**SECURITIES AND EXCHANGECOMMISSION****Washington, D.C. 20549**

**FORM 10-KSB**
| x                                                                                                                                       |   | **Annual Report Pursuant to Section 13 or 15(d) of  the Securities Exchange Act of 1934**     |
|-----------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------------|
|                                                                                                                                    |   |                                                                                          |
| **For the fiscal year ended:****December 31, 2006**                                                                                     |
|                                                                                                                                    |   |                                                                                          |
| o                                                                                                                                       |   | **Transition Report Pursuant to Section 13 or  15(d) of the Securities Exchange Act of 1934** |
|                                                                                                                                    |   |                                                                                          |
| **For the  transition period from                  to** |

 

**CommissionFile Number 000-51518**

**PARAMOUNTACQUISITION CORP.**(Name of Small Business Issuer in Its Charter)

 
| **Delaware**  (State of Incorporation)                                                        | **20-2938469**  (Small Business Issuer  I.R.S. Employer I.D. Number) |
|-----------------------------------------------------------------------------------------------|----------------------------------------------------------------------|
|                                                                                          |                                                                 |
| **787 7th  Avenue, 48th Floor, New York, New York**  (Address of principal executive offices) | **10019**  (zip code)                                                |

**(212)554-4300**(Issuer’s Telephone Number, Including Area Code)

Securitiesregistered pursuant to Section 12(b) of the Act:None

Securitiesregistered pursuant to Section 12(g) of the Act:Units consisting of one share of Common Stock, par value $.0001 per share,and two Redeemable Common Stock Purchase WarrantsCommon Stock, $.0001 par value per shareWarrants to purchase shares of Common Stock

Check whether the Issuer(1) has filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirement for the past 90 days.  Yes x   Noo

Check if there is nodisclosure of delinquent filers in response to Item 405 of Regulation S-B containedin this form, and no disclosure will be contained, to the best of theregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB.  o

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act)  Yes  x           No o

Issuer’s revenues for thefiscal year ended December 31, 2006 were $0.

As of March 27, 2007, theaggregate market value of the Common Stock held by non-affiliates of theRegistrant was approximately $ 53,001,250.

As of March 27, 2007,there were 11,900,000 shares of Common Stock, $.0001 par value per share,outstanding.

Transitional SmallBusiness Disclosure Format (check one): Yes o          No x

 

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TABLE OF CONTENTS
|           | ** ** | ** **                                                                                                                               | ** ** | ** ** |
|-----------|------------|------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|
|      |       |                                                                                                                                     |       |       |
|      |       | PART I                                                                                                                                   |       |       |
|      |       |                                                                                                                                     |       |       |
| ITEM  1.  |       | DESCRIPTION  OF BUSINESS                                                                                                                 |       | 1          |
| ITEM  2.  |       | DESCRIPTION  OF PROPERTY                                                                                                                 |       | 16         |
| ITEM 3.   |       | LEGAL PROCEEDINGS                                                                                                                        |       | 16         |
| ITEM 4.   |       | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                                      |       | 16         |
|      |       |                                                                                                                                     |       |       |
|      |       | PART II                                                                                                                                  |       |       |
|      |       |                                                                                                                                     |       |       |
| ITEM 5    |       | MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER  MATTERS                                                                                |       | 16         |
| ITEM 6.   |       | MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF  OPERATION                                                                          |       | 17         |
| ITEM  7.  |       | FINANCIAL  STATEMENTS                                                                                                                    |       | 21         |
| ITEM 8.   |       | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON  ACCOUNTINGAND FINANCIAL DISCLOSURE                                                     |       | 21         |
| ITEM  8A. |       | CONTROL  AND PROCEDURES                                                                                                                  |       | 21         |
| ITEM  8B. |       | OTHER  INFORMATION                                                                                                                       |       | 21         |
|      |       |                                                                                                                                     |       |       |
|      |       | PART III                                                                                                                                 |       |       |
|      |       |                                                                                                                                     |       |       |
| ITEM 9.   |       | DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL  PERSONS ANDCORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(a) OF  THE EXCHANGEACT |       | 21         |
| ITEM 10.  |       | EXECUTIVE COMPENSATION                                                                                                                   |       | 24         |
| ITEM 11   |       | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND  MANAGEMENT                                                                          |       | 24         |
| ITEM 12.  |       | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, ANDDIRECTOR INDEPENDENCE                                                                 |       | 26         |
| ITEM 13.  |       | EXHIBITS                                                                                                                                 |       | 28         |
| ITEM 14.  |       | PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                                                   |       | 29         |

 

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** **

**PARTI**

**ITEM1.  DESCRIPTION OF BUSINESS**

Paramount Acquisition Corp. is a blank check companyformed on June 1, 2005 to effect a merger, capital stock exchange, assetacquisition or other similar business combination with an operating business inthe healthcare industry.

On October 27, 2005, we closed our initial publicoffering of 8,500,000 units with each unit consisting of one share of ourcommon stock and two warrants, each to purchase one share of our common stockat an exercise price of $5.00 per share. On each of October 31, 2005 and November 1, 2005, we consummated theclosing of an additional 637,500 units (for a total of 1,275,000 units), whichwere subject to an over-allotment option. The units were sold at an offering price of $6.00 per unit, generatingtotal gross proceeds of $58,650,000 (including over-allotment option).  After deducting the underwriting discountsand commissions and the offering expenses, the total net proceeds to us fromthe offering were $53,473,366 (including over-allotment option), of which$52,164,500 was deposited into the trust account and the remaining proceeds of$1,308,866 became available to be used to provide for business, legal andaccounting due diligence on prospective business combinations and continuinggeneral and administrative expenses. Through December 31, 2006, we have used approximately $1,254,000 of thenet proceeds that were not deposited into the trust fund to pay general andadministrative expenses (excluding payments for accrued expenses and due torelated parties, amounting to $992,688). The net proceeds deposited into the trust fund remain on deposit in thetrust fund earning interest.  As ofDecember 31, 2006, there was $54,470,015 held in the trust fund.

We are not presently engaged in, and we will notengage in, any substantive commercial business until we consummate a businesscombination.  We intend to utilize ourcash, including the funds held in the trust fund, capital stock, debt or acombination of the foregoing in effecting a business combination.  A businesscombination may involve the acquisition of, or merger with, a company that doesnot need substantial additional capital but which desires to establish a publictrading market for its shares, while avoiding what it may deem to be adverseconsequences of undertaking a public offering itself.  These include time delays, significantexpense, loss of voting control and compliance with various federal and statesecurities laws.  In the alternative, wemay seek to consummate a business combination with a company that may befinancially unstable or in its early stages of development or growth.

**Recent Developments**

On August 25, 2006, weentered into a Contribution Agreement with BioValve Technologies Inc. (“BioValve”),BTI Tech, Inc. (“BTI”), a wholly-owned subsidiary of BioValve, and ValeritasLLC (“Valeritas”).  Pursuant to theContribution Agreement, we had agreed to acquire approximately 58% of themembership units of Valeritas. Valeritas, a wholly-owned subsidiary of BioValve, is a medicaltechnologies company focused on developing and bringing to market proprietarytechnologies for the treatment of diabetes. On January 22, 2007, we announced that we and BioValve had determinedthat it would not be possible to consummate the transaction by the outside dateprovided for in the Contribution Agreement. As a result, we and BioValve determined that it was in each of ourrespective best interests to terminate the Contribution Agreement.  On January 21, 2007, we and BioValve, BTI andValeritas entered into a Termination and Mutual Release, pursuant to which theContribution Agreement was terminated.

In January, 2007, Dr.Lindsay Rosenwald, chairman of our board of directors, and J. Jay Lobell, ourchief executive officer and a member of our board of directors, establishedpersonal warrant purchase plans conforming to Rule 10b5-1 of the SecuritiesExchange Act of 1934 (the “Exchange Act”). Under the plans, between January 25, 2007 and February 23, 2007, Dr.Rosenwald and Mr. Lobell collectively purchased 1,000,000 warrants atprevailing market prices.  The warrantpurchase plans were subject to certain limitations, including that Dr.Rosenwald and Mr. Lobell would not collectively acquire more than 100,000 warrantsin any one day, or 250,000 warrants in any single week.  The plans terminated upon the purchase by Dr.Rosenwald and Mr. Lobell, collectively, of 1,000,000 warrants.

**Opportunities for aBusiness Combination in the Healthcare Industry**

We believe the sustained demand for improved medicine,including new drugs, medical devices, diagnostic tools and other healthcareproducts is being driven by aging populations and advances in technology andtherapeutic options.  In response tothese practical and economic stimuli, private biomedical and biotechnologycompanies regularly are being

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formed in order todevelop improved therapeutic and diagnostic products.  At the same time, we believe that emergingcompanies developing such innovations face a challenging financing climate.  Currently, the traditional initial publicoffering market is relatively weak and largely unavailable to thesebusinesses.  According to Thomson VentureEconomics, 3,662 venture or private equity-backed healthcare companies raisedventure financing from 2002 through 2006. During the same period, however, only190 healthcare companies went public and another 530 were acquired through mergersand acquisitions.

We believe that a well-capitalized, publicly-tradedcompany, such as our company, will be perceived by emerging companies as anattractive business combination candidate for several reasons, including thefollowing:

·                  *Limited alternativefinancing*.  In the pastfew years, institutional venture and angel investors have provided substantialfunding for new drug candidates, devices, diagnostic tools and other healthcaretechnologies and services.  We believethis investment has created numerous emerging companies with substantialfunding needs that exceed traditional venture capital capacity and with astockholder base interested in paths to liquidity.  We therefore believe that there are numerouscompanies in the healthcare industry that have outgrown their venture backingbut cannot currently access public-market capital.

·                  *Availability of acquisition candidates*.  We believe that recent expansion in thehealthcare industry has spawned numerous acquisition candidates.  To the same effect, as more establishedpharmaceutical and healthcare products companies continue to re-engineer theiroperating platforms and strategies, the technologies they divest or spin-offmay give rise to acquisition candidates as well.

·                  *Access to United States public markets*.  We are not restricted to target businesses inthe United States and may acquire a target business in the healthcare industryin any geographic location.  Accordingly,we may identify promising companies outside the United States whose strategyrequires both obtaining a United States presence and raising their visibilitythrough a public listing in the United States markets.  As a United States public company, we willoffer those advantages to potential foreign targets.

**Attractive Sub-Sectors withinthe Healthcare Industry**

While we may seek to effect a business combinationwith any company in the healthcare industry, we believe that the followingsegments offer especially attractive opportunities for a business combination:

*Medical Device and Diagnostic Sector*.  Medical device companies develop innovativeproducts often with cardiovascular or orthopedic applications, includingartificial limbs, novel surgical devices and processes, drug-eluting vascularstents, and implantable cardiac defibrillators. Medical diagnostic companies develop products for their diagnosticcapabilities, such as PET and CAT scanners, pap smears and blood testingdevices.  Benefits of this sector includeless imposing obstacles for clinical testing and FDA approval, the potentialfor expedited generation of revenues and an enhanced opportunity to exploitpossible inefficiencies in niche markets through the roll-up of privatecompanies.

*Specialty Pharmaceutical Sector — Next-GenerationTechnologies*.  Ratherthan developing proprietary pharmaceutical products, specialty pharmaceuticalcompanies in-license products or develop and produce generic versions ofalready marketed pharmaceuticals.  Thesecompanies often have a platform drug delivery technology that they apply to currentlymarketed drugs to improve their pharmacokinetic profile or ease the means orfrequency of administration.  As anexample, many sustained or extended-release versions of older drugs have beendeveloped by specialty pharmaceutical companies.  We believe companies in this space also facefewer drug development and other clinical challenges and may be able togenerate revenues relatively quickly, thus carrying lower risk.

*Biotechnology Sector — Novel TherapeuticTechnologies*. Traditional biotechnology companies seek to develop novel therapiestargeting diseases affecting patient populations with unsatisfied medicalneeds, including oncology, heart disease, diabetes, arthritis and infectiousdisease.  Companies in this sectordevelop first-in-class drugs by conducting extensive research, pre-clinical andhuman clinical trials with the aim of producing safe and effective treatments,and eventually obtaining FDA and foreign regulatory approval and marketpenetration. Treatments that have emerged from

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biotechnology companiesinclude monoclonal antibodies to treat cancer, recombinant growth hormones totreat developmental deficiencies, and nucleoside analogs to treat HIV.

*Tools and Genomics Sector — Aiding the DrugDiscovery Effort*. Tools and genomics companies aid the pharmaceutical and biotechnologyindustries as well as academia in drug discovery efforts.  For example, the microarray gene chip is usedto monitor the entire genome on a single chip, thereby automating the processof identifying expressed mRNA and determining which genes are turned on or offin diseases.  By combining technologiessuch as gene chips with increased computing power, the cost and throughput timefor research and development is shortened, leading to more rapid productdevelopment cycles.  Genomics companiesuse genetic code databases to help drug companies discover novel targets.  This platform can be used to identify manydifferent disease-causing mutations.

*Healthcare Services Sector*.  This sector consists of HMO’s, hospitals, hospices,long-term care and nursing facilities, distributors of drugs and medicalsupplies, specialty treatment centers and clinical research organizations.  This sector has expanded consistent with theaging of the population and the growth of healthcare spending and offersdistinct opportunities with respect to the use of cash to create efficienciesand generate accretive returns.

**Selection of a targetbusiness and structuring of a business combination**

Various members of our management team have regularaccess to substantial deal flow across the healthcare industry as a result oftheir current business activities.  Ashealthcare, asset management and merchant banking professionals, members of themanagement team have been, and are likely in the future to continue to be,presented with proposals and offers of many varieties with respect toprospective investments and transactions. These individuals may also become aware of potential transactionopportunities by attending healthcare conferences or conventions.  In addition, we anticipate that targetbusiness candidates may be brought to our attention by various unaffiliatedsources, including investment bankers, venture capital funds, private equityfunds, leveraged buyout funds, management buyout funds and other members of thefinancial community.  Target businessesmay be brought to our attention by such unaffiliated sources as a result ofbeing solicited by us through calls or mailings.  These sources may also introduce us to targetbusinesses they think we may be interested in on an unsolicited basis, sincemany of these sources will have read this report and know what types ofbusinesses we are targeting.  While we donot currently have any agreements or plans to engage professional firms thatspecialize in business acquisitions to assist us in our search for a targetbusiness, we may do so in the future.  Ifwe do, we may be required to pay such firm a finder’s fee or othercompensation.  In no event, however, willwe pay any of our initial officers, directors or stockholders (collectively,our “Founders”) or any entity with which they are affiliated any finder’s feeor other compensation prior to, or for any services they render in order toeffectuate, the consummation of a business combination.

Subject to the requirement that our initial businesscombination must be with a target business in the healthcare industry and havea fair market value of at least 80% of our net assets at the time of thebusiness combination, our management has virtually unrestricted flexibility inidentifying and selecting a prospective target business.  In evaluating a prospective target business,our management considers, among other factors, the following:

·                  financial condition and results ofoperation;

·                  growth potential;

·                  the ability of the target business tobenefit from the existing healthcare reimbursement regime and possible reformwith respect to cost containment;

·                  experience and skill of managementand availability of additional personnel;

·                  capital requirements;

·                  competitive position;

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·                  barriers to entry;

·                  stage of development of the products,processes or services;

·                  degree of current or potential marketacceptance of the products, processes or services;

·                  proprietary features and degree ofintellectual property or other protection of the products, processes orservices;

·                  regulatory environment of theindustry; and

·                  costs associated with effecting thebusiness combination.

These criteria are not intended to be exhaustive.  Any evaluation relating to the merits of a particularbusiness combination will be based, in addition to the above factors, on anyother considerations deemed relevant by our management in effecting a businesscombination consistent with our business objective.  In evaluating a prospective target business,we will conduct an extensive due diligence review that will encompass, amongother things, meetings with incumbent management and inspection of facilities,as well as review of financial and other information that is made available tous.  This due diligence review will beconducted by our management and by unaffiliated third parties who we mayengage.

**Fair Market Value ofTarget Business**

The initial target business that we acquire must havea fair market value equal to at least 80% of our net assets at the time of suchacquisition.  The fair market value ofsuch business will be determined by our board of directors based upon standardsgenerally accepted by the financial community, such as actual and potentialsales, earnings and cash flow and book value. If our board is not able to independently determine that the targetbusiness has a sufficient fair market value, we will obtain an opinion from anunaffiliated, independent investment banking firm with respect to thesatisfaction of such criteria.  We willnot be required to obtain an opinion from an investment banking firm as to thefair market value if our board of directors independently determines that thetarget business has sufficient fair market value.

**Opportunity forstockholder approval of business combination**

Prior to the completion of a business combination, wewill submit the transaction to our stockholders for approval, even if thenature of the acquisition is such as would not ordinarily require stockholderapproval under applicable state law.  Inconnection with seeking stockholder approval of a business combination, we willfurnish our stockholders with proxy solicitation materials prepared inaccordance with the Exchange Act, which, among other matters, will include adescription of the operations of the target business and audited historicalfinancial statements of the business.

In connection with the vote required for any businesscombination, our Founders have agreed to vote their respective shares of commonstock owned by them immediately prior to our initial public offering (“FounderShares”) in accordance with the vote of the majority of the shares of ourcommon stock sold in such offering (“IPO Shares”).  This voting arrangement shall not apply toany shares included in units purchased by our Founders in our initial publicoffering or purchased by them after such offering in the open market.  We will proceed with the business combination only if a majority of theIPO Shares cast at the meeting to approve the business combination are votedfor the approval of such business combination and stockholders holdingless than 20% of the IPO Shares exercise their conversion rights.

**Conversion rights**

At the time we seek stockholder approval of anybusiness combination, we will offer the holders of IPO Shares (but not any ofour Founders to the extent they purchased IPO Shares) the right to have suchshares converted to cash if the stockholder votes against the businesscombination and the business combination is approved and completed.  The actual per-share conversion price will beequal to the amount in the trust fund, inclusive of any interest, as of twobusiness days prior to the consummation of the business combination, divided bythe total number of IPO Shares.  As ofDecember 31, 2006, the per-share conversion price would have been $5.57.  An eligible stockholder may requestconversion at any time after the

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mailing to ourstockholders of the proxy statement and prior to the vote taken with respect toa proposed business combination at a meeting held for that purpose, but therequest will not be granted unless the stockholder votes against the businesscombination and the business combination is approved and completed.  Any request for conversion, once made, may bewithdrawn at any time up to the date of the meeting.  It is anticipated that the funds to bedistributed to stockholders entitled to convert their shares who electconversion will be distributed promptly after completion of a business combination.  We will not complete any business combinationif stockholders owning 20% or more of the IPO Shares exercise their conversionrights.  Holders of IPO Shares whoconvert their stock into their share of the trust fund still have the right toexercise any warrants they continue to hold that they purchased as part of theunits.

**Liquidation if nobusiness combination**

If we do not complete a business combination by April27, 2007, or by October 27, 2007 if the extension criteria described below havebeen satisfied, we will take actions necessary to dissolve and will distributeto all holders of IPO Shares, in proportion to the number of IPO Shares held bythem, an aggregate sum equal to the amount in the trust fund, inclusive of anyinterest, plus any remaining net assets. The Founders have waived their rights to participate in any liquidationdistribution with respect to their Founder Shares.  There will be no distribution from the trustfund with respect to our warrants.

If we enter into either a letter of intent, anagreement in principle or a definitive agreement to complete a businesscombination prior to April 27, 2007, but are unable to complete the businesscombination prior to this date, then we will have an additional six months inwhich to complete the business combination contemplated by the letter ofintent, agreement in principle or definitive agreement.  If we are unable to complete the businesscombination by October 27, 2007, our board of directors will convene and adopta specific plan of dissolution and liquidation, which it will then recommendfor approval by our shareholders at a meeting.

If we were to expend all of the net proceeds of ourinitial public offering, other than the proceeds deposited in the trust fund,the per-share liquidation price as of December 31, 2006 would have been$5.57.  However, the proceeds depositedin the trust fund could become subject to the claims of our creditors, whocould have priority over the claims of our public stockholders.  Lindsay A. Rosenwald, our chairman of theboard, has agreed that if we liquidate prior to the consummation of a businesscombination he will be personally liable to pay debts and obligations to targetbusinesses or vendors or other entities that are owed money by us for servicesrendered or contracted for or for products sold to us to the extent they haveclaims against the funds in our trust account. In connection with that obligation, Paramount BioCapital AssetManagement, Inc. (“Paramount BioCapital”), which is an affiliate of Dr.Rosenwald, has agreed to pay such debts and obligations on Dr. Rosenwald’sbehalf, if necessary.

**Competition**

In identifying, evaluating and selecting a targetbusiness, we expect to encounter intense competition from other entities havinga business objective similar to ours. There are numerous blank check companies that have completed initialpublic offerings that are seeking to carry out a business plan similar to ourbusiness plan.  Additionally, we may besubject to competition from other companies looking to expand their operationsthrough the acquisition of a target business. Many of these entities are well established and have extensiveexperience identifying and effecting business combinations directly or throughaffiliates.  Many of these competitorspossess greater technical, human and other resources than us and our financialresources will be relatively limited when contrasted with those of many ofthese competitors.  While we believethere are numerous potential target businesses that we could acquire, ourability to compete in acquiring certain sizable target businesses will belimited by our available financial resources. This inherent competitive limitation gives others an advantage inpursuing the acquisition of a target business. Further:

·                  our obligation to seek stockholderapproval of a business combination is likely to delay the****completionof a transaction;

·                  our obligation to convert into cashshares of common stock held by our public stockholders in certain instances mayreduce the resources available to us for a business combination; and

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·                  our outstanding warrants and options,and the future dilution they potentially represent, may not be viewed favorablyby certain target businesses.

Anyof these factors may place us at a competitive disadvantage in successfully negotiatinga business combination.  Our managementbelieves, however, that our status as a public entity and potential access tothe United States public equity markets may give us a competitive advantageover privately-held entities having a similar business objective as us inacquiring a target business on favorable terms.

If we succeed in effecting a business combination,there will be, in all likelihood, intense competition from competitors of thetarget business**. **Numerouscompanies, most of which have substantially greater financial resourcesavailable to them than we do, are already engaged in the industry segments weintend to focus on.  We cannot assure youthat, subsequent to a business combination, we will have the resources orability to compete effectively.

**Government Regulation**

The healthcare industry is highly regulated, and thefederal and state laws that may affect our business following a businesscombination could be significant. Federal and state governments regulate the healthcare industryextensively including through the Medicare and Medicaid payment programs, eachof which is financed, at least in part, with federal funds.  State jurisdiction is based upon the state’sauthority to license certain categories of healthcare professionals andproviders, and the state’s interest in regulating the quality of healthcare inthe state, regardless of the source of payment.

Significant areas of federal and state regulatory lawsthat could affect our ability to conduct our business following a businesscombination include the following:

·                  *False and other improperclaims for payment*.  Thegovernment may fine a provider if it knowingly submits, or participates insubmitting, any claim for payment to the federal government that is false orfraudulent, or that contains false or misleading information.

·                  *Health InsurancePortability and Accountability Act*.  Laws designed to combat fraud against anyhealthcare benefit program for theft or embezzlement involving healthcare, aswell as providing various privacy rights to patients and customers.

·                  *Anti-kickback laws*.  Federal and state anti-kickback laws make ita felony to knowingly or willfully offer, pay, solicit or receive any form ofremuneration in exchange for referrals or recommendations regarding services orproducts.

·                  *The Stark Self-ReferralLaw and other laws prohibiting self-referral and financial inducements*.  Laws that limit the circumstances under whichphysicians who have a financial relationship with a company may refer patientsto such company for the provision of certain services.

·                  *Corporate practice ofmedicine*.  Many stateshave laws that prohibit business corporations from practicing medicine,employing physicians to practice medicine, exercising control over medicaldecisions by physicians, or engaging in certain arrangements with physicians,such as fee-splitting.

·                  *Antitrust laws*.  Wide range of laws that prohibitanticompetitive conduct among separate legal entities in the healthcareindustry.

A violation of any of these laws could result in civiland criminal penalties, the requirement to refund monies paid by governmentand/or private payers, exclusion from participation in Medicare and Medicaidprograms and/or the loss of licensure. Following a business combination, we intend to exercise care instructuring our arrangements and our practices to comply with applicablefederal and state laws.  However, therecan be no assurance that we will be successful in ensuring compliance with allapplicable laws and regulations.  If wewill be found to have violated any rules or regulations that could adverselyaffect our business and operations, the violations may delay or impair ourability to complete a business

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combination.  Additionally, laws in the healthcare industryare subject to change, interpretation and amendment, which could adverselyaffect our ability to conduct our business following a business combination.

**Employees**

We have no employees. We have four executive officers who are not obligated to contribute anyspecific number of hours to our matters and intend to devote only as much timeas they deem necessary to our affairs. The amount of time they devote in any time period will vary based on theavailability of suitable target businesses to investigate.  We do not intend to have any full timeemployees prior to the consummation of a business combination.

**Risks associated with ourbusiness**

In addition to other information included in thisreport, the following factors should be considered in evaluating our businessand future prospects.

***We are a development stage company with no operatinghistory and very limited resources and our independent registered publicaccounting firm has rendered a qualified opinion on our financial statements.***

We are a recently incorporated development stagecompany with no operating results to date. Since we do not have an operating history, you will have no basis uponwhich to evaluate our ability to achieve our business objective, which is toacquire an operating business in the healthcare industry.  We will not generate any revenues until, atthe earliest, after the consummation of a business combination.  As of December 31, 2006, our independentregistered public accounting firm has rendered a qualified opinion on ourfinancial statements since the financial statements have been prepared assumingthat we will continue as a going concern. As of December 31, 2006, we have a working capital deficiency (excludinginvestments held in the trust fund) of $803,104.  Additionally, our Certificate of Incorporationprovides for our liquidation if we don’t consummate a business combinationprior to April 27, 2007 or October 27, 2007 if certain extension criteria havebeen satisfied.

***If third parties bring claims against us, the proceedsheld in trust could be reduced and the per-share liquidation price received bystockholders could be less than $5.57 per share.***

Our placing of funds in trust may not protect thosefunds from third party claims against us. The proceeds held in trust could be subject to claims that could havepriority over the claims of our public stockholders.  If we liquidate, we cannot assure you thatthe per-share liquidation price will not be less than the $5.57 per share heldin trust as of December 31, 2006 due to claims of creditors.** **Ifwe liquidate before the completion of a business combination, Lindsay A.Rosenwald has agreed that he or an affiliate will be personally liable toensure that the proceeds in the trust fund are not reduced by the claims oftarget businesses or vendors or other entities that are owed money by us forservices rendered or contracted for or products sold to us.  However, we cannot assure you that he or anaffiliate will be able to satisfy those obligations.** **Furthermore, even after our liquidation(including the distribution of the monies then held in the trust fund), underthe Delaware General Corporation Law, stockholders may be held liable forclaims by third parties against a corporation to the extent of distributionsreceived by them in a dissolution. Accordingly, we cannot assure you that third parties will not seek torecover from our stockholders amounts owed to them by us.

***If we fail to maintain the effectiveness of aregistration statement relating to our common stock, we may be precluded fromissuing shares of our common stock upon the exercise of our warrants.***

Our warrants will not be exercisable and we will notbe obligated to issue shares of common stock upon their exercise unless at thetime a warrant holder seeks to exercise a warrant, a registration statementunder the Securities Act of 1933 with respect to our common stock iseffective.  Under the terms of thewarrant agreement we entered into with Continental Stock Transfer & TrustCompany (as agent for the warrant holders), we have agreed to use our bestefforts to meet these conditions and to maintain the effectiveness of such aregistration statement until the expiration of the warrants.  However, we cannot assure you that we will beable to do so, and if we do not maintain an effective registration statement,holders of our warrants may be unable to exercise their warrants and we willnot be required to settle any such warrant

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exercise.  In that case, the warrants may have no value,the market for such warrants may be limited and such warrants may expireworthless.

***Because there are numerous companies with a businessplan similar to ours seeking to effectuate a business combination, it may bemore difficult for us to do so.***

There are numerous similarly structured blank checkcompanies that have completed initial public offerings in the United Stateswith business plans similar to ours and there are a number of additionalofferings for blank check companies that are still in the registration processbut have not completed initial public offerings.  While some of those companies must complete abusiness combination in specific industries, a number of them may consummate abusiness combination in any industry they choose.  Therefore, we may be subject to competitionfrom these and other companies seeking to consummate a business plan similar toours. Because of this competition, we cannot assure you that we will be able toeffectuate a business combination within the required time periods.

***Since we have not currently selected any targetbusiness with which to complete a business combination, we are unable tocurrently ascertain the merits or risks of the business’ operations.***

Since we have not yet identified a prospective targetbusiness, there is no basis for investors to evaluate the possible merits or risksof the target business’ operations.  Tothe extent we complete a business combination with a financially unstablecompany or an entity in its development stage, we may be affected by numerousrisks inherent in the business operations of those entities.  Although our management will endeavor toevaluate the risks inherent in a particular target business, we cannot assureyou that we will properly ascertain or assess all of the significant riskfactors.  We also cannot assure you thatan investment in our securities will not ultimately prove to be less favorablethan a direct investment, if an opportunity were available, in a targetbusiness.

***If we effect a business combination with a companylocated outside of the United States, we will be subject to a variety ofadditional risks that may negatively impact our operations.***

We may effect a business combination with a companylocated outside of the United States. If we do so, we will be subject tospecial considerations and risks associated with companies operating in thetarget business’ home jurisdiction, including any of the following:

·                  rules and regulations or currencyconversion or corporate withholding taxes on individuals;

·                  tariffs and trade barriers;

·                  regulations related to customs andimport/export matters;

·                  longer payment cycles;

·                  tax issues, such as tax law changesand variations in tax laws as compared to the United States;

·                  currency fluctuations;

·                  challenges in collecting accountsreceivable;

·                  cultural and language differences;and

·                  employment regulations.

We cannot assure you thatwe will be able to address adequately these additional risks. If we are unableto do so, our operations might suffer.

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***If we effect a business combination with a companylocated outside of the United States, the laws applicable to such company willlikely govern all of our material agreements and we may not be able to enforceour legal rights.***

If we effect a business combination with a companylocated outside of the United States, the laws applicable to such company willgovern almost all of our material agreements relating to its operations.  We cannot assure you that the target businesswill be able to enforce any of its material agreements or that remedies will beavailable outside of the new jurisdiction. The system of laws and the enforcement of existing laws in suchjurisdiction may not be as certain in implementation and interpretation as inthe United States.  The inability toenforce or obtain a remedy under any of our future agreements could result in asignificant loss of business, business opportunities or capital.  Additionally, it is likely that substantiallyall of our assets would be located outside of the United States and some of ourofficers and directors might reside outside of the United States.  As a result, it may not be possible forinvestors in the United States to enforce their legal rights, to effect serviceof process upon our directors or officers or to enforce judgments of U.S.courts predicated upon civil liabilities and criminal penalties of ourdirectors and officers under federal securities laws.

***We may issue shares of our common stock and preferredstock to complete a business combination, which would reduce the equityinterest of our stockholders and likely cause a change in control of ourownership.***

Our certificate of incorporation authorizes theissuance of up to 40,000,000 shares of common stock, par value $.0001 pershare, and 1,000,000 shares of preferred stock, par value $.0001 pershare.  We currently have 7,275,000authorized but unissued shares of our common stock available for issuance(after appropriate reservation for the issuance of shares upon full exercise ofour outstanding warrants and options) and all of the 1,000,000 shares ofpreferred stock available for issuance. Although we currently have no commitments to issue our securities, wewill, in all likelihood, issue a substantial number of additional shares of ourcommon stock or preferred stock, or a combination of common and preferredstock, to complete a business combination. The issuance of additional shares of our common stock or any number ofshares of our preferred stock:

·                  may significantly reduce the equityinterest of stockholders;

·                  may subordinate the rights of holdersof common stock if preferred stock is issued with rights senior to thoseafforded to our common stock;

·                  will likely cause a change in controlif a substantial number of our shares of common stock are issued, which mayaffect, among other things, our ability to use our net operating loss carryforwards, if any, and most likely also result in the resignation or removal ofour present officers and directors; and

·                  may adversely affect prevailingmarket prices for our common stock.

Similarly, if we issuedebt securities, it could result in:

·                  default and foreclosure on our assetsif our operating revenues after a business combination were insufficient to payour debt obligations;

·                  acceleration of our obligations torepay the indebtedness even if we have made all principal and interest paymentswhen due if the debt security contains covenants that require the maintenanceof certain financial ratios or reserves and any such covenant is breachedwithout a waiver or renegotiation of that covenant;

·                  our immediate payment of allprincipal and accrued interest, if any, if the debt security is payable ondemand; and

·                  our inability to obtain additionalfinancing, if necessary, if the debt security contains covenants restrictingour ability to obtain additional financing while such security is outstanding.

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***Our ability to successfully effect a businesscombination and to be successful thereafter is dependent upon the efforts ofour key personnel, some of whom may join us following a business combination.***

Our ability to successfully effect a business combinationis dependent upon the efforts of our key personnel.  The future role of our key personnel in thetarget business, however, cannot presently be ascertained.  Although it is possible that some of our keypersonnel will remain associated in various capacities with the target businessfollowing a business combination, it is likely that the management of thetarget business at the time of the business combination will remain inplace.  Moreover, our key personnel willbe able to remain with the company after the consummation of a businesscombination only if they are able to negotiate employment or consultingagreements in connection with the business combination, the terms of which,including the compensation to be paid to such individuals, would be determinedat such time between the respective parties. However, the ability of our key personnel to remain with the companyafter the consummation of a business combination will not be the determiningfactor in our decision as to whether or not we will proceed with any potentialbusiness combination.  While we intend toclosely scrutinize the management of a prospective target business inconnection with evaluating the desirability of effecting a businesscombination, we cannot assure you that our assessment of management will proveto be correct.  These individuals may beunfamiliar with the requirements of operating a public company, which couldcause us to have to expend time and resources helping them become familiar withsuch requirements.  This could be expensiveand time-consuming and could lead to various regulatory issues that mayadversely affect our operations.

***Our officers and directors allocate their time toother businesses thereby causing conflicts of interest in their determinationas to how much time to devote to our affairs. This could have a negative impact on our ability to consummate abusiness combination.***

Our officers and directors are not required to committheir full time to our affairs, which may result in a conflict of interest inallocating their time between our operations and other businesses.  We do not intend to have any full timeemployees prior to the consummation of a business combination.  All of our executive officers are engaged inseveral other business endeavors and are not obligated to contribute anyspecific number of hours to our affairs. If our executive officers’ other business affairs require them to devotemore substantial amounts of time to such affairs, it could limit their abilityto devote time to our affairs and could have a negative impact on our abilityto consummate a business combination.

***Our officers and directors and their affiliates may inthe future become affiliated with entities engaged in business activitiessimilar to those conducted by us and, accordingly, may have conflicts ofinterest in determining to which entity a particular business opportunityshould be presented.***

Our officers, directors and their affiliates may inthe future become affiliated with entities, including other “blank check” companies,engaged in business activities similar to those intended to be conducted byus.  Furthermore, in light of ourofficers and directors existing affiliations with other entities, they may havefiduciary obligations to present potential business opportunities to thoseentities in addition to presenting them to us, which could cause additionalconflicts of interest.  Accordingly,while we do not believe that any of our officers or directors currently has aconflict of interest in terms of presenting to entities other than us businessopportunities that may be suitable for us, conflicts of interest may arise inthe future in determining to which entity a particular business opportunityshould be presented.  We cannot assureyou that these conflicts will be resolved in our favor.

***All of our officers and directors own shares of ourcommon stock and warrants that will not participate in liquidationdistributions and therefore they may have a conflict of interest in determiningwhether a particular target business is appropriate for a business combination.***

All of our officers and directors own stock in ourcompany, but have waived their right to receive distributions upon ourliquidation with respect to the shares of stock owned by them immediately priorto our IPO, and own warrants to purchase additional shares of our commonstock.  These shares and the warrantsowned by our directors and officers will be worthless if we do not consummate abusiness combination.  The personal andfinancial interests of our directors and officers may influence theirmotivation in identifying and selecting a target business and completing abusiness combination timely. Consequently, our directors’ and officers’ discretion in identifying andselecting a suitable target business may result in a

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conflict of interest whendetermining whether the terms, conditions and timing of a particular businesscombination are appropriate and in our stockholders’ best interest.

***It is unlikely that we will be able to complete morethan one business combination, and we may therefore be solely dependent on asingle business and a limited number of products or services.***

As of December 31, 2006, we had $54,470,015 on depositin a trust fund, which we may use to complete a business combination.  Our initial business combination must be witha business with a fair market value of at least 80% of our net assets at thetime of such acquisition, although this may entail the simultaneousacquisitions of several operating businesses at the same time.  By consummating a business combination withonly a single entity, our lack of diversification may subject us to numerouseconomic, competitive and regulatory developments.  Further, we would not be able to diversifyour operations or benefit from the possible spreading of risks or offsetting oflosses, unlike other entities that may have the resources to complete severalbusiness combinations in different industries or different areas of a singleindustry.  Accordingly, the prospects forour success may be:

·                  solely dependentupon the performance of a single business, or

·                  dependent uponthe development or market acceptance of a single or limited number of products,processes or services.

Alternatively, if our business combination entails thesimultaneous acquisitions of several operating businesses at the same time fromdifferent sellers, we would face additional risks, including difficulties andexpenses incurred in connection with the subsequent assimilation into a singleoperating business of the operations and services or products of the acquiredcompanies.  If we are unable toadequately address these risks, it could negatively impact our profitabilityand results of operations.

***The ability of our stockholders to exercise theirconversion rights may not allow us to effectuate the most desirable businesscombination or optimize our capital structure.***

When we seek stockholder approval of any businesscombination, we will offer each public stockholder the right to have his, heror its shares of common stock converted to cash if the stockholder votesagainst the business combination and the business combination is approved andcompleted.  Such holder must both voteagainst such business combination and then exercise his, her or its conversionrights to receive a pro rata portion of the trust account.  Accordingly, if our business combinationrequires us to use substantially all of our cash to pay the purchase price,because we will not know how many stockholders may exercise such conversion rights,we may either need to reserve part of the trust account for possible paymentupon such conversion, or we may need to arrange third party financing to helpfund our business combination in case a larger percentage of stockholdersexercise their conversion rights than we expect.  Therefore, we may not be able to consummate abusiness combination that requires us to use all of the funds held in the trustaccount as part of the purchase price, or we may end up having a leverage ratiothat is not optimal for our business combination.  This may limit our ability to effectuate themost attractive business combination available to us.

***Because of our limited resources and structure, we maynot be able to consummate a business combination with growth potential.***

We expect to encounter intense competition from otherentities having a business objective similar to ours, including venture capitalfunds, leveraged buyout funds and operating businesses competing foracquisitions.  Many of these entities arewell established and have extensive experience in identifying and effectingbusiness combinations directly or through affiliates.  Many of these competitors possess greatertechnical, human and other resources than we do and our financial resourceswill be relatively limited when contrasted with those of many of thesecompetitors.  While we believe that thereare numerous potential target businesses that we could acquire, our ability tocompete in acquiring certain sizable target businesses will be limited by ouravailable financial resources.  Thisinherent competitive limitation gives others an advantage in pursuing theacquisition of certain target businesses. Further, the obligation we have to seek stockholder approval of abusiness combination may delay the consummation of a transaction, and ourobligation to convert into cash the shares of common stock held by publicstockholders in certain instances may reduce the resources available for abusiness

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combination.  Additionally, our outstanding warrants, andthe future dilution they potentially represent, may not be viewed favorably bycertain target businesses.  Any of theseobligations may place us at a competitive disadvantage in successfullynegotiating a business combination. Additionally, because of our structure, there may be fewer attractivetarget businesses available to acquire or privately held target businesses maynot be not inclined to enter into a transaction with a publicly held blankcheck companies like us.

***We may be unable to obtain additional financing, ifrequired, to complete a business combination or to fund the operations andgrowth of the target business, which could compel us to restructure thetransaction or abandon a particular business combination.***

Although we believe our current assets will besufficient to allow us to consummate a business combination, in as much as wehave not yet identified any prospective target business, we cannot ascertainthe capital requirements for any particular transaction.  If we require further funds, either becauseof the size of the business combination or the depletion of our available cashin search of a target business, or because we become obligated to convert intocash a significant number of shares from dissenting stockholders, we will berequired to seek additional financing. We cannot assure you that such financing would be available onacceptable terms, if at all.  To theextent that additional financing proves to be unavailable when needed toconsummate a particular business combination, we would be compelled torestructure the transaction or abandon that particular business combination andseek an alternative target business candidate. In addition, if we consummate a business combination, we may requireadditional financing to fund the operations or growth of the targetbusiness.  The failure to secureadditional financing could have a material adverse effect on the continueddevelopment or growth of the target business. None of our officers, directors or stockholders is required to provideany financing to us in connection with or after a business combination.

***Our existing stockholders, including our officers anddirectors, control a substantial interest in us and thus may influence certainactions requiring stockholder vote.***

Our board of directors is divided into three classes,each of which will generally serve for a term of three years with only oneclass of directors being elected in each year. It is unlikely that there will be an annual meeting of stockholders toelect new directors prior to the consummation of a business combination, inwhich case all of the current directors will continue in office at least untilthe consummation of the business combination. If there is an annual meeting, as a consequence of our “staggered” boardof directors, only a minority of the board of directors will be considered forelection and our existing stockholders, because of their ownership position,will have considerable influence regarding the outcome.  Accordingly, our existing stockholders willcontinue to exert control at least until the consummation of a businesscombination.

***Our outstanding warrants may have an adverse effect onthe market price of common stock and make it more difficult to effect abusiness combination.***

We currently have outstanding warrants to purchase19,550,000 shares of common stock and options to purchase 425,000 shares ofcommon stock and warrants to purchase an additional 850,000 shares of commonstock.  To the extent we issue shares ofcommon stock to effect a business combination, the potential for the issuanceof substantial numbers of additional shares upon exercise of these warrants andoptions could make us a less attractive acquisition vehicle in the eyes of atarget business as such securities, when exercised, will increase the number ofissued and outstanding shares of our common stock and reduce the value of theshares issued to complete the business combination.  Accordingly, our warrants and options maymake it more difficult to effectuate a business combination or increase thecost of the target business.  Additionally, the sale, or even thepossibility of sale, of the shares underlying the warrants and options couldhave an adverse effect on the market price for our securities or on our abilityto obtain future public financing.  Ifand to the extent these warrants and options are exercised, you may experiencedilution to your holdings.

***If we are unable to effect a business combination andare forced to liquidate, our warrants will expire worthless.***

Our Certificate of Incorporation requires that if wedo not complete a business combination by April 27, 2007, or by October 27,2007 if certain criteria have been satisfied, we take steps necessary toliquidate and distribute to the holders of IPO Shares, in proportion to thenumber of IPO Shares held by them, an aggregate sum equal to the amount in thetrust fund,

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inclusive of anyinterest, plus any remaining net assets. In such event, there will be no distribution with respect to ouroutstanding warrants.  Accordingly, thewarrants will expire worthless.

***If our Founders exercise their registration rights, itmay have an adverse effect on the market price our common stock and theexistence of these rights may make it more difficult to effect a businesscombination.***

Our Founders are entitled to demand that we registerthe resale of their shares of common stock at any time commencing three monthsprior to the date on which their shares are to be released from escrow.  If our Founders exercise their registrationrights with respect to all of their shares of common stock, then there will bean additional 2,125,000 shares of common stock eligible for trading in thepublic market.  The presence of thisadditional number of shares of common stock eligible for trading in the publicmarket may have an adverse effect on the market price of our common stock.  In addition, the existence of these rightsmay make it more difficult to effectuate a business combination or increase thecost of the target business, as the stockholders of the target business may bediscouraged from entering into a business combination with us or will request ahigher price for their securities as a result of these registration rights andthe potential future effect their exercise may have on the trading market forour common stock.

***If we are deemed tobe an investment company, we may be required to institute burdensome compliancerequirements and our activities may be restricted, which may make it difficultfor us to complete a business combination.***

If we are deemed to be an investment company under theInvestment Company Act of 1940, we may be subject to certain restrictions thatmay make it more difficult for us to complete a business combination,including:

·                  restrictions on the nature of ourinvestments; and

·                  restrictions on the issuance ofsecurities.

In addition, we may have imposed upon us burdensomerequirements, including:

·                  registration asan investment company;

·                  adoption of aspecific form of corporate structure; and

·                  reporting,record keeping, voting, proxy and disclosure requirements and other rules andregulations.

We do not believe that our activities subject us tothe Investment Company Act of 1940.  Tothis end, the proceeds held in trust may only be invested by the trust agent in“government securities” with specific maturity dates.  By restricting the investment of the proceedsto these instruments, we intend to meet the requirements for the exemptionprovided in Rule 3a-1 promulgated under the Investment Company Act of 1940.  If we were deemed to be subject to the act,compliance with these additional regulatory burdens would require additionalexpense for which we have not allotted.

***Risks associated with our acquisition of a targetbusiness in the healthcare industry***

If we are unable to obtain any necessary governmentapprovals or are unable to substantiate our clinical trials following abusiness combination, we may be unable to offer our products, technologies orservices. We may effect a business combination with a target business engagedin the development of products or technologies or that is conducting clinicaltrials on products.  Our failure toobtain and maintain regulatory approval for a product candidate following abusiness combination will prevent us from commercializing it.  Additionally, if the results of any clinical trialsdo not support our product candidate claims, we may be unable to offer suchproducts.

Product candidates and the activities associated withtheir development and commercialization, including their testing, manufacture,safety, efficacy, recordkeeping, labeling, storage, approval, advertising,promotion, sale and distribution, are subject to comprehensive regulation bythe FDA and other United States regulatory agencies and by comparableauthorities in other countries.  We mayneed to conduct, at our own expense, extensive preclinical, clinical and

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post-commercializationtrials to demonstrate the safety and efficacy in humans of productcandidates.  Securing product approvaloften requires the submission of extensive preclinical and clinical data, informationabout product manufacturing processes, and inspection of facilities andsupporting information for each therapeutic indication to establish the productcandidate’s safety and efficacy.  Varyinginterpretations of the data obtained from preclinical and clinical testingcould delay, limit or prevent regulatory approval of a product candidate.  The process of obtaining and maintainingregulatory approvals may vary and involves substantial regulatory discretion, isexpensive, and often takes many years, if approval is obtained at all.  Moreover, success in preclinical testing andearly clinical trials does not ensure that later clinical trials will besuccessful, and interim results of a clinical trial do not necessarily predictfinal results.  Because earlier stageclinical trials often involve small patient populations, the results of theseclinical trials may not be indicative of future results and later clinicaltrials may not replicate the results of prior clinical trials and pre-clinicaltesting.

Unanticipated problems may arise at various stages ofthe development of products or technologies, and such efforts may ultimately beunsuccessful.  Any delay in, ortermination of, clinical trials will delay the filing with the FDA of anapplication for approval of that product and, ultimately, may delay our abilityto commercialize product candidates and generate product revenues. Delays incommercializing products may result in the need to seek additional capital,potentially diluting the interests of investors.  These various factors, which often result inabrupt changes in the share prices of companies in the healthcare industrygenerally, may have a broad effect on the share price of our securities aswell.

***If we are unable to comply with governmental regulationsaffecting the healthcare industry following a business combination, it couldresult in the imposition of penalties and fines against us and result in thecurtailment of our operations.***

There is extensive government regulation of manyhealthcare businesses, as well as various proposals at the federal governmentlevel to reform the healthcare system. Changes to the existing regulatory framework and/or the implementationof various reform initiatives could adversely affect certain sectors of the healthcareindustry.  If we are unable to adhere tothese requirements, it could result in the imposition of penalties and finesagainst us, and could also result in the imposition of restrictions on ourbusiness and operations.  Furthermore,the costs of compliance could reduce our profitability.

***If we are unable to obtain and maintain protection forthe intellectual property relating to our technologies, products or servicesfollowing a business combination, or if we fail to secure rights to the patentsof others, the value of our technology, products or services may be diminishedand our revenues may be decreased.***

Our success, competitive position and future revenuesfollowing a business combination will depend in part on our ability (andpossibly the ability of our licensors) to obtain and maintain patent protectionin the United States and in other countries for our products, methods,processes, services and other technologies, to preserve our trade secrets, toprevent third parties from infringing on our proprietary rights and to operatewithout infringing the proprietary rights of third parties.  At the same time, intellectual propertyrights in the fields of medical devices, diagnostics, pharmaceuticals andbiotechnology are highly uncertain and may involve complex legal and scientificquestions.  We may not be able to obtainadditional issued patents relating to our products, methods, processes,services or other technologies.  Even ifissued, patents may be challenged, narrowed, invalidated or circumvented, orothers may obtain patents claiming aspects similar to those covered by ourpatents and patent applications, which factors could limit our ability to stopcompetitors from marketing similar products or services, limit the length ofterm of patent protection we may have for our products or services, and exposeus to substantial costs and risks in litigation and administrative proceedingsand drain our resources.  Changes ineither patent laws or in interpretations of patent laws in the United States andother countries may diminish the value of our intellectual property or narrowthe scope of our patent protection.

In addition, our success following a businesscombination likely will depend at least in part upon the skills, knowledge andexperience of our scientific and technical personnel, our consultants andadvisors and possibly our licensors and contractors as well.  To help protect our proprietary know-how andour inventions for which patents may be unobtainable or difficult to obtain, welikely will need to rely on trade secret protection and confidentialityagreements.  However, even if employees,consultants, advisors and contractors enter into agreements prohibiting thedisclosure of confidential information and, where applicable, require disclosureand assignment to us of the ideas, developments, discoveries and inventionsimportant to our business, these agreements may not provide adequate protectionfor our trade secrets, know-how or other proprietary information in the eventof any unauthorized use or disclosure or the lawful development by others ofsuch

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information.  If any of our trade secrets, know-how orother proprietary information is disclosed, the value of our trade secrets,know-how and other proprietary rights may be significantly impaired and ourbusiness and competitive position may suffer.

***If we infringe the rights of third parties, we couldbe prevented from selling products, forced to pay damages, and defend againstlitigation.***

In the event that, following a business combination,our products, methods, processes or other technologies are claimed to infringethe proprietary rights of other parties, we could incur substantial costs andmay be required to:

·                  obtain licenses,which may not be available on commercially reasonable terms, if at all;

·                  abandon aninfringing product, process or technology;

·                  redesign ourproducts, processes or technologies to avoid infringement;

·                  stop using thesubject matter claimed in the patents held by others;

·                  pay damages; or

·                  defendlitigation or administrative proceedings, which may be costly whether we win orlose, and which could result in a substantial diversion of valuable managementresources.

***The healthcare industry is susceptible to significantliability exposure.  We may incursubstantial liabilities and be required to limit commercialization of ourproducts in response to product liability lawsuits.***

The testing and marketing of medical products andtechnologies entail an inherent risk of product liability.  Accordingly, any target business that weacquire in the healthcare industry may be exposed to potential liability risksinherent in the testing, manufacturing, marketing and sale of healthcareproducts and/or the provision of healthcare services.  A liability claim or the imposition of liabilitymay have a material adverse effect on our business, financial condition ormarket prices of our securities.

If we cannot successfully defend ourselves againstproduct liability claims, we may incur substantial liabilities or be requiredto limit commercialization of our products. Our inability to obtain sufficient product liability insurance at anacceptable cost to protect against potential product liability claims couldprevent or inhibit the commercialization of the products, processes or technologiesthat we develop.  Further, even if wehave agreements with any third parties that entitle us to indemnificationagainst losses, such indemnification may not be adequate should any claimarise.

***The commercial success of the products being marketed and/ordeveloped by a target business that we acquire will be impaired if physiciansand patients do not accept and use our product candidates.***

Even if the target business that we acquire has anapproved and marketed product, and the FDA following a business combinationapproves the use of additional product candidates, physicians and patients maynot accept and use them.  Acceptance anduse of our products will depend upon a number of factors including:

·                  perceptions bymembers of the health care community, including physicians, regarding thesafety and effectiveness of our products;

·                  cost-effectivenessof our products relative to competing products;

·                  availability ofreimbursement for our products from government or other healthcare payers; and

·                  effectiveness ofmarketing and distribution efforts by us and our licensees and distributors, ifany.

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Thefailure of a product to obtain or maintain market acceptance would harm ourbusiness and could require us to seek additional financing in order to fund thedevelopment of future product candidates.

**ITEM2.  DESCRIPTION OF PROPERTY**

We maintain our executive offices at 787 7th Avenue,48th Floor, New York, New York pursuant to an agreement with ParamountBioCapital, an affiliate of our chairman. We have agreed to pay Paramount BioCapital $7,500 per month for the useof this space commencing on October 21, 2005 and ending upon the consummationof a business combination.  For theperiod from June 1, 2005 (inception) to December 31, 2006, the Company incurredexpense totaling $107,500 pursuant to this agreement.  We believe, based on rents and fees forsimilar services in the New York City metropolitan area, that the fee chargedby Paramount BioCapital is at least as favorable as we could have obtained froman unaffiliated person.  We consider ourcurrent office space adequate for our current operations.

**ITEM3.  LEGAL PROCEEDINGS**

None.

**ITEM4.  SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS**

None.

**PARTII**

**ITEM5.  MARKET FOR COMMON EQUITY AND RELATEDSTOCKHOLDER MATTERS**

**Market Information**

Our units, common stock and warrants are traded on theOver-the-Counter Bulletin Board under the symbols PMQCU, PMQC and PMQCW,respectively.  The following table setsforth the range of high and low closing bid prices as reported by BloombergFinancial Markets for the units, common stock and warrants for the periodsindicated since the units commenced public trading on October 24, 2005 andsince the common stock and warrants commenced public trading on January 11,2006.  We make no representations as tothe accuracy or completeness of the information obtained from BloombergFinancial Markets.  The over-the-countermarket quotations reflect inter-dealer prices, without retail mark-up, mark-downor commission and may not necessarily represent actual transactions.
| ** **     | ** ** | **Units** | ** ** | **Common Stock** | ** ** | **Warrants** | ** ** |
|----------------|------------|-----------|------------|-----------------------|------------|--------------|------------|
| ** **     | ** ** | **High**  | ** ** | **Low**               | ** ** | **High**     | ** ** | **Low** | ** ** | **High** | ** ** | **Low** | ** ** |
| 2007:          |       |      |       |                  |       |         |       |   |   |   |   |   |   |
| First Quarter* |       | $         | 6.65       |                  | $          | 6.21         |       | $ | 5.46 |   | $ | 5.35 |   | $ | 0.67 |   | $ | 0.43 |   |
|           |       |      |       |                  |       |         |       |   |   |   |   |   |   |
| 2006:          |       |      |       |                  |       |         |       |   |   |   |   |   |   |
| First Quarter  |       | $         | 8.40       |                  | $          | 6.25         |       | $ | 5.75 |   | $ | 5.06 |   | $ | 1.35 |   | $ | 0.68 |   |
| Second Quarter |       | $         | 7.70       |                  | $          | 6.50         |       | $ | 5.46 |   | $ | 5.25 |   | $ | 1.18 |   | $ | 0.60 |   |
| Third Quarter  |       | $         | 6.90       |                  | $          | 6.15         |       | $ | 5.32 |   | $ | 5.20 |   | $ | 0.81 |   | $ | 0.50 |   |
| Fourth Quarter |       | $         | 6.85       |                  | $          | 6.50         |       | $ | 5.43 |   | $ | 5.25 |   | $ | 0.74 |   | $ | 0.51 |   |
| 2005:          |       |      |       |                  |       |         |       |   |   |   |   |   |   |
| Fourth Quarter |       | $         | 6.75       |                  | $          | 6.00         |       | — |   | — |   | — |   | — |   |
|           |       |      |       |                  |       |         |       |   |   |   |   |   |   |

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*Through March 16, 2007

**Holders**

As of March 27, 2007, there was one holder of recordof our units, eight holders of record of our common stock and one holder ofrecord of our warrants.

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**Dividends**

We have not paid any cash dividends on our commonstock to date and do not intend to pay cash dividends prior to the completionof a business combination.  We areprohibited from distributing to our stockholders any portion of the funds fromthe IPO held in trust except in liquidation of the corporation or in the eventthat a holder of IPO shares votes against a business combination transactionand demands conversion of his shares in accordance with the requirements of ourcertificate of incorporation. Following the completion of a businesscombination, the payment of cash dividends will be contingent upon our revenuesand earnings, if any, capital requirements and general financial conditionsubsequent to completion of a business combination.  The payment of any dividends subsequent to abusiness combination will be within the discretion of our then board ofdirectors. It is the present intention of our board of directors to retain allearnings, if any, for use in our business operations and, accordingly, our boarddoes not anticipate declaring any dividends in the foreseeable future.

**Recent Sales ofUnregistered Securities and Use of Proceeds**

In June 2005, we sold the following shares of commonstock without registration under the Securities Act of 1933, as amended: 
| **Stockholders**                         | ** ** | **Number of Shares** | ** ** |
|------------------------------------------|------------|--------------------------------|------------|
|                                     |       |                           |       |
| Lindsay A.  Rosenwald                    |       | 584,375                        |       |
| Lindsay A.  Rosenwald 2000 Family Trusts |       | 584,375                        |       |
| J. Jay Lobell                            |       | 318,750                        |       |
| I. Keith Maher                           |       | 318,750                        |       |
| Michael Weiser                           |       | 106,250                        |       |
| Arie Belldegrun                          |       | 106,250                        |       |
| Isaac Kier                               |       | 106,250                        |       |

 

Such shares were issuedin connection with our organization pursuant to the exemption from registrationcontained in Section 4(2) of the Securities Act as they were sold tosophisticated, wealthy individuals or entities. The shares issued to theindividuals and entities above were sold at a purchase price of approximately$0.01176 per share.

**Initial Public Offering**

On October 27, 2005, we closed our initial publicoffering of 8,500,000 units with each unit consisting of one share of ourcommon stock and two warrants, each to purchase one share of our common stockat an exercise price of $5.00 per share. On October 31, 2005 and November 1,2005, we consummated the closing of an aggregate of 1,275,000 additional units,which were subject to the over-allotment option. The units were sold at anoffering price of $6.00 per unit, generating total gross proceeds of$58,650,000. The managing underwriter in the offering was EarlyBirdCapital,Inc. The securities sold in the offering were registered under the SecuritiesAct of 1933 on a registration statement on Form S-1 (No. 333-127149). TheSecurities and Exchange Commission declared the registration statementeffective on October 21,2005.

**We paid a total of $4,105,500 inunderwriting discounts and commissions and $1,071,134 for other costs andexpenses related to the offering, including**$510,000 for the underwriters’ non-accountable expenseallowance of 1% of the gross proceeds on the initial closing only. Afterdeducting the underwriting discounts and commissions and the offering expenses,the total net proceeds to us from the offering were $53,473,366, of which$52,164,500 was deposited into the trust account and the remaining proceeds of$1,308,866 became available to be used to provide for business, legal andaccounting due diligence on prospective business combinations and continuinggeneral and administrative expenses. The net proceeds deposited into the trustfund remain on deposit in the trust fund and have earned $2,305,515, acomponent of interest income, through December 31, 2006.

**ITEM6.  MANAGEMENT’S DISCUSSION AND ANALYSISOR PLAN OF OPERATION**

We were formed on June 1, 2005, to serve as a vehicleto effect a merger, capital stock exchange, asset acquisition or other similarbusiness combination with an operating business in the healthcareindustry.  We intend to utilize cashderived

17

 

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from the proceeds of ourpublic offering, our capital stock, debt or a combination of cash, capitalstock and debt, in effecting a business combination.

On October 27, 2005, we sold 8,500,000 units in ourinitial public offering at $6.00 per unit. On October 31, 2005 and November 1, 2005 we sold an additional aggregate1,275,000 units pursuant to an over-allotment option of the offering.  The total gross proceeds from the totaloffering including the over-allotment amounted to $58,650,000.  After payments of all offering costs, the netproceeds to us amounted to $53,473,366. Each unit consists of one share of our common stock, $.0001 par value,and two redeemable common stock purchase warrants.  Each warrant entitles the holder to purchasefrom us one share of common stock at an exercise price of $5.00 commencing thelater of the completion of a business combination or one year from theeffective date of the offering and expiring four years from the effective dateof the offering.  The warrants will beredeemable by us, upon prior written consent of the representative of theunderwriters in the offering (the “Representative”), at a price of $.01 perwarrant upon 30 days’ notice after the warrants become exercisable, only in theevent that the last sale price of the common stock is at least $8.50 per sharefor any 20 trading days within a 30 trading day period ending on the third dayprior to the date on which notice of redemption is given.  In connection with our initial publicoffering, we issued an option, for $100, to the Representative to purchase425,000 units at an exercise price of $7.50 per unit.  The warrants underlying such units areexercisable at $6.25 per share.  We haveaccounted for the fair value of the option, inclusive of the receipt of the$100 cash payment, as an expense of the public offering resulting in a chargedirectly to stockholders’ equity.  Weestimate that the fair value of this option is approximately $922,250 ($2.17per unit) using a Black-Scholes option-pricing model.  The fair value of the option granted to theRepresentative is estimated as of the date of grant using the followingassumptions: (1) expected volatility of 42.875%, (2) risk-free interest rate of4.03% and (3) expected life of 5 years. The option may be exercised for cash or on a “cashless” basis at theholder’s option, such that the holder may use the appreciated value of theoption (the difference between the exercise prices of the option and theunderlying warrants and the market price of the units and underlyingsecurities) to exercise the option without the payment of any cash.  All activity from June 1, 2005 throughOctober 27, 2005 was related to our formation and our initial public offering.  Since October 27, 2005, we have been seekingto complete a business combination with a company in the healthcare industry.

On August 25, 2006 we entered into the ContributionAgreement with BioValve, BTI and Valeritas, pursuant to which we had agreed toacquire a majority interest in Valeritas. On January 22, 2007, we and BioValve announced that we had agreed toterminate the Contribution Agreement and mutually release each other fromfurther claims.  In connection therewith,all of the capitalized expenses in connection with the Valeritas transactionamounting to approximately $898,000 were charged to expense for the year endedDecember 31, 2006.

Results of Operationsfrom June 1, 2005 (Inception) to December 31, 2005 compared to the Year EndedDecember 31, 2006

We had net income of $185,122 from June 1, 2005(Inception) to December 31, 2005 consisting of $367,145 of interest income onthe trust fund and operating account offset by $90,123 of general, selling andadministrative expense and $91,900 of income tax expenses.  The main components of the $90,123 ofgeneral, selling and administrative expenses include approximately $31,000 ofdirectors and officers liability insurance expense, $19,266 of Delaware FranchiseTax expenses, approximately $17,500 for office space and administrativeexpenses paid to Paramount BioCapital, $5,000 of accounting fees, and $17,357of other general corporate overhead.

We had a net loss of $16,677 for the year endedDecember 31, 2006 consisting of $1,969,060 of interest income on the trust fundoffset by $2,075,737 of general, selling and administrative expense.  The main components of the $2,075,737 ofgeneral, selling and administrative expenses include approximately $159,000 ofdirectors and officers liability insurance expense, approximately $203,000 forpublic relations expense,  approximately$322,000 of professional fees for due diligence on potential businesscombinations, $90,000 for office space and administrative expenses paid orpayable to Paramount BioCapital, approximately $1,101,000 of legal expenses andother professional fees pertaining to the contemplated Valeritas transactionand the related quarterly fees for Form 10-QSB filings and Form 8-Kfilings during 2006, $56,198 of franchise tax expenses, approximately $105,000for travel and $39,539 of general corporate expenses.

Interest income earned in 2006 was approximately$1,602,000 higher than interest income earned in 2005.  This increase is primarily due to having afull 12 month period of cash balances that earned interest income during 2006.

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Conversely, during 2005cash balances generated interest income for approximately 10 weeks during 2005after the initial closing of the IPO on October 27, 2005.

General, selling and administrative expense incurredin 2006 was approximately $1,985,000 higher than general, selling andadministrative expenses during 2005. This increase is primarily attributable to a full 12 month period ofactive operations during 2006, as compared to active operations ofapproximately 10 weeks during 2005 after the initial closing of the IPO onOctober 27, 2005.  Additionally,approximately $898,000 of legal and professional fees were incurred during 2006in connection with the contemplated Valeritas transaction.

The overall net income of $185,122 for 2005 decreasedby $201,799 to a net loss of $16,677 for 2006. This reduction in net income was primarily caused by higher operatingexpenses incurred in 2006, including the contemplated Valeritas transaction, asdescribed above, which more than fully offset the additional interest incomeearned in 2006.

Liquidity and CapitalResources

$52,164,500 of the net proceeds of our initial publicoffering were deposited in trust, with the remaining net proceeds of $1,308,866becoming available to pay for business, legal and accounting due diligence onprospective acquisitions and continuing general and administrative expenses. Wehave used substantially all of the net proceeds of our initial public offeringnot held in trust to identify, evaluate and negotiate with prospectiveacquisition candidates (including with respect to the negotiating andstructuring of the Contribution Agreement with BioValve, BTI and Valeritas).

We intend to utilize our cash, including the fundsheld in the trust fund, capital stock, debt or a combination of the foregoingto effect a business combination.  To theextent that our capital stock or debt securities are used in whole or in partas consideration to effect a business combination, the proceeds held in thetrust fund as well as any other available cash will be used to finance theoperations of the target business.  AtDecember 31, 2006, we had cash outside of the trust fund of $54,209 and othercurrent assets of $135,375 and total liabilities of $992,688.  Our working capital deficiency (excludinginvestments held in trust) amounted to $803,104.  To the extent that we are required to pay ourliabilities before the consummation of a business combination, an affiliate ofour chairman, Paramount BioCapital, has agreed to lend us monies as necessaryto continue operations.  Additionally, wemay potentially raise additional funds through a private offering of debt orequity securities if such funds are required to consummate a businesscombination that is presented to us.  Wewould only consummate such a financing simultaneously with the combination of abusiness combination.

Our Certificate ofIncorporation requires that we will take all actions necessary to liquidate inthe event that we do not consummate a business combination within 18 monthsfrom the date of the consummation of our initial public offering (April 27,2007), or 24 months from the consummation of our initial public offering(October 27,2007) if certain criteria have been satisfied.  In the event of a liquidation, it is likelythat the per share value of the residual assets remaining available fordistribution (including assets deposited in the trust fund) will be less thanthe offering price per unit in our initial public offering due to costs relatedto the initial public offering and since no value would be attributed to thewarrants contained in the units sold. Lindsay A. Rosenwald, our chairman of the board, has agreed that, if weliquidate prior to the consummation of a business combination, he will bepersonally liable to pay debts and obligations to target businesses or vendorsor other entities that are owed money by us for services rendered or contractedfor or for products sold to us to the extent they have claims against the fundsin our trust account.  In connectiontherewith, an affiliate of Lindsay A. Rosenwald, Paramount BioCapital, hasagreed to pay such debts and obligations if necessary.

Recently IssuedAccounting Pronouncements and Their Effect on the Company’s Financial Statements

In February 2006,the Financial Accounting Standards Board (“FASB”) issued Statement of FinancialAccounting Standards (“SFAS”) No. 155 - Accounting for Certain Hybrid FinancialInstruments (“SFAS 155”), which eliminates the exemption from applying SFAS No.133 to interests in securitized financial assets so that similar instrumentsare accounted for similarly regardless of the form of the instruments, SFAS 155also allows the election of fair value measurement at acquisition, at issuance,or when a previously recognized financial instrument is subject to a  remeasurement event.  Adoption is effective for all financialinstruments acquired or issued after the beginning of the first fiscal yearthat begins after September 15, 2006. Early adoption is permitted.  Theadoption of SFAS 155 is not expected to have a material effect on our financialposition, results of operations or cash flows.

19

 

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In March 2006, theFASB issued SFAS No. 156 — Accounting for Servicing of Financial Assets (“SFAS156”), which requires all separately recognized servicing assets and servicingliabilities be initially measured at fair value.  SFAS 156 permits, but does not require, thesubsequent measurement of servicing assets and servicing liabilities at fairvalue.  Adoption is required as of thebeginning of the first fiscal year that begins after September 15, 2006.  Early adoption is permitted.  The adoption of SFAS 156 is not expected tohave a material effect on our financial position, results of operations or cashflows.

In July 2006, theFASB issued FASB Interpretation No. 48 - Accounting for Uncertainty in IncomeTaxes, an Interpretation of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifiesthe accounting and reporting for uncertainties in income tax law.  This interpretation prescribes acomprehensive model for the financial statement recognition, measurement,presentation of and disclosure of uncertain tax positions taken or expected tobe taken in income tax returns.  Thisinterpretation shall be effective for fiscal years beginning after December 15,2006.  The cumulative effects, if any, ofapplying this interpretation will be recorded as an adjustment to retainedearnings as of the beginning of the period of adoption.  We have not yet commenced the process ofevaluating the expected effect of FIN 48 on our financial statements, and weare not currently in a position to determine such effects.

In September 2006,the FASB issued SFAS No. 157 — Fair Value Measurements (“SFAS 157”).  This Statement defines fair value, establishesa framework for measuring fair value and expands disclosure of fair valuemeasurements.  SFAS 157 applies underother accounting pronouncements that require or permit fair value measurementsand accordingly does not require any new fair value measurements.  SFAS 157 is effective for financialstatements issued for fiscal years beginning after November 15, 2007.  We have not evaluated the potential impact,if any, that the adoption of SFAS 157 will have on our financial position,results of operations, or cash flows.

In September 2006,the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin108, Considering the Effects on Prior Year Misstatements when QuantifyingMisstatements in Current Year Financial Statements (“SAB 108”).  SAB 108 requires registrants to quantifyerrors using both the income statement method (i.e. iron curtain method) andthe rollover method and requires adjustment if either method indicates amaterial error.  If a correction in thecurrent year relating to prior year errors is material to the current year,then the prior year financial information needs to be corrected.  A correction to the prior year results thatare not material to those years would not require a restatement process whereprior financials would be amended.  SAB108 is effective for fiscal years ending after November 15, 2006.  We have assessed SAB 108 and have concludedthat it did not have a material effect on our financial position, results ofoperations or cash flows.

Obligations to ParamountBioCapital for General and Administrative Services

We presentlyoccupy office space provided by Paramount BioCapital. Paramount BioCapital hasagreed that, until we acquire a target business, it will make such officespace, as well as certain office and secretarial services, available to us aswe may require from time to time. We have agreed to pay Paramount BioCapital$7,500 per month for such services commencing on October 21, 2005 and endingupon the consummation of a business combination.  For the year ended December 31, 2006, theperiod from June 1, 2005 (inception) to December 31, 2005 and for the periodfrom June 1, 2005 (inception) to December 31, 2006, we incurred expensetotaling $90,000, $17,500 and $107,500, respectively, to Paramount BioCapitalpursuant to this agreement.  As ofDecember 31, 2006, $22,500 was due to Paramount BioCapital pursuant to thisagreement.

Financial StatementsAssume Continuation as a Going Concern

Our financialstatements have been prepared assuming that we will continue as a goingconcern. As discussed elsewhere in this Annual Report, besides the fact that wehave a working capital deficiency of $803,104 as of December 31, 2006, we arerequired to consummate a business combination by April 27, 2007, or by October 27,2007 if the extension criteria have been satisfied as described herein. Thepossibility that we will not consummate a business combination raisessubstantial doubt about our ability to continue as a going concern, and ourfinancial statements do not include any adjustments that might result from theoutcome of this uncertainty.

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**ITEM7.  FINANCIAL STATEMENTS**

This information appears following Item 14 of thisReport and is incorporated herein by reference.

**ITEM8.  CHANGES IN AND DISAGREEMENTS WITHACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

                None.

**ITEM8A.  CONTROL AND PROCEDURES**

Disclosure controls and procedures are controls andother procedures that are designed to ensure that information required to bedisclosed in company reports filed or submitted under the Exchange Act isrecorded, processed, summarized and reported, within the time periods specifiedin the Securities and Exchange Commission’s rules and forms.  Disclosure controls and procedures (as suchterm is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)include, without limitation, controls and procedures designed to ensure thatinformation required to be disclosed in company reports filed or submittedunder the Exchange Act is accumulated and communicated to management, includingour chief executive officer and treasurer, as appropriate to allow timelydecisions regarding required disclosure.

As required by Rules 13a-15(b) and 15d-15(b)under the Exchange Act, our chief executive officer carried out an evaluationof the effectiveness of the design and operation of our disclosure controls andprocedures as of December 31, 2006.  Hisevaluation was carried out with the participation of other members of ourmanagement.  Based upon their evaluation,he concluded that our disclosure controls and procedures were effective.

Our internal control over financial reporting is aprocess designed by, and under the supervision of, our chief executive officerand effected by our board of directors, management and other personnel, toprovide reasonable assurance regarding the reliability of our financialreporting and the preparation of our financial statements for external purposesin accordance with generally accepted accounting principles.  Internal control over financial reportingincludes policies and procedures that pertain to the maintenance of recordsthat in reasonable detail accurately and fairly reflect the transactions anddispositions of our assets; provide reasonable assurance that transactions arerecorded as necessary to permit preparation of our financial statements inaccordance with generally accepted accounting principles, and that our receiptsand expenditures are being made only in accordance with the authorization ofour board of directors and management; and provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use ordisposition of our assets that could have a material effect on our financialstatements.

During the most recently completed fiscal quarter,there has been no change in our internal control over financial reporting (assuch term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.

**ITEM8B.  OTHER INFORMATION**

                None.

**PARTIII**

**ITEM9.  DIRECTORS, EXECUTIVE OFFICERS,PROMOTERS AND CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION16(a) OF THE EXCHANGE ACT**

**Directors and ExecutiveOfficers**

Our current directors and executive officers are asfollows:

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| Name                  | ** ** | **Age** | ** ** | **Position**                                    |
|-----------------------|------------|---------|------------|-------------------------------------------------|
| Lindsay A.  Rosenwald |       | 51      |       | Chairman of the Board                           |
|                  |       |    |       |                                            |
| J. Jay Lobell         |       | 44      |       | Chief Executive Officer, Secretary and Director |
|                  |       |    |       |                                            |
| I. Keith Maher        |       | 38      |       | President and Director                          |
|                  |       |    |       |                                            |
| Michael Weiser        |       | 43      |       | Executive Vice President, Director              |
|                  |       |    |       |                                            |
| Arie Belldegrun       |       | 56      |       | Director                                        |
|                  |       |    |       |                                            |
| Isaac Kier            |       | 53      |       | Director                                        |

**Lindsay A. Rosenwald, M.D.**hasserved as our chairman of the board since our inception. Dr. Rosenwald hasserved as chairman and chief executive officer of Paramount BioCapital, Inc. since1991, as managing member of Paramount Biosciences LLC (and its predecessor,Paramount BioCapital Investments, LLC) since 1996, and as chairman and chiefexecutive officer of Paramount BioCapital Asset Management since 1994.  Paramount BioCapital Inc. is a privateinvestment banking firm and an SEC- and NASD-registered broker-dealerspecializing in private placements of equity and debt securities forpublicly-traded and privately-held companies in the biomedical,biopharmaceutical and medical technology industries.  Paramount BioSciences, LLC is engaged in theresearch, formation and acquisition of seed-stage and distressed life sciencetechnologies and companies, identifying and evaluating a broad spectrum oftherapeutic and medical technologies in order to capture innovations withsignificant commercial potential. Paramount BioCapital Asset Management manageshedge and private equity funds focused on healthcare and life sciencecompanies.  Dr. Rosenwald serves on the boardof directors of Cougar Biotechnology, Inc., a publicly traded company that wasestablished to in-license and develop early clinical stage drugs, with aspecific focus on the field of oncology. He has also served since March 2000through November 2006 as a director of Keryx BioPharmaceuticals, Inc., a NASDAQNational Market listed biopharmaceutical company focused on the acquisition,development and commercialization of novel pharmaceutical products for thetreatment of life-threatening diseases, including diabetes and cancer.  Dr. Rosenwald received a B.S. fromPennsylvania State University and a M.D. from the Temple University School ofMedicine.

**J. Jay Lobell** has served as ourchief executive officer, secretary and a member of our board of directors sinceour inception.  Mr. Lobell has served aspresident and chief operating officer of Paramount BioCapital Asset Management andParamount Biosciences, LLC since January 2005, and is a registeredrepresentative of Paramount BioCapital, Inc. Mr. Lobell serves on the boards of directors of NovaDel Pharma Inc. andInnovive Pharmaceuticals, Inc., both of which are publicly traded companies,and is on the boards of several private biotechnology companies. From 1996through December 2004, Mr. Lobell was a partner at Covington & Burling, alaw firm, where he provided litigation, corporate and regulatory advice.  Mr. Lobell received a B.A. from QueensCollege and a J.D. from Yale Law School.

**I. Keith Maher, M.D.** has servedas our president and a member of our board of directors since our inception.Dr. Maher has served as managing director of Paramount BioCapital AssetManagement since March 2005, and is a registered representative of ParamountBioCapital, Inc.  From February 2002 toMarch 2005, Dr. Maher worked at Weiss, Peck & Greer, where he served asmanaging director and as portfolio manager and analyst at the WPG Farber Fund,an equity hedge fund, where he also led that fund’s direct investmentpractice.  From July 2000 to February2002, Dr. Maher was with Lehman Brothers, where he was involved in equityresearch, including research on medical technology companies.  Dr. Maher received a B.A. from BostonUniversity, a M.D. from Union University and a M.B.A. from the Kellogg Schoolof Business at Northwestern University.

**Michael Weiser, M.D.** has servedas our executive vice president and a member of our board of directors sinceour inception.  Dr. Weiser is currentlyfounder and co-chairman of Actin Capital, LLC and Actin Biomed, a New Yorkbased healthcare investment firm.  FromJuly 1998 through November 2006, Dr. Weiser served as the director of researchat Paramount BioCapital Asset Management, and was a registered representativeof Paramount BioCapital, Inc.  Prior tojoining Paramount, Dr. Weiser was a medical student and later a resident at NYUSchool of Medicine and NYU Medical Center. Dr. Weiser is also a director of the following public companies:

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·                  HanaBiosciences, Inc., a Nasdaq-listed biopharmaceutical company that aims toacquire, develop and commercialize innovative products for the treatment ofimportant unmet medical needs in cancer and immunological diseases;

·                  ManhattanPharmaceuticals, Inc., an AMEX-listed company developing and commercializingbiomedical and pharmaceutical technologies; and

·                  VioQuestPharmaceuticals, Inc., an OTC Bulletin Board-listed company that, through itssubsidiaries, provides products and services to pharmaceutical and finechemical companies.

Dr.Weiser received a B.A. from University of Vermont, a Ph.D. from CornellUniversity Graduate School of Medicine and a M.D. from NYU School of Medicine.

**Arie Belldegrun, M.D.** has been amember of our board of directors since our inception.  He has served as professor of urology since1994, and chief of the division of urologic oncology since 1996, at the DavidGeffen School of Medicine at the University of California, Los Angeles (UCLA),whose faculty he first joined in 1988. He has also held the Roy and Carol Doumani Chair in urologic oncology atUCLA since 2000. Prior to UCLA, Dr. Belldegrun served as a research fellow insurgical oncology at the National Cancer Institute/NIH from 1985 to 1988.  He is certified by the American Board ofUrology and is a Fellow of the American College of Surgeons.  Dr. Belldegrun is on the scientific boards ofseveral biotechnology and pharmaceutical companies and serves as a reviewer formany medical journals and granting organizations.  In addition to holding several patents, Dr.Belldegrun is the author of several books on prostate and kidney cancers, andhas written over 350 scientific publications with an emphasis on urologiconcology, particularly kidney, prostate and bladder cancers.  He is the founder of Agensys, Inc., a companyfocused on the development of fully human monoclonal antibodies to treat solidtumor cancers based on Agensys’ propriety targets.  Dr. Belldegrun served as founding chairman ofAgensys from 1997 to 2002 and has served on the board of directors and as aconsultant since that time.  Dr. Belldegrunhas served on the board of directors of Hana Biosciences, Inc. since April2004.  Dr. Belldegrun also is vicechairman of the board of directors and chairman of the Scientific AdvisoryBoard of Cougar Biotechnology, Inc., a publicly traded company that was establishedto in-license and develop early clinical stage drugs, with a specific focus onthe field of oncology.  Dr. Belldegrunreceived a B.S. and a M.D. from Hebrew University Hadassah Medical School inJerusalem.  He completed his posttraining at the Weizmann Institute of Science and his residency in urology atHarvard Medical School.

****Isaac Kier**** has been amember of our board of directors since our inception.  Since February2006, Mr. Kier has been a principal and managing member of Kier Global LLC, aninvestment group involved in investments and mergers and acquisitions. Since2006, Mr. Kier has served as a partner in the general partner of indiaSTAR, aprivate equity fund investing in India. From 2000 to 2006 Mr. Kier was apartner in Coqui Capital Partners L.P., a venture capital firm, which primarilyinvested in early stage companies.  Since October 1997, he has been aprincipal and managing partner of First Americas Partners, LLC, an investmentpartnership focusing on investments in North and South America.  From 1987to 1997, he served as the managing partner of the Alabama 8 Market, anon-wireline cellular licensee.  From 1982 until its sale in 1995, Mr.Kier served as the chairman of the board and chief executive officer of Lida,Inc., a NASDAQ-listed company engaged in textile production and printing. Since October 2004, Mr. Kier has served as a member of the board of directorsof Hana Biosciences, Inc. and Rand Logistics, both NASDAQ companies. Mr. Kieralso serves on the board of directors of several private companies, includingCaribbean Storage, Inc. and Montebello Brand Liquors, Inc. Mr. Kier received aB.A. from Cornell University and a J.D. from George Washington University LawSchool.

The term of office of the first class of directors,consisting of Arie Belldegrun and Isaac Kier, will expire at our first annualmeeting of stockholders. The term of office of the second class of directors,consisting of Michael Weiser and I. Keith Maher, will expire at the secondannual meeting. The term of the third class of directors, consisting of J. JayLobell and Lindsay A. Rosenwald, will expire at the third annual meeting.

**Section 16(a) BeneficialOwnership Reporting Compliance**

Section 16(a) of the Exchange Act requires ourofficers, directors and persons who own more than ten percent of a registeredclass of our equity securities to file reports of ownership and changes inownership with the Securities and Exchange Commission.  Officers, directors and ten percent stockholdersare required by regulation to furnish us with copies 

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of all Section 16(a) forms they file.  Due to an administrative error, a purchase byMr. Lobell on January 31, 2007 of 15,000 warrants was incorrectly reportedas a purchase of 10,000 warrants. Except as set forth in the immediately precedingsentence, and based solely on copies of such forms received or writtenrepresentations from certain reporting persons that no Form 5s were requiredfor those persons, we believe that, during the fiscal year ended December 31,2006, all filing requirements applicable to our officers, directors and greaterthan ten percent beneficial owners were complied with.

**Code of Ethics**

In November 2005, our board of directors adopted acode of ethics that applies to our directors, officers and employees as well asthose of our subsidiaries.  Requests forcopies of our code of ethics should be sent in writing to Paramount AcquisitionCorp., 787 7th Avenue, 48th Floor, New York,New York 10019.

**Corporate Governance**

Our board of directors does not have audit or nominatingcommittees. Our entire board of directors carries out the functions customarilyundertaken by these committees. No determination has been made as to whetherany member of our board of directors qualifies as an audit committee financialexpert.

**ITEM10.  EXECUTIVE COMPENSATION**

Commencing on October 21, 2005 and ending upon theacquisition of a target business, we will pay Paramount BioCapital a fee of$7,500 per month for providing us with office space and certain office andsecretarial services.  Other than this$7,500 per-month fee, no compensation of any kind, including finders andconsulting fees, will be paid to any of our Founders or any of their respectiveaffiliates, prior to, or for any services they render in order to effectuate,the consummation of a business combination. However, our Founders will be reimbursed for any out-of-pocket expensesincurred in connection with activities on our behalf such as identifyingpotential target businesses and performing due diligence on suitable businesscombinations.

Since our formation, we have not granted any stockoptions or stock appreciation rights or any awards under long-term incentiveplans.

**ITEM11.  SECURITY OWNERSHIP OF CERTAINBENEFICIAL OWNERS AND MANAGEMENT**

The following table sets forth information regardingthe beneficial ownership of our common stock as of March 27, 2007 by:

·                  eachperson known by us to be the beneficial owner of more than 5% of ouroutstanding shares of common stock;

·                  eachof our officers and directors; and

·                  allour officers and directors as a group.

Unlessotherwise indicated, we believe that all persons named in the table have solevoting and investment power with respect to all shares of common stockbeneficially owned by them.
| **Name and Address of Beneficial Owner(1)** | ** ** | **Amount and Nature of  Beneficial Ownership** | ** ** | **Percent of Class** | ** ** |
|----------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|--------------------------------|------------|
| Lindsay A.  Rosenwald                                                |       |                                                               | 1,168,750  | (2)                            |       |   | 9.8 | % |   |
|                                                                 |       |                                                               |       |                           |       |   |   |   |   |
| J. Jay Lobell                                                        |       |                                                               | 318,750    | (3)                            |       |   | 2.7 | % |   |
|                                                                 |       |                                                               |       |                           |       |   |   |   |   |
| I. Keith Maher                                                       |       |                                                               | 318,750    | (4)                            |       |   | 2.7 | % |   |
|                                                                 |       |                                                               |       |                           |       |   |   |   |   |
| Isaac Kier(5)                                                        |       |                                                               | 156,250    | (6)                            |       |   | 1.3 | % |   |
|                                                                 |       |                                                               |       |                           |       |   |   |   |   |
| Michael Weiser(8)                                                    |       |                                                               | 106,250    | (7)                            |       |   | * |   |   |
|                                                                 |       |                                                               |       |                           |       |   |   |   |   |
| Arie Belldegrun(9)                                                   |       |                                                               | 106,250    | (7)                            |       |   | * |   |   |

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| Andrew M. Weiss(10)                                                |   | 913,700   | (11)   | 7.7    | %      |
|--------------------------------------------------------------------|--------|-----------|--------|--------|--------|
|                                                               |   |      |   |   |   |
| Morgan Stanley(12)                                                 |   | 831,934   | (13)   | 7.0    | %      |
|                                                               |   |      |   |   |   |
| Fir Tree, Inc.(14)                                                 |   | 764,800   | (15)   | 6.4    | %      |
|                                                               |   |      |   |   |   |
| Satellite Asset  Management, L.P. (16)                             |   | 650,000   | (17)   | 5.5    | %      |
|                                                               |   |      |   |   |   |
| All directors and  executive officers as a group (six individuals) |   | 2,175,000 | (18)   | 18.3   | %      |

----

*Less than onepercent.
| (1)  | Unless otherwise  indicated, the business address of each of the following is 787 7th Avenue,  48th Floor, New York, New York 10019.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)  | Includes 584,375  shares of common stock held by the Lindsay A. Rosenwald 2000 Family Trusts  established for the benefit of Dr. Rosenwald’s family. Dr. Rosenwald disclaims  beneficial ownership of such shares except with regard to his pecuniary  interest therein, if any. Does not include 1,304,574 shares of common stock  issuable upon exercise of warrants held by Dr. Rosenwald that are not  currently exercisable and will not become exercisable within 60 days.                                                                                                                                                                                                                                  |
| (3)  | Does not include  395,523 shares of common stock issuable upon exercise of warrants held by Mr.  Lobell that are not currently exercisable and will not become exercisable  within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (4)  | Does not include  50,453 shares of common stock issuable upon exercise of warrants held by Dr.  Maher that are not currently exercisable and will not become exercisable  within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (5)  | The business  address of Mr. Kier is Kier Global LLC, 1775 Broadway, Ste. 604, New York,  New York 10019.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
| (6)  | Includes 50,000  shares of common stock held by the Kier Family LP. Does not include (i)  44,150 shares of common stock issuable upon exercise of warrants held by Mr.  Kier and (ii) 100,000 shares of common stock issuable upon exercise of  warrants held by the Kier Family LP, none of which are not currently  exercisable and all of which will not become exercisable within 60 days.                                                                                                                                                                                                                                                                                                                         |
| (7)  | Does not include  44,150 shares of common stock issuable upon exercise of warrants that are not  currently exercisable and will not become exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| (8)  | The business  address of Dr.Weiser is 590 Madison Avenue, 21st floor, New York, NY 10022                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| (9)  | The business  address of Dr. Belldegrun is 10940 Wilshire Blvd., Suite 600, Los Angeles,  California 90024.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| (10) | The business  address of Dr. Weiss is 29 Commonwealth Avenue, 10th Floor, Boston,  Massachusetts 02116.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (11) | Represents  shares beneficially owned by a private investment partnership of which Weiss  Asset Management, LLC is the sole general partner and which may be deemed to  be controlled by Dr. Weiss, who is the Managing Member of Weiss Asset  Management, and also includes shares held by a private investment corporation  which may be deemed to be controlled by Dr. Weiss, who is the managing member  of Weiss Capital, LLC the investment manager of such private investment  corporation. Dr. Weiss disclaims beneficial ownership of such shares except  to the extent of his pecuniary interest therein. The foregoing information  was derived from a Schedule 13G filed with the SEC on February 1, 2007. |
| (12) | The business  address of Morgan Stanley is 1585 Broadway, New York, NY 10036.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| (13) | Represents  shares that are owned, or may be deemed to be beneficially owned, by Morgan  Stanley & Co. Incorporated, a wholly-owned subsidiary of Morgan Stanley.  The foregoing information was derived from a Schedule 13G filed with the SEC  on February 15, 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| (14) | The business  address of Fir Tree, Inc. is 535 Fifth Avenue, 31st Floor, New York, New York  10017.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| (15) | Represents (i)  514,077 shares of common stock held by Sapling, LLC and (ii) 250,723 shares  of common stock held by Fir Tree Recovery Master Fund, L.P. Fir Tree, Inc. is  the investment manager of both entities. The foregoing information was  derived from a Schedule 13G/A filed with the SEC on February 14, 2007.                                                                                                                                                                                                                                                                                                                                                                                             |
| (16) | The business  address of Satellite Asset Management, L.P. is 623 Fifth Avenue, 19th Floor,  New York, NY 10022.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (17) | Represents  shares held by (i) Satellite Fund II, L.P. and Satellite Fund IV, L.P. (collectively,  the “Delaware Funds”) over which Satellite Advisors, L.L.C. (“Satellite  Advisors”) has discretionary trading authority, as general partner, and (ii)  Satellite Overseas Fund, Ltd., The Apogee Fund, Ltd., Satellite Overseas Fund  V, Ltd., Satellite Overseas                                                                                                                                                                                                                                                                                                                               |

 

25

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|      | Fund VI, Ltd.,  Satellite Overseas Fund VII, Ltd., Satellite Overseas Fund VIII, Ltd. and  Satellite Overseas Fund IX, Ltd. (collectively, the “Offshore Funds” and  together with the Delaware Funds, the “Satellite Funds”) over which Satellite  Asset Management, L.P. (“Satellite Asset Management”) has discretionary  investment trading authority. The general partner of Satellite Asset  Management is Satellite Fund Management LLC (“Satellite Fund Management”).  Satellite Fund Management and Satellite Advisors each share the same  Executive Committee that make investment decisions on behalf of the Satellite  Funds and investment decisions made by such Executive Committee, when  necessary, are made through approval of a majority of the Executive Committee  members. The foregoing information was derived from a Schedule 13G/A filed  with the SEC on February 14, 2007. |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (18) | Does not include  1,983,000 shares of common stock issuable upon exercise of warrants  beneficially owned by our officers and directors that are not currently  exercisable and will not become exercisable within 60 days.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

 

All 2,125,000 shares of our outstanding common stockowned by our Founders prior to our initial public offering have been placed inescrow with Continental Stock Transfer & Trust Company, as escrow agent,pursuant to an escrow agreement described below.

**ITEM12.  CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS, AND DIRECTOR INDEPENDENCE**

In June 2005, we issued 2,125,000 shares of our commonstock to the following individuals for $25,000 in cash, at a purchase price ofapproximately $0.01176 per share as set forth below:
| **Name**                                  | ** ** | **Number of Shares** | ** ** | **Relationship to Us**                |
|-------------------------------------------|------------|--------------------------------|------------|-------------------------------------------------|
|                                      |       |                           |       |                                            |
| Lindsay A.  Rosenwald                     |       | 584,375                        |       | Chairman of the Board                           |
| Lindsay A.  Rosenwald  2000 Family Trusts |       | 584,375                        |       | Stockholder                                     |
| J. Jay Lobell                             |       | 318,750                        |       | Chief Executive Officer, Secretary and Director |
| I. Keith Maher                            |       | 318,750                        |       | President and Director                          |
| Michael Weiser                            |       | 106,250                        |       | Executive Vice President, Director              |
| Arie Belldegrun                           |       | 106,250                        |       | Director                                        |
| Isaac Kier                                |       | 106,250                        |       | Director                                        |

Pursuant to an escrow agreement between us, theFounders and Continental Stock Transfer & Trust Company, all of theFounders Shares were placed in escrow, with Continental acting as escrow agent,pursuant to an escrow agreement, until the earliest of:

·                  October 21,2008;

·                  our liquidation;or

·                  the consummationof a liquidation, merger, stock exchange or other similar transaction thatresults in all of our stockholders having the right to exchange their shares ofcommon stock for cash, securities or other property subsequent to ourconsummating a business combination with a target business.

During the escrow period, these shares cannot be sold,but the Founders will retain all other rights as stockholders, including,without limitation, the right to vote their shares of common stock and theright to receive cash dividends, if declared. If dividends are declared and payable in shares of common stock, suchdividends will also be placed in escrow. If we are unable to effect a business combination and liquidate, none ofour Founders will receive any portion of the liquidation proceeds with respectto common stock owned by them.

We also entered into a registration rights agreementwith the Founders pursuant to which the holders of the majority of the FoundersShares will be entitled to make up to two demands that we register theseshares.  The holders of the majority ofthese shares may elect to exercise these registration rights at any timecommencing three months prior to the date on which 

26

----

these shares of common stock are released fromescrow.  In addition, these stockholdershave certain “piggy-back” registration rights on registration statements filedsubsequent to the date on which these shares of common stock are released fromescrow.  We will bear the expensesincurred in connection with the filing of any such registration statements.

Each of our Founders also entered into a letteragreement with us and EarlyBirdCapital pursuant to which, among other things:

·                  each agreed tovote all Founder Shares owned by him in accordance with the majority of the IPOShares if we solicit approval of our stockholders for a business combination;

·                  if we fail toconsummate a business combination within 18 months of the effective date of theregistration statement relating to our initial public offering (or 24 months incertain circumstances described in the prospectus relating to our initialpublic offering), each agreed to take all reasonable actions within his powerto cause us to liquidate as soon as reasonably practicable;

·                  each waived anyand all rights he may have to receive any distribution of cash, property orother assets as a result of such liquidation with respect to his FounderShares;

·                  each agreed topresent to us for our consideration, prior to presentation to any other personor entity, any suitable opportunity to acquire an operating business, until theearlier of our consummation of a business combination, our liquidation or untilsuch time as he ceases to be an officer or director of ours, subject to anypre-existing fiduciary obligations he might have;

·                  each agreed thatwe could not consummate any business combination that involves a company thatis affiliated with any of the Founders unlesswe obtain an opinion from an independent investment banking firm reasonablyacceptable to EarlyBirdCapital that the business combination is fair to ourstockholders from a financial perspective;

·                  each agreed thathe and his affiliates will not be entitled to receive and will not accept anycompensation for services rendered to us prior to the consummation of ourbusiness combination; and

·                  each agreed thathe and his affiliates will not be entitled to receive or accept a finder’s feeor any other compensation in the event he or his affiliates originate abusiness combination.

We presently occupy office space provided by ParamountBioCapital, an affiliate of our chairman.  Paramount BioCapital has agreed that, until we acquire a targetbusiness, it will make such office space, as well as certain office andsecretarial services, available to us as we may require from time to time. Wehave agreed to pay Paramount BioCapital $7,500 per month for such servicescommencing on October 21, 2005 and ending upon the consummation of a businesscombination.  For the year ended December31, 2006, the period from June 1, 2005 (inception) to December 31, 2005 and forthe period from June 1, 2005 (inception) to December 31, 2006, we incurredexpense totaling $90,000, $17,500 and $107,500, respectively, to Paramount BioCapitalpursuant to this agreement.  As ofDecember 31, 2006, $22,500 of office service fees plus expenses amounting to$2,489 were due to Paramount BioCapital pursuant to this agreement. In January2007, Paramount BioCapital agreed to lend us money from time to time asnecessary to continue our operations.

During 2005, Dr. Rosenwald advanced an aggregate of$100,000 to us to cover expenses related to our initial public offering.  The loans were payable without interest onthe earlier of December 1, 2006 or the consummation of our initial publicoffering.  These loans were repaid inNovember 2005.

We will reimburse our officers and directors for anyreasonable out-of-pocket business expenses incurred by them in connection withcertain activities on our behalf such as identifying and investigating possibletarget businesses and business combinations.

27

----

 Other thanreimbursable out-of-pocket expenses payable to our officers and directors, nocompensation or fees of any kind, including finders and consulting fees, willbe paid to any of our Founders or to any of their respective affiliates priorto, or for any services they render in order to effectuate, the consummation ofa business combination.

All ongoing and future transactions between us and anyof our officers and directors or their respective affiliates, will be on termsbelieved by us to be no less favorable than are available from unaffiliatedthird parties and will require prior approval in each instance by a majority ofthe members of our board who do not have an interest in the transaction.

In January, 2007, Dr. Lindsay Rosenwald, chairman ofour board of directors, and J. Jay Lobell, our chief executive officer and amember of our board of directors, established personal warrant purchase plansconforming to Rule 10b5-1 of the Exchange Act. Under the plans, between January25, 2007 and February 23, 2007, Dr. Rosenwald and Mr. Lobell collectivelypurchased 1,000,000 warrants at prevailing market prices. The warrant purchaseplans were subject to certain limitations, including that Dr. Rosenwald and Mr.Lobell would not collectively acquire more than 100,000 warrants in any oneday, or 250,000 warrants in any single week. The plans terminated upon thepurchase by Dr. Rosenwald and Mr. Lobell, collectively, of 1,000,000 warrants.

**Director Independence**

We currently do not have, and are not required to have, a majority ofindependent directors. Should we decide to list our common stock on a nationalsecurities exchange, we will be required to adhere to the independencerequirements of that exchange.  Four ofour six directors could not currently meet the independence requirementsapplicable to companies listed on NASDAQ, including those applicable to audit,compensation and nominating committee members, because they are current orformer officers in our company.  Ourother two directors, Dr. Belldegrun and Mr. Kier, also may not satisfy thedirector independence requirements of NASDAQ. Our entire board of directors carries out the functions customarilyundertaken by audit, compensation and nominating committees.

**ITEM13.  EXHIBITS**

(a)  The following Exhibits are filed as part ofthis report.
|        | **Exhibit No.** | ** ** | **Description**                                                                                                                           |
|--------|-----------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|   | 3.1             |       | Certificate of Incorporation. (1)                                                                                                         |
|   |            |       |                                                                                                                                      |
|   | 3.2             |       | By-laws. (1)                                                                                                                              |
|   |            |       |                                                                                                                                      |
|   | 4.1             |       | Specimen Unit Certificate. (1)                                                                                                            |
|   |            |       |                                                                                                                                      |
|   | 4.2             |       | Specimen Common Stock Certificate. (1)                                                                                                    |
|   |            |       |                                                                                                                                      |
|   | 4.3             |       | Specimen Warrant Certificate. (1)                                                                                                         |
|   |            |       |                                                                                                                                      |
|   | 4.4             |       | Form of Unit Purchase Option granted to  EarlyBirdCapital, Inc. (1)                                                                       |
|   |            |       |                                                                                                                                      |
|   | 4.5             |       | Form of Warrant Agreement between Continental Stock  Transfer & Trust Company and the Registrant. (1)                                 |
|   |            |       |                                                                                                                                      |
|   | 4.6             |       | Amendment to Unit Purchase Option, dated as of  October 12, 2006, between the Registrant and EarlyBirdCapital, Inc. (2)                   |
|   |            |       |                                                                                                                                      |
|   | 4.7             |       | Warrant Clarification Agreement, dated October 12,  2006, between the Registrant and Continental Stock Transfer & Trust  Company. (2) |
|   |            |       |                                                                                                                                      |
|   | 10.1            |       | Letter Agreement among the Registrant,  EarlyBirdCapital, Inc. and Lindsay A. Rosenwald. (1)                                              |
|   |            |       |                                                                                                                                      |
|   | 10.2            |       | Letter Agreement among the Registrant,  EarlyBirdCapital, Inc. and Lindsay A. Rosenwald 2000 Family Trusts. (1)                           |
|   |            |       |                                                                                                                                      |
|   | 10.3            |       | Letter Agreement among the Registrant,  EarlyBirdCapital, Inc. and J. Jay Lobell. (1)                                                     |

28

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|   | 10.4   | Letter Agreement among the Registrant,  EarlyBirdCapital, Inc. and I. Keith Maher. (1)                                                                                                  |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                    |
|   | 10.5   | Letter Agreement among the Registrant,  EarlyBirdCapital, Inc. and Michael Weiser. (1)                                                                                                  |
|   |   |                                                                                                                                                                                    |
|   | 10.6   | Letter Agreement among the Registrant,  EarlyBirdCapital, Inc. and Arie Belldegrun. (1)                                                                                                 |
|   |   |                                                                                                                                                                                    |
|   | 10.7   | Letter Agreement among the Registrant,  EarlyBirdCapital, Inc. and Isaac Kier. (1)                                                                                                      |
|   |   |                                                                                                                                                                                    |
|   | 10.8   | Form of Investment Management Trust Agreement  between Continental Stock Transfer & Trust Company and the Registrant.  (1)                                                          |
|   |   |                                                                                                                                                                                    |
|   | 10.9   | Form of Stock Escrow Agreement between the  Registrant, Continental Stock Transfer & Trust Company and the Founders.  (1)                                                           |
|   |   |                                                                                                                                                                                    |
|   | 10.10  | Form of Letter Agreement between Paramount  BioCapital Asset Management, Inc. and Registrant regarding administrative  support. (1)                                                     |
|   |   |                                                                                                                                                                                    |
|   | 10.11  | Promissory Note, dated July 22, 2005, issued to  Lindsay A. Rosenwald. (1)                                                                                                              |
|   |   |                                                                                                                                                                                    |
|   | 10.12  | Registration Rights Agreement among the Registrant  and the Founders. (1)                                                                                                               |
|   |   |                                                                                                                                                                                    |
|   | 10.13  | Form of Warrant Purchase Agreements among  EarlyBirdCapital, Inc. and each of Lindsay A. Rosenwald, J. Jay Lobell, I.  Keith Maher, Michael Weiser, Arie Belldegrun and Isaac Kier. (1) |
|   |   |                                                                                                                                                                                    |
|   | 10.14  | Contribution Agreement, dated as of August 25, 2006,  among Registrant, BioValve Technologies Inc., BTI Tech, Inc. and Valeritas  LLC. (3)                                              |
|   |   |                                                                                                                                                                                    |
|   | 10.15  | Termination and Mutual Release, dated as of January  21, 2007, among the Registrant, BioValve Technologies, Inc., BTI Tech, Inc.  and Valeritas LLC. (4)                                |
|   |   |                                                                                                                                                                                    |
|   | 31     | Certification of Chief Executive Officer pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                    |
|   |   |                                                                                                                                                                                    |
|   | 32     | Certification of Chief Executive Officer pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                    |

----

(1)                      Incorporated by reference to theRegistrant’s Registration Statement on Form S-1 (SEC File No. 333-127149).

(2)                      Incorporated by reference to theRegistrant’s Quarterly Report on Form 10-QSB filed with the Commission onNovember 14, 2006.

(3)                    Incorporated by reference to the Registrant’s CurrentReport on Form 8-K filed with the Commission on August 28, 2006.

(4)                      Incorporated by reference to theRegistrant’s Current Report on Form 8-K filed with the Commission on January22, 2007.

**ITEM14.  PRINCIPAL ACCOUNTING FEES ANDSERVICES**

The firm of Marcum & Kliegman LLP acts as ourindependent registered public accounting firm. The following is a summary of fees paid to Marcum & Kliegman LLP forservices rendered.

29

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**Audit Fees**

During the fiscal years ended December 31, 2006 and2005, audit fees for our independent registered public accounting firm were$35,000 and $50,000, respectively.

**Audit-Related Fees**

During 2006, audit-related fees paid to ourindependent registered public accounting firm were $15,300. During 2005, therewere no audit-related fees paid to our independent registered public accountingfirm.

**Tax Fees**

During 2006, we paid our independent registered publicaccounting firm $3,000 for tax preparation services. During 2005, no tax fees werepaid to our independent registered public accounting firm.

**All Other Fees**

None.

**Audit Committee Approval**

We currently do not have an audit committee.

30

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Paramount Acquisition Corp.

(a development stage enterprise)

Financial Statements

For the year endedDecember 31, 2006, for the period from June 1, 2005 (inception) to December 31,2005 and from June 1, 2005 (inception) to December 31, 2006

Contents
|                                                              | ** ** |
|--------------------------------------------------------------|------------|
| ** **                                                   |       |
| **Report  of Independent Registered Public Accounting Firm** | F-2        |
|                                                         |       |
| **Financial  statements**                                    |       |
|                                                         |       |
|                                                         |       |
| Balance Sheet                                                | F-3        |
| Statements  of Operations                                    | F-4        |
| Statement of Changes in Stockholders’ Equity            | F-5        |
| Statements  of Cash Flows                                    | F-6        |
|                                                         |       |
| **Notes  to Financial Statements**                           | F-7-F-14   |

 

F-1

 

----

**Report of Independent Registered Public AccountingFirm**

To the Board of Directorsand Stockholders of

ParamountAcquisition Corp.

We have auditedthe accompanying balance sheet of Paramount Acquisition Corp. (a developmentstage enterprise) (the “Company”) as of December 31, 2006, and the relatedstatements of operations, changes in stockholders’ equity and cash flows forthe year ended December 31, 2006, for the period June 1, 2005 (inception) toDecember 31, 2005 and from June 1, 2005 (inception) to December 31, 2006.  These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.

We conducted ouraudits in accordance with the standards of the Public Company AccountingOversight Board (United States).  Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatements.  The Company is notrequired to have, nor were we engaged to perform, an audit of its internalcontrol over financial reporting.  Ouraudit included consideration of internal control over financial reporting as abasis for designing audit procedures that are appropriate in the circumstances,but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining on a testbasis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that our auditsprovide a reasonable basis for our opinion.

In our opinion,the financial statements referred to above present fairly, in all materialrespects, the financial position of Paramount Acquisition Corp. (a developmentstage enterprise) as of December 31, 2006, and the results of its operationsand its cash flows for the year ended December 31, 2006, for the period June 1,2005 (inception) to December 31, 2005, and for the period June 1, 2005(inception) to December 31, 2006, in conformity with generally acceptedaccounting principles (United States).

The accompanyingfinancial statements have been prepared assuming that the Company will continueas a going concern. As discussed in Note 1 to the financial statements, theCompany’s certificate of incorporation provides for mandatory liquidation ofthe Company in the event that the Company does not consummate a businesscombination prior to April 27, 2007 or October 27, 2007 if certain extensioncriteria have been satisfied. These conditions raise substantial doubt aboutthe Company’s ability to continue as a going concern. Management’s plansregarding those matters are described in Note 2. The financial statements donot include any adjustments that might result from the outcome of thisuncertainty.

MARCUM & KLIEGMAN LLP

Melville, New York

March 30, 2007

 

F-2

 

----

 

**Paramount Acquisition Corp.**

**(a development stage enterprise)**

**Balance Sheet**
| ** **                                                                                                                                                     | ** ** | **December   31, 2006** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------|------------|
| **Assets**                                                                                                                                                     | ** ** | ** **                        | ** ** |
| Current assets:                                                                                                                                                |       |                              |       |
| Cash                                                                                                                                                           |       | $                                 | 54,209     |   |
| Investments held in  Trust Fund                                                                                                                                |       | 54,470,015                        |       |
| Prepaid expenses and  other current assets                                                                                                                     |       | 135,375                           |       |
|                                                                                                                                                           |       |                              |       |
| Total assets                                                                                                                                                   |       | $                                 | 54,659,599 |   |
|                                                                                                                                                           |       |                              |       |
| **Liabilities and Stockholders’  Equity**                                                                                                                 |       |                              |       |
| Current liabilities:                                                                                                                                           |       |                              |       |
| Due to related  party — accrued expenses                                                                                                                  |       | $                                 | 24,989     |   |
| Accounts payable  and accrued expenses                                                                                                                         |       | 967,699                           |       |
|                                                                                                                                                           |       |                              |       |
| Total current  liabilities                                                                                                                                     |       | 992,688                           |       |
|                                                                                                                                                           |       |                              |       |
| Common Stock, subject  to possible conversion, 1,954,023 shares at conversion value                                                                            |       | 10,888,556                        |       |
|                                                                                                                                                           |       |                              |       |
| **Commitment and Contingencies**                                                                                                                               |       |                              |       |
|                                                                                                                                                           |       |                              |       |
| Stockholders’ equity                                                                                                                                      |       |                              |       |
| Preferred stock,  $.0001 par value, authorized 1,000,000 shares; none issued                                                                                   |       | —                            |       |
| Common Stock,  $.0001 par value, authorized 40,000,000 shares, total issued and outstanding  11,900,000 shares (less 1,954,023 subject to possible conversion) |       | 996                               |       |
| Additional  paid-in capital                                                                                                                                    |       | 42,608,914                        |       |
| Earnings  accumulated during the development stage                                                                                                             |       | 168,445                           |       |
| Total stockholders’  equity                                                                                                                               |       | 42,778,355                        |       |
| Total liabilities and stockholders’ equity                                                                                                                |       | $                                 | 54,659,599 |   |

 

*Theaccompanying notes are an integral part of these financial statements.*

F-3

----

 

**Paramount Acquisition Corp.**

**(a development stage enterprise)**

**Statementsof Operations**

**For thePeriod from June 1, 2005 (Inception) to December 31, 2006**
| ** **                                                                       | ** ** | **For the year   ended** | ** ** | **For the Period  from June 1,  2005 (Inception)  to** | ** ** | **For the Period  from June 1,  2005 (Inception)  to** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------------------------|------------|---------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------|------------|
| ** **                                                                       | ** ** | **December 31,  2006**             | ** ** | **December 31,  2005**                                                     | ** ** | **December 31,  2006**                                                     | ** ** |
|                                                                             |       |                                    |       |                                                                            |       |                                                                            |       |
| Revenue                                                                          |       | $                                       | —     |                                                                            | $          | —                                                                          |       | $ | — |   |
|                                                                             |       |                                    |       |                                                                            |       |                                                                            |       |
| General, selling and  administrative expenses                                    |       | 2,075,737                               |       | 90,123                                                                          |       | 2,165,860                                                                       |       |
|                                                                             |       |                                    |       |                                                                            |       |                                                                            |       |
| Operating loss                                                                   |       | (2,075,737                              | )          | (90,123                                                                         | )          | (2,165,860                                                                      | )          |
|                                                                             |       |                                    |       |                                                                            |       |                                                                            |       |
| Interest income                                                                  |       | 1,969,060                               |       | 367,145                                                                         |       | 2,336,205                                                                       |       |
| (Loss) income before  provision for income taxes                                 |       | (106,677                                | )          | 277,022                                                                         |       | 170,345                                                                         |       |
| Benefit from (provision  for) income taxes                                       |       | 90,000                                  |       | (91,900                                                                         | )          | (1,900                                                                          | )          |
|                                                                             |       |                                    |       |                                                                            |       |                                                                            |       |
| Net (loss) income                                                                |       | (16,677                                 | )          | 185,122                                                                         |       | 168,445                                                                         |       |
|                                                                             |       |                                    |       |                                                                            |       |                                                                            |       |
| Accretion of Trust Fund  relating to Common Stock subject to possible conversion |       | (389,162                                | )          | (71,711                                                                         | )          | (460,873                                                                        | )          |
|                                                                             |       |                                    |       |                                                                            |       |                                                                            |       |
| Net (loss) income  available to other Common Stockholders                        |       | $                                       | (405,839   | )                                                                               | $          | 113,411                                                                         |       | $ | (292,428 | ) |
|                                                                             |       |                                    |       |                                                                            |       |                                                                            |       |
| Weighted average shares  outstanding—basic and diluted                      |       | 9,945,977                               |       | 4,515,626                                                                       |       | 7,938,905                                                                       |       |
|                                                                             |       |                                    |       |                                                                            |       |                                                                            |       |
| Basic and diluted (loss) income per share                                        |       | $                                       | (0.04      | )                                                                               | $          | 0.03                                                                            |       | $ | (0.04) |   |

 

*Theaccompanying notes are an integral part of these financial statements.*

F-4

----

 

**Paramount Acquisition Corp.**

**(a development stage enterprise)**

**Statementof Changes in Stockholders’ Equity**

**For the Period from June 1, 2005(Inception) to December 31, 2006**

 
| ** **                                                                                                                                                              | ** ** | **Common Stock** | ** ** | **Additional  paid-in** | ** ** | **Earnings  accumulated during** | ** ** | **Total  stockholders’** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-------------------------|------------|---------------------------------------|------------|-------------------------------|------------|
| ** **                                                                                                                                                              | ** ** | **Shares**            | ** ** | **Amount**              | ** ** | **capital**                           | ** ** | **development stage**    | ** ** | **equity** | ** ** |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Balance, June 1,  2005 (inception)                                                                                                                                      |       | —                |       | $                       | —     |                                  | $          | —                        |       | $ | — |   | $ | — |   |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Issuance of  Common Stock to initial stockholders                                                                                                                       |       | 2,125,000             |       | 213                     |       | 24,787                                |       | —                        |       | 25,000 |   |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Sale of  9,775,000 units, net of underwriters’ discount and offering expenses  amounting to $5,176,634 (includes 1,954,023 shares subject to possible  conversion) |       | 9,775,000             |       | 978                     |       | 53,472,388                            |       | —                        |       | 53,473,366 |   |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Proceeds subject  to possible conversion of 1,954,023 shares                                                                                                            |       | —                |       | (195                    | )          | (10,427,488                           | )          | —                        |       | (10,427,683 | ) |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Proceeds from  issuance of option                                                                                                                                       |       | —                |       | —                  |       | 100                                   |       | —                        |       | 100 |   |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Accretion of  Trust Fund relating to Common Stock subject to possible conversion                                                                                        |       | —                |       | —                  |       | (71,711                               | )          | —                        |       | (71,711 | ) |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Net income for  the period from June 1, 2005 (inception) to December 31, 2005                                                                                           |       | —                |       | —                  |       | —                                |       | 185,122                       |       | 185,122 |   |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Balance,  December 31, 2005                                                                                                                                             |       | 11,900,000            |       | 996                     |       | 42,998,076                            |       | 185,122                       |       | 43,184,194 |   |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Accretion of  Trust Fund relating to Common Stock subject to possible conversion                                                                                        |       | —                |       | —                  |       | (389,162                              | )          | —                        |       | (389,162 | ) |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Net loss for the  year ended December 31, 2006                                                                                                                          |       | —                |       | —                  |       | —                                |       | (16,677                       | )          | (16,677 | ) |
|                                                                                                                                                                    |       |                  |       |                    |       |                                  |       |                          |       |   |   |
| Balance, December 31,  2006                                                                                                                                             |       | 11,900,000            |       | $                       | 996        |                                  | $          | 42,608,914                    |       | $ | 168,445 |   | $ | 42,778,355 |   |

 

*Theaccompanying notes are an integral part of these financial statements.*

F-5

----

 

**Paramount Acquisition Corp.****(a development stage enterprise)****Statements of Cash Flows**
| ** **                                                                       | ** ** | ** **            | ** ** | **For the Period** | ** ** | **For the Period** | ** ** |
|----------------------------------------------------------------------------------|------------|-----------------------|------------|------------------------------|------------|------------------------------|------------|
| ** **                                                                       | ** ** | ** **            | ** ** | **from June 1,**   | ** ** | **from June 1,**   | ** ** |
| ** **                                                                       | ** ** | **For the**      | ** ** | **2005 (Inception)**    | ** ** | **2005 (Inception)**    | ** ** |
| ** **                                                                       | ** ** | **Year ended**   | ** ** | **to**                       | ** ** | **to**                       | ** ** |
| ** **                                                                       | ** ** | **December 31,** | ** ** | **December 31,**        | ** ** | **December 31,**        | ** ** |
| ** **                                                                       | ** ** | **2006**              | ** ** | **2005**                     | ** ** | **2006**                     | ** ** |
| **Cash Flows from Operating  Activities**                                        |       |                  |       |                         |       |                         |       |
| Net (loss) /  income                                                             |       | $                     | (16,677    | )                            | $          | 185,122                      |       | $ | 168,445 |   |
| Changes in  Operating Assets and Liabilities:                                    |       |                  |       |                         |       |                         |       |
| Prepaid expenses  and other current assets                                       |       | 83,697                |       | (219,072                     | )          | (135,375                     | )          |
| Accounts payable  and accrued expenses                                           |       | 878,590               |       | 181,009                      |       | 1,059,599                    |       |
| Due to related  party — accrued expenses                                    |       | 24,989                |       | —                       |       | 24,989                       |       |
| Income taxes  payable                                                            |       | (91,900               | )          | —                       |       | (91,900                      | )          |
| Net cash  provided by operating activities                                       |       | 878,699               |       | 147,059                      |       | 1,025,758                    |       |
| ** **                                                                       |       |                  |       |                         |       |                         |       |
| **Cash Flows Used in Investing  Activities**                                     |       |                  |       |                         |       |                         |       |
| Investments held  in Trust Fund                                                  |       | (1,946,780            | )          | (52,523,235                  | )          | (54,470,015                  | )          |
| Net cash used in  investing activities                                           |       | (1,946,780            | )          | (52,523,235                  | )          | (54,470,015                  | )          |
| ** **                                                                       |       |                  |       |                         |       |                         |       |
| **Cash Flows from Financing  Activities**                                        |       |                  |       |                         |       |                         |       |
| Proceeds from  sale of Common Stock to initial stockholders                      |       | —                |       | 25,000                       |       | 25,000                       |       |
| Gross proceeds  from initial public offering                                     |       | —                |       | 58,650,000                   |       | 58,650,000                   |       |
| Proceeds from  issuance of option                                                |       | —                |       | 100                          |       | 100                          |       |
| Payments of  deferred offering costs                                             |       | —                |       | (5,176,634                   | )          | (5,176,634                   | )          |
|                                                                             |       |                  |       |                         |       |                         |       |
| Net cash  provided by financing activities                                       |       | —                |       | 53,498,466                   |       | 53,498,466                   |       |
|                                                                             |       |                  |       |                         |       |                         |       |
| Net (decrease) increase  in cash                                                 |       | (1,068,081            | )          | 1,122,290                    |       | 54,209                       |       |
| Cash at beginning of  the period                                                 |       | 1,122,290             |       | —                       |       | —                       |       |
|                                                                             |       |                  |       |                         |       |                         |       |
| Cash at end of the  period                                                       |       | $                     | 54,209     |                         | $          | 1,122,290                    |       | $ | 54,209 |   |
|                                                                             |       |                  |       |                         |       |                         |       |
| Supplemental disclosure  of cash flow information:                               |       |                  |       |                         |       |                         |       |
| Accretion of  Trust Fund relating to Common Stock subject to possible conversion |       | 389,162               |       | 71,711                       |       | 460,873                      |       |
| Income taxes paid                                                                |       | 93,309                |       | —                       |       | 93,309                       |       |

 

 

*The accompanying notes are anintegral part of these financial statements.*

F-6

----

 

**Paramount Acquisition Corp.**

**(a development stage enterprise)**

**Notes toFinancial Statements**

**December31, 2006**
| **1. Organization, Business** | Paramount Acquisition Corp. (the “Company”) was  incorporated in Delaware on                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **Operations  and Significant**    | June 1, 2005 as a blank check company whose  objective is to acquire an                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **Accounting  Policies**           | operating business in the healthcare industry.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| ** **                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| ** **                         | All activity from June 1, 2005 through October 27,  2005 related to the Company’s formation and initial public offering is  described below. Since October 28, 2005, the Company has been searching for a  target business to acquire. The Company has selected December 31 as its  fiscal year end.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| ** **                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| ** **                         | The registration statement for the Company’s initial  public offering (“Offering”) was declared effective October 21, 2005 by  selling 8,500,000 units (“Units”) at $6 per unit. The Company consummated the  Offering on October 27, 2005. In addition, on October 31, 2005 and November  1, 2005, the Company sold an additional 1,275,000 Units at $6 per unit  pursuant to an over-allotment option for the Offering, receiving total gross  proceeds sold of $58,650,000 for the entire offering.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** **                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| ** **                         | The Company’s management has broad discretion with  respect to the specific application of the net proceeds of the Offering,  although substantially all of the net proceeds of the Offering are intended  to be generally applied toward consummating a business combination with an  operating business in the healthcare industry (“Business Combination”).  Furthermore, there is no assurance that the Company will be able to  successfully effect a Business Combination. An aggregate of $52,164,500  (including the over-allotment option described in Note 3), before any  interest earned, has been deposited in an interest-bearing trust account  (“Trust Account”) until the earlier of (i) the consummation of a Business  Combination or (ii) liquidation of the Company. Under the agreement governing  the Trust Account, funds will only be invested in United States “government  securities” within the meaning of Section 2(a)(16) of the Investment Company  Act of 1940 with a maturity of 180 days or less or in money market funds  meeting certain conditions under Rule 2a-7 promulgated under the Investment  Company Act of 1940. The remaining net proceeds of $1,308,866 (not held in  the Trust Account) may be used to pay for business, legal and accounting due  diligence on prospective acquisitions and continuing general and  administrative expenses. |
| ** **                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| ** **                         | The Company, after signing a definitive agreement  for the acquisition of a target business, will submit such transaction for  stockholder approval. In the event that stockholders owning 20% or more of  the shares sold in the Offering vote against the Business Combination and  exercise their conversion rights described below, the Business Combination  will not be consummated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| ** **                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| ** **                         | All of the Company’s stockholders prior to the  Offering, including all of the officers and directors of the Company  (“Initial Stockholders”), have agreed to vote their 2,125,000 founding shares  of common stock in accordance with the vote of the majority in interest of  all other stockholders of the Company (“Public                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

F-7

----

 
|            | Stockholders”) with respect to any Business  Combination. After consummation of a Business Combination, these voting  safeguards will no longer be applicable.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| ** ** | With respect to a Business Combination which is  approved and consummated, any Public Stockholder who voted against the  Business Combination may demand that the Company convert his shares. The per  share conversion price will equal the amount in the Trust Account, calculated  as of two business days prior to the consummation of the proposed Business  Combination, divided by the number of shares of common stock held by Public Stockholders  at the consummation of the Offering. Accordingly, Public Stockholders holding  19.99% of the aggregate number of shares owned by all Public Stockholders may  seek conversion of their shares in the event of a Business Combination. Such  Public Stockholders are entitled to receive their per share interest in the  Trust Account computed without regard to the shares held by Initial  Stockholders. |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       | The Company’s Certificate of Incorporation provides  for mandatory liquidation of the Company in the event that the Company does  not consummate a Business Combination within 18 months from the date of the  consummation of the Offering, or 24 months from the consummation of the  Offering if certain extension criteria have been satisfied. In the event of  liquidation, it is likely that the per share value of the residual assets  remaining available for distribution (including Trust Account assets) will be  less than the initial public offering price per Unit in the Offering due to  costs related to the Offering and since no value would be attributed to the  Warrants (as defined in Note 3, below) contained in the Units sold.                                                                                                       |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       | CASH AND CASH EQUIVALENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       | The Company considers all highly liquid money market  instruments with maturities of three months or less at date of purchase to be  cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       | INVESTMENTS HELD IN TRUST FUND                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       | The Company maintains its cash, held in the trust  fund, in money market instruments at cost which approximates fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       | Deferred income taxes are provided for the  differences between the bases of assets and liabilities for financial  reporting and income tax purposes. A valuation allowance is established when  necessary to reduce deferred tax assets to the amount expected to be  realized. Management did not record the impact of deferred taxes as they were  deemed immaterial.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|       | The provision for federal, state and local taxes,  which are included in the accompanying statement of operations amounted to  $91,900 for the period from                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

F-8

----

 
|        | June 1, 2005 (inception) to December 31, 2005 and  $1,900 for the period from June 1, 2005 (inception) to December 31, 2006. As  of December 31, 2006, the Company has recorded a $90,000 tax refund  receivable which is included in prepaid expenses and other current assets.  The Company expects to apply its tax net operating loss incurred during 2006  to prior year profits thereby generating an income tax benefit for the year  ended December 31, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | EARNINGS/(LOSS) PER SHARE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | Basic earnings (loss) per share is computed by  dividing the net income (loss) available to the common stockholders by the  weighted average number of common shares outstanding during the period.  Common shares subject to possible redemption of 1,954,023 have been excluded  from the calculation of basic earnings (loss) per share since such shares, if  redeemed, only participate in their pro rata share of the trust earnings.  Diluted earnings (loss) per share adjusts basic earnings (loss) per share for  the effects of Warrants, Unit options (see Note 3) and other potentially  dilutive financial instruments, only in the periods in which such effect is  dilutive. Securities that could potentially dilute basic earnings per share (“EPS”)  in the future that were not included in the computation of the diluted basic EPS  because to do so would have been anti-dilutive are as follows: (i) The  conversion of the outstanding Warrants (as defined in Note 3) of 19,550,000  for the year ended December 31, 2006 and from June 1, 2005 (inception) to  December 31, 2005 is contingent upon the occurrence of future events, and  therefore, is not includable in the calculation of diluted earnings per share  in accordance with Statement of Financial Accounting Standards (“SFAS”) No.  128—Earnings per Share. The December 31, 2005 earnings per share presentation  was revised to conform with this policy and to the current year presentation;  (ii) The underwriters’ Unit purchase option of 1,275,000 was not included in  the computation of the diluted EPS because to do so would have been  anti-dilutive for the year ended December 31, 2006 and from June 1, 2005  (inception) to December 31, 2005. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | ESTIMATES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | The preparation of financial statements in  conformity with accounting principles generally accepted in the United States  of American requires management to make estimates and assumptions that affect  the reported amounts of assets and liabilities at the date of the financial  statements and the reported amounts of expenses during the reporting period.  Actual results could differ from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | CONCENTRATIONS OF CREDIT RISK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|   | SFAS No. 105, “Disclosure of Information about  Financial Instruments with Off-Balance Sheet Risk and Financial Instruments  with Concentration of Credit Risk”, requires disclosure of significant  concentrations of credit risk regardless of the degree of risk. At December  31, 2006, financial instruments that potentially expose the Company to credit  risk consist of cash. The Company maintains its cash balances in various  financial institutions. The Federal Deposit Insurance Corporation insures  balances in bank accounts up to $100,000 and the Securities Investor  Protection Corporation insures balances up to $500,000 in brokerage accounts.  At December 31, 2006, the uninsured balances in the bank brokerage accounts  amounted to $53,970,015. Management believes the risk of loss to be minimal  since it invests in or through major financial institutions.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

F-9

----

 
|        | FAIR VALUE OF FINANCIAL INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | The carrying value of cash, investments held in the  trust fund, accounts payable and accrued expenses are reasonable estimates of  the fair values due to their short-term maturity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | RECENTLY ISSUED PRONOUNCEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | In February 2006, the Financial Accounting Standards  Board (“FASB”) issued SFAS No. 155 — Accounting for Certain Hybrid Financial  Instruments (“SFAS 155”), which eliminates the exemption from applying SFAS  133 to interests in securitized financial assets so that similar instruments  are accounted for similarly regardless of the form of the instruments, SFAS  155 also allows the election of fair value measurement at acquisition, at  issuance, or when a previously recognized financial instrument is subject to  a remeasurement event. Adoption is effective for all financial instruments  acquired or issued after the beginning of the first fiscal year that begins  after September 15, 2006. Early adoption is permitted. The adoption of SFAS  155 is not expected to have a material effect on the Company’s financial  position, results of operations or cash flows.                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | In March 2006, the FASB issued SFAS No. 156 —  Accounting for Servicing of Financial Assets (“SFAS 156”), which requires all  separately recognized servicing assets and servicing liabilities be initially  measured at fair value. SFAS 156 permits, but does not require, the  subsequent measurement of servicing assets and servicing liabilities at fair  value. Adoption is required as of the beginning of the first fiscal year that  begins after September 15, 2006. Early adoption is permitted. The adoption of  SFAS 156 is not expected to have a material effect on the Company’s financial  position, results of operations or cash flows.                                                                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | In July 2006, the FASB issued FASB Interpretation  No. 48 — Accounting for Uncertainty in Income Taxes, an Interpretation  of FASB Statement No. 109 (“FIN 48”). FIN 48 clarifies the accounting  and reporting for uncertainties in income tax law. This interpretation  prescribes a comprehensive model for the financial statement recognition,  measurement, presentation of and disclosure of uncertain tax positions taken  or expected to be taken in income tax returns. This interpretation shall be  effective for fiscal years beginning after December 15, 2006. The  cumulative effects, if any, of applying this Interpretation will be recorded  as an adjustment to retained earnings as of the beginning of the period of  adoption. The Company has not yet commenced the process of evaluating the  expected effect of FIN 48 on its financial statements and is not  currently in a position to determined such effects. |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|   | In September 2006, the FASB issued SFAS No. 157 —  Fair Value Measurements (“SFAS 157”). This Statement defines fair value, establishes  a framework for measuring fair value and expands disclosure of fair value  measurements. SFAS 157 applies needs to be corrected. A correction to the  prior year results that are not material to those years would not require a  restatement process where prior financials would be amended. SAB 108 is  effective for fiscal years ending after November 15, 2006. The Company  has assessed SAB 108 and has concluded that it did not have a material effect  on the Company’s financial position, results of operations or under other  accounting pronouncements that require or permit fair                                                                                                                                                                                                            |

F-10

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|                                             | value measurements and accordingly does not require  any new fair value measurements. SFAS 157 is effective for financial  statements issued for fiscal years beginning after November 15, 2007. The  Company will evaluate the potential impact, if any, that the adoption of SFAS  157 will have on our financial position, results of operations, or cash  flows.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|---------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                        | In September 2006, the Securities and Exchange Commission  (“SEC”) issued Staff Accounting Bulletin 108, Considering the Effects on  Prior Year Misstatements when Quantifying Misstatements in Current Year  Financial Statements (“SAB 108”). SAB 108 requires registrants to quantify  errors using both the income statement method (i.e. iron curtain method) and  the rollover method and requires adjustment if either method indicates a  material error. If a correction in the current year relating to prior year  errors is material to the current year, then the prior year financial  information cash flows.                                                                                                                                                                                                                                          |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **2. Going  Concern and  Management Plans** | As of December 31, 2006, excluding investments held  in the Trust Fund of $54,470,015, the Company had a working capital  deficiency of $803,104. In order for the Company to continue to fund the  operating costs for its search for an acquisition candidate, an officer of  the Company has agreed to advance funds to the Company from one of his  affiliates, Paramount BioCapital Asset Management, Inc. There can be no  assurance that the Company will enter into a business combination prior to  April 27, 2007, or October 27, 2007, if certain extension conditions have  been satisfied. Pursuant to its Certificate of Incorporation, the Company  would have to liquidate pursuant to a plan of dissolution and return the  funds held in the trust account to the holders of shares issued in the  offering as described in Note 3.                                     |
| ** **                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|                                        | These conditions raise substantial doubt about the  Company’s ability to continue as a going concern. The financial statements do  not include any adjustments that might result from the outcome of this  uncertainty.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| **3. Initial Public Offering**              | On October 27, 2005, the Company sold 8,500,000  Units in the Offering at $6.00 per Unit. On October 31, 2005 and November 1,  2005 the Company sold an additional aggregate 1,275,000 Units pursuant to an  over-allotment option of the Offering. The total gross proceeds from the  total offering including the over-allotment amounted to $58,650,000. After  payments of all offering costs, the net proceeds to the Company amounted to  $53,473,366. Each Unit consists of one share of the Company’s common stock,  $.0001 par value, and two Redeemable common stock Purchase Warrants  (“Warrants”). Each Warrant entitles the holder to purchase from the Company  one share of common stock at an exercise price of $5.00 commencing the later  of the completion of a Business Combination or one year from the effective  date of the Offering and expiring |
| ** **                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

F-11

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|                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-----------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **                        | four years from the effective date of the Offering.  The Warrants will be redeemable by the Company, upon prior written consent of  the Representative, at a price of $.01 per Warrant upon 30 days’ notice after  the Warrants become exercisable, only in the event that the last sale price  of the common stock is at least $8.50 per share for any 20 trading days  within a 30 trading day period ending on the third day prior to the date on  which notice of redemption is given. In connection with this Offering, the  Company issued an option, for $100, to the Representative to purchase 425,000  Units at an exercise price of $7.50 per Unit. The warrants underlying such  Units are exercisable at $6.25 per share. The Company has accounted for the  fair value of the option, inclusive of the receipt of the $100 cash payment,  as an expense of the public offering resulting in a charge directly to  stockholders’ equity. The Company estimates that the fair value of this  option is approximately $922,250 ($2.17 per Unit) using a Black-Scholes  option-pricing model. The fair value of the option granted to the  Representative is estimated as of the date of grant using the following  assumptions: (1) expected volatility of 42.875%, (2) risk-free interest rate  of 4.03% and (3) expected life of 5 years. The option may be exercised for  cash or on a “cashless” basis at the holder’s option, such that the holder  may use the appreciated value of the option (the difference between the  exercise prices of the option and the underlying Warrants and the market  price of the Units and underlying securities) to exercise the option without  the payment of any cash. |
| ** **                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                              | The Company’s Warrants, or the warrants underlying  the Units which may be purchased by the Representative, will not be  exercisable and the Company will not be obligated to issue shares of common  stock upon the Warrants’ exercise unless at the time a Warrant holder seeks  to exercise a Warrant, either a registration statement under the Securities  Act of 1933 with respect to the Company’s common stock is effective or an  exemption from the registration requirements of the Securities Act is  available. Under the terms of the Warrant agreement the Company entered into  with Continental Stock Transfer & Trust Company (as agent for the Warrant  holders), the Company has agreed to use its best efforts to meet these  conditions and to maintain the effectiveness of such a registration statement  until the expiration of the Warrants. If the Company is unable to do so,  holders of the Warrants may be unable to exercise the Warrants and the  Company will not be required to settle any exercise of the Warrants. In that  case, the Warrants may have no value, the market for such Warrants may be  limited and such Warrants may expire worthless.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                              | Under no circumstances shall the Company be required  to net cash settle either the Warrants or the warrants underlying the Units  which may be purchased by the Representative.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| **4. Related Party Transactions** | The Company presently occupies office space provided  by an affiliate of the Company’s chairman. Such affiliate has agreed that,  until the acquisition of a target business by the Company, it will make such  office space, as well as certain office and secretarial services, available  to the Company, as may be required by the Company from time to time. The  Company has agreed to pay such affiliate $7,500 per month for such services  commencing on October 21, 2005 and ending upon the consummation of a Business  Combination. For the year ended                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

F-12

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|                                      | December 31, 2006, the period from June 1, 2005  (inception) to December 31, 2005 and for the period from June 1, 2005  (inception) to December 31, 2006 the Company has incurred expense totaling  $90,000, $17,500 and $107,500, respectively, to such affiliate pursuant to  this agreement. As of December 31, 2006, $22,500 is due to such affiliate  pursuant to this agreement.                                                                                                                                          |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **5. Commitment  and Contingencies** | Pursuant to letter agreements dated July 25, 2005  with the Company and Early Bird Capital, Inc., the representative of the  underwriters in the offering (“Representative”), the Initial Stockholders  have waived their right to receive distributions with respect to their  founding shares upon the Company’s liquidation.                                                                                                                                                                                  |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                 | The Company’s directors agreed with the  Representative that, after consummation of the Offering and within the first  three month period after separate trading of the Warrants has commenced, they  or certain of their affiliates or designees will collectively purchase up to  $1,750,000 of Warrants in the public marketplace at prices not to exceed  $0.70 per Warrant. Pursuant to this commitment, the directors purchased an  aggregate of 883,000 Warrants at prices ranging from $.667 to $.70 per  Warrant. |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                 | The Initial Stockholders are entitled to  registration rights with respect to their founding shares pursuant to an  agreement dated October 21, 2005. The holders of the majority of these shares  are entitled to make up to two demands that the Company register these shares  at any time commencing three months prior to October 21, 2008. In addition,  the Initial Stockholders have certain “piggy-back” registration rights on  registration statements filed subsequent to October 21, 2008.               |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **6. Preferred Stock**               | The Company is authorized to issue 1,000,000 shares  of preferred stock with such designations, voting and other rights and  preferences as may be determined from time to time by the board of directors.                                                                                                                                                                                                                                                                                                                      |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **7. Common Stock**                  | At December 31, 2006, 20,825,000 shares of common  stock were reserved for issuance upon exercise of redeemable Warrants and the  underwriters’ Unit purchase option.                                                                                                                                                                                                                                                                                                                                                      |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
| **8. Contribution Agreement**        | On August 25, 2006, the Company and BioValve  Technologies, Inc. (“BioValve”), a privately-held innovator in life  sciences, announced that they entered into a definitive agreement  (“Contribution Agreement”) whereby the Company agreed to acquire a majority  interest in Valeritas, LLC (“Valeritas”), the medical technologies subsidiary  of BioValve.                                                                                                                               |
|                                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                                 | On January 27, 2007, the Company and BioValve  announced that they had agreed to terminate the Contribution Agreement and  mutually release both parties from further claims. In connection therewith,  approximately $898,000 of capitalized deferred acquisition costs were charged  to operating expense during the year ended December 31, 2006.                                                                                                                                                                            |

F-13

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| **9. Subsequent Event** | In January 2007, two of the Company’s directors  entered into a new personal Warrant purchase plan to collectively purchase up  to an additional 1,000,000 Warrants in the public marketplace at prices not  to exceed $.64 per Warrant. The purchase plan was completed during February  2007, resulting in the purchase of 1,000,000 Warrants pursuant to such  purchase plan. |
|-------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

 

F-14

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**SIGNATURES**

Pursuant to the requirements of the Section 13 or 15or 15(d) of the Securities Exchange Act of 1934, the registrant has duly causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized on the 2nd day of April, 2007.

**PARAMOUNT ACQUISITION CORP.**
| By:  | /s/ J. JAY LOBELL             |   |
|-----------|-------------------------------|--------|
|      | J. Jay Lobell                 |
|      | Chief Executive Officer       |
|      | (Principal Executive Officer) |

 

In accordance with the Securities Exchange Act of1934, this report has been signed below by the following persons on behalf ofthe registrant and in the capacities and on the dates indicated.
| Name                          |   | Title  |                                                                                                                          | Date   |
|-------------------------------|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|--------|
|                          |   |   |                                                                                                                          |   |
| /s/ LINDSAY A. ROSENWALD |   |   | Chairman of the Board                                                                                                         |   | April 2, 2007 |
| Lindsay A. Rosenwald          |   |   |                                                                                                                          |   |
|                          |   |   |                                                                                                                          |   |
| /s/ J. JAY LOBELL        |   |   | Chief Executive Officer, Secretary and Director  (Principal Executive Officer and Principal Accounting and Financial Officer) |   | April 2, 2007 |
| J. Jay Lobell                 |   |   |                                                                                                                          |   |
|                          |   |   |                                                                                                                          |   |
| /s/ I. KEITH MAHER       |   |   | President and Director                                                                                                        |   | April 2, 2007 |
| I. Keith Maher                |   |   |                                                                                                                          |   |
|                          |   |   |                                                                                                                          |   |
| /s/ MICHAEL WEISER       |   |   | Executive Vice President and Director                                                                                         |   | April 2, 2007 |
| Michael Weiser                |   |   |                                                                                                                          |   |
|                          |   |   |                                                                                                                          |   |
| /s/ ARIE BELLDEGRUN      |   |   | Director                                                                                                                      |   | April 2, 2007 |
| Arie Belldegrun               |   |   |                                                                                                                          |   |
|                          |   |   |                                                                                                                          |   |
| /s/ ISAAC KIER           |   |   | Director                                                                                                                      |   | April 2, 2007 |
| Isaac Kier                    |   |   |                                                                                                                          |   |

 

 

S-1

 

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