnification Agreement, dated as of December 8, 2006, from the Company to Ronald Osman (filed in Biovests Form 8-K filed December 14, 2006 and incorporated herein
by reference)                                                                                                                                                                                                                                                                                                                                 
|              | 
|10.80         |  | Indemnification Agreement, dated as of December 8, 2006, from the Company to Francis ODonnell (filed in Biovests Form 8-K filed December 14, 2006 and
incorporated herein by reference)                                                                                                                                                                                                                                                                                                                            
|              | 
|10.81         |  | Indemnification Agreement, dated as of December 8, 2006, from the Company to Alan Pearce (filed in Biovests Form 8-K filed December 14, 2006 and incorporated herein
by reference)                                                                                                                                                                                                                                                                                                                                  
|              | 
|10.82         |  | Indemnification Agreement, dated as of December 8, 2006, from the Company to Steven Arikian (filed in Biovests Form 8-K filed December 14, 2006 and incorporated
herein by reference)                                                                                                                                                                                                                                                                                                                               
|              | 
|10.83         |  | Subscription Agreement, dated December 8, 2006, between the Company and SLDC (filed in Biovests Form 8-K filed December 14, 2006 and incorporated herein by
reference)                                                                                                                                                                                                                                                                                                                                              
|              | 
|10.84         |  | Common Stock Purchase Warrant, dated December 14, 2006 issued by the Company to Dennis Ryll (filed in Biovests Form 8-K filed December 14, 2006 and incorporated
herein by reference)                                                                                                                                                                                                                                                                                                                               
|              | 
|10.85         |  | Common Stock Purchase Warrant, dated December 14, 2006 issued by the Company to Steven Stogel (filed in Biovests Form 8-K filed December 14, 2006 and incorporated
herein by reference)                                                                                                                                                                                                                                                                                                                             
|              | 
|10.86         |  | Common Stock Purchase Warrant, dated December 14, 2006 issued by the Company to Donald Ferguson (filed in Biovests Form 8-K filed December 14, 2006 and incorporated
herein by reference)                                                                                                                                                                                                                                                                                                                           
|              | 
|10.87         |  | Common Stock Purchase Warrant, dated December 14, 2006 issued by the Company to Ronald Osman (filed in Biovests Form 8-K filed December 14, 2006 and incorporated
herein by reference)                                                                                                                                                                                                                                                                                                                              
|              | 
|10.88         |  | Common Stock Purchase Warrant, dated December 14, 2006 issued by the Company to Hopkins Capital Group II, LLC (filed in Biovests Form 8-K filed December 14,
2006 and incorporated herein by reference)                                                                                                                                                                                                                                                                                                             
|              | 
|10.89         |  | Common Stock Purchase Warrant, dated December 14, 2006 issued by the Company to Alan Pearce (filed in Biovests Form 8-K filed December 14, 2006 and incorporated
herein by reference)                                                                                                                                                                                                                                                                                                                               



57



---



|              |  |                                                                                                                                                                                                                                                        
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                            
|              | 
|10.90         |  | Common Stock Purchase Warrant, dated December 14, 2006 issued by the Company to Steven Arikian (filed in Biovests Form 8-K filed December 14, 2006 and incorporated
herein by reference)                                                              
|              | 
|10.91         |  | Promissory Note dated January 16, 2007, between the Company and Pulaski Bank and Trust Company (filed in Biovests Form 10-KSB for the period ended September 30,
2006, filed on December 29, 2006 and incorporated herein by reference)               
|              | 
|10.92         |  | Common Stock Purchase Warrant, dated January 16, 2007, issued by the Company to Donald L. Ferguson (filed in Biovests Form 10-KSB for the period ended September 30,
2006, filed on December 29, 200 and incorporated herein by reference )           
|              | 
|10.93         |  | Common Stock Purchase Warrant, dated January 16, 2007, issued by the Company to Hopkins Capital Group II, LLC (filed in Biovests Form 10-KSB for the period ended
September 30, 2006, filed on December 29, 2006 and incorporated herein by reference)
|              | 
|10.94         |  | Common Stock Purchase Warrant, dated January 16, 2007, issued by the Company to Ronald E. Osman (filed in Biovests Form 10-KSB for the period ended September 30,
2006, filed on December 29, 2006 and incorporated herein by reference)              
|              | 
|10.95         |  | Common Stock Purchase Warrant, dated January 16, 2007, issued by the Company to Alan M. Pearce (filed in Biovests Form 10-KSB for the period ended September 30,
2006, filed on December 29, 2006 and incorporated herein by reference)               
|              | 
|10.96         |  | Common Stock Purchase Warrant, dated January 16, 2007, issued by the Company to Dennis L. Ryll (filed in Biovests Form 10-KSB for the period ended September 30,
2006, filed on December 29, 2006 and incorporated herein by reference)               
|              | 
|10.97         |  | Indemnification Agreement, dated January 11, 2007, issued by the Company to Donald L. Ferguson (filed in Biovests Form 10-KSB for the period ended September 30,
2006, filed on December 29, 2006 and incorporated herein by reference)               
|              | 
|10.98         |  | Indemnification Agreement, dated January 11, 2007, issued by the Company to Hopkins Capital Group II, LLC (filed in Biovests Form 10-KSB for the period ended
September 30, 2006, filed on December 29, 2006 and incorporated herein by reference)    
|              | 
|10.99         |  | Indemnification Agreement, dated January 11, 2007, issued by the Company to Ronald E. Osman (filed in Biovests Form 10-KSB for the period ended September 30, 2006,
filed on December 29, 2006 and incorporated herein by reference)                  
|              | 
|10.100        |  | Indemnification Agreement, dated January 11, 2007, issued by the Company to Alan M. Pearce (filed in Biovests Form 10-KSB for the period ended September 30, 2006,
filed on December 29, 2006 and incorporated herein by reference)                   
|              | 
|10.101        |  | Indemnification Agreement, dated January 11, 2007, issued by the Company to Dennis L. Ryll (filed in Biovests Form 10-KSB for the period ended September 30, 2006,
filed on December 29, 2006 and incorporated herein by reference)                   
|              | 
|10.102        |  | Promissory Note dated March 22, 2007, between the Company and Pulaski Bank and Trust Company (filed in Biovests Form 8-K filed January 19, 2007 and incorporated
herein by reference)                                                                 
|              | 
|10.103        |  | Common Stock Warrant from the Company to Pulaski dated March 22, 2007 (in Biovests Form 8-K filed January 19, 2007 and incorporated herein by
reference)                                                                                              
|              | 
|10.104        |  | Common Stock Warrant from the Company to Peter Pappas and Catherine Pappas dated March 22, 2007 (in Biovests Form 8-K filed January 19, 2007 and incorporated herein
by reference)                                                                    
|              | 
|10.105        |  | Indemnity Agreement from the Company to Peter Pappas and Catherine Pappas dated March 22, 2007 (in Biovests Form 8-K filed January 19, 2007 and incorporated herein
by reference)                                                                     
|              | 
|10.106        |  | Letter-Agreement between the Company and Laurus Master Fund, Ltd. Effective as of April 17, 2007 (in Biovests Form 8-K filed March 28, 2007 and incorporated herein
by reference)                                                                     
|              | 
|10.107        |  | Agreement between American Defense International, Inc. and the Company dated February 8, 2007 (in Biovests Form 8-K filed April 19, 2007 and incorporated herein by
reference)                                                                        
|              | 
|10.108        |  | Promissory Note between the Company and Pulaski Bank and Trust Company dated April 22, 2007 (in Biovests Form 8-K filed April 19, 2007 and incorporated herein by
reference)                                                                          



58



---



|              |  |                                                                                                                                                                                                                                  
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                      
|              | 
|10.109        |  | Distribution Agreement dated June 8, 2007 between AutovaxID, Inc. and VWR International, Inc. (in Biovests Form 10-Q for period ended March 31, 2007 filed
May 15, 2007 and incorporated herein by reference)                   
|              | 
|10.110        |  | Promissory Note dated June 26, 2007, between the Company and Southwest Bank Creve Couer Financial Center of St. Louis, MO (in Biovests Form 8-K filed June 13, 2007
and incorporated herein by reference)                       
|              | 
|10.111        |  | Common Stock Purchase Warrant, dated June 26, 2007, issued by Biovest to Alan M. Pearce (in Biovests Form 8-K filed June 13, 2007 and incorporated herein by
reference)                                                         
|              | 
|10.112        |  | Indemnity Agreement dated June 26, 2007 between Biovest and Alan M. Pearce (in Biovests Form 8-K filed June 13, 2007 and incorporated herein by
reference)                                                                      
|              | 
|10.113        |  | Amended March 22, 2007 Promissory Note with Pulaski Bank and Trust Company of St. Louis, MO (Pulaski) and the Company dated April 22, 2007 (in Biovests
Form 8-K filed June 29, 2007 and incorporated herein by reference)    
|              | 
|10.114        |  | Second Amended March 22, 2007 Promissory Note with Pulaski and the Company dated May 21, 2007 (in Biovests Form 8-K filed June 29, 2007 and incorporated herein
by reference)                                                   
|              | 
|10.115        |  | Third Amended March 22, 2007 Promissory Note with Pulaski and the Company dated July 21, 2007 (in Biovests Form 8-K filed June 29, 2007 and incorporated herein
by reference)                                                   
|              | 
|10.116        |  | Amended January 16, 2007 Promissory Note with Pulaski and the Company dated July 5, 2007 (in Biovests Form 8-K filed June 29, 2007 and incorporated herein by
reference)                                                        
|              | 
|10.117        |  | Subordinated Promissory Note with Philip E. Rosensweig and the Company dated September 10, 2007 (in Biovests Form 8-K filed June 29, 2007 and incorporated herein by
reference)                                                 
|              | 
|10.118        |  | Subordinated Note Purchase Agreement with Philip E. Rosensweig and the Company dated September 10, 2007 (in Biovests Form 10-K for period ended September 30, 2007
filed December 28, 2007 and incorporated herein by reference)
|              | 
|10.119        |  | Unsecured Promissory Note with Francis E. ODonnell, Jr. and the Company dated September 11, 2007 (in Biovests Form 10-K for period ended September 30, 2007
filed December 28, 2007 and incorporated herein by reference)      
|              | 
|10.120        |  | Unsecured Promissory Note with Ronald E. Osman and the Company dated September 11, 2007 (in Biovests Form 10-K for period ended September 30, 2007 filed
December 28, 2007 and incorporated herein by reference)                
|              | 
|10.121        |  | Common Stock Purchase Warrant, dated September 11, 2007, issued by the Company to Ronald E. Osman (in Biovests Form 10-K for period ended September 30, 2007 filed
December 28, 2007 and incorporated herein by reference)      
|              | 
|10.122        |  | Unsecured Promissory Note with Dennis L. Ryll and the Company dated October 1, 2007 (in Biovests Form 10-K for period ended September 30, 2007 filed
December 28, 2007 and incorporated herein by reference)                    
|              | 
|10.123        |  | Common Stock Purchase Warrant, dated October 1, 2007 issued by the Company to Dennis L. Ryll (in Biovests Form 10-K for period ended September 30, 2007 filed
December 28, 2007 and incorporated herein by reference)           
|              | 
|10.124        |  | Promissory Note dated October 5, 2007, between the Company and Pulaski Bank and Trust Company (in Biovests Form 10-K for period ended September 30, 2007 filed
December 28, 2007 and incorporated herein by reference)          
|              | 
|10.125        |  | Unsecured Promissory Note dated October 12, 2007, between the Company and Ronald E. Osman (in Biovests Form 10-Q for period ended June 30, 2007 filed August 14,
2007 and incorporated herein by reference)                     
|              | 
|10.126        |  | Common Stock Purchase Warrant, dated October 12, 2007, issued by the Company to Ronald E. Osman (in Biovests Form 10-Q for period ended June 30, 2007 filed
August 14, 2007 and incorporated herein by reference)               
|              | 
|10.127        |  | Promissory Note dated October 21, 2007, between the Company and Pulaski Bank and Trust Company (in Biovests Form 10-K for period ended September 30, 2007 filed
December 28, 2007 and incorporated herein by reference)         
|              | 
|10.128        |  | Note Purchase Agreement dated October 30, 2007, between the Company and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed September 12, 2007 and incorporated
herein by reference)                                      
|              | 
|10.129        |  | Note Purchase Agreement dated October 30, 2007, between the Company and Valens U.S. SPV I, LLC (in Biovests Form 8-K filed September 12, 2007 and incorporated herein
by reference)                                             



59



---



|              |  |                                                                                                                                                                                                                                                     
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                         
|              | 
|10.130        |  | Royalty Agreement dated October 30, 2007, between the Company and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed September 12, 2007 and incorporated
herein by reference)                                                               
|              | 
|10.131        |  | Royalty Agreement dated October 30, 2007, between the Company and Valens U.S. SPV I, LLC (in Biovests Form 8-K filed September 12, 2007 and incorporated herein by
reference)                                                                      
|              | 
|10.132        |  | Secured Promissory Note dated October 30, 2007 between the Company and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed September 12, 2007 and incorporated
herein by reference)                                                          
|              | 
|10.133        |  | Secured Promissory Note dated October 30, 2007 between the Company and Valens U.S. SPV I, LLC (in Biovests Form 8-K filed September 12, 2007 and incorporated herein
by reference)                                                                 
|              | 
|10.134        |  | Master Security Agreement dated October 30, 2007 between the Company and Valens U.S. SPV I, LLC. and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed
September 12, 2007 and incorporated herein by reference)                            
|              | 
|10.135        |  | Amendment dated as of October 31, 2007 between the Company and Laurus Master Fund, Ltd. (in Biovests Form 8-K filed September 12, 2007 and incorporated herein by
reference)                                                                       
|              | 
|10.136        |  | Note Purchase Agreement dated December 10, 2007, between the Company and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed October 18, 2007 and incorporated
herein by reference)                                                          
|              | 
|10.137        |  | Note Purchase Agreement dated December 10, 2007, between the Company and Valens U.S. SPV I, LLC (in Biovests Form 8-K filed October 18, 2007 and incorporated herein
by reference)                                                                 
|              | 
|10.138        |  | Royalty Agreement dated December 10, 2007, between the Company and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed October 18, 2007 and incorporated herein
by reference)                                                                
|              | 
|10.139        |  | Royalty Agreement dated December 10, 2007, between the Company and Valens U.S. SPV I, LLC (in Biovests Form 8-K filed October 18, 2007 and incorporated herein by
reference)                                                                       
|              | 
|10.140        |  | Secured Promissory Note dated December 10, 2007 between the Company and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed October 18, 2007 and incorporated
herein by reference)                                                           
|              | 
|10.141        |  | Secured Promissory Note dated December 10, 2007 between the Company and Valens U.S. SPV I, LLC (in Biovests Form 8-K filed October 18, 2007 and incorporated herein
by reference)                                                                  
|              | 
|10.142        |  | Master Security Agreement dated December 10, 2007 between the Company and Valens U.S. SPV I, LLC and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed
October 18, 2007 and incorporated herein by reference)                              
|              | 
|10.143        |  | Intellectual Property Security Agreement dated December 10, 2007 between the Company and Valens U.S. SPV I, LLC and Valens Offshore SPV II, Corp. (in Biovests Form 8-K
filed October 18, 2007 and incorporated herein by reference)               
|              | 
|10.144        |  | Guaranty dated December 10, 2007 between the Company and Valens U.S. SPV I, LLC. and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed October 18, 2007 and
incorporated herein by reference)                                              
|              | 
|10.145        |  | Amendment to Royalty Agreement dated December 10, 2007, between the Company and Valens Offshore SPV II, Corp. (in Biovests Form 10-K for period ended
September 30, 2007 filed December 28, 2007 and incorporated herein by reference)             
|              | 
|10.146        |  | Amendment to Royalty Agreement dated December 10, 2007, between the Company and Valens U.S. SPV I, LLC. (in Biovests Form 10-K for period ended September 30, 2007
filed December 28, 2007 and incorporated herein by reference)                   
|              | 
|10.147        |  | Side Letter dated December 10, 2007, between the Company, Laurus, Valens U.S. SPV I, LLC and Valens Offshore SPV II, Corp. (in Biovests Form 10-K for period ended
September 30, 2007 filed December 28, 2007 and incorporated herein by reference)
|              | 
|10.148        |  | Amendment Letter dated December 17, 2007, between the Company and Dennis L. Ryll (in Biovests Form 10-K for period ended September 30, 2007 filed December 28,
2007 and incorporated herein by reference)                                          
|              | 
|10.149        |  | Sublicense Agreement dated January 16, 2008 between the Company and Revimmune, LLC (in Biovests Form 8-K filed January 22, 2008 and incorporated herein by
reference)                                                                              



60



---



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                               
|              | 
|10.150        |  | Amendment Letter effective January 31, 2008 to Royalty Agreement dated October 31, 2007 between the Company and Valens U.S. SPV I, LLC (in Biovests Form 8-K filed
February 6, 2008 and incorporated herein by reference)                                                                                                                                                                                                                
|              | 
|10.151        |  | Amendment Letter effective January 31, 2008 to Royalty Agreement dated October 31, 2007 between the Company and Valens Offshore SPV II, Corp. (in Biovests Form 8-K
filed February 6, 2008 and incorporated herein by reference)                                                                                                                                                                                                         
|              | 
|10.152        |  | Amendment Letter effective January 31, 2008 to Royalty Agreement dated December 10, 2007 between the Company and Valens U.S. SPV I, LLC (in Biovests Form 8-K filed
February 6, 2008 and incorporated herein by reference)                                                                                                                                                                                                               
|              | 
|10.153        |  | Amendment Letter effective January 31, 2008 to Royalty Agreement dated December 10, 2007 between the Company and Valens Offshore SPV II, Corp. (in Biovests Form 8-K
filed February 6, 2008 and incorporated herein by reference)                                                                                                                                                                                                        
|              | 
|10.154        |  | Amendment and clarification of Accentia Royalty Agreement dated February 5, 2008 between the Company and Accentia Biopharmaceuticals, Inc. (in Biovests Form 8-K filed
February 6, 2008 and incorporated herein by reference)                                                                                                                                                                                                            
|              | 
|10.155        |  | Conversion Agreement dated February 5, 2008 between the Company and Accentia Biopharmaceuticals, Inc. (in Biovests Form 8-K filed February 6, 2008 and incorporated
herein by reference)                                                                                                                                                                                                                                                 
|              | 
|10.156        |  | Amendment Letter dated May 30, 2008 between the Company, Valens U.S. SPV I, LLC and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed June 5, 2008 and
incorporated herein by reference)                                                                                                                                                                                                                                         
|              | 
|10.157        |  | December 10, 2007 Royalty Agreement Amendment dated May 30, 2008 between the Company and Laurus Master Fund, Ltd., Valens U.S. SPV I, LLC, Valens U.S. SPV I, Ltd., Valens
Offshore SPV II, Corp., and PSource Structured Debt Limited (in Biovests Form 8-K filed June 5, 2008 and incorporated herein by reference)                                                                                                                    
|              | 
|10.158        |  | Reaffirmation and Ratification Agreement dated May 30, 2008 between the Company and its subsidiaries, Revimmune LLC, LV Administrative Services, Inc., Valens U.S. SPV I, LLC,
and Valens Offshore SPV II, Corp. (in Biovests Form 8-K filed June 5, 2008 and incorporated herein by reference)                                                                                                                                          
|              | 
|10.159        |  | Guaranty Side Letter dated May 30, 2008 between Accentia Biopharmaceuticals, Inc., Laurus Master Fund, Ltd., Valens U.S. SPV I, LLC, Valens U.S. SPV I, Ltd., Valens Offshore
SPV II, Corp., Valens Offshore SPV II, LLC and PSource Structured Debt Limited (in Biovests Form 8-K filed June 5, 2008 and incorporated herein by reference)                                                                                              
|              | 
|10.160        |  | Promissory Note dated as of June 30, 2008, between the Company and Pulaski Bank and Trust Company (in Biovests Form 8-K filed August 1, 2008 and incorporated herein
by reference)                                                                                                                                                                                                                                                       
|              | 
|10.161        |  | Promissory Note dated as of June 30, 2008, between the Company and Pulaski Bank and Trust Company (in Biovests Form 8-K filed August 1, 2008 and incorporated herein
by reference)                                                                                                                                                                                                                                                       
|              | 
|10.162        |  | Amendment Agreement dated July 31, 2008 between the Company and Laurus Master Fund, Ltd., Valens Offshore SPV I, Ltd., Valens Offshore SPV II, Corp., Valens U.S. SPV I, LLC and
PSource Structured Debt Limited (in Biovests Form 8-K filed August 1, 2008 and incorporated herein by reference)                                                                                                                                        
|              | 
|10.163        |  | Reaffirmation and Ratification Agreement dated July 31, 2008 between the Company and its subsidiaries, Accentia Biopharmaceuticals, Inc. and Revimmune LLC and LV Administrative
Services, Inc., as Agent, Laurus Master Fund, Ltd., Valens U.S. SPV I, LLC, Valens Offshore SPV I, Ltd., Valens Offshore SPV II, Corp., PSource Structured Debt Limited (in Biovests Form 8-K filed August 1, 2008 and incorporated
herein by reference)
|              | 
|10.164        |  | Form of Securities Purchase Agreement, dated September 19, 2008, among Biovest and each of the purchasers of the Private Placement (in Biovests Form 8-K filed
September 26, 2008 and incorporated herein by reference)                                                                                                                                                                                                                  
|              | 
|10.165        |  | Form of Registration Rights Agreement, dated September 19, 2008, among Biovest and each of the purchasers of the Private Placement (in Biovests Form 8-K filed
September 26, 2008 and incorporated herein by reference)                                                                                                                                                                                                                  
|              | 
|10.166        |  | Form of Secured Convertible Debenture among Biovest and each of the purchasers of the Private Placement. (in Biovests Form 8-K filed September 26, 2008 and incorporated
herein by reference)                                                                                                                                                                                                                                            
|              | 
|10.167        |  | Form of Security Agreement, dated September 19, 2008, among Biovest and each of the purchasers of the Private Placement (in Biovests Form 8-K filed September 26,
2008 and incorporated herein by reference)                                                                                                                                                                                                                             



61



---



|              |  |                                                                                                                                                                                                                                                  
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                      
|              | 
|10.168        |  | Form of Common Stock Purchase Warrant (in Biovests Form 8-K filed September 26, 2008 and incorporated herein by reference)                                                                                                                      
|              | 
|10.169        |  | Form of Intellectual Property Security Agreement, dated September 19, 2008, among Biovest and each of the purchasers of the Private Placement (in Biovests Form 8-K filed
September 26, 2008 and incorporated herein by reference)              
|              | 
|10.170        |  | Form of Subordination Agreement between Accentia and Senior Lenders of Biovest dated September 19, 2008 (in Biovests Form 8-K filed September 26, 2008 and
incorporated herein by reference)                                                    
|              | 
|10.171        |  | Form of Subordination Agreement between Accentia and the purchasers of the Private Placement dated September 19, 2008 (in Biovests Form 8-K filed September 26, 2008
and incorporated herein by reference)                                      
|              | 
|10.172        |  | Form of Subordination Agreement between the purchasers of the Private Placement and Senior Lenders of the Company dated September 19, 2008 (in Biovests Form 8-K filed
September 26, 2008 and incorporated herein by reference)                 
|              | 
|10.173        |  | Common Stock Warrant from the Company to Ronald E. Osman dated September 26, 2008 (in Biovests Form 8-K filed September 26, 2008 and incorporated herein by
reference)                                                                          
|              | 
|10.174        |  | Common Stock Warrant from the Company t to Ronald E. Osman dated September 26, 2008 (in Biovests Form 8-K filed September 26, 2008 and incorporated herein by
reference)                                                                        
|              | 
|10.175        |  | Common Stock Warrant from the Company t to Francis E. ODonnell, Jr. dated September 26, 2008 (in Biovests Form 8-K filed September 26, 2008 and incorporated
herein by reference)                                                              
|              | 
|10.176        |  | Promissory Note dated as of September 30, 2008, between the Company and Pulaski Bank and Trust Company (in Biovests Form 8-K filed October 31, 2008 and incorporated
herein by reference)                                                       
|              | 
|10.177        |  | Promissory Note dated as of September 30, 2008, between the Company and Pulaski Bank and Trust Company (in Biovests Form 8-K filed October 31, 2008 and incorporated
herein by reference)                                                       
|              | 
|10.178        |  | Common Stock Warrant from the Company to Philip E. Rosensweig dated October 15, 2008 (in Biovests Form 8-K filed October 31, 2008 and incorporated herein by
reference)                                                                         
|              | 
|10.179        |  | Secured Promissory Note between Corps Real, LLC and Biovest dated December 22, 2008 (in Biovests Form 8-K filed December 23, 2008 and incorporated herein by
reference)                                                                         
|              | 
|10.180        |  | Security Agreement between Corps Real, LLC and Biovest dated December 22, 2008 (in Biovests Form 8-K filed December 23, 2008 and incorporated herein by
reference)                                                                              
|              | 
|10.181        |  | Securities Purchase Agreement, dated October 19, 2010 (the Securities Purchase Agreement), among Biovest and the investors listed on the Schedule of Buyers (in
Biovests Form 8-K filed October 25, 2010 and incorporated herein by reference)
|              | 
|10.182        |  | Form of Debtor in Possession Secured Convertible Note issued October 19, 2010 (in Biovests Form 8-K filed October 25, 2010 and incorporated herein by
reference)                                                                                
|              | 
|10.183        |  | Form of Series A Warrant issued October 19, 2010 (in Biovests Form 8-K filed October 25, 2010 and incorporated herein by reference)                                                                                                             
|              | 
|10.184        |  | Form of Series B Warrant issued October 19, 2010 (in Biovests Form 8-K filed October 25, 2010 and incorporated herein by reference)                                                                                                             
|              | 
|10.185        |  | Lease Between Biovest and JMS Holdings, LLC dated December 2, 2010(in Biovests Form 8-K filed December 8, 2010 and incorporated herein by reference)                                                                                            
|              | 
|10.186        |  | Common Stock Purchase Warrant Issued by Biovest to James Stanton dated December 2, 2010(in Biovests Form 8-K filed December 8, 2010 and incorporated herein by
reference)                                                                       
|              | 
|10.187        |  | Biovests 2010 Equity Incentive Plan.                                                                                                                                                                                                            



62



---



|              |  |                                                                                                                                                  
|------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                      
|              | 
|31.1          |  | Certifications of Chief Executive Officer (Principal Executive Officer) pursuant to Rule 13a-14(a)/(15d-14(a)                                    
|              | 
|31.2          |  | Certifications of Chief Financial Officer pursuant to Rule 13a-14(a)/(15d-14(a)                                                                  
|              | 
|32.1          |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|              | 
|32.2          |  | Certificate of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  



63



---

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



BIOVEST INTERNATIONAL, INC.By:

/s/ Francis E. ODonnell, Jr., M.D.Chairman and Chief Executive Officer(Principal Executive Officer)By:

/s/ Alan M. PearceChief Financial Officer(Principal Financial Officer andPrincipal Accounting Officer)


Date:
December 14, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Company and in the capacities and as of the date indicated:



|    |  |                                 |  |                                                                                        |  |                  
|--- |  | ------------------------------- |  | -------------------------------------------------------------------------------------- |  | -----------------
|    |  | Signature                       |  | Title                                                                                  |  | Date             
|    |  |                                 | 
|By: |  | /s/ Francis E. ODonnell, Jr.   |  | Chief Executive Officer; Chairman of the Board;
Director (Principal Executive Officer) |  | December 14, 2010
|    |  | Francis E. ODonnell, Jr., M.D. |  |                                                                                        | 
|    |  |                                 | 
|By: |  | /s/ Alan M. Pearce              |  | Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |  | December 14, 2010
|    |  | Alan M. Pearce                  |  |                                                                                        | 
|    |  |                                 | 
|By: |  | /s/ Christopher C. Chapman      |  | Director                                                                               |  | December 14, 2010
|    |  | Christopher C. Chapman, M.D.    |  |                                                                                        |  |                  
|    |  |                                 | 
|By: |  | /s/ Raphael J. Mannino          |  | Director                                                                               |  | December 14, 2010
|    |  | Raphael J. Mannino, Ph.D.       |  |                                                                                        |  |                  
|    |  |                                 | 
|By: |  | /s/ Peter J. Pappas, Sr.        |  | Director                                                                               |  | December 14, 2010
|    |  | Peter J. Pappas, Sr.            |  |                                                                                        |  |                  
|    |  |                                 | 
|By: |  | /s/ Jeffrey A. Scott            |  | Director                                                                               |  | December 14, 2010
|    |  | Jeffrey A. Scott, M.D.          |  |                                                                                        |  |                  
|    |  |                                 | 
|By: |  | /s/ John Sitilides              |  | Director                                                                               |  | December 14, 2010
|    |  | John Sitilides                  |  |                                                                                        |  |                  
|    |  |                                 | 
|By: |  | /s/ Ronald E. Osman             |  | Director                                                                               |  | December 14, 2010
|    |  | Ronald E. Osman, Esquire        |  |                                                                                        |  |                  
|    |  |                                 | 
|By: |  | /s/ Edmund C. King              |  | Director                                                                               |  | December 14, 2010
|    |  | Edmund C. King                  |  |                                                                                        |  |                  



64



---

BIOVEST INTERNATIONAL, INC.

Index to Financial Statements



|                                                                                                  |  |      |     | 
|------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                  |  | Page |    
|Report of Independent Registered Public Accounting Firm                                           |  |      | F-1 | 
|Consolidated Balance Sheets as of September 30, 2010 and 2009                                     |  |      | F-2 | 
|Consolidated Statements of Operations for the years ended September 30, 2010 and
2009             |  |      | F-3 | 
|Consolidated Statements of Stockholders Deficit for the years ended September 
30, 2010 and 2009 |  |      | F-4 | 
|Consolidated Statements of Cash Flows for the years ended September 30, 2010 and
2009             |  |      | F-5 | 
|Notes to Consolidated Financial Statements                                                        |  |      | F-6 | 



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Biovest International, Inc. and Subsidiaries

Tampa, Florida

We have audited the accompanying consolidated balance sheets of Biovest International, Inc. and Subsidiaries as of September 30, 2010 and 2009 and
the related consolidated statements of operations, stockholders deficit, and cash flows for each of the years then ended. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to
express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with standards of
the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis of designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Biovest International, Inc. and Subsidiaries as of September 30, 2010 and 2009 and their consolidated results of operations and their cash flows
for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying
consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the consolidated financial statements, the Company incurred cumulative net losses since inception of
approximately $149 million and cash used in operating activities of approximately $2.7 million during the two years ended September 30, 2010, and had a working capital deficiency of approximately $79.6 million at September 30, 2010. These
factors, among others as discussed in Note 4 to the consolidated financial statements, raise substantial doubt about the Companys ability to continue as a going concern. Managements plans in regards to these matters are also described in
Note 4. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As
discussed in Note 3 to the accompanying consolidated financial statements, Biovest International, Inc. and Subsidiaries changed the presentation of the non-controlling interest in its consolidated financial statements effective October 1, 2009.

As discussed in Note 2 to the accompanying consolidated financial statements, on November 10, 2008, Biovest International, Inc. and
subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code.

/s/ CHERRY,
BEKAERT, & HOLLAND L.L.P.

Tampa, Florida

December 14, 2010



F-1



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                     |  |               |              |   |      |   |              |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------------ | - | ---- | - | ------------ | -
|                                                                                                                                                     |  | September 30, |             
|                                                                                                                                                     |  | 2010          |              |   | 2009 |  
|ASSETS                                                                                                                                               |  |               |              |   |      |   |              |  
|Current assets:                                                                                                                                      |  |               |              |   |      |   |              |  
|Cash                                                                                                                                                 |  | $             | 206,000      |   |      | $ | 226,000      |  
|Accounts receivable, net of $8,000 allowance for doubtful accounts at September 30, 2010 and 2009                                                    |  |               | 398,000      |   |      |   | 207,000      |  
|Costs and estimated earnings in excess of billings on uncompleted contracts                                                                          |  |               | 106,000      |   |      |   | 251,000      |  
|Inventories                                                                                                                                          |  |               | 417,000      |   |      |   | 509,000      |  
|Prepaid expenses and other current assets                                                                                                            |  |               | 140,000      |   |      |   | 138,000      |  
|                                                                                                                                                     |  |               |              |   |      |   |              |  
|Total current assets                                                                                                                                 |  |               | 1,267,000    |   |      |   | 1,331,000    |  
|                                                                                                                                                     |  |              
|Property and equipment, net                                                                                                                          |  |               | 77,000       |   |      |   | 81,000       |  
|Patents and trademarks, net                                                                                                                          |  |               | 261,000      |   |      |   | 290,000      |  
|Reorganization value in excess of amounts allocated to identifiable assets                                                                           |  |               | 2,131,000    |   |      |   | 2,131,000    |  
|Other assets                                                                                                                                         |  |               | 153,000      |   |      |   | 240,000      |  
|                                                                                                                                                     |  |               |              |   |      |   |              |  
|Total assets                                                                                                                                         |  | $             | 3,889,000    |   |      | $ | 4,073,000    |  
|                                                                                                                                                     |  |               |              |   |      |   |              |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                |  |               |              |   |      |   |              |  
|Liabilities not subject to compromise:                                                                                                               |  |               |              |   |      |   |              |  
|Current liabilities:                                                                                                                                 |  |               |              |   |      |   |              |  
|Accounts payable                                                                                                                                     |  |               | 556,000      |   |      |   | 446,000      |  
|Customer deposits                                                                                                                                    |  |               | 85,000       |   |      |   | 159,000      |  
|Accrued liabilities                                                                                                                                  |  |               | 689,000      |   |      |   | 311,000      |  
|Notes payable, related parties                                                                                                                       |  |               | 2,597,000    |   |      |   | 1,664,000    |  
|                                                                                                                                                     |  |               |              |   |      |   |              |  
|Total liabilities not subject to compromise                                                                                                          |  |               | 3,927,000    |   |      |   | 2,580,000    |  
|                                                                                                                                                     |  |              
|Liabilities subject to compromise (Note 11)                                                                                                          |  |               | 76,898,000   |   |      |   | 53,980,000   |  
|                                                                                                                                                     |  |               |              |   |      |   |              |  
|Total liabilities                                                                                                                                    |  |               | 80,825,000   |   |      |   | 56,560,000   |  
|                                                                                                                                                     |  |              
|Commitments and contingencies (Note 20)                                                                                                              |  |               |              |   |      |   |              |  
|                                                                                                                                                     |  |              
|Stockholders deficit:                                                                                                                               |  |               |              |   |      |   |              |  
|Preferred stock, $.01 par, 50,000,000 shares authorized; no shares issued and outstanding                                                            |  |               |             |   |      |   |             |  
|Common stock, $.01 par, 300,000,000 shares authorized; 98,149,783 and 97,549,783 issued and outstanding at September 30,
2010 and 2009, respectively |  |               | 981,000      |   |      |   | 975,000      |  
|Additional paid-in capital                                                                                                                           |  |               | 67,934,000   |   |      |   | 74,483,000   |  
|Accumulated deficit                                                                                                                                  |  |               | (149,416,000 | ) |      |   | (131,922,000 | )
|                                                                                                                                                     |  |               |              |   |      |   |              |  
|Total stockholders deficit attributable to Biovest International, Inc.                                                                              |  |               | (80,501,000  | ) |      |   | (56,464,000  | )
|                                                                                                                                                     |  |              
|Non-controlling interests in variable interest entities (Notes 17 and 18)                                                                            |  |               | 3,565,000    |   |      |   | 3,977,000    |  
|                                                                                                                                                     |  |               |              |   |      |   |              |  
|Total stockholders deficit                                                                                                                          |  |               | (76,936,000  | ) |      |   | (52,487,000  | )
|                                                                                                                                                     |  |               |              |   |      |   |              |  
|                                                                                                                                                     |  |              
|Total liabilities and stockholders deficit                                                                                                          |  | $             | 3,889,000    |   |      | $ | 4,073,000    |  
|                                                                                                                                                     |  |               |              |   |      |   |              |  

The accompanying footnotes are an integral part of these consolidated financial statements.



F-2



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                                                                      |  |                                   |             |   |      |   |             |  
|--------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                                                      |  | For the Years Ended September 30, |            
|                                                                                                                      |  | 2010                              |             |   | 2009 |  
|Revenue:                                                                                                              |  |                                   |             |   |      |   |             |  
|Products                                                                                                              |  | $                                 | 4,156,000   |   |      | $ | 2,175,000   |  
|Services                                                                                                              |  |                                   | 1,196,000   |   |      |   | 1,481,000   |  
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|Total revenue                                                                                                         |  |                                   | 5,352,000   |   |      |   | 3,656,000   |  
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|Operating costs and expenses:                                                                                         |  |                                   |             |   |      |   |             |  
|Cost of revenue:                                                                                                      |  |                                   |             |   |      |   |             |  
|Products                                                                                                              |  |                                   | 1,960,000   |   |      |   | 1,456,000   |  
|Services                                                                                                              |  |                                   | 941,000     |   |      |   | 996,000     |  
|Research and development expense                                                                                      |  |                                   | 815,000     |   |      |   | 1,060,000   |  
|General and administrative expense                                                                                    |  |                                   | 2,379,000   |   |      |   | 2,915,000   |  
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|Total operating costs and expenses                                                                                    |  |                                   | 6,095,000   |   |      |   | 6,427,000   |  
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|Loss from operations                                                                                                  |  |                                   | (743,000    | ) |      |   | (2,771,000  | )
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|Other income (expense):                                                                                               |  |                                   |             |   |      |   |             |  
|Interest expense, net                                                                                                 |  |                                   | (7,166,000  | ) |      |   | (6,915,000  | )
|Loss on derivative liabilities                                                                                        |  |                                   | (2,516,000  | ) |      |   | (1,040,000  | )
|Other income (expense), net                                                                                           |  |                                   | 254,000     |   |      |   | (138,000    | )
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|                                                                                                                      |  |                                   | (9,428,000  | ) |      |   | (8,093,000  | )
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|Loss before reorganization items, non-controlling interest in losses from variable interest entities and income
taxes |  |                                   | (10,171,000 | ) |      |   | (10,864,000 | )
|                                                                                                                      |  |                                  
|Reorganization items:                                                                                                 |  |                                   |             |   |      |   |             |  
|Gain on settlement of pre-petition claims                                                                             |  |                                   | 59,000      |   |      |   |            |  
|Gain on settlement of rejected lease                                                                                  |  |                                   |            |   |      |   | 30,000      |  
|Professional Fees                                                                                                     |  |                                   | (535,000    | ) |      |   | (380,000    | )
|Provision for indemnity agreements                                                                                    |  |                                   | 2,062,000   |   |      |   | (3,895,000  | )
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|                                                                                                                      |  |                                   | 1,586,000   |   |      |   | (4,245,000  | )
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|Loss before non-controlling interest in losses from variable interest entities and income taxes                       |  |                                   | (8,585,000  | ) |      |   | (15,109,000 | )
|                                                                                                                      |  |                                  
|Income tax expense                                                                                                    |  |                                   |            |   |      |   |            |  
|Non-controlling interest in losses from variable interest entities                                                    |  |                                   | 412,000     |   |      |   | 455,000     |  
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|Net loss                                                                                                              |  | $                                 | (8,173,000  | ) |      | $ | (14,654,000 | )
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|Loss per common share:                                                                                                |  |                                   |             |   |      |   |             |  
|Basic and diluted                                                                                                     |  | $                                 | (0.08       | ) |      | $ | (0.15       | )
|                                                                                                                      |  |                                   |             |   |      |   |             |  
|Weighted average shares outstanding:                                                                                  |  |                                   |             |   |      |   |             |  
|Basic and diluted                                                                                                     |  |                                   | 97,574,441  |   |      |   | 97,502,888  |  
|                                                                                                                      |  |                                   |             |   |      |   |             |  

The accompanying footnotes are an integral part of these consolidated financial statements.



F-3



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT

YEARS ENDED
SEPTEMBER 30, 2010, AND 2009



|                                                    |  |              |            |  |        |   |         |                            |  |   |                    |   |  |                      |              |   |       |   |           |   |  |   |             |  
|--------------------------------------------------- |  | ------------ | ---------- |  | ------ | - | ------- | -------------------------- |  | - | ------------------ | - |  | -------------------- | ------------ | - | ----- | - | --------- | - |  | - | ----------- | -
|                                                    |  | Common Stock |            |  |        |   |         |                            |  |   | Non-               |   |  |                      |             
|                                                    |  | Shares       |            |  | Amount |   |         | AdditionalPaid-in 
Capital |  |   | AccumulatedDeficit |   |  | ControllingInterests |              |   | Total |  
|Balances at October 1, 2008                         |  |              | 96,485,477 |  |        | $ | 965,000 |                            |  | $ | 73,993,000         |   |  | $                    | (117,268,000 | ) |       | $ | 4,432,000 |   |  | $ | (37,878,000 | )
|Stock issued for payment of interest on debt        |  |              | 964,306    |  |        |   | 9,000   |                            |  |   | 233,000            |   |  |                      |             |   |       |   |          |   |  |   | 242,000     |  
|Stock issued for modification of debt               |  |              | 100,000    |  |        |   | 1,000   |                            |  |   | 31,000             |   |  |                      |             |   |       |   |          |   |  |   | 32,000      |  
|Warrants issued for modification of debt            |  |              |           |  |        |   |        |                            |  |   | 62,000             |   |  |                      |             |   |       |   |          |   |  |   | 62,000      |  
|Employee share-based compensation                   |  |              |           |  |        |   |        |                            |  |   | 164,000            |   |  |                      |             |   |       |   |          |   |  |   | 164,000     |  
|Net loss                                            |  |              |           |  |        |   |        |                            |  |   |                   |   |  |                      | (14,654,000  | ) |       |   | (455,000  | ) |  |   | (15,109,000 | )
|                                                    |  |              |            |  |        |   |         |                            |  |   |                    |   |  |                      |              |   |       |   |           |   |  |   |             |  
|Balances at September 30, 2009                      |  |              | 97,549,783 |  |        | $ | 975,000 |                            |  | $ | 74,483,000         |   |  | $                    | (131,922,000 | ) |       | $ | 3,977,000 |   |  | $ | (52,487,000 | )
|                                                    |  |              |            |  |        |   |         |                            |  |   |                    |   |  |                      |              |   |       |   |           |   |  |   |             |  
|                                                    |  |              |            |  |        |  
|Cumulative effect of change in accounting principle |  |              |           |  |        |   |        |                            |  |   | (7,008,000         | ) |  |                      | (9,321,000   | ) |       |   |          |   |  |   | (16,329,000 | )
|Employee share-based compensation                   |  |              |           |  |        |   |        |                            |  |   | 65,000             |   |  |                      |             |   |       |   |          |   |  |   | 65,000      |  
|Shares issued per settlement of pre-petition claim  |  |              | 600,000    |  |        |   | 6,000   |                            |  |   | 394,000            |   |  |                      |             |   |       |   |          |   |  |   | 400,000     |  
|Net Loss                                            |  |              |           |  |        |   |        |                            |  |   |                   |   |  |                      | (8,173,000   | ) |       |   | (412,000  | ) |  |   | (8,585,000  | )
|                                                    |  |              |            |  |        |   |         |                            |  |   |                    |   |  |                      |              |   |       |   |           |   |  |   |             |  
|Balances at September 30, 2010                      |  |              | 98,149,783 |  |        | $ | 981,000 |                            |  | $ | 67,934,000         |   |  | $                    | (149,416,000 | ) |       | $ | 3,565,000 |   |  | $ | (76,936,000 | )
|                                                    |  |              |            |  |        |   |         |                            |  |   |                    |   |  |                      |              |   |       |   |           |   |  |   |             |  

The accompanying footnotes are an integral part of these consolidated financial statements.



F-4



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                               |  |                                   |            |   |      |   |             |  
|------------------------------------------------------------------------------ |  | --------------------------------- | ---------- | - | ---- | - | ----------- | -
|                                                                               |  | For the Years ended September 30, |           
|                                                                               |  | 2010                              |            |   | 2009 |  
|Cash flows from operating activities:                                          |  |                                   |            |   |      |   |             |  
|Net loss before non-controlling interest in loss of variable interest entities |  | $                                 | (8,585,000 | ) |      | $ | (15,109,000 | )
|Adjustments to reconcile net loss to net cash flows from operating activities: |  |                                   |            |   |      |   |             |  
|Depreciation                                                                   |  |                                   | 53,000     |   |      |   | 145,000     |  
|Amortization                                                                   |  |                                   | 29,000     |   |      |   | 23,000      |  
|Employee share-based compensation                                              |  |                                   | 65,000     |   |      |   | 164,000     |  
|Amortization of discounts on notes payable                                     |  |                                   | 1,220,000  |   |      |   | 1,472,000   |  
|Amortization of deferred loan costs                                            |  |                                   | 64,000     |   |      |   | 36,000      |  
|Loss on disposal of property and equipment                                     |  |                                   |           |   |      |   | 335,000     |  
|Gain on settlement of accrued expenses                                         |  |                                   |           |   |      |   | (63,000     | )
|Loss on derivative liabilities                                                 |  |                                   | 2,516,000  |   |      |   | 1,040,000   |  
|Increase (decrease) in cash resulting from changes in:                         |  |                                   |            |   |      |   |             |  
|Accounts receivable                                                            |  |                                   | (189,000   | ) |      |   | 75,000      |  
|Costs and estimated earnings in excess of billing on uncompleted contracts     |  |                                   | 145,000    |   |      |   | (148,000    | )
|Inventories                                                                    |  |                                   | 92,000     |   |      |   | 100,000     |  
|Prepaid expenses and other current assets                                      |  |                                   | (11,000    | ) |      |   | 61,000      |  
|Accrued interest                                                               |  |                                   | 5,710,000  |   |      |   | 5,075,000   |  
|Accounts payable and accrued liabilities                                       |  |                                   | (3,000     | ) |      |   | 789,000     |  
|Customer deposits                                                              |  |                                   | (74,000    | ) |      |   | 29,000      |  
|                                                                               |  |                                   |            |   |      |   |             |  
|Net cash flows from operating activities before reorganization items           |  |                                   | 1,032,000  |   |      |   | (5,976,000  | )
|                                                                               |  |                                   |            |   |      |   |             |  
|                                                                               |  |                                  
|Reorganization items:                                                          |  |                                   |            |   |      |   |             |  
|Cash paid for settlement of administrative claim                               |  |                                   |           |   |      |   | 14,000      |  
|Gain on settlement of pre-petition claims                                      |  |                                   | 59,000     |   |      |   |            |  
|Gain on settlement of rejected lease                                           |  |                                   |           |   |      |   | (44,000     | )
|(Decrease)/Increase in provision for indemnity agreements                      |  |                                   | (2,062,000 | ) |      |   | 3,895,000   |  
|Increase in accrued professional fees                                          |  |                                   | 176,000    |   |      |   | 182,000     |  
|                                                                               |  |                                   |            |   |      |   |             |  
|Net change in cash flows from reorganization items                             |  |                                   | (1,827,000 | ) |      |   | 4,047,000   |  
|                                                                               |  |                                   |            |   |      |   |             |  
|Net cash flows from operating activities                                       |  |                                   | (795,000   | ) |      |   | (1,929,000  | )
|                                                                               |  |                                   |            |   |      |   |             |  
|Cash flows from investing activities:                                          |  |                                   |            |   |      |   |             |  
|Purchase of property and equipment                                             |  |                                   | (49,000    | ) |      |   |            |  
|                                                                               |  |                                   |            |   |      |   |             |  
|Net cash flows from investing activities                                       |  |                                   | (49,000    | ) |      |   |            |  
|                                                                               |  |                                   |            |   |      |   |             |  
|Cash flows from financing activities:                                          |  |                                   |            |   |      |   |             |  
|Repayment of notes payable and long-term debt                                  |  |                                   | (39,000    | ) |      |   | (89,000     | )
|Advances from related party                                                    |  |                                   | 903,000    |   |      |   | 1,770,000   |  
|Payment of deferred financing costs                                            |  |                                   | (40,000    | ) |      |   | (65,000     | )
|                                                                               |  |                                   |            |   |      |   |             |  
|Net cash flows from financing activities                                       |  |                                   | 824,000    |   |      |   | 1,616,000   |  
|                                                                               |  |                                   |            |   |      |   |             |  
|Net change in cash                                                             |  |                                   | (20,000    | ) |      |   | (313,000    | )
|Cash at beginning of period                                                    |  |                                   | 226,000    |   |      |   | 539,000     |  
|Cash at end of period                                                          |  | $                                 | 206,000    |   |      | $ | 226,000     |  
|                                                                               |  |                                   |            |   |      |   |             |  
|Supplemental cash flow information                                             |  |                                   |            |   |      |   |             |  
|Non-cash financing and investing transactions:                                 |  |                                   |            |   |      |   |             |  
|Stock issued for payment of accrued expenses and interest                      |  | $                                 |           |   |      | $ | 240,000     |  
|Stock issued for settlement of pre-petition claim                              |  |                                   | 504,000    |   |      |   | 25,000      |  
|Issuance of warrants                                                           |  |                                   |           |   |      |   | 62,000      |  
|Cash paid for interest during the year                                         |  | $                                 | 203,000    |   |      | $ | 163,000     |  

The accompanying
footnotes are an integral part of these consolidated financial statements.



F-5



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009

1. Nature of business

As a result of Biovest International, Inc.s (the Company or Biovest) collaboration with the National Cancer Institute (NCI), Biovest is developing BiovaxID® as a personalized therapeutic cancer vaccine for the treatment of non-Hodgkins lymphoma, specifically
follicular lymphoma (FL), mantle cell lymphoma (MCL) and potentially other B-cell blood cancers. Both FL and MCL are generally considered to be incurable with currently approved therapies. These generally fatal diseases arise from the lymphoid
tissue and are characterized by an uncontrolled proliferation and spread throughout the body of mature B-cells, which are a type of white blood cell.

Three clinical trials conducted under the Companys Investigational New Drug Application (IND) have studied BiovaxID in non-Hodgkins lymphoma. These studies include a Phase 2 clinical trial and
a Phase 3 clinical trial in patients with FL, as well as, a Phase 2 clinical trial in MCL patients. Biovest believes that these clinical trials have demonstrated that BiovaxID, which is personalized and autologous (derived from a patients own
tumor cells), has an excellent safety profile and is effective in the treatment of these life-threatening diseases.

To support Biovests
planned commercialization of BiovaxID, Biovest developed an automated cell culture instrument called AutovaxID. Biovest believes that AutovaxID has significant potential application in the production of a broad range of patient-specific
medicines, such as BiovaxID as well as other monoclonal antibodies. Biovest is collaborating with the U.S. Department of Defense to further develop AutovaxID and to explore potential production of additional vaccines, including vaccines for viral
indications such as influenza. AutovaxID is automated and computer controlled to improve cell production reliability and to maximize cell production. AutovaxID uses a disposable production unit which Biovest anticipates will minimize the need for
FDA required clean rooms in the production process and provides for robust and dependable manufacturing while complying with the industry cGMP standards. AutovaxID has a small footprint and supports scalable production.

Biovest also manufactures instruments and disposables used in the hollow-fiber production of cell culture products. Biovests hollow-fiber cell
culture products and instruments are used by biopharmaceutical and biotech companies, medical schools, universities, research facilities, hospitals and public and private laboratories. Biovest also produces mammalian and insect cells, monoclonal
antibodies, recombinant and secreted proteins and other cell culture products using Biovests unique capability, expertise and proprietary advancements in the cell production process known as hollow fiber perfusion.

Biovests business consists of three primary business segments: development of BiovaxID and potentially other B-cell blood cancer vaccines; the
manufacture and sale of AutovaxID and other instruments and consumables; and commercial production of cell culture products and services.

As
of September 30, 2010, Biovest is a 75% owned subsidiary of Accentia Biopharmaceuticals, Inc. (Accentia).

2. Chapter
11 Reorganization:

On November 10, 2008, Biovest, along with its subsidiaries, Biovax, Inc., AutovaxID, Inc.,
Biolender LLC and Biolender II LLC (collectively, the Debtors) filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code (Chapter 11) in the U.S. Bankruptcy Court for the Middle
District of Florida, Tampa Division (the Bankruptcy Court). During the pendency of the Chapter 11 proceedings, we operated our business as a debtor-in-possession in accordance with the provisions of Chapter 11, and subject to the
jurisdiction of the Bankruptcy Court. On August 16, 2010, Biovest filed its First Amended Joint Plan of Reorganization, and, on October 25, 2010, its filed the First Modification to the First Amended Joint Plan of Reorganization
(collectively and as amended and supplemented, the Plan). On October 27, 2010, the Bankruptcy Court held a Confirmation hearing and confirmed the Plan, and, on November 2, 2010, the Bankruptcy Court entered an Order Confirming
Debtors First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Confirmation Order), which approved and confirmed the Plan, as modified by the Confirmation Order. Biovest emerged from Chapter 11
protection, and the Plan became effective, on November 17, 2010 (the Effective Date). With existing cash flow and the potential for relatively near-term significant business development opportunities for BiovaxID® and AutovaxID, the Chapter 11 proceedings provided an opportunity for the Company to restore shareholder value
and to pay all secured and unsecured creditors. Under protection of the Bankruptcy Court, Biovest implemented a series of initiatives designed to significantly decrease operating expenses and financing costs, and focus cash and resources on its
priority programs that will allow the Company to attract key funding/partnering opportunities. The accompanying audited consolidated financial statements have been prepared assuming the Company will continue as a going concern as it emerges from
Chapter 11.



F-6



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Under section 362 of the Bankruptcy Code, actions to collect most of the Debtors prepetition
liabilities, including payments owing to vendors in respect of goods furnished and services provided prior to the petition date, are automatically stayed and other contractual obligations of the Debtors generally may not be enforced. Shortly after
the petition date, the Debtors began notifying all known actual or potential creditors of the Debtors for the purpose of identifying all prepetition claims against the Debtors. The Chapter 11 proceedings triggered defaults on substantially all
debt obligations of the Debtors. The stay provisions of section 362 of the Bankruptcy Code, however, also applied to actions to collect prepetition indebtedness or to exercise control over the property of the Debtors estate in respect of
such defaults. The rights of and ultimate payments by the Debtors for its prepetition obligations were addressed in the Debtors plan of reorganization discussed in detail in Note 21, Subsequent Events.

3. Significant accounting policies

Principles of Consolidation:

The
consolidated financial statements represent the consolidation of wholly-owned companies and interests in variable interest entities where the Company has a controlling financial interest or has been determined to be the primary beneficiary under
Accounting Standards Codification (ASC) Topic 810  Consolidation.

The 2010 and 2009 consolidated financial
statements include Biovest, its wholly owned subsidiaries Biovax, Inc., AutovaxID, Inc., Biolender LLC and Biolender II LLC; and certain variable interest entities of the Company, Biovax Investment LLC, Telesis CDE Two LLC, AutovaxID Investment LLC,
and St. Louis New Markets Tax Credit Fund II LLC (Notes 17 and 18).

All significant inter-company balances and transactions have been
eliminated.

Voluntary Petition in Bankruptcy:

On November 10, 2008, the Debtors filed voluntary petitions for reorganization under Chapter 11 in the Bankruptcy Court. During the pendency of the Chapter 11 proceedings, Biovest operated its
business as a debtor-in-possession in accordance with the provisions of Chapter 11, and was subject to the jurisdiction of the Bankruptcy Court. On August 16, 2010, the Company filed its First Amended Joint Plan of Reorganization, and, on
October 25, 2010, the Company filed the First Modification to the First Amended Joint Plan of Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010, the Bankruptcy Court held a
Confirmation hearing and confirmed the Plan, and, on November 2, 2010, the Bankruptcy Court entered an Order Confirming Debtors First Amended Joint Plan of Reorganization. Under Chapter 11 of the Bankruptcy Code (the Confirmation
Order), which approved and confirmed the Plan, as modified by the Confirmation Order. The Company emerged from Chapter 11 protection, and the Plan became effective, on November 17, 2010 (the Effective Date).

ASC Topic 852 - Reorganizations, which is applicable to companies in Chapter 11, generally does not change the manner in which financial
statements are prepared. However, it does require that the financial statements for periods subsequent to the filing of the Chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the
ongoing operations of the business. Revenues, expenses, realized gains and losses, and provisions for losses that can be directly associated with the reorganization and restructuring of the business must be reported separately as reorganization
items in the statements of operations beginning in the quarter ending December 31, 2008. The balance sheet must distinguish prepetition liabilities subject to compromise from both those prepetition liabilities that are not subject to compromise
and from post-petition liabilities. Liabilities that may be affected by a plan of reorganization must be reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts. In addition, cash
provided by reorganization items must be disclosed separately in the statement of cash flows. Biovest became subject to ASC Topic 852 effective on November 10, 2008 and will segregate those items as outlined above for all reporting periods
subsequent to such date.



F-7



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Use of estimates in the preparation of financial statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America require management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures about contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates.

Inventories:

Inventories are recorded at the lower of cost or market with cost determined using the first-in, first-out (FIFO) method.

Property and equipment:

Property and
equipment are recorded at cost. Depreciation for property and equipment is computed using the straight-line method over the estimated useful lives of three to seven years. Leasehold improvements are amortized over the shorter of their economic lives
or the lease term.

Contractual Interest Expense:

Contractual interest expense represents amounts due under the contractual terms of outstanding debt, including debt subject to compromise for which interest expense may not recognized in accordance with
the provisions of ASC Topic 852. The Companys voluntary petition for bankruptcy on November 10, 2008 triggered default provisions on certain of the Companys pre-petition debt, which allow for the accrual of additional interest and
fees above the contractual rate. The Company recorded interest expense at the default rate on its pre-petition debt for periods after November 10, 2008 due to the uncertain nature of the provisions of the plan of reorganization (the
Plan) prior to its confirmation. On November 2, 2010, the Bankruptcy Court confirmed the Companys Plan, setting November 17, 2010 as the Companys effective date for emergence from Chapter 11 reorganization. The Plan
sets forth the interest each class of creditors shall receive as part of their allowed claim. See the Subsequent Events footnote for further information on the Companys Plan.

Reorganization value in excess of amounts allocated to identifiable assets:

Reorganization
value in excess of amounts allocated to identifiable assets relates to our cell culture and instrument manufacturing segments located in Minneapolis, MN, which continue to be profitable segments of the Company. Reorganization value is tested for
impairment annually or whenever there is an impairment indication. The Company has not recorded any impairment losses as a result of these evaluations.

Patents and trademarks:

Costs incurred in relation to patent applications are capitalized
as deferred patent costs. If and when a patent is issued, the related patent application costs are transferred to the patent account and amortized over the estimated useful life of the patent. If it is determined that a patent will not be issued,
the related patent application costs are charged to expense at the time such determination is made. Patent and trademark costs are recorded at historical cost. Patent and trademark costs are being amortized using the straight-line method over their
estimated useful lives of six years for patents and twenty years for trademarks.

Deferred Financing Costs:

Deferred financing costs include fees paid in cash in conjunction with obtaining notes payable and long-term debt and are amortized over the term of the
related financial instrument.

Carrying value of long-lived assets:

The carrying values of the Companys long-lived assets are evaluated whenever events or changes in circumstances indicate that the carrying amount might not be recoverable. This assessment may be
based upon managements experience in the industry, historical and projected sales, current backlog, and expectations of undiscounted future cash flows. The Company reviews the valuation and amortization of those long-lived assets to determine
possible impairment by comparing the carrying value to projected undiscounted future cash flows of the related assets. The Company determined no impairment existed as of September 30, 2010.



F-8



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Financial instruments:

Financial instruments, as defined in ASC 825  Financial Instruments, consist of cash, evidence of ownership in an entity and contracts that both (i) impose on one entity a contractual
obligation to deliver cash or another financial instrument to a second entity, or to exchange other financial instruments on potentially unfavorable terms with the second entity, and (ii) conveys to that second entity a contractual right
(a) to receive cash or another financial instrument from the first entity or (b) to exchange other financial instruments on potentially favorable terms with the first entity. Accordingly, the Companys financial instruments consist of
cash, accounts receivable, accounts payable, accrued liabilities, notes payable, long-term debt, royalty liabilities, and derivative financial instruments.

The Company carries cash, accounts receivable, accounts payable, and accrued liabilities at historical costs for which the respective estimated fair values approximates carrying value due to their short
term nature. The Company also carries notes payable and long-term debt at historical cost less discounts from warrants issued as loan financing costs; however, fair values of these debt instruments are estimated for disclosure purposes based upon
the present value of the estimated cash flows at market interest rates applicable to similar instruments.

Derivative instruments:

Fair Value of Financial Assets and Liabilities

The Company measures the fair value of financial assets and liabilities in accordance with GAAP which defines fair value, establishes a framework for measuring fair value, and expands disclosures about
fair value measurements.

GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability
(an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP also establishes a fair value hierarchy, which requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value:

Level 1  quoted prices in active markets for identical assets or liabilities

Level 2 
quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3  inputs that are unobservable
(for example cash flow modeling inputs based on assumptions)

The Company generally does not use derivative financial instruments to hedge
exposures to cash-flow, market or foreign-currency risks. However, the Company and its consolidated subsidiaries have entered into certain other financial instruments and contracts, such as debt financing arrangements and freestanding warrants with
features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the counterparty. These instruments are required to be carried
as derivative liabilities, at fair value.

The Company estimates fair values of all derivative instruments, such as free-standing warrants,
and embedded conversion features utilizing level 3 inputs. The Company generally uses the Black-Scholes-Merton option valuation technique because it embodies all of the requisite assumptions (including trading volatility, estimated terms and risk
free rates) necessary to fair value these instruments. Estimating fair values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the
instrument with related changes in internal and external market factors. In addition, option-based techniques are highly volatile and sensitive to changes in the Companys trading market price and the trading market price of various peer
companies, which have historically had high volatility. Since derivative financial instruments are initially and subsequently carried at fair value, the Companys income will reflect the volatility in these estimate and assumption changes.

The Company reports its derivative liabilities at fair value on the accompanying consolidated balance sheets as of September 30, 2010
and 2009.

Revenue recognition:

Instruments and disposables sales are recognized in the period in which the applicable products are delivered. The Company does not provide its customers with a right of return; however, deposits made by
customers must be returned to customers in the event of non-performance by the Company and, as such, are not recognized as sales until product delivery.

Revenues from contract cell production services are recognized using the percentage-of-completion method, measured by the percentage of contract costs incurred to date to the estimated total contract
costs for each contract. Contract costs include all direct material, subcontract and labor costs and those indirect costs related to contract performance, such as indirect labor, insurance, supplies and tools. Provisions for estimated losses on
uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions, estimated profitability and final contract settlements may result in revisions to revenues, costs and profits and are
recognized in the period such revisions are determined. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change in the near term. The asset costs and estimated earnings
in excess of billings on uncompleted contracts represents revenues recognized in excess of amounts billed. Such revenues are expected to be billed and collected within one year on uncompleted contracts. The liability billings in excess
of costs and estimated earnings on uncompleted contracts represents billings in excess of revenue recognized.



F-9



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Research and development expenses:

The Company expenses research and development expenditures as incurred. Such costs include payroll and related costs, facility costs, consulting and professional fees, equipment rental and maintenance,
lab supplies, and certain other indirect cost allocations that are directly related to research and development activities. In the fiscal years ended September 30, 2010 and 2009, the Company incurred total research and development expenses of
approximately $0.8 million, and $1.1 million, respectively.

Shipping and handling costs:

Shipping and handling costs are included as a component of cost of revenue in the accompanying consolidated statements of operations.

Stock-based compensation:

The
Company has accounted for stock-based compensation under the provisions of ASC Topic 718  Stock Compensation, which, requires the use of the fair-value based method to determine compensation for all arrangements under which employees
and others receive shares of stock or equity instruments (warrants and options). The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected
dividends, expected term, and the risk-free interest rate. Expected volatilities are based on historical volatility of peer companies and other factors estimated over the expected term of the options. The expected term of options granted is derived
using the simplified method which computes expected term as the average of the sum of the vesting term plus the contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of
the expected term.

Loss per common share:

Basic loss per share is computed using the weighted average number of common shares outstanding.

The Company had net losses for all periods presented in which potential common shares were in existence. Diluted loss per share assumes conversion of all
potentially dilutive outstanding common stock options, warrants, or other convertible financial instruments. Potential common shares outstanding are excluded from the calculation of diluted loss per share if their effect is anti-dilutive. As such,
dilutive loss per share is the same as basic loss per share for all periods presented as the effect of all potential common shares outstanding is anti-dilutive.

The common stock equivalents and common shares indexed to convertible debt securities that are not considered in the calculation of diluted loss per share because the effect would be anti-dilutive are as
follows:



|                                              |  |                           |             |  |      |  |            | 
|--------------------------------------------- |  | ------------------------- | ----------- |  | ---- |  | ---------- | 
|                                              |  | Years ended September 30, |            
|                                              |  | 2010                      |             |  | 2009 | 
|Options and Warrants to purchase common stock |  |                           | 58,032,891  |  |      |  | 45,011,712 | 
|Convertible Debt Instruments                  |  |                           | 50,896,231  |  |      |  | 47,268,348 | 
|                                              |  |                           |             |  |      |  |            | 
|                                              |  |                           | 108,929,122 |  |      |  | 92,280,060 | 
|                                              |  |                           |             |  |      |  |            | 

As a result of the Companys Plan, on November 17, 2010, the Company issued approximately 36 million shares in
settlement of pre-petition debt and warrants outstanding, including in part, those items shown in the table above. See note 21, subsequent events for further detail.



F-10



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Recent Accounting Pronouncements:

In December 2007, the FASB issued new guidance requiring non-controlling interests to be treated as a separate component of equity, not as a liability or other item outside of permanent equity. This new
guidance is applicable to the accounting for non-controlling interests and transactions with non-controlling interest holders in consolidated financial statements and is effective for fiscal years beginning on or after December 15, 2008.
Accordingly, we have adopted this new pronouncement as of October 1, 2009 resulting in a change in stockholders equity on our opening fiscal year 2010 consolidated statement of financial condition; however, the adoption of this
pronouncement did not have a material effect on our results of operations or cash flows.

In June 2008, the FASB issued new guidance for
determining whether an equity-linked financial instrument (or embedded feature) is indexed to an entitys own stock. The Company adopted this new guidance effective October 1, 2009. Certain of the Companys outstanding warrants and
convertible debt contain features which fall under the scope of this guidance resulting in a decrease of $7.0 million and $9.3 million to the October 1, 2009 balances of additional paid-in capital and accumulated deficit respectively. These
adjustments are recorded on the line item cumulative effect of change in accounting principle on the Companys consolidated statement of stockholders deficit for the year ended September 30, 2010 and are discussed in more
detail in below.

In June 2009, the FASB issued new guidance amending the existing pronouncement related to the consolidation of variable
interest entities. This new guidance requires the reporting entities to evaluate former Qualifying Special Purpose Entity for consolidation, changes the approach to determine a variable interest entitys primary beneficiary from a quantitative
assessment to a qualitative assessment designed to identify a controlling financial interest, and increases the frequency of required assessments to determine whether we are the primary beneficiary of any variable interest entities which we are a
party to. This new guidance is not effective for the Company until October 1, 2010 and earlier adoption is prohibited. This guidance will not have a material impact on our consolidated financial statements.

In April 2010, the FASB issued Accounting Standards Update No. 2010-17 (ASU 2010-17) which provides guidance on defining a milestone and
determining when it may be appropriate to apply the milestone method of revenue recognition for research or development transactions. ASU 2010-17 is effective prospectively for milestones achieved in fiscal years and interim periods within those
years, beginning in fiscal years on or after June 15, 2010. The Company has adopted this standard and adjusted its revenue recognition policy to apply the milestone method of revenue recognition for future research and development contracts.

In January 2010, the FASB issued ASU 2010-06- Improving Disclosures about Fair Value Measurements. ASU 2010-06 requires additional
disclosures about fair value measurements including transfers in and out of Levels 1 and 2 and a higher level of disaggregation for the different types of financial instruments. For the reconciliation of Level 3 fair value measurements,
information about purchases, sales, issuances and settlements should be presented separately. This ASU is effective for annual and interim reporting periods beginning after December 15, 2009 for most of the new disclosures and for periods
beginning after December 15, 2010 for the new Level 3 disclosures. Comparative disclosures are not required in the first year the disclosures are required. The Company is currently reviewing the guidance and will update its disclosures when the
guidance becomes applicable.

4. Liquidity and managements plans

During the year ended September 30, 2010, the Company incurred a net loss of $8.2 million. On September 30, 2010, the Company had an accumulated deficit of approximately $149 million and working
capital deficit of approximately $79.6 million which includes liabilities subject to compromise through the Companys Chapter 11 proceedings. The Companys independent auditors issued a going concern uncertainty on the
financial statements for the year ended September 30, 2010, citing significant losses and working capital deficits at that date, which raised substantial doubt about the Companys ability to continue as a going concern.

Regulatory strategy and commercialization expenditures:

The Company completed its Phase 3 clinical trial of BiovaxID® for
the indication of FL. Under the Companys current regulatory strategy, the Company is performing in-depth analyses of the available clinical trial data in preparation for submission of the data to the FDA and EMEA. Based upon a recommendation
from the independent Data Monitoring Committee (DMC) which monitors the safety and efficacy profile of the clinical trial and the Companys analysis of the available clinical trial data, the Company plans to seek accelerated and
conditional approval of BiovaxID with the FDA, EMEA, and other international agencies, for the indication of FL. Pending the outcome of these anticipated applications for accelerated and conditional approval, the Company has ceased enrolling new
patients in its Phase 3 clinical trial and has discontinued most clinical trial activities which had the effect of decreasing clinical trial expenses compared to those recorded for prior periods. Accelerated or conditional approval would require the
Company to perform additional clinical studies as a condition to continued marketing of BiovaxID. Accordingly, should the Company receive accelerated and/or conditional approval, clinical trial activities and related expenses may return to the
levels experienced in periods prior to the



F-11



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



application for conditional approval until any such clinical trial activity is completed. There can be no assurances the Company will receive accelerated or conditional approval. The
Companys ability to timely access required financing will continue to be essential to support the ongoing commercialization efforts. The Companys inability to obtain required funds or any substantial delay in obtaining required funds
will have a material adverse effect on the ongoing commercialization efforts.

Advances to the Company by Accentia:

As of September 30, 2010, the Company has borrowed approximately $13.2 million from Accentia. The advances by Accentia consist of cash loans,
payments directly to third parties on the Companys behalf, allocated inter-company expenses, accrued interest of $2.4 million, and amounts owed in connection with the conversion of notes outstanding at the time of Accentias initial
investment in June 2003. The balance of the inter-company loans is evidenced by three secured promissory demand notes which accrue interest at the prime rate, are due on demand, and are convertible into shares of the Companys common stock at a
conversion price of $0.32 per share. The Company granted piggyback and demand registration rights to Accentia for the shares underlying this Conversion Option. Pursuant to the Companys Plan for reorganization, on November 17, 2010, the
balance due from the Company to Accentia was converted into the Companys common stock at a conversion rate equal to $0.75 per share, resulting in the issuance of 17,925,720 shares of the Companys common stock.

Debtor-in-Possession Financing:

Corps
Real, LLC

On December 22, 2008, the Company completed the closing of a debtor-in-possession financing transaction
(the DIP Transaction) with Corps Real, LLC (the DIP Lender), an Illinois limited liability company, the principal owners of which are directors of, or affiliated with directors of the Company. Pursuant to the
transaction, the DIP Lender provided to the Company a secured line of credit in an amount of up to $3.0 million in accordance with an order entered by the Bankruptcy Court. As of September 30, 2010, the DIP Lender has advanced $1.89 million to
the Company. On November 17, 2010, the Company
executed and delivered in favor of the DIP Lender a secured convertible promissory note (the DIP Lender Plan Note) in an original principal amount equal to $2,291,560. The DIP Lender Plan Note amends and restates the $3.0 million secured
promissory note dated December 22, 2008, previously executed by the Company in favor of the DIP Lender. The following are the material terms and conditions of the DIP Lender Plan Note:



| |  |  | the DIP Lender Plan Note matures on November 17, 2012, and all principal and accrued but unpaid interest is due on such date;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------



| |  |  | interest accrues and is payable on the outstanding principal amount of the DIP Lender Plan Note at a fixed rate of sixteen percent (16%) per
annum, with interest in the amount of ten percent (10%) per annum to be paid monthly and interest in the amount of six percent (6%) per annum to accrue and be paid on the maturity date;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company may prepay the DIP Lender Plan Note in full, without penalty, at any time; and
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | the DIP Lender may convert all or a portion of the outstanding balance of the DIP Lender Plan Note into shares of the Companys common stock (the
DIP Lender Plan Shares) at a conversion rate of $0.75 per share.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The DIP Lender Plan Note is secured by a first
priority lien on all of the Companys property. On November 17, 2010, the Company executed and delivered in favor of the DIP Lender an amended and restated security agreement (which amended and restated the security agreement previously
executed by the Company in favor of the DIP Lender) and other customary security documents evidencing such lien.



F-12



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Convertible Note Transaction

On October 19, 2010, the Company entered into a debtor-in-possession financing transaction (the Convertible Note Financing) pursuant to which it issued an aggregate of $7.0 million in
principal amount of Debtor In Possession Secured Convertible Notes (the Initial Notes) and warrants to purchase shares of the Companys common stock (the Initial Warrants) to a total of twelve accredited investors (the
Buyers). In connection with the Convertible Note Financing, the Company and the Buyers entered into a Securities Purchase Agreement, dated October 19, 2010 (the Purchase Agreement), pursuant to which the Company sold and
issued the Initial Notes and the Initial Warrants to the Buyers. Pursuant to the Purchase Agreement, the Company issued two separate Initial Warrants to the Buyers, Series A Warrants (the Initial Series A Warrants) and Series B Warrants
(the Initial Series B Warrants).

Pursuant to the Purchase Agreement, on the Effective Date (a) the Initial Notes were
exchanged pursuant to the terms of the Plan for new unsecured notes (the Exchange Notes) in the aggregate principal amount of $7.04 million, (b) the Initial Series A Warrants were exchanged pursuant to the terms of the Plan for new
warrants to purchase a like number of shares of Company common stock (the Series A Exchange Warrants), and (c) the Initial Series B Warrants were exchanged pursuant to the terms of the Plan for new warrants to purchase a like number
of shares of Company common stock (the Series B Exchange Warrants).

The following are the material terms and conditions of the
Exchange Notes:



| |  |  | the Exchange Notes mature on November 17, 2012, and all principal and accrued but unpaid interest is due on such date;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | interest accrues and is payable on the outstanding principal amount of the Exchange Notes at a fixed rate of seven percent (7%) per annum (with a
fifteen percent (15%) per annum default rate), and is payable monthly in arrears, with the first date for an interest payment being December 1, 2010;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest payments under the Exchange Notes are payable in either cash or, at the Companys election and subject to certain specified conditions,
in shares of the Companys common stock;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company may from time to time, subject to certain conditions, redeem all or any portion of the outstanding principal amount of the Exchange Notes
for an amount, in cash, equal to 110% of the sum of the principal amount being redeemed and certain make-whole interest payments;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of the Exchange Notes may convert all or a portion of the outstanding balance of the Exchange Notes into shares of the Companys
common stock at a conversion rate of $0.91 per share of the Companys common stock, subject to anti-dilution adjustments in certain circumstances; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event that the average of the daily volume weighted average price of the Companys common stock is at least 150% of the then-effective
conversion price for any ten (10) consecutive trading days, the Company, at its option, may upon written notice to the holders of the Exchange Notes, convert the then outstanding balance of the Exchange Notes into shares of the Companys
common stock at the conversion price then in effect under the Exchange Notes.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following are the
material terms and conditions of the Series A Exchange Warrants:



| |  |  | the Series A Exchange Warrants give each Buyer the right to purchase that number of shares of the Companys common stock (the Series A
Warrant Shares) equal to the amount loaned by such Buyer to the Company under such Buyers Initial Note divided by $0.91;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Series A Exchange Warrants have an initial exercise price of $1.45 per share (subject to anti-dilution adjustments in certain circumstances) and a
term of seven (7) years from the Effective Date; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event that the average weighted-average price of the Companys common stock during the period beginning on (and including) December 1,
2010 and ending on (and including) December 21, 2010, is less than the then existing exercise price of the Series A Exchange Warrants, the exercise price of the Series A Exchange Warrants will be reduced to 120% of the weighted average price
during such period, but no lower than $0.60 per share.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-13



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



The following are the material terms and conditions of the Series B Exchange Warrants:



| |  |  | the Series B Exchange Warrants give each Buyer the right to purchase that number of shares of the Companys common stock (the Series B
Warrant Shares) equal to the difference between (a) the original principal amount of such Buyers Exchange Note divided by $0.50, and (b) the original principal amount of such Buyers Exchange Note divided by $0.91,
provided that the number of shares of the Companys common stock issuable upon exercise of a Series B Exchange Warrant may not exceed the Maximum Eligibility Number (as set forth below);
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | for purposes of the Series B Exchange Warrants, the Maximum Eligibility Number will initially be an amount equal to zero, provided that if
on December 22, 2010, 80% of the average of the weighted average price for the Companys common stock during the preceding 21 days is less than $0.91, the Maximum Eligibility Number will be equal to the difference between (a) the
quotient determined by dividing (i) the aggregate principal amount of the Buyers Exchange Note by (ii) the greater of (A) $0.50 (subject to adjustment for stock splits, stock adjustments and the like), and (B) 80% of such
average of the weighted average price, and (b) the quotient determined by dividing the aggregate principal amount of the Buyers Exchange Note by $0.91;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Series B Exchange Warrants have an exercise price of $0.01 per share and an expiration date of December 23, 2010; and if, on December 22,
2010, the Maximum Eligibility Number exceeds zero, then the Series B Exchange Warrants will be deemed to be exercised by a cashless exercise on December 22, 2010 and, if the Maximum Eligibility Number does not exceed zero, then the Series B
Exchange Warrants will automatically expire.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Additional expected financing activity:

Management will attempt to meet its cash requirements through proceeds from its convertible notes and debtor in possession financing transactions,
cell culture and instrument manufacturing activities, trade vendor credit, restructuring of our outstanding debt obligations through the Chapter 11 reorganization proceedings, short-term borrowings, debt and equity financings, and strategic
transactions such as collaborations and licensing. The Companys ability to continue present operations, pay its liabilities as they become due, and meet its obligations for vaccine development is dependent upon the Companys ability to
obtain significant external funding. Additional sources of funding have not been established; however, additional financing is currently being sought by the Company from a number of sources, including the sale of equity or debt securities, strategic
collaborations, recognized research funding programs, as well as domestic and/or foreign licensing of BiovaxID. Management is currently in the process of exploring these various financing alternatives. There can be no assurance that the Company will
be successful in securing such financing at commercially acceptable terms, if at all. Accordingly, the Companys ability to continue present operations, pay the Companys existing liabilities as they become due, and continue the
Companys ongoing research and product development is dependent upon its ability to successfully complete the Chapter 11 reorganization process, to perform in accordance with its Plan of Reorganization, and to obtain significant external
funding, which raises substantial doubt about the Companys ability to continue as a going concern. If adequate funds are not available from the foregoing sources, or if the Company determines it to otherwise be in the Companys best
interest, the Company may consider additional strategic financing options, including sales of assets, or the Company may be required to delay, reduce the scope of, or eliminate one or more of its research or development programs or curtail some or
all of its commercialization efforts.



F-14



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



5. Accounts Receivable, concentrations of credit risk and major customers

Financial instruments that subject the Company to concentrations of credit risk include cash and accounts receivable.

Accounts receivable are customer obligations due under normal trade terms for products sold to distributors and retail customers. The Company performs
ongoing credit evaluations of customers financial condition, but does not require collateral or any other security to support amounts due. Management reviews accounts receivable on a monthly basis to determine if any receivables will
potentially be uncollectible. The allowance for doubtful accounts contains a specific accrual for accounts receivable balances that are considered potential bad debts and a general accrual for remaining possible bad debts. Any accounts receivable
balances that are determined to be uncollectible are written off to the allowance. Based on the information available, management believes that the allowance for doubtful accounts as of September 30, 2010 is adequate. However, actual write-offs
might exceed the recorded allowance.

Three customers accounted for 56% of revenues for fiscal 2010 while two customers accounted for 28% of
revenues for fiscal 2009. Four customers accounted for 75% of trade accounts receivable as of September 30, 2010, while two customers accounted for 71% of trade accounts receivable as of September 30, 2009. A significant amount of the
Companys revenue has been derived from export sales. The Companys export sales were 29%, and 28% of revenues for fiscal years 2010 and 2009 respectively. Sales to customers in the United Kingdom accounted for 22% and 17% of total revenue
for the last two fiscal years.

6. Inventories

Inventories consist of the following:



|                |  |               |         |  |      |   |         | 
|--------------- |  | ------------- | ------- |  | ---- | - | ------- | 
|                |  | September 30, |        
|                |  | 2010          |         |  | 2009 |  
|Raw materials   |  | $             | 313,000 |  |      | $ | 354,000 | 
|Work-in-process |  |               |        |  |      |   | 8,000   | 
|Finished goods  |  |               | 104,000 |  |      |   | 147,000 | 
|                |  |               |         |  |      |   |         | 
|                |  | $             | 417,000 |  |      | $ | 509,000 | 
|                |  |               |         |  |      |   |         | 

7. Costs and estimated earnings on uncompleted contracts

Costs and estimated earnings on uncompleted contracts consist of the following:



|                                        |  |               |            |   |      |   |            |  
|--------------------------------------- |  | ------------- | ---------- | - | ---- | - | ---------- | -
|                                        |  | September 30, |           
|                                        |  | 2010          |            |   | 2009 |  
|Costs incurred on uncompleted contracts |  | $             | 323,000    |   |      | $ | 561,000    |  
|Estimated earnings                      |  |               | 966,000    |   |      |   | 931,000    |  
|                                        |  |               |            |   |      |   |            |  
|                                        |  |               | 1,289,000  |   |      |   | 1,492,000  |  
|Less billings to date                   |  |               | (1,183,000 | ) |      |   | (1,241,000 | )
|                                        |  |               |            |   |      |   |            |  
|                                        |  | $             | 106,000    |   |      | $ | 251,000    |  
|                                        |  |               |            |   |      |   |            |  

These amounts are included in the accompanying consolidated balance sheets under the following captions:



|                                                                            |  |               |         |  |      |   |         | 
|--------------------------------------------------------------------------- |  | ------------- | ------- |  | ---- | - | ------- | 
|                                                                            |  | September 30, |        
|                                                                            |  | 2010          |         |  | 2009 |  
|Costs and estimated earnings in excess of billings on uncompleted contracts |  | $             | 106,000 |  |      | $ | 251,000 | 
|Billings in excess of costs and estimated earnings on uncompleted contracts |  |               |        |  |      |   |        | 
|                                                                            |  |               |         |  |      |   |         | 
|                                                                            |  | $             | 106,000 |  |      | $ | 251,000 | 
|                                                                            |  |               |         |  |      |   |         | 



F-15



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



8. Property, plant and equipment

Property, plant and equipment consist of the following:



|                                               |  |               |            |   |      |   |            |  
|---------------------------------------------- |  | ------------- | ---------- | - | ---- | - | ---------- | -
|                                               |  | September 30, |           
|                                               |  | 2010          |            |   | 2009 |  
|Furniture and fixtures                         |  | $             | 73,000     |   |      | $ | 73,000     |  
|Leasehold improvements                         |  |               | 70,000     |   |      |   | 70,000     |  
|Machinery and equipment                        |  |               | 1,260,000  |   |      |   | 1,212,000  |  
|                                               |  |               |            |   |      |   |            |  
|                                               |  |               | 1,403,000  |   |      |   | 1,355,000  |  
|Less accumulated depreciation and amortization |  |               | (1,326,000 | ) |      |   | (1,274,000 | )
|                                               |  |               |            |   |      |   |            |  
|                                               |  | $             | 77,000     |   |      | $ | 81,000     |  
|                                               |  |               |            |   |      |   |            |  

9. Patents and Trademarks

Patents and trademarks consist of the following:



|                         |  |               |          |   |      |   |          |  
|------------------------ |  | ------------- | -------- | - | ---- | - | -------- | -
|                         |  | September 30, |         
|                         |  | 2010          |          |   | 2009 |  
|Patents                  |  | $             | 12,000   |   |      | $ | 12,000   |  
|Trademarks               |  |               | 579,000  |   |      |   | 579,000  |  
|                         |  |               |          |   |      |   |          |  
|                         |  |               | 591,000  |   |      |   | 591,000  |  
|Accumulated amortization |  |               | (330,000 | ) |      |   | (301,000 | )
|                         |  |               |          |   |      |   |          |  
|                         |  | $             | 261,000  |   |      | $ | 290,000  |  
|                         |  |               |          |   |      |   |          |  

Estimated future amortization of patent and trademark costs is as follows:



|                          |  |   |         | 
|------------------------- |  | - | ------- | 
|Year ending September 30, |  |   |        
|2011                      |  | $ | 30,000  | 
|2012                      |  |   | 30,000  | 
|2013                      |  |   | 30,000  | 
|2014                      |  |   | 30,000  | 
|2015                      |  |   | 30,000  | 
|thereafter                |  |   | 111,000 | 
|                          |  |   |         | 
|                          |  | $ | 261,000 | 
|                          |  |   |         | 

10. Related party transactions

Notes payable, related party consists of the following:



|                                              |  |               |           |  |      |   |           | 
|--------------------------------------------- |  | ------------- | --------- |  | ---- | - | --------- | 
|                                              |  | September 30, |          
|                                              |  | 2010          |           |  | 2009 |  
|Accentia promissory demand notes  prime rate |  | $             | 556,000   |  |      | $ | 332,000   | 
|Debtor-in-possession note  16%               |  |               | 1,890,000 |  |      |   | 1,250,000 | 
|Accrued interest                              |  |               | 151,000   |  |      |   | 82,000    | 
|                                              |  |               |           |  |      |   |           | 
|                                              |  | $             | 2,597,000 |  |      | $ | 1,664,000 | 
|                                              |  |               |           |  |      |   |           | 



F-16



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Accentia promissory demand notes:

Notes payable, related parties includes amounts advanced under three secured promissory demand notes issued to Accentia, bearing interest at the prime rate. On February 5, 2008, the terms of these
notes were modified to allow Accentia the option to convert part or all of the principal and interest due into shares of the Companys common stock at a conversion price of $1.10 per share subject to adjustment in the event of certain
recapitalizations or in the event of the sale of the Companys stock at prices below the conversion price. On September 22, 2008, as provided for under the adjustment provisions of the conversion option, the conversion price was modified
to allow Accentia to convert part or all of the principal and interest due into shares of the Companys common stock at a conversion price of $0.32 per share. The Company granted piggyback and demand registration rights to Accentia for the
shares underlying this conversion option.

Management concluded that the February 5thmodification added a substantive conversion option to these notes
and thus applied debt extinguishment accounting to the transaction resulting in a $4.9 million gain on modification, recorded as an increase in additional paid-in capital on the Companys consolidated balance sheet as of September 30,
2009.

The balance due under these notes was $12.0 million as of November 10, 2008, the date of the Companys voluntary petition for
Chapter 11 protection. This balance has been reclassified to liabilities subject to compromise on the Companys condensed consolidated balance sheet as of September 30, 2010 (Note 11). Since filing for Chapter 11, the Company has continued
to draw on this line of credit through payments made by Accentia directly to third parties on the Companys behalf as well as through the allocation of inter-company expenses for shared resources. Additionally, the Company has continued to
accrue interest at prime on the outstanding principal due under the note. See the Subsequent Events footnote for information on the treatment of this debt in the Companys Plan for Reorganization.

Debtor-in-possession note:

On December 22, 2008, the Company completed the closing of a debtor-in-possession financing transaction (the DIP Transaction) with Corps Real, LLC, a Illinois limited liability company,
the principal owner is a director of or affiliated with directors of the Company (the DIP Lender). Pursuant to the transaction, the DIP Lender provided to the Company a secured line of credit in an amount of up to $3.0 million in
accordance with an order entered by the Bankruptcy Court. As of September 30, 2010, the DIP Lender had advanced $1.89 million to the Company1.

The DIP
Transaction was memorialized by a Secured Promissory Note (the DIP Note) and Security Agreement dated December 22, 2008. The following describes certain material terms of the DIP Transaction:



| |  |  | Principal Amount- Up to $3.0 million
| | - |  | ------------------------------------



| |  |  | Priority and Security- The facility is a secured super-priority loan to a Debtor-in-Possession and is secured by all assets of the Company that
is senior to all prior and existing liens of Biovest.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Advances under the Facility- For all amounts in excess of $1.0 million, Lender and the Company shall within 30 days of the entry of the Initial
Order agree on a list of milestone events to be achieved by the Company through use of these Advances, and the Company shall be required to make a written request(s) detailing the amount and use and Lender shall in its reasonable
discretion approve or reject the written request based upon whether the Company demonstrates reasonable progress in achieving the agreed milestones.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Term- All loans outstanding under the Facility (the Loans)shall become due and payable on the earlier of:
(i) December 31, 2010; (ii) dismissal of the Chapter 11 proceeding; (iii) conversion of the Chapter 11 proceeding to a Chapter 7 proceeding; or (iv) confirmation of the Companys Plan of Reorganization.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Interest- Loans will bear interest at 16% per annum computed on a daily basis based on the principal amount outstanding. Interest shall be
paid as follows: (i) 10% interest shall be paid monthly and (ii) 6% interest shall accrue and be paid at maturity.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|1 | Subsequent to the period of this report and as of December 7, 2010, the DIP Lender has advanced a total of $2.14 million to the Company pursuant
to the terms of the DIP Transaction.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-17



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009





| |  |  | Points- At the Closing, the Company paid in cash 4% of the initial $1.0 million of the Facility ($40,000). In August 2009, the time at which the
Company borrowed in excess of $1.0 million, the Company paid in cash 4% of the second $1.0 million of the Facility ($40,000). At the time that the Company borrows in excess of $2.0 million, the Company shall pay in cash 4% of the third $1.0
million of the Facility ($40,000). These payments have been recorded as deferred financing costs and amortized through the maturity date of the facility.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expenses- The Company issued payment of $25,000 in costs at the Closing.
| | - |  | ------------------------------------------------------------------------



| |  |  | Prepayment- Loans may be prepaid at any time in an amount of $50,000 or multiples of $50,000 in excess thereof, provided, however, that the
Companys senior secured lender (Laurus and the Valens Funds) provides its consent to each prepayment via written notification to the Company and Lender.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See the Subsequent Events footnote for information on the treatment of this liability in the Companys Plan.

11. Liabilities subject to compromise

As a result of the Companys Chapter 11
filings, the payment of prepetition indebtedness may be subject to compromise or other treatment under the Debtors Plan of Reorganization. Although actions to enforce or otherwise effect payment of prepetition liabilities are stayed, at
hearings held in November 2008, the Bankruptcy Court granted approval of the Debtors administrative motions, generally designed to stabilize the Debtors operations and covering, among other things, human capital obligations, business
operations, tax matters, cash management, utilities, case management and retention of professionals.

The Debtors have been paying and intend
to continue to pay undisputed post-petition claims in the ordinary course of business. In addition, the Debtors may reject prepetition executory contracts and unexpired leases with respect to the Debtors operations, with the approval of the
Bankruptcy Court. Damages resulting from rejection of executory contracts and unexpired leases are treated as general unsecured claims and will be classified as liabilities subject to compromise.

On August 16, 2010, the Company filed its First Amended Joint Plan of Reorganization, and, on October 25, 2010, the Company filed the First
Modification to the First Amended Joint Plan of Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010, the Bankruptcy Court held a Confirmation hearing and confirmed the Plan, and, on
November 2, 2010, the Bankruptcy Court entered an Order Confirming Debtors First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Confirmation Order), which approved and confirmed the
Plan, as modified by the Confirmation Order. The Company emerged from Chapter 11 protection, and the Plan became effective, on November 17, 2010 (the Effective Date). See Note 21 - Subsequent Events for information on the treatment
of these liabilities in the Companys Plan.

ASC Topic 852 requires prepetition liabilities that are subject to compromise to be reported
at the amounts expected to be allowed, even if they may be settled for lesser amounts. The amounts currently classified as liabilities subject to compromise may be subject to future adjustments depending on Bankruptcy Court actions, further
developments with respect to disputed claims, determinations of the secured status of certain claims, the values of any collateral securing such claims, or other events.



F-18



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Liabilities subject to compromise consist of the following:



|                                                                        |  |               |            |   |      |   |            |  
|----------------------------------------------------------------------- |  | ------------- | ---------- | - | ---- | - | ---------- | -
|                                                                        |  | September 30, |           
|                                                                        |  | 2010          |            |   | 2009 |  
|Secured promissory notes payable to Laurus and affiliates               |  | $             | 14,681,000 |   |      | $ | 14,681,000 |  
|Secured promissory demand notes payable to Accentia (Note 10)           |  |               | 10,279,000 |   |      |   | 10,279,000 |  
|Secured convertible debentures  15%                                    |  |               | 1,450,000  |   |      |   | 1,450,000  |  
|Unsecured promissory notes payable to Pulaski Bank                      |  |               | 1,000,000  |   |      |   | 1,000,000  |  
|Unsecured promissory note payable to Southwest Bank                     |  |               | 200,000    |   |      |   | 200,000    |  
|Unsecured convertible promissory note  10%                             |  |               | 1,000,000  |   |      |   | 1,000,000  |  
|Minimum royalty due to Laurus on net sales of AutovaxID instrumentation |  |               | 7,500,000  |   |      |   | 7,500,000  |  
|Accounts payable                                                        |  |               | 3,574,000  |   |      |   | 3,817,000  |  
|Derivative liabilities                                                  |  |               | 17,846,000 |   |      |   | 2,080,000  |  
|Provision for indemnity agreements                                      |  |               | 1,833,000  |   |      |   | 3,895,000  |  
|Other                                                                   |  |               | 1,120,000  |   |      |   | 1,120,000  |  
|Accrued interest and fees                                               |  |               | 17,597,000 |   |      |   | 11,978,000 |  
|                                                                        |  |               |            |   |      |   |            |  
|                                                                        |  |               | 78,080,000 |   |      |   | 59,000,000 |  
|Less: unamortized discounts                                             |  |               | (1,182,000 | ) |      |   | (5,020,000 | )
|                                                                        |  |               |            |   |      |   |            |  
|                                                                        |  | $             | 76,898,000 |   |      | $ | 53,980,000 |  
|                                                                        |  |               |            |   |      |   |            |  

Secured notes payable to Laurus and affiliates:

The notes issued to Laurus Master Fund, Ltd (Laurus) and affiliates consist of a $7.799 million note payable to Laurus (originated March 2006), a $0.250 million note payable to Valens Offshore
SPV II, Corp (originated October 2007), a $0.245 million note payable to Valens U.S. SPV I, LLC (originated October 2007), a $3.6 million note payable to Valens Offshore SPV II, Corp (originated December 2007), and a $4.9 million note payable
to Valens U.S. SPV I, LLC (originated December 2007). All notes are secured by all assets of the Company and are subordinate only to the DIP Lender debtor-in-possession financing discussed in Note 10 above. Through a series of modifications, all
notes had a maturity date of July 31, 2009 and accrue interest at 30% per year. The Company has continued to accrue interest at this contractual rate while in Chapter 11. Additionally, in July 2008, a loan modification fee of $4.4 million
was added to the amounts due under the notes, and has been included in line item accrued interest and fees in the table above.

As
a result of the November 10, 2008 Chapter 11 filings by the Company and its subsidiaries, all actions to enforce or otherwise effect the Companys obligations and payments under any debt facility were automatically stayed pursuant to
provisions of federal bankruptcy law. See the Subsequent Events footnote for information on the treatment of these liabilities in the Companys Plan.

Secured convertible debentures:

On September 22, 2008 and September 26, 2008,
the Company entered into definitive agreements with three investors, all of whom are affiliates, related to a private placement of 15% Secured Convertible Debentures (the Debentures). The documents permit Biovest to place up to $5.0
million in principal amount of its Debentures (the Private Placement). The Company sold $1.150 million in principal amount of its Debentures (the Initial Tranche) and sold an additional $0.3 million in principal
amount of its Debentures to another individual investor effective as of October 15, 2008 (the Second Tranche). The Debentures are convertible into the Companys common stock at $0.32 per share (the Conversion
Price) and, provided certain conditions are satisfied, the Company may, at its option, redeem the Debentures for an amount equal to 110% of the then outstanding principal. Each purchaser of Debentures in the Private Placement has the right to
elect to be repaid in one of the following methods: a) on March 22, 2009, the Debentures amortized through twelve equal monthly payments or b) a single lump-sum payment of all remaining outstanding principal and accrued interest was to be
made on June 30, 2010. All principal amortization payments and monthly interest payments would be made in cash or the Company may elect to make the payments in shares of its common stock.



F-19



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



The Companys ability to pay interest with shares of Companys common stock will be subject to
specified conditions, including the existence of an effective registration statement covering the resale of the shares issued in payment of redemption amount unless the shares may be resold pursuant to Rule 144 without volume or manner-of-sale
restrictions or current public information requirements. Any common stock delivered in satisfaction of an amortization payment will be valued at the lesser of (i) the conversion price in effect at the time of the amortization payment or
(ii) 90% of the average of the daily volume weighted average price of the shares for the 20 trading days prior to the amortization payment date. The Company has the ability to make payment of interest with shares of the Companys common
stock if the conditions stated herein are not met, upon the consent of the holder of the Debenture, and in that event the common stock delivered in satisfaction of an amortization payment will be valued at the lesser of (i) the conversion price
in effect at the time of the amortization payment or (ii) 80% of the average of the daily volume weighted average price of the shares for the 20 trading days prior to the amortization payment date.

In the event that the Company issues or grants in the future any rights to purchase any of the Companys common stock, or other securities
convertible into the Companys common stock, for an effective per share price less than the Conversion Price or in the instance of warrants the Exercise Price then in effect, the conversion price of all unconverted Debentures and the Exercise
Price of all unexercised Warrants will be decreased to equal such lower price. The above-described adjustments to the Conversion Price and Exercise Price for future stock issuances by the Company will not apply to certain exempt issuances, including
stock issuances pursuant to employee stock option plans and strategic transactions.

As a result of the November 10, 2008 Chapter 11
filings by the Company and its subsidiaries, all actions to enforce or otherwise effect the Companys obligations and payments under any debt facility were automatically stayed pursuant to provisions of federal bankruptcy law. See the
Subsequent Events footnote for information on the treatment of these liabilities in the Companys Plan.

Management concluded that the
conversion features associated with the debentures were derivative financial instruments and required bifurcation under applicable accounting standards. Proceeds from the debenture were allocated to debt and derivative liabilities based on the
relative fair values of the debt and derivatives. The resulting discount on the debt was amortized to interest expense over the term of the debentures using the effective interest method.

Pulaski Bank:

In January and March 2007, the Company issued two unsecured promissory
notes to Pulaski Bank and Trust Company of St. Louis, MO (Pulaski Bank) in the aggregate amount of $1.75 million and guaranteed by individuals affiliated with the Company. Through a series of modifications the notes were amended to
mature on March 31, 2009. The Company has accrued interest at the default rate of prime plus 5% while in Chapter 11. On December 29, 2008, Pulaski Bank called the guarantees resulting in an aggregate payment of $1.0 million by the
guarantors of the notes. As a result of the November 10, 2008 Chapter 11 filings by the Company and its subsidiaries, all actions to enforce or otherwise effect the Companys obligations and payments under any debt facility were
automatically stayed pursuant to provisions of federal bankruptcy law. See the Subsequent Events footnote for information on the treatment of these liabilities in the Companys Plan.

Southwest Bank:

On June 26, 2007, the Company issued an unsecured promissory note to
Southwest Bank Creve Coeur Financial Center of St. Louis, MO (Southwest Bank) in the amount of $0.2 million. On December 26, 2008, the note matured. The Company has accrued interest at the default rate of prime plus 4% while in
Chapter 11. In January 2009, Southwest Bank called its guarantee resulting in an aggregate payment of $0.2 million by the guarantor of the note. As a result of the November 10, 2008 Chapter 11 filings by the Company and its subsidiaries,
all actions to enforce or otherwise effect the Companys obligations and payments under any debt facility were automatically stayed pursuant to provisions of federal bankruptcy law. See the Subsequent Events footnote for information on the
treatment of these liabilities in the Companys Plan.



F-20



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Unsecured convertible promissory note:

On May 9, 2008, the Company entered into a financing transaction with one of the Companys directors, whereby the Company issued a convertible promissory note in the amount of $1.0 million,
bearing interest at 10% and with a maturity date of the earlier to occur of one year from the date of issuance, or, at the election of the lender, upon closing of a financing transaction resulting in net proceeds to the Company of at least $15.0
million. Interest only is payable monthly and may be paid by issuance of the Companys restricted common stock, calculated at a price of $0.50 per share. At any time after issuance of the note the lender may elect to convert all or any portion
of the outstanding principal and accrued interest on the note into common stock of the Company, at a conversion price equal to $0.50 per share. As part of this transaction the Company issued to the lender a warrant to purchase up to 2.0 million
shares of the Companys common stock at an exercise price of $0.50 per share, with cashless exercise provisions and a 7-year term. In addition, the Company entered into an option agreement with the lender whereby the lender may elect, at any
time before the earlier to occur of i) notice of a signed term sheet for a financing of specified magnitude or ii) maturity of the note as defined therein, to increase his loan by an amount of up to the full original loan amount ($1.0 million) upon
the same terms as contained in the original note, including issuance of additional warrants with the same term, exercise price, and cashless exercise provisions. As a result of the November 10, 2008 Chapter 11 filings by the Company and
its subsidiaries, all actions to enforce or otherwise effect the Companys obligations and payments under any debt facility were automatically stayed pursuant to provisions of federal bankruptcy law. See the Subsequent Events footnote for
information on the treatment of these liabilities in the Companys Plan.

Under applicable accounting guidance the Company was required
to value the warrants and beneficial conversion feature granted with this debt (BCF) separately from the note. The value assigned to the warrants ($0.25 million), the BCF ($0.36 million) and the option agreement ($0.39 million) was
initially recorded as a discount to the face value of the note and an offsetting increase to additional paid-in capital. The debt discount ($1.0 million aggregate) was amortized to interest expense over the life of the note using the effective
interest method. The Company has continued to accrue interest at the contractual rate of 10% while in reorganization.

Royalty due on
AutovaxID instrumentation:

On April 17, 2007, the Company executed an amendment agreement with its senior lender, Laurus, to defer
payments of principal on its $7.799 million loan. As consideration for the forbearance the Company granted to Laurus a non-cancelable royalty equal to three percent of world-wide net sales of AutovaxID instruments for a period of five years
commencing on May 31, 2007. Under the terms of the royalty agreement the Companys royalty payments to Laurus are required to aggregate to a minimum of $8.0 million, and are required to be paid quarterly. On December 31, 2007, a
payment of $0.5 million was made on the royalty due, leaving a remaining balance of $7.5 million due on May 31, 2012. The Company recorded the royalty liability based on the present value of the minimum payments (discounted at an annual rate of
11%) due under the agreement. The Company has continued to amortize the discount to interest expense while in reorganization. As a result of the November 10, 2008 Chapter 11 filings by the Company and its subsidiaries, all actions to
enforce or otherwise effect the Companys obligations and payments under any debt facility were automatically stayed pursuant to provisions of federal bankruptcy law. See the Subsequent Events footnote for information on the treatment of these
liabilities in the Companys Plan.

Accounts Payable:

Accounts payable subject to compromise decreased by approximately $240,000 from September 30, 2009 to September 30, 2010, as the Company reached an agreement with its principal auditors and SEC
legal counsel for the cancellation of fees incurred prior to the Companys voluntary petition of reorganization on November 10, 2008.

Derivative liabilities:

The Company
does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company and its consolidated subsidiaries have entered into certain other financial instruments and contracts, such as debt
financing arrangements and freestanding warrants with features that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to host contracts, or (iii) may be net-cash settled by the
counterparty. These instruments are required to be carried as derivative liabilities, at fair value.



F-21



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



The following table discloses the fair value of the Companys derivative liabilities and their
location in the consolidated balance sheets as of September 30, 2010 and 2009. The Company held no asset derivatives at either reporting date.



|                                                                     |  |                        |                                  |  |                    |   |            |                        |  |  |                                  |  |  |   |           | 
|-------------------------------------------------------------------- |  | ---------------------- | -------------------------------- |  | ------------------ | - | ---------- | ---------------------- |  |  | -------------------------------- |  |  | - | --------- | 
|                                                                     |  | Liability Derivatives  |                                 
|                                                                     |  | September 30, 2010     |                                  |  | September 30, 2009 |  
|                                                                     |  | Balance Sheet Location |                                  |  | FairValue          |   |            | Balance Sheet Location |  |  | FairValue                        | 
|                                                                     |  |                        |                                  | 
|Derivatives designated as hedging instruments                        |  |                        | none                             |  |                    | $ |           |                        |  |  | none                             |  |  | $ |          | 
|                                                                     |  |                        |                                  | 
|Derivatives not designated as hedging instruments                    |  |                        |                                  |  |                    |   |            |                        |  |  |                                  |  |  |   |           | 
|                                                                     |  |                        |                                  | 
|Biovax Investment, LLC investor put option (Note 17)                 |  |                        | Liabilities subject tocompromise |  |                    |   | 136,000    |                        |  |  | Liabilities subjectto compromise |  |  |   | 122,000   | 
|                                                                     |  |                        |                                  | 
|AutovaxID Investment, LLC investor put option (Note17)               |  |                        | Liabilities subject tocompromise |  |                    |   | 84,000     |                        |  |  | Liabilities subjectto compromise |  |  |   | 75,000    | 
|                                                                     |  |                        |                                  | 
|Derivatives resulting from issuance of Secured Convertible Debenture |  |                        | Liabilities subject tocompromise |  |                    |   | 1,778,000  |                        |  |  | Liabilities subjectto compromise |  |  |   | 1,833,000 | 
|                                                                     |  |                        |                                  | 
|Outstanding warrants with contingent exercise provisions             |  |                        | Liabilities subject tocompromise |  |                    |   | 7,595,000  |                        |  |  | Liabilities subjectto compromise |  |  |   | 50,000    | 
|                                                                     |  |                        |                                  | 
|Accentia conversion option                                           |  |                        | Liabilities subject tocompromise |  |                    |   | 8,253,000  |                        |  |  | N/A                              |  |  |   |          | 
|                                                                     |  |                        |                                  |  |                    |   |            |                        |  |  |                                  |  |  |   |           | 
|                                                                     |  |                        |                                  | 
|Total derivatives not designated as hedging instruments              |  |                        |                                  |  |                    |   | 17,846,000 |                        |  |  |                                  |  |  |   | 2,080,000 | 
|                                                                     |  |                        |                                  |  |                    |   |            |                        |  |  |                                  |  |  |   |           | 
|                                                                     |  |                        |                                  | 
|Total derivatives                                                    |  |                        |                                  |  |                    | $ | 17,846,000 |                        |  |  |                                  |  |  | $ | 2,080,000 | 
|                                                                     |  |                        |                                  |  |                    |   |            |                        |  |  |                                  |  |  |   |           | 

In June 2008, the FASB issued new guidance for determining whether an equity-linked financial instrument or embedded
features within financial instruments are indexed to an entitys own stock. As a result of this guidance, the Company was required to record conversion features associated with the notes outstanding to Accentia, as well as certain of the
Companys outstanding warrants containing contingent exercise provisions, as liabilities. The Company adopted this new guidance effective October 1, 2009.

Provision for indemnity agreements:

The notes issued to Pulaski and Southwest Banks are
guaranteed by individuals affiliated with the Company or Accentia. The Company agreed to indemnify and hold harmless each guarantor should their guarantees be called by the lenders. In addition, in the event of default by the Company resulting in a
payment to the lender by the guarantors, the Company agreed to compensate each affected guarantor by issuance of that number of shares of the Companys restricted common stock determined by dividing 700% of the amount guaranteed by $1.10. On
December 29, 2008, Pulaski Bank called the guarantees resulting in an aggregate payment of $1.0 million by the guarantors. In January 2009, Southwest Bank called its guarantee resulting in an aggregate payment of $0.2 million by the guarantor.
As a result of their indemnification agreements, the Company originally recorded a provision for approximately 7.6 million shares of the Companys common stock valued using the trading price of the Companys stock at each reporting
date. For the quarter ended March 31, 2010, the Company reached an agreement with the guarantors whereby the indemnities will be valued using a price of $0.24 per share, which represents the closing price of the Companys stock on
November 9, 2008, the day prior to the Companys petition for reorganization, and represents the amount that will be allowed as an unsecured claim of the guarantors in the Companys reorganization proceedings (approximately $1.8
million). See the Subsequent Events footnote for information on the treatment of these liabilities in the Companys Plan.



F-22



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



12. Stockholders equity

Preferred stock:

The Company has authorized 50.0 million shares of preferred stock.
As of the fiscal years ended September 30, 2010 and 2009, no preferred shares were issued or outstanding.

Common stock:

The Company has authorized 300 million shares of common stock. For the year ended September 30, 2010, the Company issued the
following:



| |  |  | 600,000 unrestricted shares of common stock to an individual holder of the Companys secured convertible debentures discussed in Note 11 above. On
September 15, 2010, the Bankruptcy Court issued an order granting a joint motion to compromise between the Company and the debenture holder. As part of the settlement terms, the Company issued 600,000 unrestricted common shares in return for
the cancellation of warrants to purchase 843,750 shares of the Companys common stock at a price of $0.40 per share which had been previously issued to the debenture holder.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For the year ended September 30, 2009, the Company issued the following:



| |  |  | 964,306 restricted shares of common stock in payment of interest accrued on debt outstanding.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | 100,000 restricted shares of common stock to Pulaski Bank and Trust as consideration for extending the maturity date on the Companys debt
obligations.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------

13. Common stock options and warrants

Stock Option Plans:

The Companys 2000 Stock Option Plan was approved and made
effective by the Companys stockholders and Board of Directors on July 19, 2000 (the 2000 Plan). The Companys 2006 Equity Incentive Plan (the 2006 Plan) was approved by the Companys Board of Directors
(the Board) on November 2, 2006, and by the written consent of holders of a majority of the Companys shares of common stock on October 4, 2007. The 2000 Plan and 2006 Plan are collectively, the Stock Option
Plans. The purposes of the Stock Option Plans are to create incentives designed to motivate employees to significantly contribute toward the Companys growth and profitability, to provide the Companys executives, directors and other
employees, and persons who, by their position, ability and diligence, are able to make important contributions to the Companys growth and profitability, with an incentive to assist the Company in achieving its long-term corporate objectives,
to attract and retain executives and other employees of outstanding competence, and to provide such persons with an opportunity to acquire an equity interest in the Company.

The Stock Option Plans are administered by a committee appointed by the Board or by the full Board of Directors. All members of such a committee must be non-employee directors and outside directors, as
defined in the Stock Option Plans. Subject to the limitations set forth in the Stock Option Plans, the administrator has the authority to grant options and to determine the purchase price of the shares of the Companys common stock covered by
each option, the term of each option, the number of shares of the Companys common stock to be covered by each option, to establish vesting schedules, to designate options as incentive stock options or non-qualified stock options, and to
determine the persons to whom grants are to be made.

The Stock to be subject to awards under the Stock Option Plans may be either authorized
and un-issued shares or shares held in the treasury of the Company. The maximum number of shares of Stock which may be granted under the 2006 Plan, subject to adjustment in accordance with the provisions of the 2006 Plan, is 27.0 million
shares. For the purpose of computing the total number of shares of stock remaining available for awards under the Stock Option Plans at any time while the Stock Option Plans are in effect, the total number of shares shall be reduced by: (1) the
maximum number of shares of stock subject to issuance upon exercise of outstanding options or outstanding stock appreciation rights granted under the 2006 Plan; (2) the maximum number of shares of stock subject to issuance upon exercise of
outstanding options or outstanding stock appreciation rights granted under the 2000 Plan; and (3) the maximum number of shares related to outstanding other stock-based awards granted under these Stock Option Plans, as determined by the Board in
each case as of the dates on which such



F-23



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



awards were granted. The shares involved in the unexercised or undistributed portion of any terminated, expired or forfeited awards, including any unexercised or undistributed portion of any
terminated, expired or forfeited award under the 2000 Plan, will be made available for further Stock Option Plans awards. The Stock Option Plans permit the grant of restricted stock, incentive stock options, non-qualified stock options,
stock-appreciation rights, and phantom stock awards. Awards granted under the Stock Option Plans that have not vested will generally terminate immediately upon the grantees termination of employment or business relationship with us or any of
the Companys subsidiaries for any reason other than retirement, disability or death. The Board of Directors or a committee of the Board may determine at the time of the grant that an award agreement should contain provisions permitting the
grantee to exercise the stock options for any stated period after such termination, or for any period the Board or a committee of the Board determines to be advisable after the grantees employment or business relationship with us terminates by
reason of retirement, disability, death or termination without cause. Except in the case of retirement or disability, vested Incentive Stock Options will generally terminate no more than three months after termination of the optionees
employment and twelve months after termination of the optionees employment due to disability. In the event of termination of employment as a result of retirement, termination of the Option will occur at the end of the exercise period as
specified in the grant; and will comply in all other respects with the provisions of Code Section 422. For purposes of the Stock Option Plans, retirement shall mean the employee terminates at a time when employees combined age
and years of service equal at least sixty (60) (subject to the Age and Service Guidelines set forth below). The Age and Service Guidelines are:



| | (a) | the employee must have a minimum of three (3) years of service; and
| | --- | -------------------------------------------------------------------



| | (b) | the employee must have attained a minimum age of fifty-five (55) years during the year of termination.
| | --- | ------------------------------------------------------------------------------------------------------

The Board of Directors or a committee of the Board may permit a deceased optionees stock options to be exercised by the optionees executor or
heirs during a period acceptable to the Board or a committee of the Board following the date of the optionees death but such exercise must occur prior to the expiration date of the stock option.

Under generally accepted accounting principles with respect to the financial accounting treatment of stock options used to compensate employees, upon the
grant of stock options under the Companys Stock Option Plans, the fair value of the options will be measured on the date of grant and this amount will be recognized as compensation expense ratably over the service period, usually corresponding
to the vesting period. Stock appreciation rights granted under the Stock Option Plans must be settled in common stock. Therefore, stock appreciation rights granted under the Stock Option Plans will receive the same accounting treatment as options.
The cash the Company receives upon the exercise of stock options will be reflected as an increase in the Companys capital. No additional compensation expense will be recognized at the time stock options are exercised, although the issuance of
shares of common stock upon exercise may reduce basic earnings per share, as more shares of the Companys common stock would then be outstanding.

In the case of a grant of restricted stock, the fair value of the restricted stock award at the date of grant will be determined and this amount will be recognized over the service period of the award,
usually the vesting period. The fair value of a restricted stock award is equal to the fair market value of the Companys common stock on the date of grant.

Stock option activity for the years ended September 30, 2010 and 2009 is as follows:



|                                  |  |        |            |   |                              |   |      |                                 |  |  |                                      |  |  |                         |      |  |  |   |            | 
|--------------------------------- |  | ------ | ---------- | - | ---------------------------- | - | ---- | ------------------------------- |  |  | ------------------------------------ |  |  | ----------------------- | ---- |  |  | - | ---------- | 
|                                  |  | Shares |            |   | WeightedAverageExercisePrice |   |      | WeightedAverageContractual Life |  |  | WeightedAverage GrantDate Fair Value |  |  | AggregateIntrinsicValue |     
|Outstanding at October 1, 2008    |  |        | 9,471,796  |   |                              | $ | 0.72 |                                 |  |  | 6.77                                 |  |  | $                       | 0.32 |  |  | $ |           | 
|Exercisable at October 1, 2008    |  |        | 9,113,462  |   |                              | $ | 0.72 |                                 |  |  | 6.72                                 |  |  | $                       | 0.32 |  |  | $ |           | 
|                                  |  |        |            |   |                             
|Granted(1)                        |  |        | 6,340,000  |   |                              |   | 0.06 |                                 |  |  |                                      |  |  |                         |      |  |  |   |            | 
|Exercised                         |  |        |           |   |                              |   |     |                                 |  |  |                                      |  |  |                         |      |  |  |   |            | 
|Cancelled                         |  |        | (2,874,239 | ) |                              |   | 0.62 |                                 |  |  |                                      |  |  |                         |      |  |  |   |            | 
|                                  |  |        |            |   |                             
|Outstanding at September 30, 2009 |  |        | 12,937,557 |   |                              |   | 0.42 |                                 |  |  | 6.86                                 |  |  |                         | 0.18 |  |  |   | 2,853,000  | 
|Exercisable at September 30, 2009 |  |        | 6,610,890  |   |                              |   | 0.76 |                                 |  |  | 5.42                                 |  |  |                         | 0.31 |  |  |   | 21,000     | 
|Granted(1)                        |  |        | 14,030,000 |   |                              |   | 0.70 |                                 |  |  |                                      |  |  |                         |      |  |  |   |            | 
|Exercised                         |  |        |           |   |                              |   |     |                                 |  |  |                                      |  |  |                         |      |  |  |   |            | 
|Cancelled                         |  |        | (155,071   | ) |                              |   | 0.49 |                                 |  |  |                                      |  |  |                         |      |  |  |   |            | 
|Outstanding at September 30, 2010 |  |        | 26,812,486 |   |                              | $ | 0.57 |                                 |  |  | 7.64                                 |  |  |                         | 0.33 |  |  | $ | 17,409,103 | 
|Exercisable at September 30, 2010 |  |        | 6,599,153  |   |                              | $ | 0.76 |                                 |  |  | 4.42                                 |  |  |                         | 0.31 |  |  | $ | 3,045,586  | 



|(1) | The options are restricted for exercise until the effective date of our plan for reorganization, which was November 17, 2010. See note 21.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------



F-24



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



The following assumptions were used to determine the fair value of the stock option grants:



|                         |  |                            |  |                 
|------------------------ |  | -------------------------- |  | ----------------
|                         |  | Years Ending September 30,
|                         |  | 2010                       |  | 2009            
|Expected volatility      |  | 78% - 88%                  |  | 81% - 118%      
|Expected life            |  | 5.4 to 5.5 years           |  | 5.5 to 5.6 years
|Risk-free interest rates |  | 1.98% - 2.52%              |  | 2.01% - 2.18%   
|Dividend yields          |  | none                       |  | none            

The following tables summarize
information for options outstanding and exercisable at September 30, 2010:



|                         |  |                     |            |  |                                       |  |      |                            |  |   |                   |  |  |                                       |           |  |                            |  |      |  |  |   |      | 
|------------------------ |  | ------------------- | ---------- |  | ------------------------------------- |  | ---- | -------------------------- |  | - | ----------------- |  |  | ------------------------------------- | --------- |  | -------------------------- |  | ---- |  |  | - | ---- | 
|                         |  | Options Outstanding |            |  | Options Exercisable                   | 
|Range of Exercise Prices |  | NumberOutstanding   |            |  | Weighted AveRemaining ContractualLife |  |      | Weighted AveExercise Price |  |   | NumberExercisable |  |  | Weighted AveRemaining ContractualLife |           |  | Weighted AveExercise Price | 
|$ 0.01-1.00              |  |                     | 24,949,386 |  |                                       |  | 8.38 |                            |  | $ | 0.51              |  |  |                                       | 4,936,053 |  |                            |  | 5.53 |  |  | $ | 0.60 | 
|1.01-2.00                |  |                     | 1,853,100  |  |                                       |  | 3.57 |                            |  |   | 1.23              |  |  |                                       | 1,653,100 |  |                            |  | 2.82 |  |  |   | 1.21 | 
|2.01-3.00                |  |                     | 10,000     |  |                                       |  | 0.92 |                            |  |   | 3.00              |  |  |                                       | 10,000    |  |                            |  | 0.92 |  |  |   | 3.00 | 
|                         |  |                     |            |  |                                       |  |      |                            |  |   |                   |  |  |                                       |           |  |                            |  |      |  |  |   |      | 
|                         |  |                     | 26,812,486 |  |                                       |  | 7.64 |                            |  |   | 0. 57             |  |  |                                       | 6,599,153 |  |                            |  | 4.42 |  |  |   | 0.76 | 

The Company recognized $0.1 million
and $0.2 million in total employee stock-based compensation expense for the years ended September 30, 2010 and 2009 respectively. A summary of the status of the Companys non-vested employee stock options as of September 30, 2010, and
changes during the two years then ended is presented below:



|                                 |  |        |            |   |                                  |   |      | 
|-------------------------------- |  | ------ | ---------- | - | -------------------------------- | - | ---- | 
|Non-vested Options               |  | Shares |            |   | Weighted AveGrant-DateFair Value |  
|Non-vested at September 30, 2008 |  |        | 358,334    |   |                                  | $ | 0.31 | 
|Granted                          |  |        | 6,340,000  |   |                                  |   | 0.04 | 
|Vested                           |  |        | (23,333    | ) |                                  |   | 0.23 | 
|Cancelled                        |  |        | (348,334   | ) |                                  |   | 0.29 | 
|                                 |  |       
|Non-vested at September 30, 2009 |  |        | 6,326,667  |   |                                  | $ | 0.04 | 
|Granted                          |  |        | 14,030,000 |   |                                  |   | 0.47 | 
|Vested                           |  |        | (23,334    | ) |                                  |   | 0.23 | 
|Cancelled                        |  |        | (120,000   | ) |                                  |   | 0.30 | 
|                                 |  |       
|Non-vested at September 30, 2010 |  |        | 20,213,333 |   |                                  | $ | 0.34 | 

As of September 30, 2010, there
was $6.6 million of total unrecognized compensation cost related to non-vested share-based compensation. This cost is expected to be recognized over a period of approximately one year.



F-25



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Common Stock Warrants:

Stock warrants issued, exercised and outstanding at September 30, 2010 and 2009 are summarized as follows:



|                                  |  |              |            |   |                |   |      | 
|--------------------------------- |  | ------------ | ---------- | - | -------------- | - | ---- | 
|                                  |  | Weighted Ave |           
|Warrants                          |  | Shares       |            |   | Exercise Price |  
|Outstanding at September 30, 2008 |  |              | 31,220,405 |   |                | $ | 0.35 | 
|Exercisable at September 30, 2008 |  |              | 30,020,405 |   |                |   | 0.31 | 
|                                  |  |             
|Issued                            |  |              | 843,750    |   |                |   | 0.25 | 
|Exercised                         |  |              |           |   |                |   |     | 
|Cancelled                         |  |              |           |   |                |   |     | 
|                                  |  |             
|Outstanding at September 30, 2009 |  |              | 32,064,155 |   |                |   | 0.35 | 
|Exercisable at September 30, 2009 |  |              | 31,164,155 |   |                |   | 0.32 | 
|                                  |  |             
|Issued                            |  |              |           |   |                |   | 0.25 | 
|Exercised                         |  |              |           |   |                |   |     | 
|Cancelled                         |  |              | (843,750   | ) |                |   | 0.40 | 
|                                  |  |             
|Outstanding at September 30, 2010 |  |              | 31,220,405 |   |                |   | 0.35 | 
|Exercisable at September 30, 2010 |  |              | 30,620,405 |   |                |   | 0.33 | 

14. Segment information

The Company operates in three identifiable industry segments. The Companys cell culture products and services
are engaged in the production and contract manufacturing of biologic drugs and cell production for research institutions worldwide. The Instruments and Disposables segment is engaged in the development, manufacture and marketing of patented cell
culture systems, equipment and consumable parts to pharmaceutical, diagnostic and biotechnology companies, as well as leading research institutions worldwide. The Therapeutic Vaccine segment, which has generated no revenues to date, is focused on
developing BiovaxID®, as described earlier.

The Company defines its segment operating results as earnings/(loss) before general and administrative costs, interest expense, interest income, other income, and income taxes. Under the Companys
shared resources concept, assets of the Company are common to the segments listed below and thus not segregated for reporting purposes. Reorganization value in excess of amounts allocated to identifiable assets was $2.1 million for the years ended
September 30, 2010 and 2009 and has not been allocated to the segments listed below. Segment information is as follows:



|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |            |  
|--------------------------------------------------------------------------------------------------- |  | ----------------------------- | --------- | - | -------------------------- | - | ---------- | ------------------ |  | - | -------- | - |  | - | ---------- | -
|                                                                                                    |  | Year ended September 30, 2010 |          
|                                                                                                    |  | Cell CultureServices          |           |   | Instruments andDisposables |   |            | TherapeuticVaccine |  |   | Total    |  
|Revenues:                                                                                           |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |            |  
|Products                                                                                            |  | $                             |          |   |                            | $ | 4,156,000  |                    |  | $ |         |   |  | $ | 4,156,000  |  
|Services                                                                                            |  |                               | 1,196,000 |   |                            |   |           |                    |  |   |         |   |  |   | 1,196,000  |  
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |            |  
|Total Revenues                                                                                      |  |                               | 1,196,000 |   |                            |   | 4,156,000  |                    |  |   |         |   |  |   | 5,352,000  |  
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |            |  
|Costs and Expenses:                                                                                 |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |            |  
|Cost of revenue                                                                                     |  |                               | (941,000  | ) |                            |   | (1,960,000 | )                  |  |   |         |   |  |   | (2,901,000 | )
|Research and development                                                                            |  |                               |          |   |                            |   |           |                    |  |   | (815,000 | ) |  |   | (815,000   | )
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |            |  
|Operating income/(loss) including segment identifiable expenses                                     |  | $                             | 255,000   |   |                            | $ | 2,196,000  |                    |  | $ | (815,000 | ) |  |   | 1,636,000  |  
|General and administrative expense                                                                  |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   | (2,379,000 | )
|Other income/(expense), net                                                                         |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   | (7,842,000 | )
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |            |  
|Net loss before non-controlling interest in losses from variable interest entities and income taxes |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   | (8,585,000 | )
|Non-controlling interest in losses from variable interest entities                                  |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   | 412,000    |  
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |            |  
|Net loss before income taxes                                                                        |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   | (8,173,000 | )
|Income taxes                                                                                        |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |           |  
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |            |  
|Net loss                                                                                            |  |                               |           |   |                            |   |            |                    |  |   |          |   |  | $ | (8,173,000 | )
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |          |   |  |   |            |  



F-26



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009







|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |             |  
|--------------------------------------------------------------------------------------------------- |  | ----------------------------- | --------- | - | -------------------------- | - | ---------- | ------------------ |  | - | ---------- | - |  | - | ----------- | -
|                                                                                                    |  | Year ended September 30, 2009 |          
|                                                                                                    |  | Cell CultureServices          |           |   | Instruments andDisposables |   |            | TherapeuticVaccine |  |   | Total      |  
|Revenues:                                                                                           |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |             |  
|Products                                                                                            |  | $                             |          |   |                            | $ | 2,175,000  |                    |  | $ |           |   |  | $ | 2,175,000   |  
|Services                                                                                            |  |                               | 1,481,000 |   |                            |   |           |                    |  |   |           |   |  |   | 1,481,000   |  
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |             |  
|Total Revenues                                                                                      |  |                               | 1,481,000 |   |                            |   | 2,175,000  |                    |  |   |           |   |  |   | 3,656,000   |  
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |             |  
|                                                                                                    |  |                               |           |  
|Costs and Expenses:                                                                                 |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |             |  
|Cost of revenue                                                                                     |  |                               | (996,000  | ) |                            |   | (1,456,000 | )                  |  |   |           |   |  |   | (2,452,000  | )
|Research and development                                                                            |  |                               |          |   |                            |   |           |                    |  |   | (1,060,000 | ) |  |   | (1,060,000  | )
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |             |  
|Operating income/(loss) including segment identifiable expenses                                     |  | $                             | 485,000   |   |                            | $ | 719,000    |                    |  | $ | (1,060,000 | ) |  |   | 144,000     |  
|                                                                                                    |  |                               |           |  
|General and administrative expense                                                                  |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   | (2,915,000  | )
|Other income/(expense), net                                                                         |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   | (12,338,000 | )
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |             |  
|Net loss before non-controlling interest in losses from variable interest entities and income taxes |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   | (15,109,000 | )
|Non-controlling interest in losses from variable interest entities                                  |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   | 455,000     |  
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |             |  
|Net loss before income taxes                                                                        |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   | (14,654,000 | )
|Income taxes                                                                                        |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |            |  
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |             |  
|Net loss                                                                                            |  |                               |           |   |                            |   |            |                    |  |   |            |   |  | $ | (14,654,000 | )
|                                                                                                    |  |                               |           |   |                            |   |            |                    |  |   |            |   |  |   |             |  



F-27



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



15. Income taxes

The significant income components of the Companys net deferred total are as follows:



|                                               |  |                           |             |   |      |   |             |  
|---------------------------------------------- |  | ------------------------- | ----------- | - | ---- | - | ----------- | -
|                                               |  | Year Ending September 30, |            
|                                               |  | 2010                      |             |   | 2009 |  
|Interest due to tax affiliated group           |  | $                         | 903,000     |   |      | $ | 893,000     |  
|Loss on restructure of related party agreement |  |                           | 2,519,000   |   |      |   | 2,519,000   |  
|Related party financing cost                   |  |                           | 468,000     |   |      |   | 468,000     |  
|Loss on modification of debt                   |  |                           | 2,629,000   |   |      |   | 2,652,000   |  
|Loss on impairment                             |  |                           | 1,433,000   |   |      |   | 1,433,000   |  
|Basis difference in fixed assets               |  |                           | 724,000     |   |      |   | 931,000     |  
|Stock option compensation                      |  |                           | 450,000     |   |      |   | 448,000     |  
|Net operating loss carryover                   |  |                           | 29,347,000  |   |      |   | 28,910,000  |  
|Other                                          |  |                           | 3,341,000   |   |      |   | 484,000     |  
|                                               |  |                           |             |   |      |   |             |  
|Total deferred tax asset                       |  |                           | 41,814,000  |   |      |   | 38,738,000  |  
|                                               |  |                           |             |   |      |   |             |  
|Less: valuation allowance                      |  |                           | (41,814,000 | ) |      |   | (38,738,000 | )
|                                               |  |                           |             |   |      |   |             |  
|Net deferred tax asset                         |  | $                         |            |   |      | $ |            |  
|                                               |  |                           |             |   |      |   |             |  

The components of the provision (benefit) for income taxes consists of the following:



|                                           |  |                           |            |   |      |   |            |  
|------------------------------------------ |  | ------------------------- | ---------- | - | ---- | - | ---------- | -
|                                           |  | Year Ending September 30, |           
|                                           |  | 2010                      |            |   | 2009 |  
|Deferred tax                               |  |                           |            |   |      |   |            |  
|Deferred                                   |  | $                         | (3,077,000 | ) |      | $ | (1,631,000 | )
|Increase in valuation allowance            |  |                           | 3,077,000  |   |      |   | 1,631,000  |  
|                                           |  |                           |            |   |      |   |            |  
|Total provision (benefit) for income taxes |  | $                         |           |   |      | $ |           |  
|                                           |  |                           |            |   |      |   |            |  

ASC740 requires that a deferred tax amount be reduced by a valuation allowance if, based on the weight of available evidence
it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. The valuation allowance should be sufficient to reduce the deferred tax asset to the amount that is more
likely than not to be realized. As a result the Company recorded a valuation allowance with respect to all the Companys deferred tax assets.

For the tax periods June 17, 2003 through September 30, 2005, the Company was part of a consolidated federal income tax return that includes Accentia Biopharmaceuticals, Inc
(Accentia). As of December 7, 2005 the Company became deconsolidated from the Accentia group as a result of Accentias ownership in the Company being reduced below 80% and will file a separate return beginning with the period
December 8, 2005 and going forward including the year ended September 30, 2010. The Company has filed as part of the Accentia group for the period from October 1, 2005 through December 7, 2005.

The Company has a federal net operating loss of approximately $70.7 million as of September 30, 2010 (expiring 2020). Under Section 382 and 383
of the Internal Revenue Code, if an ownership occurred change occurs with respect to a loss corporation, as defined, there are annual limitations on the amount of the net operating loss (NOL) and other deductions which are
available to the company. The portion of the NOLs incurred prior to June 17, 2003 ($3.4 million) is subject to this limitation. As such, these NOLs are limited to approximately $0.2 million per year. NOLs incurred after
June 17, 2003 may also subject to restriction.

At the time that the Company was acquired by Accentia, it had significant NOLs. Due to
severe limitations of these NOLs and the fact that a significant portion of NOLs could never be utilized, the Company made and an election under IRS regulation 1.1502-22P32(b)(4) to waive most of the losses. The Company waived approximately $29
million of NOLs while retaining $3.4 million.



F-28



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



A reconciliation of the U.S. Federal statutory rate to the effective rate is as follows:



|                              |  |                           |     |    |      |  |     |   
|----------------------------- |  | ------------------------- | --- | -- | ---- |  | --- | --
|                              |  | Year Ending September 30, |    
|                              |  | 2010                      |     |    | 2009 | 
|Federal statutory rate        |  |                           | (34 | )% |      |  | (34 | )%
|State taxes                   |  |                           | (4  | )% |      |  | (4  | )%
|Effect of valuation allowance |  |                           | 38  | %  |      |  | 38  | % 
|                              |  |                           |     |    |      |  |     |   
|Net actual effective rate     |  |                           |    | %  |      |  |    | % 
|                              |  |                           |     |    |      |  |     |   

16. Employee benefit plan

The Accentia 401(k) and Profit Sharing Plan (the Employee Benefit Plan) was established effective July 1, 2004 as a defined contribution plan. The Employee Benefit Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Employee Benefit Plan includes eligible employees of Accentia and its affiliates including the Company. Employees of the Company who have completed one month of service
are eligible to participate in the Employee Benefit Plan. Participants are permitted to make annual pre-tax salary reduction contributions of up to 50% of their compensation subject to certain limitations. Employer and participant contributions are
invested at the direction of the participant in various money market funds or pooled/mutual funds. Employer matching and profit sharing contributions are based upon discretionary amounts and percentages authorized by the Board of Directors of the
Company. For the fiscal years ended September 30, 2010 and 2009, the Company made no employer contributions to the Employee Benefit Plan.

17. New Market Tax Credit transactions

April 2006 NMTC Transaction:

On April 25, 2006, the Company through its wholly owned subsidiary, Biovax, Inc.
(Biovax) closed a financing transaction (Transaction I) that was structured in an effort to obtain certain perceived advantages and enhancements from the New Markets Tax Credit (NMTC) regulations adopted under the
auspices of the United States Department of the Treasury in 2002 to provide incentive for investing in businesses located in qualifying census tracts, or areas with a median income below the poverty line. The NMTC was provided for in the
Community Renewal Relief Act of 2000 (the Act) and permits taxpayers (whether companies or individuals) to claim credits against their Federal income taxes for up to 39% of qualified investments in the equity of Community Development
Entities (CDE). CDE are privately managed investment institutions that are certified to make Qualified Low-Income Community Investments (QLICI). The following parties were involved in Transaction I: Accentia, Biovests
majority shareholder, Biolender, LLC (Biolender), Biovax Investment Corp., Biovax Investment, LLC (Fund), U.S. Bancorp Community Investment Corporation (US Bancorp), Telesis CDE Two, LLC (CDE), Telesis
CDE Corporation, Biovax, and Laurus. Biovax is a qualified, active low-income business and is eligible to receive investment capital under the NMTC regulations.

On March 31, 2006, in contemplation of Transaction I, Biovest closed a financing transaction with Laurus pursuant to which Laurus purchased from Biovest a secured promissory note in the principal
amount of $7.799 million (the Laurus Note). Accentia originally guaranteed 64% of any amounts outstanding under the note. On May 30, 2008, this guaranty was modified to reflect a fixed principal amount of $5.0 million. Under the
terms of the Laurus Note, $7.5 million of the principal amount was deposited into a restricted bank account of Biovest pursuant to a restricted account agreement between Biovest and Laurus. Accentia, Analytica International, Inc. (and Laurus also
entered into an Amended and Restated Stock Pledge Agreement pledging Accentias shares of TEAMM Pharmaceuticals, Inc., Analytica International, Inc., Biovest, and Biolender, who was added as obligor by way of joinder, to secure the obligations
owed to Laurus as a result of the Laurus Note.



F-29



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



In contemplation of Transaction I, Biovest and Accentia formed Biolender, as a Delaware limited
liability company. On April 21, 2006, $2.5 million was released from the restricted account created under the Laurus Note. The release of these funds was contingent upon their use in Transaction I. These proceeds were used to purchase a
29.5% equity investment in Biolender for $2.5 million. Accentia used the proceeds of a $6.0 million intraday loan from First Bank to purchase the remaining 70.5% equity interest in Biolender. The $6.0 million loan from First Bank was fully
guaranteed by two directors of Accentia. On April 27, 2006, the Company redeemed 10 million shares of its common stock owned of record by Accentia for a $6.0 million cash payment which equaled the market price of $0.60 per share. Accentia
used the proceeds of the stock redemption to repay its intraday loan due First Bank. Subsequently, on October 31, 2006, the Company entered into a Purchase Agreement with Accentia whereby the Company purchased Accentias 70.5% ownership
interest in Biolender. In consideration of the sale of this interest in Biolender, the Company issued to Accentia ten million shares of common stock, representing the negotiated value of the purchased interest (Note 10).

In contemplation of Transaction I, Biovax Investment, LLC (the Fund) was established. U.S. Bancorp invested $3.6 million for a 99.99% equity
interest in the Fund. Biovax Investment Corp., the Fund manager, invested an additional $100 for the remaining 0.01% equity interest. On April 25, 2006, Biolender loaned the Fund $8.5 million pursuant to a 5.18%, annual rate, senior secured,
convertible note receivable, due October 27, 2013. Interest on the note is payable as follows: (i) 0.64% interest per annum, non-compounding, shall be payable on the first day of each calendar month until October 27, 2013; and
(ii) any remaining accrued and unpaid interest shall be payable in one installment on October 27, 2013. The note is convertible at the option of the fund into shares of the Companys common stock near the maturity date.

The proceeds received by the Fund from the aforementioned financing transactions were used to make a contemporaneous 99.99% equity investment in Telesis
CDE II, LLC ($12.0 million) as well as make payment for associated management, legal and accounting fees ($0.1 million). The $12.0 million investment by the Fund to the CDE constituted a qualified equity investment (QEI) under the NMTC
Program authorized by Section 45D of the Internal Revenue Code of 1986, as amended (the Code), resulting in $4.7 million in tax credits.

The CDE is a Community Development Entity that is certified through the U.S. Treasury Department to make QLICI, and is managed and partially owned (0.01%) by Telesis CDE Corporation, a private financial
institution. Telesis CDE Corporation paid $1,200 in consideration for its 0.01% interest in Telesis. The CDE, upon receipt of its equity funding, contemporaneously issued $11.5 million to Biovax for a 1.0% convertible promissory note payable, due
October 27, 2013. The convertible promissory note is convertible into common stock at the option of the CDE within 5 days of the maturity date at a conversion price equaling the then trading market price of the common stock. The overall
arrangement provides that in the event the CDE converts the note payable, the aforementioned note receivable is subject to immediate conversion at the same conversion price. The Company also issued to Telesis CDE Corporation warrants to purchase
1.2 million shares of the Companys common stock over a period of nine-years at a fixed price of $1.30. These warrants were reflected as an equity financing cost in stockholders equity at a fair value of $517,000 computed using the
Black-Scholes option pricing model. Accentia also issued warrants to Telesis CDE Corporation to purchase 0.2 million shares of Accentias common stock over a period of seven years at a fixed price of $9.00.

Biovax used the proceeds of the $11.5 million convertible promissory note as follows: $6.0 million was paid to Biovest pursuant to an Asset Purchase and
Sale Agreement dated April 18, 2006 and described further below, $1.6 million was issued as a dividend to Biovest and $1.3 million was paid to Biovest for BiovaxID anti-cancer vaccines in various stages of production. The remaining $2.6 million
was used to cover ongoing operational expenses.

The transaction was structured so that, upon maturity, Biovax will have paid approximately
$12.4 million in principal and interest payments to the CDE. The operating agreement of the CDE stipulates that in the event the QLICI is repaid in the combination of stock and cash, the stock received shall be distributed to the Fund. Furthermore,
any distributable cash received by Telesis CDE II, LLC shall be distributed to the Fund in proportion to the Funds respective percentage interest in the CDE in an amount sufficient to fully pay the Funds note payable to Biolender. Upon
maturity, the Fund will have paid approximately $11.9 million in principal and interest payments to Biolender. At maturity, total equity of the Fund is approximated to be $100,000 resulting from the difference of $12.4 million in principal and
interest payments received less $11.9 million in principal and interest paid less approximately $0.4 million in estimated operating costs of the Fund over the 7.5 year term of the notes. Biolender and US Bancorp entered into a put option wherein US
Bancorp will have the right to put its investment in the Fund to the Company near the maturity of the instruments at a price of $180,000. Management has



F-30



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



concluded that the fair value of US Bancorps investment in the Fund at maturity of both notes (approximately $0.1 million) would be less than the $180,000 US Bancorp would receive upon
exercise of the put option and thus it is managements expectation that this option will be exercised. Thus, prior to maturity of both notes, it is anticipated that the Fund will be 99.99% owned by Biolender. The Company accounted for this
option as a derivative liability that requires recognition at fair value. The Company utilized a probability-based, discounted cash flow approach to value the put. Accordingly, the valuation technique provided for the recognition of the full put
amount ($180,000) at the present value of its cash flows, using market interest rates that would likely be considered by market participants trading similar instruments.

Salient terms and conditions of Transaction I are as follows:



| |  |  | Under an Asset Purchase and Sale Agreement dated as of April 18, 2006 (the Asset Purchase Agreement), Biovest transferred all or
substantially all of the assets of its vaccine manufacturing business situated at 377 Plantation Street, Worcester, Massachusetts (the Plant and the assets hereinafter the Equipment) and its rights under that certain lease
agreement for the Plant and that certain letter of intent with the landlord to potentially lease additional space adjacent to the Plant (collectively the Leasehold) to Biovax. As full purchase price for the Equipment, Biovax paid Biovest
$1.5 million. In addition, Biovax advanced rental payments for the Leasehold in the amount of $4.5 million. Under the Asset Purchase Agreement, Biovest is required to treat the advance as unrestricted and non-segregated funds provided that
Biovest uses the funds to make all required lease payments. Finally, Biovax also hired all of Biovests employees related to the vaccine manufacturing business and assumed responsibility for all accrued vacation time and the maintenance of
existing health and other benefits.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The tax credits arising from the transaction were fully assigned to US Bancorp. Biovax entered into an indemnification agreement directly with US
Bancorp that provides for indemnification in the event of tax credit recapture from events caused by Biovax. Biovax is contractually required to maintain the following covenants to avoid tax credit recapture: (i) Biovax shall maintain its
status as a qualified active low-income business; (ii) At least fifty percent of the use of the tangible property of the Biovax (whether owned or leased) will be within the low-income community as defined by Section 45D(e) of the U.S. Tax
Code; (iii) At least fifty percent of the services performed for Biovax by its employees will be within low-income community as defined by Section 45D(e) of the U.S. Tax Code; (iv) Less than five percent of the average of the
unadjusted bases of the property of Biovax will be attributable to collectibles (as defined in Section 408(m)(2) of the Code, and which includes any work of art; any rug or antique; any metal or gem; any stamp or coin; and any alcoholic
beverage) other than collectibles that are held primarily for sale to customers in the ordinary course of business; (v) Less than five percent of the average of the unadjusted bases of the property of Biovax will be attributable to nonqualified
financial property (as defined in Section 1397C(e) of the Code and in Section 1.45D-1(d)(4)(i)(E) of the Regulations, and which includes debt, stock, partnership interests, options, futures contracts, forward contracts, warrants, notional
principal contracts, annuities and other similar property); (vi) No part of the business activities of Biovax will consist of the operation of any private or commercial golf course, country club, massage parlor, hot tub facility, or suntan
facility, race track or other facility used for gambling, or store the principal business of which is the sale of alcoholic beverages for consumption off premises; (vii) No part of Biovaxs business activities will include the rental to
others of residential rental property (the term residential rental property is defined in Section 168(e)(2)(A) of the Code as meaning any building or structure if eighty percent or more of the gross rental income from such building
or structure for the taxable year is rental income from dwelling units); (viii) The predominant trade or business of Biovax will not include the development or holding of intangibles for sale or license, as provided under
Section 1.45D-1(d)(5)(iii) of the Regulations; (ix) Farming (within the meaning of Section 2032A(e)(5)(A) or (B) of the Code) will not be an activity of Biovax; (x) Biovax will generate revenues by the date of April 25,
2009; (xi) Biovax shall not discontinue conducting business, shall not materially change the nature of its business, and shall not materially change the manner in which its business activities are conducted, other than changes in the nature of
its business or the manner in which it conducts its business that do not cause the making of the Loan by the Lender to cease to constitute a qualified low-income community investment as such term is used in Section 45D of the Code
(as determined by the Lender in its good faith judgment and based upon the advice of counsel); (xii) Biovax will not be a bank, credit union or other financial institution; (xiii) Biovax will not maintain a qualified low-income
building under Section 42 of the Code; (xiv) Biovax will not become a single-member entity treated as disregarded as separate from its owner for federal income tax purposes, nor be liquidated or merged into another
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-31



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



| | entity without the written consent of Telesis CDE II, LLC; and (xv) Biovax and Biovest will operate consistently with the Asset Purchase Agreement between Biovax and the Company, and will
not amend such agreement without prior written consent of Telesis CDE II, LLC. An example of an event that would not cause a recapture is changes in the Internal Revenue Code that results in such recapture. The total indemnification amount could be
$4.7 million (representing 39% of the $12.0 million qualified investment). However, in accordance with Financial Interpretation 45 Guarantors Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of the
Indebtedness of Others, the conditions and events that could result in recapture are within the control of Biovax. Therefore, this potential liability is not reflected in the consolidated financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company, Accentia and certain directors of the Company and Accentia entered into a guarantee arrangement with the CDE for the debt service of
Biovax. The Company has guaranteed 100% of the debt service while the directors of the Company and Accentia have guaranteed up to $6.0 million of the debt service. In addition, Accentia has partially guaranteed debt service with limitations
established at no greater than $60,000 each year the instrument is outstanding. The Company issued warrants to purchase 1.0 million shares of common stock to the officers and directors as compensation for their guarantees. The guarantees were
treated in a manner similar to contributed service and their fair value of $460,000 was charged to expense upon issuance. The Company also indemnified the guarantors from any claims of any kind to the extent that the guarantors are called upon to
pledge funds, assets or collateral in connection with the guarantee being executed.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Various legal and accounting fees of $108,000 paid directly by Biovax and involved in structuring this transaction were recorded as a reduction to
additional paid-in capital. Various legal and accounting fees of $170,000 paid by entities in which the Company has a variable interest and involved in structuring this transaction (the Fund and the CDE) were recorded as a reduction to
non-controlling interests in variable interest entities on the Companys consolidated balance sheet. Professional fees of $360,000 involved in the continuing management of this transaction were recorded as a prepaid expense and will be
amortized over a period of seven and one half years, representing the duration of both convertible notes issued by the Fund and Biovax.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Various legal and accounting fees of $108,000 paid directly by the Company and involved in structuring this transaction were recorded as a reduction to
additional paid-in capital. Various legal and accounting fees of $170,000 paid by entities in which the Company has a variable interest and involved in structuring this transaction were recorded as a reduction to non-controlling interests in
variable interest entities on the Companys consolidated balance sheet. Professional fees of $360,000 involved in the continuing management of this transaction were recorded as a prepaid expense and will be amortized over a period of seven and
one half years, representing the duration of both convertible notes issued by the Fund and Biovax, Inc.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In July 2010, the
Company and certain of its affiliates entered into an agreement (the Worcester Restructuring Agreement) with Telesis CDE Corporation and Telesis CDE Two, LLC (collectively, Telesis), contingent upon submission to and approval
by the Bankruptcy Court. The Worcester Restructuring Agreement effectively terminates all agreements and obligations of all parties pursuant to Transaction I, in consideration of retention by Telesis of an unsecured claim in the Companys
Chapter 11 proceeding in the amount of $0.3 million along with a settlement payment in the amount of $85,000 to defray certain legal and administrative expenses incurred by Telesis. This Worcester Restructuring Agreement was approved by the
Bankruptcy Court in an Order entered on December 1, 2010. As a result, all obligations to all parties to Transaction I were terminated. See the Subsequent Events footnote below for further information.

December 2006 NMTC Transaction:

On
December 8, 2006, the Company through its wholly owned subsidiary, AutovaxID, Inc. (AutovaxID) closed a second NMTC financing transaction (Transaction II). The following parties were involved in Transaction II:
AutovaxID, Accentia, Biolender II, LLC (Biolender II), St. Louis New Market Tax Credit Fund II, LLC (CDE II), St. Louis Development Corp., AutovaxID Investment LLC (Fund II), U.S. Bancorp, and Laurus.



F-32



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



On December 8, 2006, Accentia loaned to the Company $3.1 million pursuant to a Secured Promissory
Note (the Accentia Note). Under the terms of the Accentia Note, interest accrues at a rate equal to prime rate, and is convertible, at Accentias option, to shares of the Companys common stock at a conversion price of $0.32
per share. Upon closing of Transaction II, the Company repaid Accentia $1.1 million. The remaining $2.0 million of principal and all accrued and unpaid interest is included in notes payable, related parties in the accompanying September 30,
2008 consolidated balance sheet, and is due upon 30 days advance written notice by Accentia.

In contemplation of Transaction II, Biovest
formed Biolender II as a Delaware limited liability company. On December 8, 2006, $2.5 million was released from the restricted account created under the Laurus Note. The release of these funds was contingent upon their use in Transaction II.
These funds, together with the amount loaned to Biovest under the Accentia Note funded the purchase of a 100% equity interest in Biolender II for the benefit of the Company. The Companys entire equity interest of $5.6 million in Biolender II
has been pledged to Laurus as collateral to secure the Laurus Note.

In contemplation of Transaction II, Fund II was established. U.S. Bancorp
invested $2.4 million for a 100% equity interest in Fund II. Additionally, Biolender II and Fund II entered into a Loan and Security Agreement pursuant to which Biolender II made a loan to Fund II in the principal amount of $5.6 million (the
Leverage Loan), evidenced by a promissory note dated December 8, 2006 payable from Fund II to Biolender II (the Leverage Note). The Leverage Note becomes due on June 9, 2014, and bears an interest rate of 8%,
non-compounding. Payment of interest is due annually on the first calendar day of each year through maturity. The outstanding principal amount on the Leverage Loan and any unpaid interest is due on maturity in cash.

The proceeds received by Fund II from U.S. Bancorp and Biolender II were used to make a contemporaneous 99.99% equity investment in CDE II. The $8.0
million investment by Fund II to CDE II constituted a qualified equity investment (QEI) under the New Markets Tax Credit Program authorized by Section 45D of the Internal Revenue Code of 1986, as amended, resulting in $3.12 million
in tax credits which were allocated to U.S. Bancorp. All of Fund II interest in CDE II has been pledged to Biolender II as collateral for the Leverage Loan.

CDE II is a Community Development Entity that is certified through the U.S. Treasury Department to make QLICI, and is managed and partially owned (0.01%) by St. Louis Development Corporation, a
not-for-profit corporation organized in Missouri. St. Louis Development Corporation paid $1,000 in consideration for its 0.01% interest in CDE II. CDE II, upon receipt of its equity funding, contemporaneously issued a QLICI to AutovaxID, evidenced
by a $7.7 million subordinated promissory note dated as of December 8, 2006 which matures on December 8, 2036 (the CDE II Loan). Pursuant to a call right, for a period of six months starting on December 8, 2013, the
CDE will have the right to call for the repayment of the CDE II Loan in the amount of $5.7 million, in full satisfaction of the principal on the CDE II Loan. Interest on the outstanding principal amount of the CDE II Loan accrues at the rate of
5.82% per annum, non-compounding and is payable in arrears on an annual basis having commenced on January 2, 2007 and continuing until maturity. The CDE II Loan is guaranteed in full by the Company and also guaranteed up to an amount of
$4.5 million by officers and directors of Accentia. The Company issued warrants to purchase 2.6 million shares of common stock to these officers and directors as compensation for their guarantees. The guarantees were treated in a manner similar
to contributed service and their fair value of $1.4 million was charged to expense upon issuance. The Company also indemnified the guarantors from any claims of any kind to the extent that the guarantors are called upon to pledge funds, assets or
collateral in connection with the guarantee being executed.

AutovaxID used the proceeds from the $7.7 million promissory note to pay the
Company $6.1 million pursuant to an Asset Purchase and License Agreement dated December 8, 2006 and described further below. The remaining $1.6 million was used to cover ongoing operational expenses of AutovaxID.

The transaction was structured so that, on June 9, 2014, AutovaxID will have paid approximately $9.1 million in principal and interest payments to
CDE II. The operating agreement of CDE II stipulates that any distributable cash received shall be distributed to Fund II in proportion to the respective percentage interest Fund II has in CDE II in an amount sufficient to fully pay the Fund II note
payable to Biolender II. On June 9, 2014, Fund II will have paid approximately $9.0 million in principal and interest payments to Biolender II (assuming CDE II exercises its right to call the CDE II loan for $5.7 million on June 9, 2014).
At maturity then, total equity of the Fund is approximated to be $100,000, resulting from the difference of $9.1 million in principal and interest payments received less $9.0M in principal and interest paid over the 7.5 year term of the notes.



F-33



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Biolender II and US Bancorp entered into a put option wherein US Bancorp will have the right to put its
investment in Fund II to the Company near the maturity of the instruments at a price of $120,000. Management has concluded that the fair value of US Bancorps investment in Fund II at maturity of both notes (approximately $100,000) would be
less than the $120,000 US Bancorp would receive upon exercise of the put option and thus it is managements expectation that this option will be exercised. Thus, prior to maturity of both notes, it is anticipated that the Fund will be 100%
owned by Biolender II. The Company accounted for this option as a derivative liability that requires recognition at fair value. The Company utilized a probability-based, discounted cash flow approach to value the put. Accordingly, the valuation
technique provided for the recognition of the full put amount ($120,000) at the present value of its cash flows, using market interest rates that would likely be considered by market participants trading similar instruments.

Salient terms and conditions of Transaction II are as follows:



| |  |  | Under a License and Asset Purchase Agreement dated as of December 8, 2006, Biovest granted a non-exclusive license to the intellectual property
enabling AutovaxID to manufacture and sell automated cell culture instruments in the United States, Canada and Mexico (the License), which license became exclusive upon the occupancy by AutovaxID of a space located at 1031 Macklind
Avenue, St. Louis, Missouri (the New Plant) in June 2007. As full purchase price for the License and related business opportunity, AutovaxID paid Biovest $5.6 million. Biovest also agreed to sell AutovaxID certain equipment upon the
occupancy by AutovaxID of the New Plant for the fair market value of $0.5 million.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The CDE II Loan is secured by second lien on all assets of AutovaxID for the benefit of CDE II pursuant to a Second-Lien Security Agreement between
AutovaxID and CDE II dated as of December 8, 2006. Laurus has a senior lien on the assets of AutovaxID through the security agreement from the Company to Laurus, which AutovaxID joined by way of a Joinder Agreement.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | AutovaxID does not have the right to prepay the CDE Loan prior to June 8, 2014. AutovaxID does have the right to prepay the CDE Loan after this
date, provided that (i) it prepays the entire CDE Loan amount, (ii) the CDE consents to such prepayment and USBancorp and the managing member of the CDE agree on the reinvestment of such proceeds in an alternative investment that would
qualify as a QLICI and (iii) AutovaxID or the Individual Guarantors (as defined below) under the Tax Credit and Reimbursement and Indemnity Agreement pay to USBancorp the recapture amount so specified is such agreement.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All indebtedness owed by AutovaxID and its subsidiaries to CDE II, including its right to receive payments of principal and interest under the CDE II
Loan, is expressly subordinate to the extent set forth under the Telesis Subordination Agreement dated as of December 8, 2006 entered into by Laurus, CDE II, USBancorp, AutovaxID and the Company.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The tax credits arising from this transaction were fully assigned to US Bancorp. AutovaxID has entered into an indemnification agreement directly with
US Bancorp that provides for indemnification in the event of tax credit recapture from events caused by AutovaxID. AutovaxID is contractually required to maintain the following covenants to avoid tax credit recapture: (i) AutovaxID shall
maintain its status as a qualified active low-income business; (ii) At least fifty percent of the use of the tangible property of the AutovaxID (whether owned or leased) will be within the low-income community as defined by Section 45D(e)
of the U.S. Tax Code; (iii) At least fifty percent of the services performed for AutovaxID by its employees will be within low-income community as defined by Section 45D(e) of the U.S. Tax Code; (iv) Less than five percent of the
average of the unadjusted bases of the property of AutovaxID will be attributable to collectibles (as defined in Section 408(m)(2) of the Code, and which includes any work of art; any rug or antique; any metal or gem; any stamp or coin; and any
alcoholic beverage) other than collectibles that are held primarily for sale to customers in the ordinary course of business; (v) Less than five percent of the average of the unadjusted bases of the property of AutovaxID will be
attributable to nonqualified financial property (as defined in Section 1397C(e) of the Code and in Section 1.45D-1(d)(4)(i)(E) of the Regulations, and which includes debt, stock, partnership interests, options, futures contracts, forward
contracts, warrants, notional principal contracts, annuities and other similar property); (vi) No part of the business activities of AutovaxID will consist of the operation of any private or commercial golf course, country club, massage parlor,
hot tub facility, or suntan facility, race track or other facility used for gambling, or store the principal business of which is the sale of alcoholic beverages for consumption off premises; (vii) No part of AutovaxIDs business
activities will include the rental to others of residential rental property (the term residential rental property is defined in Section 168(e)(2)(A) of the Code as meaning any building or structure if eighty percent or more of the
gross rental income from such building or
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-34



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



| | structure for the taxable year is rental income from dwelling units); (viii) The predominant trade or business of AutovaxID will not include the development or holding of intangibles for
sale or license, as provided under Section 1.45D-1(d)(5)(iii) of the Regulations; (ix) Farming (within the meaning of Section 2032A(e)(5)(A) or (B) of the Code) will not be an activity of AutovaxID; (x) AutovaxID will
generate revenues by the date of December 8, 2009; (xi)AutovaxID shall not discontinue conducting business, shall not materially change the nature of its business, and shall not materially change the manner in which its business activities are
conducted, other than changes in the nature of its business or the manner in which it conducts its business that do not cause the making of the Loan by the Lender to cease to constitute a qualified low-income community investment as such
term is used in Section 45D of the Code (as determined by the Lender in its good faith judgment and based upon the advice of counsel); (xii) AutovaxID will not be a bank, credit union or other financial institution; (xiii) AutovaxID
will not maintain a qualified low-income building under Section 42 of the Code; (xiv) AutovaxID will not become a single-member entity treated as disregarded as separate from its owner for federal income tax purposes, nor be liquidated or
merged into another entity without the written consent of CDE II; and (xv) AutovaxID and Biovest will operate consistently with the License between AutovaxID and Biovest, and will not amend such agreement without prior written consent of CDE
II. An example of an event that would not cause a recapture is changes in the Internal Revenue Code that results in such recapture. The total indemnification amount could be $3.12 million (representing 39% of the $8.0 million qualified investment).
However, in accordance with Financial Interpretation 45 Guarantors Accounting and Disclosure Requirements for Guarantees, including Indirect Guarantees of the Indebtedness of Others, the conditions and events that could result in recapture are
within AutovaxIDs control. Therefore, this potential liability is not reflected in the consolidated financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Under a Reimbursement Agreement dated as of December 8, 2006, Biovest agreed to reimburse St. Louis Development Corp (the 0.01% and managing
member of CDE II) up to $32,000 annually for expenses incurred by St. Louis Development Corp in connection with its management of CDE II.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Various legal, accounting, and professional fees of $433,000 paid directly by the Company and AutovaxID and involved in structuring this transaction
were recorded as a reduction to additional paid-in capital. Various legal and accounting fees of $180,000 paid by entities in which the Company has a variable interest (CDE II, and Fund II) and involved in structuring this transaction were recorded
as a reduction to non-controlling interests in variable interest entities on the Companys consolidated balance sheet. Professional fees of $115,000 involved in the continuing management of this transaction were recorded as a prepaid expense
and will be amortized over a period of seven and one half years, representing the duration of the note issued by Fund II and payable to Biolender II.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In July 2010, the Company and certain of its affiliates entered into an agreement (the St. Louis Restructuring Agreement) with St. Louis Development Corporation and Saint Louis New Markets Tax
Credit Fund II, LLC (collectively SLDC), contingent upon submission to and approval by the Bankruptcy Court. The St. Louis Restructuring Agreement effectively terminates all agreements and obligations of all parties pursuant to
Transaction II, in consideration of retention by SLDC of an unsecured claim in the Companys Chapter 11 proceeding in the amount of $160,000 along with a settlement payment in the amount of $62,000 to defray certain legal and administrative
expenses incurred by SLDC. The Bankruptcy Court approved the St. Louis Restructuring Agreement in an Order entered on December 1, 2010. As a result, all obligations to all parties to Transaction II were terminated. See the Subsequent Events
footnote for further information.

18. Variable interest entities

Accounting for the NMTC financing arrangement:

The Company evaluated the structure of the
NMTC financing arrangements and entities so involved under the context of ASC 810. This guidance provides a framework for determining whether certain entities should be consolidated (irrespective of equity ownership) based upon a variable interests
model. This model determines the control and consolidation based upon potential variability in gains and losses of the entity being evaluated for consolidation. Generally, a variable interest holder that absorbs a majority of the entitys
expected losses, if they occur, receives a majority of the entitys expected residual return, if they occur, or both is identified as the primary beneficiary for consolidation purposes.



F-35



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



The Company concluded that Biolender, Biovax Investment, LLC, Telesis CDE Two, LLC, Biolender II,
Autovax Investment, LLC and St. Louis New Market Tax Credit Fund II, LLC met the definition of variable interest entity. However, for the Company to be required to apply the provisions of the Interpretation, it must have a variable interest in the
entity. Variable interests in a variable interest entity are contractual, ownership or other monetary interests in an entity that change with changes in the value of the net assets of the entity. The following tables illustrate the variable
interests have been identified in each of the entities considered by the Company and the related holder:

New Market Tax Credit Transaction I:



|                                |  |                                   |  |                                          |  |                                        
|------------------------------- |  | --------------------------------- |  | ---------------------------------------- |  | ---------------------------------------
|Variable Interest Holder        |  | Variable Interests
Biolender, LLC |  | Variable Interests BiovaxInvestment,
LLC |  | Variable Interests
Telesis CDE Two, LLC
|Biovest and its Related Parties |  | Controlling interest              |  | Senior beneficial interest               |  | Senior beneficial interest             
|                                |  |                                   | 
|                                |  | Primary beneficiary               |  | Guaranty Agreement                       |  | Guarantee Agreement                    
|                                |  |                                   | 
|                                |  |                                   |  | Indemnification Agreement                |  |                                        
|                                |  |                                   | 
|                                |  |                                   |  | Put (VIE Equity)                         |  |                                        
|                                |  |                                   | 
|                                |  |                                   |  | Call (VIE Equity)                        |  |                                        
|                                |  |                                   | 
|Biovax Investment, LLC          |  |                                   |  |                                          |  | VIE Equity (99.9%)                     
|                                |  |                                   | 
|US Bancorp                      |  |                                   |  | VIE Equity (99.9%)                       |  | Tax Credit Rights                      
|                                |  |                                   | 
|Biovax Investment Corp.         |  |                                   |  | VIE Equity (0.01%)                       |  |                                        
|                                |  |                                   | 
|Telesis CDE, Corp               |  |                                   |  |                                          |  | VIE Equity (0.01%)                     

New Market Tax Credit
Transaction II:



|                                  |  |                                     |  |                                             |  |                                               
|--------------------------------- |  | ----------------------------------- |  | ------------------------------------------- |  | ----------------------------------------------
|Variable Interest Holder          |  | Variable Interest
Biolender II, LLC |  | Variable Interests AutovaxIDInvestment,
LLC |  | Variable Interests St. Louis
NMTC Fund II, LLC
|Biovest and its Related Parties   |  | Controlling interest                |  | Senior beneficial interest                  |  | Senior beneficial interest                    
|                                  |  |                                     | 
|                                  |  | Primary beneficiary                 |  | Guaranty Agreement                          |  | Guarantee Agreement                           
|                                  |  |                                     | 
|                                  |  |                                     |  | Indemnification Agreement                   |  |                                               
|                                  |  |                                     | 
|                                  |  |                                     |  | Put (VIE Equity)                            |  |                                               
|                                  |  |                                     | 
|                                  |  |                                     |  | Call (VIE Equity)                           |  |                                               
|                                  |  |                                     | 
|AutovaxID Investment, LLC         |  |                                     |  |                                             |  | VIE Equity (99.9%)                            
|                                  |  |                                     | 
|US Bancorp                        |  |                                     |  | VIE Equity (100%)                           |  | Tax Credit Rights                             
|                                  |  |                                     | 
|St. Louis Development Corporation |  |                                     |  |                                             |  | VIE Equity (0.01%)                            

The above table
illustrates the weight of the variable interests that are held by the Company. In addition, in performing quantitative valuation, the Company afforded significant weight to the guarantee agreements, indemnifications and put features, the
preponderance of which limit the equity investors risk of loss on the venture. In evaluating both qualitative and quantitative considerations, the Company concluded that its variable interests in the entity absorb most of the variable interest
entities losses and should, therefore, consolidate the entities under the scope of ASC 810.

Assets of $21.5 million and
liabilities of $17.9 million of the variable interest entities identified above are limited to the instruments pertaining to the NMTC financing arrangements. In accordance with consolidation principles, these assets and liabilities are eliminated in
consolidation leaving the non-controlling interests of Biolender, Telesis CDE Two, LLC, Biovax Investment, LLC, Biolender II, AutovaxID Investment, LLC, and St. Louis NMTC Fund II, LLC, reflected on the Companys September 30, 2010
consolidated balance sheet as non-controlling interests in variable interest entities.



F-36



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



The Companys $412,000 non-controlling interest in (income)/losses from variable interest entities
on it consolidated statement of operations for the year ended September 30, 2010 consists of the following:



|                            |  |   |          |  
|--------------------------- |  | - | -------- | -
|Variable Interest Entity    |  |   |         
|Biovax Investment LLC       |  | $ | 456,000  |  
|Telesis CDE Two, LLC        |  |   | (59,000  | )
|AutovaxID Investment, LLC   |  |   | 448,000  |  
|St. Louis NMTC Fund II, LLC |  |   | (433,000 | )
|                            |  |   |          |  
|                            |  | $ | 412,000  |  
|                            |  |   |          |  

19. Selected Quarterly Financial Data (Unaudited)



|                        |  |                               |            |   |           |   |             |           |  |   |            |   |  |   |            |  
|----------------------- |  | ----------------------------- | ---------- | - | --------- | - | ----------- | --------- |  | - | ---------- | - |  | - | ---------- | -
|                        |  | Year Ended September 30, 2010 |           
|                        |  | Quarter 1                     |            |   | Quarter 2 |   |             | Quarter 3 |  |   | Quarter 4  |  
|Net sales               |  | $                             | 1,436,000  |   |           | $ | 1,241,000   |           |  | $ | 1,566,000  |   |  | $ | 1,109,000  |  
|Gross profit            |  |                               | 803,000    |   |           |   | 506,000     |           |  |   | 734,000    |   |  |   | 408,000    |  
|Net profit/(loss)       |  |                               | 4,966,000  |   |           |   | (26,055,000 | )         |  |   | 9,111,000  |   |  |   | 3,805,000  |  
|Income/(Loss) per share |  | $                             | 0.05       |   |           | $ | (0.27       | )         |  | $ | 0.09       |   |  | $ | 0.05       |  
|                        | 
|                        |  | Year Ended September 30, 2009 |           
|                        |  | Quarter 1                     |            |   | Quarter 2 |   |             | Quarter 3 |  |   | Quarter 4  |  
|Net sales               |  | $                             | 658,000    |   |           | $ | 986,000     |           |  | $ | 868,000    |   |  | $ | 1,144,000  |  
|Gross profit            |  |                               | 56,000     |   |           |   | 312,000     |           |  |   | 293,000    |   |  |   | 543,000    |  
|Net loss                |  |                               | (3,115,000 | ) |           |   | (2,709,000  | )         |  |   | (7,309,000 | ) |  |   | (1,521,000 | )
|Loss per share          |  | $                             | (0.03      | ) |           | $ | (0.03       | )         |  | $ | (0.07      | ) |  | $ | (0.02      | )

20. Commitments and contingencies

Bankruptcy proceedings:

On November 10, 2008, the Company filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code (Chapter
11) in the U.S. Bankruptcy Court for the Middle District of Florida, Tampa Division (the Bankruptcy Court). During the pendency of the Chapter 11 proceedings, the Company operated its business as a debtor-in-possession in
accordance with the provisions of Chapter 11 and subject to the jurisdiction of the Bankruptcy Court. On August 16, 2010, the Company filed its First Amended Joint Plan of Reorganization, and, on October 25, 2010, the Company filed the First
Modification to the First Amended Joint Plan of Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010, the Bankruptcy Court held a confirmation hearing and confirmed the Plan, and, on November 2,
2010, the Bankruptcy Court entered an Order Confirming Debtors First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Confirmation Order), which approved and confirmed the Plan, as modified by the
Confirmation Order. The Company emerged from Chapter 11 protection, and the Plan became effective, on November 17, 2010 (the Effective Date).

Notwithstanding the effectiveness of our Plan, the Bankruptcy Court retains jurisdiction to adjudicate any remaining issues regarding, inter alia, the validity, amount, and method of payment of
claims filed in connection with our Chapter 11 proceeding. Accordingly, the Company anticipates that there may be ongoing proceedings before the Bankruptcy Court to resolve any filed objections or disputes as to claims filed in the Chapter 11
proceeding.

Other proceedings:

On August 4, 2008, the Company was served with a summons and complaint filed in California Superior Court on behalf of Clinstar LLC for breach of contract for non-payment of certain fees for clinical
trial studies and pass-through expenses in the amount of $385,000. The Company intends to seek to dismiss this litigation and plan to defend these claims vigorously. Upon the filing of the Companys Chapter 11 petition on November 10, 2008,
this litigation was automatically stayed pursuant to provisions of federal bankruptcy law. The Company anticipates that the claims involved in this litigation will be contested and resolved by the Bankruptcy Court as part of an objection to claim
which the Company expects to file shortly.

Except for the foregoing, the Company is not party to any material legal proceedings, and
management is not aware of any threatened legal proceedings that could cause a material adverse impact on our business, assets, or results of operations.



F-37



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Facility leases:

The Company leases equipment and office and manufacturing space pursuant to several non-cancelable operating leases. The Company leases approximately 33,000 square feet in Minneapolis, Minnesota, which is
used for offices, a laboratory, manufacturing, warehousing areas to support the production of perfusion cell culture equipment and contract cell culture services. This facility lease agreement has expired and the Company continues to occupy this
facility on a month to month basis. Rent expense pertaining to this lease was $0.3 million per year for both the years ended September 30, 2010 and 2009.

On December 2, 2010, the Company entered into a renewal Lease for its current facility in Minneapolis for a ten year term. This Lease, which has a ten-year term, also capitalizes certain improvements to
the Minneapolis facility, being financed and performed principally by the Companys landlord as well as through government grant loans from city and state agencies in Minnesota. These improvements will include the construction of a GMP vaccine
manufacturing space within the existing Minneapolis facility. The Company anticipates that its facilities will meet its needs during fiscal 2011. The Company anticipates that as its development of BiovaxID advances and as the Company prepares for
the future commercialization of its products, its facilities requirements will increase.

Cooperative Research and Development Agreement:

In September 2001, the Company entered into a definitive CRADA with the NCI for the development and ultimate commercialization of
patient-specific vaccines for the treatment of non-Hodgkins low-grade follicular lymphoma. The terms of the CRADA, as amended, included, among other things, a requirement to pay $0.5 million quarterly to NCI for expenses incurred in connection
with the ongoing Phase 3 clinical trials. Since the transfer to Biovest of the investigational new drug application for development of this vaccine, which occurred in April 2004, these payments to NCI have been reduced to a small fraction of this
original obligation (approximately $0.2 million per year). On September 25, 2006, the Company provided written notice to the NCI in accordance with the terms of the CRADA to terminate the CRADA at the end of the sixty day notice period. Under
the terms of the CRADA, the Company is obligated to continue to provide vaccine to the NCI at no charge for purposes of the NCIs studies that are within the scope of the CRADA if the Company were to abandon work on the vaccine. As the Company
is actively developing the vaccine for commercialization and intends to do so to its completion, no estimated costs have been accrued as of September 30, 2010.

Food and Drug Administration:

The FDA has extensive regulatory authority over
biopharmaceutical products (drugs and biological products), manufacturing protocols and procedures and the facilities in which mammalian proteins will be manufactured. Any new bioproduct intended for use in humans (including, to a somewhat lesser
degree, in vivo biodiagnostic products), is subject to rigorous testing requirements imposed by the FDA with respect to product efficacy and safety, possible toxicity and side effects. FDA approval for the use of new bioproducts (which can never be
assured) requires several rounds of extensive preclinical testing and clinical investigations conducted by the sponsoring pharmaceutical company prior to sale and use of the product. At each stage, the approvals granted by the FDA include the
manufacturing process utilized to produce the product. Accordingly, the Companys cell culture systems used for the production of therapeutic or biotherapeutic products are subject to significant regulation by the FDA under the Federal Food,
Drug and Cosmetic Act, as amended (the FD&C Act).

Product liability:

The contract production services for therapeutic products offered exposes an inherent risk of liability as the proteins or other substances manufactured,
at the request and to the specifications of customers, could foreseeably cause adverse effects. The Company obtains agreements from contract production customers indemnifying and defending the Company from any potential liability arising from such
risk. There can be no assurance, however, that the Company will be successful in obtaining such agreements in the future or that such indemnification agreements will adequately protect the Company against potential claims relating to such contract
production services. The Company may also be exposed to potential product liability claims by users of its products. A successful partial or completely uninsured claim against the Company could have a material adverse effect on the Companys
operations.



F-38



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Guarantee Indemnifications:

Under the terms of the January and March Pulaski Bank notes payable, several board members and affiliates issued personal guarantees. The Company agreed to indemnify and hold harmless each guarantor
should their guarantees be called by Pulaski Bank by agreeing to compensate each affected guarantor by an issuance of restricted common stock equal to 700% of the amount of their guarantee. The stock was to be issued using a pre-determined
value of $1.10 per share. On December 29, 2008, Pulaski Bank called its guaranty resulting in an aggregate payment of $1.0 million by the guarantors. As a result of the indemnification agreements, the Company originally recorded a
provision for approximately 6.4 million shares of the Companys common stock valued using the trading price of the Companys stock. In March, 2010, the Company reached an agreement with the guarantors whereby the indemnities will be
valued using a price of $0.24 per share, which represents the closing price of the Companys stock on November 9, 2008, the day prior to the Companys petition for reorganization, and represents the amount that will be allowed as an
unsecured claim of the Pulaski guarantors in the Companys reorganization proceedings (approximately $1.5 million). See the Subsequent Events footnote for information on the treatment of these liabilities in the Companys Plan.

Under the terms of the Southwest Bank note payable issued June 26, 2007, an officer of Biovest issued a personal guarantee. The Company agreed to
indemnify and hold harmless the guarantor should the guarantee be called by Southwest Bank by agreeing to compensate the guarantor by an issuance of restricted common stock equal to 700% of the amount of the guarantee. The stock was to be issued
using a pre-determined value of $1.10 per share. In January 2009, Southwest Bank called its guaranty resulting in an aggregate payment of $0.2 million by the guarantor. As a result of the indemnification agreement, the Company originally
recorded a provision for approximately 1.2 million shares of the Companys common stock valued using the trading price of the Companys stock. In March 2010, the Company reached an agreement with the guarantor whereby the indemnity
will be valued using a price of $0.24 per share, which represents the closing price of the Companys stock on November 9, 2008, the day prior to the Companys petition for reorganization, and represents the amount that will be allowed
as an unsecured claim of the guarantor in the Companys reorganization proceedings (approximately $0.3 million). See the Subsequent Events footnote for information on the treatment of these liabilities in the Companys Plan.

Royalty agreements:

Pursuant to the
royalty agreement dated October 31, 2006, as amended, the Company is required to pay to Accentia a 15.5% royalty on net sales from biologics products.

On April 17, 2007, the Company executed an amendment agreement (the Amendment) with its senior lender, Laurus, to defer payments of principal on its $7.8 million loan. As consideration
for the forbearance the Company granted to Laurus a non-cancelable royalty equal to three percent of world-wide net sales of AutovaxID instruments for a period of five years commencing on May 31, 2007. Under the terms of the royalty agreement
the Companys royalty payments to Laurus are required to aggregate to a minimum of $8.0 million with $0.5 million of the minimum royalty having been paid on December 10, 2007 and the balance (if any), less actual royalties paid, being due
on May 31, 2012.

On October 30, 2007, December 10, 2007, and again on May 30, 2008 the Company completed and/or modified
financing transactions with the Valens Funds, both of which are subsidiary companies of Laurus. Pursuant to these transactions, the Valens Funds were granted an aggregate 19.5% royalty interest in the worldwide net commercial sales of the
Companys biologic products.

See the Subsequent Events footnote for information on the treatment of these liabilities in the
Companys Plan.



F-39



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Stanford University agreement:

In September 2004, the Company entered into an agreement with Stanford University (Stanford) allowing worldwide rights to use two proprietary hybridoma cell lines that are used in the
production of BiovaxID. Under the agreement with Stanford, the Company is obligated to pay an annual maintenance fee of $10,000. The agreement also provides that the Company pay Stanford $100,000 within one year following FDA approval of BiovaxID or
five years following the agreement date (whichever occurs first), and following approval the Company is required to pay Stanford a running royalty of the higher of $50.00 per patient or 0.05% of revenues received by the Company for each BiovaxID
patient treated using this cell line. This running royalty will be creditable against the yearly maintenance fee. The Companys agreement with Stanford obligates us to diligently develop, manufacture, market, and sell BiovaxID and to provide
progress reports to Stanford regarding these activities. The Company can terminate this agreement at any time upon 30 days prior written notice, and Stanford can terminate the agreement upon a breach of the agreement by us that remains uncured
for 30 days after written notice of the breach from Stanford.

Sublicense agreement with related party:

On January 16, 2008, the Company entered into a sublicense agreement (the Sublicense Agreement) with Revimmune under which the Company
was granted the exclusive worldwide rights to Revimmune, a patent-pending pharmaceutical treatment in late-stage development for the treatment of and prevention of transplant rejection including rejection following a bone marrow transplant.

The material terms and conditions of the Sublicense Agreement are as follows:



| |  |  | The Company is obligated to pay to Revimmune a royalty of 6% on net sales, and in the event of a sublicense by the Company, to pay 20% of sublicense
consideration received. The Company did not pay an upfront fee in connection with the Sublicense but upon the approval of the sublicensed treatment in the U.S. for each sublicensed indication, the Company is required to issue to Revimmune vested
warrants to purchase 2.0 million shares of the Companys common stock. Each such warrant which will be granted at the approval of each successive Sublicensed Product will have an exercise price of $1.10 per share or, at the discretion of
Company, at a price equal to the fair market value of the Companys common stock on the date of the grant of such warrant.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company assumed certain obligations under Revimmunes license with Johns Hopkins University related to the sublicensed technology, including
the payment of all royalty obligations due Johns Hopkins University for the sublicensed products which includes a 4.0% royalty on licensed products and services and a 20.0% royalty on sublicense consideration.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company will be responsible, at its sole cost and expense, for the development, clinical trial(s), promotion, marketing, sales and
commercialization of the sublicensed products.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In the event of any petition in bankruptcy filed by or with respect to the Company, or any pledge or grant of a lien by the Company of the sublicensed
rights, the Sublicense Agreement shall terminate and the Sublicensed Rights shall revert to Revimmune. Revimmune has not exercised this term.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Revimmune is affiliated with a director of the Company.
| | - |  | -------------------------------------------------------

21. Subsequent Events

Bankruptcy Proceedings:

On October 25, 2010, the Company and its subsidiaries (collectively, the Debtors) filed the First Modification to the First Amended Joint
Plan of Reorganization (collectively and as amended and supplemented, the Plan). On October 27, 2010, the United States Bankruptcy Court for the Middle District of Florida, Tampa Division (the Bankruptcy Court) held
a Confirmation hearing and confirmed the Plan, and on November 2, 2010, the Bankruptcy Court entered an Order Confirming Debtors First Amended Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code (the Confirmation
Order), which approved and confirmed the Plan. The Debtors emerged from Chapter 11 protection, and the Plan became effective, on November 17, 2010 (the Effective Date).



F-40



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Amendments to Articles of Incorporation or Bylaws.

On the Effective Date, the Company amended and restated its certificate of incorporation and its bylaws to incorporate provisions (a) required by the
Plan, the Confirmation Order, and/or the U.S. Bankruptcy Code, and (b) granting Laurus/Valens the right, upon an event of default under Section 20(a) of that certain Term Loan and Security Agreement, executed on the Effective Date, by and
among LV, the lenders party thereto, the Company, and the Companys subsidiaries (after giving effect to any applicable grace period provided therein), to appoint and maintain one-third (1/3) of the total number of directors of the Company
(thereafter, such right to appoint directors will continue notwithstanding the Companys cure of any such event of default until both the Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes have been paid in full).

DIP Lender Plan Note

On the Effective
Date, the Company executed and delivered in favor of Corps Real, LLC, a Illinois limited liability company, the members of which are the Companys directors, or affiliated with the Companys directors (the DIP Lender), a
secured convertible promissory note (the DIP Lender Plan Note) in an original principal amount equal to $2,291,560 and allows the Company to draw up to an additional $0.9 million on the note. The DIP Lender Plan Note replaces the $3.0
million secured line of credit promissory note dated December 22, 2008, which we previously executed in favor of the DIP Lender. The DIP Lender Plan Note matures on November 17, 2012 and all principal and accrued but unpaid interest is due
on such date. Interest accrues and is payable on the outstanding principal amount of the DIP Lender Plan Note at a fixed rate of sixteen percent (16%) per annum, with interest in the amount of ten percent (10%) to be paid monthly and
interest in the amount of six percent (6%) to accrue and be paid on the maturity date. We may prepay the DIP Lender Plan Note in full, without penalty, at any time, and the DIP Lender may convert all or a portion of the outstanding balance of
the DIP Lender Plan Note into shares of our common stock at a conversion rate of $0.75 per share of our common stock.

The DIP Lender Plan
Note is secured by a first priority lien on all of our property.

Convertible Note Transaction

On October 19, 2010, the Company entered into a debtor-in-possession financing transaction (the Convertible Note Financing) pursuant to
which it issued an aggregate of $7.0 million in principal amount of Debtor In Possession Secured Convertible Notes (the Initial Notes) and warrants to purchase shares of the Companys common stock (the Initial Warrants)
to a total of twelve accredited investors (the Buyers). In connection with the Convertible Note Financing, the Company and the Buyers entered into a Securities Purchase Agreement, dated October 19, 2010 (the Purchase
Agreement), pursuant to which the Company sold and issued the Initial Notes and the Initial Warrants to the Buyers. Pursuant to the Purchase Agreement, the Company issued two separate Initial Warrants to the Buyers, Series A Warrants (the
Initial Series A Warrants) and Series B Warrants (the Initial Series B Warrants).

Pursuant to the Purchase Agreement,
on the Effective Date (a) the Initial Notes were exchanged pursuant to the terms of the Plan for new unsecured notes (the Exchange Notes) in the aggregate principal amount of $7.04 million, (b) the Initial Series A Warrants
were exchanged pursuant to the terms of the Plan for new warrants to purchase a like number of shares of Company common stock (the Series A Exchange Warrants), and (c) the Initial Series B Warrants were exchanged pursuant to the
terms of the Plan for new warrants to purchase a like number of shares of Company common stock (the Series B Exchange Warrants).

The following are the material terms and conditions of the Exchange Notes:



| |  |  | the Exchange Notes mature on November 17, 2012, and all principal and accrued but unpaid interest is due on such date;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | interest accrues and is payable on the outstanding principal amount of the Exchange Notes at a fixed rate of seven percent (7%) per annum (with a
fifteen percent (15%) per annum default rate), and is payable monthly in arrears, with the first date for an interest payment being December 1, 2010;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | interest payments under the Exchange Notes are payable in either cash or, at the Companys election and subject to certain specified conditions,
in shares of the Companys common stock;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-41



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009





| |  |  | the Company may from time to time, subject to certain conditions, redeem all or any portion of the outstanding principal amount of the Exchange Notes
for an amount, in cash, equal to 110% of the sum of the principal amount being redeemed and certain make-whole interest payments;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the holders of the Exchange Notes may convert all or a portion of the outstanding balance of the Exchange Notes into shares of the Companys
common stock at a conversion rate of $0.91 per share of the Companys common stock, subject to anti-dilution adjustments in certain circumstances; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event that the average of the daily volume weighted average price of the Companys common stock is at least 150% of the then-effective
conversion price for any ten (10) consecutive trading days, the Company, at its option, may upon written notice to the holders of the Exchange Notes, convert the then outstanding balance of the Exchange Notes into shares of the Companys
common stock at the conversion price then in effect under the Exchange Notes.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following are the
material terms and conditions of the Series A Exchange Warrants:



| |  |  | the Series A Exchange Warrants give the Buyers the right to purchase an aggregate 7,692,301 shares of the Companys common stock (the Series
A Warrant Shares).
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Series A Exchange Warrants have an initial exercise price of $1.45 per share (subject to anti-dilution adjustments in certain circumstances) and a
term of seven (7) years from the Effective Date; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in the event that the average weighted-average price of the Companys common stock during the period beginning on (and including) December 1,
2010 and ending on (and including) December 21, 2010 is less than the then existing exercise price of the Series A Exchange Warrants, the exercise price of the Series A Exchange Warrants will be reduced to 120% of the weighted average price
during such period, but no lower than $0.60 per share.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following are the material terms and
conditions of the Series B Exchange Warrants:



| |  |  | the Series B Exchange Warrants give each Buyer the right to purchase a maximum of 6,307,699 shares of the Companys common stock, provided that
the number of shares of the Companys common stock issuable upon exercise of a Series B Exchange Warrant may not exceed the Maximum Eligibility Number (as set forth below);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | for purposes of the Series B Exchange Warrants, the Maximum Eligibility Number will initially be an amount equal to zero, provided that if
on December 22, 2010, 80% of the average of the weighted average price for the Companys common stock during the preceding 21 days is less than $0.91, the Maximum Eligibility Number will be equal to the difference between (a) the
quotient determined by dividing (i) the aggregate principal amount of the Buyers Exchange Note by (ii) the greater of (A) $0.50 (subject to adjustment for stock splits, stock adjustments and the like), and (B) 80% of such
average of the weighted average price, and (b) 7,692,308;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Series B Exchange Warrants have an exercise price of $0.01 per share and an expiration date of December 23, 2010; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | if, on December 22, 2010, the Maximum Eligibility Number exceeds zero, then the Series B Exchange Warrants will be deemed to be exercised by a
cashless exercise on December 22, 2010 and, if the Maximum Eligibility Number does not exceed zero, then the Series B Exchange Warrants will automatically expire.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-42



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Laurus/Valens Secured Claims

Laurus/Valens Term A Notes

Pursuant to the Plan, Laurus Master Fund, Ltd. (In Liquidation)
(Laurus), PSource Structured Debt Limited (PSource), Valens Offshore SPV I, Ltd. (Valens I), Valens Offshore SPV II, Corp. (Valens II), Valens U.S. SPV I, LLC (Valens US and together with
Valens I and Valens II, Valens), and LV Administrative Services, Inc., as administrative and collateral agent for Laurus, PSource, and Valens (LV and together with Laurus, PSource, Valens, and each of their respective
affiliates, Laurus/Valens), have an allowed secured claim against the Company in the amount of $24.9 million. On the Effective Date, pursuant to a Term Loan and Security Agreement, the Company executed and delivered to Laurus/Valens term
notes (the Laurus/Valens Term A Notes) evidencing such allowed secured claim in the original principal amount of $24.9 million. The following are the material terms and conditions of the Laurus/Valens Term A Notes:



| |  |  | the Laurus/Valens Term A Notes mature on November 17, 2012;
| | - |  | -----------------------------------------------------------



| |  |  | interest accrues on the Laurus/Valens Term A Notes at the rate of eight percent (8%) per annum (with a twelve percent (12%) per annum default
rate), and is payable at the time of any principal payment or prepayment of principal;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company may prepay the Laurus/Valens Term A Notes, without penalty, at any time;
| | - |  | ------------------------------------------------------------------------------------



| |  |  | the Company is required to make mandatory prepayments under the Laurus/Valens Term A Notes as follows:
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to thirty percent (30%) of the net proceeds (i.e., the gross proceeds received less any investment banking or similar fees and
commissions and legal costs and expenses incurred by the Company) of certain capital raising transactions (with certain exclusions), but only up to the then outstanding principal and accrued interest under the Laurus/Valens Term A Notes;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | from any intercompany funding by Accentia Biopharmaceuticals, Inc. (Accentia) to the Company (with certain exceptions and conditions); and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a prepayment equal to fifty percent (50%) of positive net cash flow of the Company for each fiscal quarter after the Effective Date, less the
amount of certain capital expenditures on certain biopharmaceutical products of the Company made during such fiscal quarter or during any prior fiscal quarter ending after the Effective Date; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | on November 18, 2010, the Company prepaid the Laurus/Valens Term A Notes in an amount equal to $1.4 million from the proceeds received in the
Convertible Note Financing.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Laurus/Valens Term B Notes

Pursuant to the Plan, Laurus/Valens has an additional allowed secured claim against the Company in the amount of $4,160,000. On the Effective Date, the Company executed and delivered to Laurus/Valens term
notes (the Laurus/Valens Term B Notes) evidencing such additional allowed secured claim in the original principal amount of $4.16 million. The following are the material terms and conditions of the Laurus/Valens Term B Notes:



| |  |  | the Laurus/Valens Term B Notes mature on November 17, 2013;
| | - |  | -----------------------------------------------------------



| |  |  | interest accrues on the Laurus/Valens Term B Notes at the rate of eight percent (8%) per annum (with a twelve percent (12%) per annum default
rate), and is payable at the time of any principal payment or prepayment of principal;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company may prepay the Laurus/Valens Term B Notes, without penalty, at any time; and
| | - |  | ----------------------------------------------------------------------------------------



| |  |  | provided that the Laurus/Valens Term A Notes have been paid in full, the Company is required to make mandatory prepayments under the Laurus/Valens Term
B Notes from any intercompany funding by Accentia to the Company (with certain exceptions and conditions), but only up to the outstanding principal and accrued interest under the Laurus/Valens Term B Notes.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-43



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



With the prior written consent of Laurus/Valens, the Company may convert all or any portion of the
outstanding principal and accrued interest under either the Laurus/Valens Term A Notes or the Laurus/Valens Term B Notes into shares of the Companys common stock. The number of shares of the Companys common stock issuable on such a
conversion (the Laurus/Valens Conversion Shares) is equal to (a) an amount equal to the aggregate portion of the principal and accrued and unpaid interest thereon outstanding under the applicable Laurus/Valens Term A Note or the
Laurus/Valens Term B Note being converted, divided by (b) ninety percent (90%) of the average closing price publicly reported (or reported by Pink Sheets, LLC) for the Companys common stock for the ten (10) trading days
immediately preceding the date of the notice of conversion.

The Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes will be secured
by a first lien in all of the assets of the Company and its subsidiaries, junior only to the lien granted by the Bankruptcy Court to the DIP Lender and to certain permitted liens. The Laurus/Valens Term A Notes and the Laurus/Valens Term B Notes
will also be guaranteed by Accentia (the Accentia Guaranty), up to a maximum amount of $4,991,360. The Accentia Guaranty will be secured by a pledge by Accentia of 20,115,818 shares of the Companys common stock owned by Accentia
and by the assets of Accentias subsidiary, Analytica International, Inc.

Conversion of Secured Notes held by Accentia

On the Effective Date the entire pre-petition claim plus accrued interest (approximately $13.5 million) due from the Company to Accentia,
the owner of a majority of the outstanding stock of the Company, was converted into the Companys common stock at a conversion rate equal to $0.75 per share, resulting in the issuance of 17,925,720 shares of the Companys common stock.

2008 Secured Debentures

On
the Effective Date, two the holders of the Companys 2008 secured debentures, including one of the Companys Directors and an entity affiliated with the Companys CEO/Chairman, elected to convert the entire outstanding principal
balance ($0.5 million) plus accrued interest into the Companys common stock at a conversion rate equal to $1.66 per share, resulting in the issuance of 331,456 shares of the Companys common stock. One additional holder of the
Companys 2008 secured debentures, elected to convert the entire outstanding principal balance of $0.3 million plus accrued interest into 550,000 shares of the Companys common stock, issuable in eight quarterly installments of 68,750
shares, with the first installment issued on Effective Date. The final holder of the Companys 2008 secured debentures, Valens U.S. SPV I, LLC, received consideration for their claim in accordance with the Laurus/Valens Term A and Term B notes
discussed above.

Claims of Ronald E. Osman

On the Effective Date, the holder of the Companys May 9, 2008 promissory note, Ronald E. Osman, a director of the Company, elected to convert the entire outstanding principal balance under the
note (approximately $1.0 million) plus accrued interest into the Companys common stock at a conversion rate equal to $1.66 per share, resulting in the issuance of 608,224 shares of the Companys common stock.

Plan Distributions to Unsecured Creditors

On the Effective Date, the Company became obligated to make a distribution in cash in favor of holders of approximately $2.7 million in principal amount
of allowed unsecured claims, which included and not limited to the unsecured promissory notes, Pulaski Bank notes, Southwest Bank note, and the guarantor indemnities, in Class 8 electing Option A (the Class 8 Holders) (the Class 8
Plan Distribution) in an original principal amount equal to one hundred percent (100%) of such Class 8 Holders Allowed Class 8 unsecured claim under the Plan (including postpetition interest under the Plan at the rate of three
percent (3%) per annum). The Class 8 Plan Distributions mature on the date that is forty (40) months following the Effective Date and all principal and accrued but unpaid interest is due on such date. Interest accrues and is payable on the
outstanding principal amount under the Class 8 Plan Distributions at a fixed rate of five percent (5%) per annum.

On the Effective Date,
the Company issued to Holders of approximately $3.2 million in principal amount of Class 8 unsecured claims who elected to receive payment in equity as provided in the Plan a total of 2.1 million shares of the Companys common stock, at an
effective conversion rate equal to $1.66 per share.



F-44



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Equity Interests  Class 12

Each Company common stockholder on the Effective Date was deemed to receive one (1) share of Reorganized Biovest Common Stock (the Class 12 Plan Shares) for each share of Existing Biovest
Common Stock held by such stockholder as of the Effective Date. The Companys Class 12 Plan Shares shall be deemed issued pursuant to Section 1145 of the Bankruptcy Code and shall not have any legend restricting the sale thereof under
federal securities laws.

April 2006 NMTC Transaction

The Company and certain of its affiliates entered into an agreement in July 2010 (the Worcester Restructuring Agreement) with Telesis CDE
Corporation and Telesis CDE Two, LLC (collectively, Telesis), contingent upon submission to and approval by the Bankruptcy Court. The Worcester Restructuring Agreement effectively terminates all agreements and obligations of all parties
pursuant to Transaction I, in consideration of retention by Telesis of an unsecured claim in our Chapter 11 proceeding in the amount of $0.3 million along with a settlement payment in the amount of $85,000 to defray certain legal and
administrative expenses incurred by Telesis. This Worcester Restructuring Agreement and the compromise of the outstanding claims against the Company and its affiliates in connection with Transaction I was approved by the Bankruptcy Court in an Order
entered on December 1, 2010. As a result, the Companys Guaranty, Accentias, and all of the Companys subsidiary Guaranties from affiliates and third parties and all other obligations to all parties to Transaction I were
terminated.

December 2006 NMTC Transaction

The Company and certain of its affiliates entered into an agreement in July 2010 (the St. Louis Restructuring Agreement) with St. Louis
Development Corporation and Saint Louis New Markets Tax Credit Fund II, LLC (collectively SLDC), contingent upon submission to and approval by the Bankruptcy Court. The St. Louis Restructuring Agreement effectively terminates all
agreements and obligations of all parties pursuant to Transaction II, in consideration of retention by SLDC of an unsecured claim in our Chapter 11 proceeding in the amount of $160,000 along with a settlement payment in the amount of $62,000, to
defray certain legal and administrative expenses incurred by SLDC. This St. Louis Restructuring Agreement and the compromise of the outstanding claims against Biovest in connection with Transaction II was approved by the Bankruptcy Court in an Order
entered on December 1, 2010. As a result, our Guaranty, Accentias, and all of our subsidiary Guaranties from affiliates and third parties and all other obligations to all parties to Transaction II were terminated. On November 17,
2010 pursuant to our Plan, the outstanding balance due under the $3.1 million pursuant to a Secured Promissory Note from Accentia was converted into our common stock issued to Accentia at a conversion rate equal to $0.75 per share.

Termination of Warrants and Issuance of Shares

On the Effective Date, all of the following warrants (the Laurus/Valens Warrants) were terminated and cancelled pursuant to the Plan:



| |  |  | the common stock purchase warrant dated March 31, 2006, issued by the Company to Laurus, for the purchase of up to 18,087,889 shares of the
Companys common stock at an exercise price of $0.01 per share;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the common stock purchase warrant dated September 22, 2008, issued by the Company to Valens U.S., for the purchase of up to 1,015,625 shares of
the Companys common stock at an exercise price of $0.40 per share; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the warrant dated October 31, 2006, issued by Accentia to Laurus, for the purchase of up to 10,000,000 shares of the Companys common stock
owned by Accentia at an exercise price of $0.01 per share.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In consideration for the cancellation of the Laurus/Valens Warrants, on the Effective Date, Laurus/Valens received 14,834,782 shares of the
Companys common stock (the Laurus/Valens Plan Shares). The Laurus/Valens Plan Shares were issued pursuant to Section 1145 of the U.S. Bankruptcy Code and do not have any legend restricting the sale thereof under federal
securities laws, but the transfer thereof is subject to certain restrictions and conditions set forth in the Plan.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



F-45



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



Cancellation and Reduction of Royalty Interests

On the Effective Date, the Company, Accentia, and Laurus/Valens entered into several agreements (the Laurus/Valens Royalty Termination
Agreements) terminating the following royalties pursuant to the Plan:



| |  |  | Accentia. On the Effective Date, the Royalty Agreement by and between the Company and Accentia, dated as of October 31, 2006, as amended,
was terminated, which resulted in the cancellation of all royalty interest of Accentia in the Companys biologic products. Under the Royalty Agreement, Accentia had a 15.5% royalty interest in the gross revenue of the Companys biologic
products including BiovaxID, as defined in the agreement after allowing for the 4.00% royalty assigned by Accentia to Laurus/Valens pursuant to the four (4) separate Assignment of Rights Under Royalty Agreements, each dated as of June 18,
2008, by and among Accentia, the Company, Erato Corp., Valens U.S., Valens I, and PSource, as amended, modified or supplemented thereafter in accordance with their terms; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Laurus/Valens. (i) The Royalty Agreement by and between the Company and Valens II dated October 30, 2007; (ii) the Royalty
Agreement by and between the Company and Valens II dated December 10, 2007, as amended by a letter agreement dated May 30, 2008, and as further amended, modified or supplemented thereafter in accordance with their terms);
(iii) the Royalty Agreement by and between the Company and Valens U.S. dated October 30, 2007; (iv) the Royalty Agreement by and between the Company and Valens U.S. dated December 10, 2007, and as amended, modified or
supplemented thereafter in accordance with their terms).
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

On the Effective Date, the previously granted royalty equal to
three percent (3%) of world-wide net sales (i.e., gross receipts from the world-wide sales of the automated cell and biologic production instrument known as AutovaxID manufactured by the Company (the AutovaxID Instruments)
less any rebates, returns and discounts) of AutovaxID Instruments for a period of five (5) years through May 31, 2012, granted to Laurus by the Company and AutovaxID, Inc. in a letter agreement dated March 19, 2007, was terminated in
accordance with the Plan (including the guaranteed minimum royalty in the amount of $7.5 million remaining under such royalty).

As a result of the foregoing terminations, coupled with the entry into the new Laurus/Valens Royalty Agreement described in Item 1.01, Laurus/Valens reduced their aggregate royalty interest from
19.5% of the gross revenue of the Companys biologic products, including BiovaxID®, as defined in the
royalty agreements, to an aggregate of 6.25% of the gross revenue of the Companys biologic products including BiovaxID and Accentia terminated its entire 15.5% royalty interest in the Companys products.

Pro forma Balance Sheet as of Reorganization Plan Effective Date (unaudited)

The following pro forma balance sheet has been prepared to compare the Companys financial position as of September 30, 2010 with the Companys financial position on Effective Date, as if
Effective Date was September 30, 2010.



F-46



---

BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009







|                                                                                                                                                                |  |                    |              |   |             |  |             |                           |  |   |              |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------------ | - | ----------- |  | ----------- | ------------------------- |  | - | ------------ | -
|                                                                                                                                                                |  | September 30 ,2010 |              |   | Adjustments |  |             | Effective Date(unaudited) | 
|ASSETS                                                                                                                                                          |  |                    |              |   |             |  |             |                           |  |   |              |  
|Current assets:                                                                                                                                                 |  |                    |              |   |             |  |             |                           |  |   |              |  
|Cash                                                                                                                                                            |  | $                  | 206,000      |   |             |  | 5,075,000   |                           |  | $ | 5,281,000    |  
|Accounts receivable, net of $8,000 allowance for doubtful accounts at September 30, 2010 and effective date                                                     |  |                    | 398,000      |   |             |  |            |                           |  |   | 398,000      |  
|Costs and estimated earnings in excess of billings on uncompleted contracts                                                                                     |  |                    | 106,000      |   |             |  |            |                           |  |   | 106,000      |  
|Inventories                                                                                                                                                     |  |                    | 417,000      |   |             |  |            |                           |  |   | 417,000      |  
|Prepaid expenses and other current assets                                                                                                                       |  |                    | 140,000      |   |             |  | (63,000     | )                         |  |   | 77,000       |  
|                                                                                                                                                                |  |                    |              |   |             |  |             |                           |  |   |              |  
|Total current assets                                                                                                                                            |  |                    | 1,267,000    |   |             |  |             |                           |  |   | 6,279,000    |  
|                                                                                                                                                                |  |                    |             
|Property and equipment, net                                                                                                                                     |  |                    | 77,000       |   |             |  |            |                           |  |   | 77,000       |  
|Patents and trademarks, net                                                                                                                                     |  |                    | 261,000      |   |             |  |            |                           |  |   | 261,000      |  
|Reorganization value in excess of amounts allocated to identifiable assets                                                                                      |  |                    | 2,131,000    |   |             |  |            |                           |  |   | 2,131,000    |  
|Other assets                                                                                                                                                    |  |                    | 153,000      |   |             |  | 629,000     |                           |  |   | 782,000      |  
|                                                                                                                                                                |  |                    |              |   |             |  |             |                           |  |   |              |  
|Total assets                                                                                                                                                    |  | $                  | 3,889,000    |   |             |  |             |                           |  | $ | 9,530,000    |  
|                                                                                                                                                                |  |                    |              |   |             |  |             |                           |  |   |              |  
|                                                                                                                                                                | 
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                           |  |                    |              |  
|Liabilities not subject to compromise:                                                                                                                          |  |                    |              |  
|Current liabilities:                                                                                                                                            |  |                    |              |  
|Accounts payable                                                                                                                                                |  |                    | 556,000      |   |             |  | (143,000    | )                         |  |   | 413,000      |  
|Customer deposits                                                                                                                                               |  |                    | 85,000       |   |             |  |            |                           |  |   | 85,000       |  
|Accrued liabilities                                                                                                                                             |  |                    | 689,000      |   |             |  |            |                           |  |   | 689,000      |  
|Convertible notes payable                                                                                                                                       |  |                    |             |   |             |  | 875,000     |                           |  |   | 875,000      |  
|Notes payable, related parties                                                                                                                                  |  |                    | 2,597,000    |   |             |  | (2,024,000  | )                         |  |   | 573,000      |  
|Other notes payable                                                                                                                                             |  |                    |             |   |             |  | 27,000      |                           |  |   | 27,000       |  
|                                                                                                                                                                |  |                    |              |   |             |  |             |                           |  |   |              |  
|Total current liabilities                                                                                                                                       |  |                    | 3,927,000    |   |             |  |             |                           |  |   | 2,662,000    |  
|                                                                                                                                                                |  |                    |             
|Convertible notes payable                                                                                                                                       |  |                    |             |   |             |  | 717,000     |                           |  |   | 717,000      |  
|Long-term debt, less current maturities                                                                                                                         |  |                    |             |   |             |  | 30,658,000  |                           |  |   | 30,658,000   |  
|Derivative liabilities                                                                                                                                          |  |                    |             |   |             |  | 13,811,000  |                           |  |   | 13,811,000   |  
|                                                                                                                                                                |  |                    |              |   |             |  |             |                           |  |   |              |  
|Total liabilities not subject to compromise                                                                                                                     |  |                    | 3,927,000    |   |             |  |             |                           |  |   | 47,848,000   |  
|                                                                                                                                                                |  |                    |             
|Reserve for unresolved pre-petition claims                                                                                                                      |  |                    |             |   |             |  | 425,000     |                           |  |   | 425,000      |  
|Liabilities subject to compromise                                                                                                                               |  |                    | 76,898,000   |   |             |  | (76,898,000 | )                         |  |   |             |  
|                                                                                                                                                                |  |                    |              |   |             |  |             |                           |  |   |              |  
|Total liabilities                                                                                                                                               |  |                    | 80,825,000   |   |             |  |             |                           |  |   | 48,273,000   |  
|                                                                                                                                                                | 
|Stockholders deficit:                                                                                                                                          |  |                    |              |  
|Preferred stock, $.01 par, 50,000,000 shares authorized; no shares issued and outstanding                                                                       |  |                    |             |   |             |  |             |                           |  |   |             |  
|Common stock, $.01 par, 300,000,000 shares authorized; 98,149,783 and 136,416,887 issued and outstanding at September 30,
2010 and effective date, respectively |  |                    | 981,000      |   |             |  | 383,000     |                           |  |   | 1,364,000    |  
|Additional paid-in capital                                                                                                                                      |  |                    | 67,934,000   |   |             |  | 50,317,000  |                           |  |   | 118,251,000  |  
|Accumulated deficit                                                                                                                                             |  |                    | (149,416,000 | ) |             |  | (8,942,000  | )                         |  |   | (158,358,000 | )
|                                                                                                                                                                |  |                    |              |   |             |  |             |                           |  |   |              |  
|Total stockholders deficit attributable to Biovest International, Inc.                                                                                         |  |                    | (80,501,000  | ) |             |  |             |                           |  |   | (38,743,000  | )
|                                                                                                                                                                |  |                    |             
|Non-controlling interests in variable interest entities                                                                                                         |  |                    | 3,565,000    |   |             |  | (3,565,000  | )                         |  |   |             |  
|                                                                                                                                                                |  |                    |              |   |             |  |             |                           |  |   |              |  
|Total stockholders deficit                                                                                                                                     |  |                    | (76,936,000  | ) |             |  |             |                           |  |   | (38,743,000  | )
|                                                                                                                                                                |  |                    |             
|Total liabilities and stockholders deficit                                                                                                                     |  | $                  | 3,889,000    |   |             |  |             |                           |  | $ | 9,530,000    |  
|                                                                                                                                                                |  |                    |              |   |             |  |             |                           |  |   |              |  



F-47



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BIOVEST INTERNATIONAL, INC. AND SUBSIDIARIES

(DEBTOR-IN-POSSESSION)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED SEPTEMBER 30, 2010
AND 2009



The Qualifying Therapeutic Discovery Project

On October 31, 2010, the Company received notice from the U.S. Internal Revenue Service (IRS) that it was approved to receive a Federal grant in the
amount of approximately $245,000 under the Qualifying Therapeutic Discovery Project. The Qualifying Therapeutic Discovery Project tax credit is provided under new section 48D of the Internal Revenue Code (IRC), enacted as part of the Patient
Protection and Affordable Care Act of 2010 (P.L. 111-148). The credit is a tax benefit targeted to therapeutic discovery projects that show a reasonable potential to:



| |  |  | Result in new therapies to treat areas of unmet medical need or prevent, detect or treat chronic or acute diseases and conditions,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Reduce the long-term growth of health care costs in the United States, or
| | - |  | -------------------------------------------------------------------------



| |  |  | Significantly advance the goal of curing cancer within 30 years.
| | - |  | ----------------------------------------------------------------

Allocation of the credit will also take into consideration which projects show the greatest potential to create and sustain high-quality, high-paying U.S. jobs and to advance U.S. competitiveness in life,
biological and medical sciences. The funds were awarded to support the advancement of BiovaxID.

2010 Equity Incentive Plan

On November 15, 2010, the Companys Board of Directors approved the 2010 Equity Incentive Plan, pursuant to which the Company may grant an
aggregate of up to 10.0 million shares of the Companys common stock for stock option awards, and other equity based awards, to employees, directors, and consultants of the Company and its subsidiaries.

Minneapolis, Minnesota Facility Lease

On December 2, 2010, the Company entered into a lease agreement (the Lease) with JMS Holdings, LLC (Landlord) for
continued use and occupancy of the Companys existing facility in Minneapolis, Minnesota. The Lease has an initial term of ten (10) years, with provisions for extensions thereof, and will allow the Company to continue and to expand its
operations in the Minneapolis facility which it has occupied for over 25 years. The Lease also contains provisions regarding a strategic collaboration whereby Landlord has agreed to construct certain improvements to the leased premises to allow the
Company to perform GMP manufacturing of biologic products in the Minneapolis facility, with the costs of the construction to be amortized over the term of the Lease. In connection with this strategic agreement, the Company issued to Landlord a
warrant (the Warrant) to purchase up to one million shares of the Companys common stock, vesting 60 days from the date of issuance, with an initial exercise price of $1.21 per share and a term of five years from the earlier to
occur of (i) the date that the shares underlying the warrant become registered (the Company has agreed to file a registration statement including the shares underlying the Warrant within one year of the date of issuance) or (ii) the date
that the shares become otherwise freely-tradable pursuant to Rule 144. Resale of the underlying shares is subject to restrictions pursuant to Rule 144 and certain agreed lock-up provisions.



F-48