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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



(Mark one)

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



For the fiscal year ended June 30, 2005.



or



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



For the transition period from  to
.



Commission file number: 0-12104



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IMMUNOMEDICS, INC.

(Exact name of registrant as specified in its charter)



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|                                             |  |                                     
|-------------------------------------------- |  | ------------------------------------
|Delaware                                     |  | 61-1009366                          
|(State of incorporation)                     |  | (I.R.S. Employer Identification No.)
|                                             | 
|300 American Road, Morris Plains, New Jersey |  | 07950                               
|(Address of principal executive offices)     |  | (Zip Code)                          



Registrants
telephone number, including area code: (973) 605-8200



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



None



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



Common Stock, $0.01 par value

Series G Junior Participating Preferred Stock, $0.01 par value

(Title of each class)



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



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



Indicate by check whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes  x    No ̈



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



The aggregate market value of the registrants common stock held by
non-affiliates computed by reference to the price at which the common stock was last sold as of December 31, 2004 was $144,366,536. The number of shares of the registrants common stock outstanding as of September 6, 2005 was 54,073,059.



Documents Incorporated by Reference:



Certain information required in Part III of this Annual Report on Form 10-K
will be set forth in, and incorporated from the registrants Proxy Statement for the 2005 Annual Meeting of Stockholders, which will be filed by the registrant with the Securities and Exchange Commission not later than 120 days after the end of
the registrants fiscal year ended June 30, 2005.



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PART I



Introduction



Immunomedics, Inc. (the Company, we, our, or us) is a biopharmaceutical company focused on the development
of monoclonal antibody-based products for the targeted treatment of cancer, autoimmune and other serious diseases. We have developed a number of advanced proprietary technologies that allow us to create humanized antibodies that can be used either
alone in unlabeled, or naked form, or conjugated with radioactive isotopes, chemotherapeutics or toxins, in each case to create highly targeted agents. Using these technologies, we have built a pipeline of therapeutic product candidates
that utilize several different mechanisms of action. Our lead product candidate, epratuzumab, is currently in two pivotal Phase III trials for the treatment of patients with moderate and severe lupus. At present, there is no cure for lupus and no
new lupus therapy has been approved in the U.S. in the last 40 years. We believe that our portfolio of intellectual property, which includes approximately 90 issued patents in the United States and more than 250 other issued patents worldwide, is
essential to protecting our product candidates and technologies.



Therapeutic Product Candidates



We
currently have antibody product candidates in clinical development targeting autoimmune diseases such as systemic lupus erythematosus (SLE) and Sjögrens syndrome, B-cell non-Hodgkins lymphoma (NHL), and various solid tumors. All of
our therapeutic product candidates are humanized antibodies, which means that the portion of the antibody derived from mouse (murine) DNA sequences is generally less than 10%.



We believe that each of our antibodies has therapeutic potential either when administered alone or when conjugated with
therapeutic radioisotopes (radiolabeled), chemotherapeutics or other toxins to create unique and potentially more effective treatment options. The attachment of various compounds to antibodies is intended to allow the delivery of these therapeutic
agents to tumor sites with greater precision than conventional radiation therapy or chemotherapeutic approaches. This treatment method is designed to reduce the total exposure of the patient to the therapeutic agents, which ideally minimizes
debilitating side effects. We are currently focusing our efforts on unlabeled, or naked antibodies and antibodies conjugated with drugs or toxins, and on the use of radioisotopes, such as Yttrium-90, sometimes referred to as Y-90, and
Iodine-131, sometimes referred to as I-131.



We also have a
number of other product candidates that target solid tumors and hematologic malignancies and other diseases in various stages of pre-clinical development, although it is too early to assess which of these, if any, will merit further evaluation in
clinical trials. In an effort to permit an effective use of our resources, our clinical development focus has been reduced to three different antibodies in a limited number of indications.



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The table below summarizes the status of our current therapeutic product candidates in clinical
development, which assumes we will obtain adequate financing to continue these trials of which there is no assurance:



|                              |  |                            |  |                    |  |                                    |  |                                   
|----------------------------- |  | -------------------------- |  | ------------------ |  | ---------------------------------- |  | ----------------------------------
|Program and Product Candidate |  | Description/Target Antigen |  | Disease Indication |  | Development Status                
|CD22 Program:Epratuzumab      |  |                            |  |                   
|IMMU-103                      |  | Unlabeled antibody         |  | CD22               |  | Systemic lupus erythematosus (SLE) |  | Phase III clinical trials ongoing 
|                              |  |                            |  |                   
|                              |  |                            |  |                    |  | Non-Hodgkins lymphoma (NHL)       |  | Phase II clinical trials completed
|                              |  |                            |  |                   
|                              |  |                            |  |                    |  | Sjögrens syndrome                 |  | Phase II clinical trial ongoing   
|                              |  |                            |  |                   
|IMMU-102                      |  | Y-90-labeled antibody      |  | CD22               |  | Non-Hodgkins lymphoma             |  | Phase I/II clinical trials ongoing
|                              |  |                            |  |                   
|CD20 Program                  |  |                            |  |                    |  |                                    |  |                                   
|IMMU-106                      |  | Unlabeled antibody         |  | CD20               |  | Non-Hodgkins lymphoma             |  | Phase I/II clinical trial ongoing 
|                              |  |                            |  |                   
|PAM4 Program                  |  |                            |  |                    |  |                                    |  |                                   
|IMMU-107                      |  | Y-90-labeled antibody      |  | PAM4               |  | Pancreatic cancer                  |  | Phase I/II clinical trial ongoing 



CD22
Program: Epratuzumab



Our most advanced
therapeutic product candidate, IMMU-103, is an unlabeled humanized antibody which targets an antigen, known as CD22, found on the surface of B-lymphocytes, a type of white blood cells. Since B-lymphocytes are involved in the production of
autoantibodies, we reasoned that epratuzumab might show activity in the treatment of autoimmune diseases by affecting B-cell levels and function. Our humanized CD22 antibody has been shown not to evoke any substantial anti-epratuzumab antibodies in
NHL patients, even after repeated dosing, making it a potentially good candidate for treating patients with a chronic, autoimmune diseases.



In October 2004, updated clinical results of epratuzumab in patients with SLE were presented at the 68thannual scientific meeting of American College of Rheumatology/Association of Rheumatology Health Professionals. The objective of the open label, single-center
study was to evaluate the safety, tolerability, lack of immunogenicity and early evidence of efficacy of epratuzumab, which was administered as a single agent every other week, for a total of four doses. A scoring system called BILAG (British Isle
Lupus Assessment Group) was used to measure the level of disease activity in these patients prior to, and at several time points post administration of epratuzumab. Patients with mild to moderate SLE activity (defined by Global BILAG scores of 6-12
prior to treatment) were enrolled. A high BILAG score indicates increased disease activity.



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SLE assessments after treatment demonstrated consistent clinical improvement, with decreased global BILAG
scores for all fourteen enrolled patients compared to the pre-therapy scores. Specifically, nine out of fourteen patients (64%) had lowered their pre-treatment global BILAG scores by 50% or more, twenty-four hours post-therapy. Furthermore, six of
the seven patients who had returned for their six-month check-up retained clinical benefit. In all patients, the treatment was well tolerated with infusions completed in about one hour, and no evidence of reactions or immunogenicity.



Based on these positive results, we submitted an application to the U.S. Food
and Drug Administration (FDA) for Fast Track designation and in January 2005, received notice from the agency granting epratuzumab Fast Track Product designation for the treatment of patients with moderate and severe SLE. The fast track programs of
the FDA are designed to facilitate drug development and to expedite the review of new drugs that are intended to treat serious or life threatening conditions, and that demonstrate the potential to address unmet medical needs. As such, the fast track
designation allows for close and frequent interaction with the agency. A designated fast track drug may also be considered for priority review with a shortened review time, rolling submission and accelerated approval if applicable.



In May and June 2005, we initiated two pivotal Phase III clinical trials to
further evaluate the safety and efficacy of epratuzumab for the treatment of patients with moderate and severe SLE. These pivotal trials are randomized, double-blinded, placebo-controlled, multi-center studies using the BILAG index to monitor and
assess disease activity. The trials have been named ALLEVIATE or Alleviate Lupus Affliction with Epratuzumab and Validate its Autoimmune Safety and Efficacy. One trial, ALLEVIATE A, is for patients with severe SLE flares, and the second
trial, ALLEVIATE B, is for patients with moderately active SLE. We anticipate completing the initial phase of these trials in approximately two years (June 2007), which assumes that we will have adequate financing to complete the trials.



SLE is a serious autoimmune disease affecting approximately 1.5 million
Americans, according to the Lupus Foundation of America. In the U.S., women with SLE outnumber men by a ratio of nine to one, and 80% of female patients develop lupus between the ages of 15 and 45. At present, there is no cure for lupus and no new
lupus drug has been approved in the U.S. for nearly 40 years. Lupus most often results in chronic inflammation and pain affecting various parts of the body, especially the skin, joints, blood, and kidneys. The disease can be serious and life
threatening. Current treatments include corticosteroids, nonsteroidal anti-inflammatory drugs, immunosuppressives, and antimalarials.



A second autoimmune disease that we are evaluating with epratuzumab is Sjögrens syndrome, a disease that currently affects between 2 to 4
million Americans. We presented results from our open-label, non-randomized, two-center Phase I/II trial in June, 2005, at the European League Against Rheumatism (EULAR) Annual European Congress of Rheumatology. Seventeen patients with primary
Sjögrens syndrome were enrolled in this study to assess feasibility, safety, and early evidence of efficacy. Over an eight-week period, patients received 360 mg/m2of epratuzumab every two weeks for a total of four doses. Fourteen patients received all four infusions without reactions, with a median infusion time of fifty
minutes. One patient discontinued the third infusion due to an acute infusion reaction, but completed the fourth infusion with no further reaction.



Patients reported improvements in their clinical signs and symptoms that include: dry eyes, dry mouth, fatigue, tender joints, tender points, tear and
salivary flow. Specifically, twenty-four hours after the last treatment, symptomatic improvements ranging from 100% of patients experiencing tender joints to 33% of patients with salivary flow were observed. Moreover, when these patients were
evaluated twelve weeks post therapy, 86% of patients who showed tender joints improvement retained clinical benefit, as did 20% of patients with increased salivary flow. Follow-up in these patients is ongoing.



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Epratuzumab seems to show activity causing a mild decrease in the number of circulating B-lymphocytes,
thus perhaps reducing the risk of infection. Consistent with our past clinical experience with the antibody, we have found a reduction of 50% to 60% in circulating B-cells in the patients enrolled in both the SLE and Sjögrens syndrome
trials. This data suggests that B-cell modulation may be the primary mechanism of action of epratuzumab, and that complete depletion of B-cells is not necessary to provide a clinical benefit.



Epratuzumab has also demonstrated good safety, tolerability, and clinical
efficacy in more than 340 patients with non-Hodgkins lymphoma. Results from our clinical trials in patients with NHL have been published in The Journal of Clinical Oncologyand Clinical Cancer Research.



While the clinical results to date have been encouraging, we are not able to
determine when, if ever, epratuzumab will be approved for sale in the United States or anywhere else. Even if it is approved, there can be no assurance that it will be commercially successful or that we will ever receive revenues equal to our
financial investment in this product candidate.



CD20 Program



Similar to CD22, CD20 is an antigen that is expressed
on B-lymphocytes and lymphomas. Rituximab, a $1.8 billion drug for the therapy of NHL, is a chimeric antibody (comprised of one-third mouse and two-thirds human protein) that binds to the CD20 antigen. IMMU-106 is our humanized antibody (90-95%
human and the remainder mouse) constructed of binding sites to CD20, which makes it very similar to rituximab in affinity and potency. IMMU-106 is currently in Phase I/II clinical trials in patients with NHL. We believe our Company is the first to
bring a humanized CD20 antibody into clinical testing. We also believe that this humanized CD20 antibody may be less immunogenic than those with increased mouse protein, and therefore, may be more appropriate to use in patients where repeated dosing
would be required, or patients with well preserved immune systems (e.g., patients with autoimmune diseases).



PAM4-Y-90 Program



PAM4 is our solid tumor therapeutic product candidate. It is a humanized monoclonal antibody highly specific for pancreatic cancer. Preclinical studies in mice with transplanted human pancreatic cancer have demonstrated that the antibody
labeled with Y-90, IMMU-107, has activity by itself as well as in combination with gemcitabine, a radiosensitizing chemotherapeutic that is commonly used to treat this disease. In fact, the combination appeared to be more effective than either
IMMU-107 or gemcitabine alone. A dose-escalation Phase I/II study is currently ongoing for patients with pancreatic cancer. We intend to also evaluate IMMU-107 in combination with gemcitabine in future clinical trials.



CEA Program



We have developed another solid tumor therapeutic product candidate that targets an antigen known as carcinoembryonic
antigen, or CEA. The CEA antigen is abundant at the site of virtually all cancers of the colon and rectum, and is associated with many other solid tumors, such as breast and lung cancers. We are not currently conducting clinical trials with our CEA
antibody, however, we are providing clinical supplies for an investigator-sponsored Phase II clinical trial in Germany, evaluating repeat dosing with IMMU-111 in patients with resected liver metastases of colorectal cancer.



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IMMU-111, our I-131-labeled CEA antibody, has been tested in a single-center, Phase II trial in Europe in
patients with proven metastatic colorectal cancer after surgical resection of their liver metastases. Twenty-three patients who underwent surgery for liver metastases of colorectal cancer received a dose of 40  60 mCi/m2of IMMU-111. Safety, disease-free survival and overall survival were determined and compared retrospectively to similar control
patients treated at the same institution and in a similar timeframe, but without receiving IMMU-111. At the 41stAnnual Meeting of the American Society of Clinical Oncology in May 2005, we reported that, with a median follow-up of 64 months, median overall survival on 19 assessable patients from the first liver resection was 68.0 months vs. 31.0 months for the
control group. Disease-free survival for IMMU-111 patients had a median of 18.0 months vs. 12.0 months for the controls. Five-year survival was 51.3% and 7.4% for the IMMU-111 and control groups, respectively. We believe that these initial results
with IMMU-111 are encouraging, and will need to be confirmed in future prospectively randomized trials comparing those receiving IMMU-111 with patients receiving standard care.



IMMU-100, the unlabeled form, has completed a Phase I/II dose-escalation trial in patients with colorectal or breast cancer.
This trial was performed to demonstrate the safety of administering repeated high doses of the unlabeled CEA antibody;, so that future trials could examine unlabeled antibody combined with chemotherapy in various solid tumors. This is because
preclinical results suggested that this antibody is capable of enhancing the effects of certain cancer drugs. Currently, we have no clinical studies ongoing with the naked CEA antibody.



Our Y-90-labeled CEA antibody, IMMU-101, has completed two multicenter Phase I trials in patients with advanced colorectal
or pancreatic cancer. Results from these studies, involving 15-18 patients each, showed tumor targeting, acceptable normal organ radiation doses, and defined the maximum tolerated dose for a single administration.



CD22-Y-90 Program



IMMU-102 (Y-90-labeled epratuzumab) is our radiolabeled CD22 antibody
product candidate being evaluated in patients with NHL. Radioimmunotherapy (RAIT) combines the targeting power of monoclonal antibodies with the cell-damaging ability of localized radiation. When infused into a patient, these radiation-carrying
antibodies circulate in the body until they locate and bind to the surface of specific cells, and then deliver their cytotoxic radiation more directly too the cells. This therapy, unlike chemotherapy, mainly selects cancer cells, has fewer side
effects, and may be administered on an outpatient basis.



Current RAIT treatments for NHL such as tositumomab and ibritumomab tiuxetan are radiolabeled murine antibodies targeting the CD20 antigen on the surface of mature B-lymphocytes and B-lymphocyte tumors. Epratuzumab is a humanized monoclonal
antibody that targets the CD22 antigen on B-lymphocytes. The internalizing property of epratuzumab is well suited for delivering radiation from the potent radioisotope, yttrium-90, selectively and locally to lymphoma cells that express the CD22
antigen. Moreover, because epratuzumab is humanized, IMMU-102 can potentially be administered to patients repeatedly in smaller doses than the regimens used by tositumomab and ibritumomab tiuxetan. Researchers found that splitting the dose over two
or three fractions made it tolerable to patients while delivering higher radioactivity to tumor cells. We continue to evaluate IMMU-102 in a Phase I/II dose-escalation trial being conducted in Europe. This clinical trial is examining the safety and
efficacy of IMMU-102 in patients with indolent or aggressive NHL who have had a relapse of disease following standard chemotherapy.



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CD74 Program



CD74 is a rapidly internalizing type-II transmembrane chaperone molecule associated with MHC class II. It actively directs transport from the cell surface
to an endosomal compartment and as such is a unique target for antibody-drug immunoconjugate therapy. We have observed high expression of CD74 in human non-Hodgkins lymphoma and multiple myeloma clinical specimens and cell lines, and have
developed IMMU-115, a naked humanized antibody, targeting the CD74 antigen. In preclinical studies, IMMU-115 has demonstrated activity in animal models of non-Hodgkins lymphoma and multiple myeloma with doses as low as 25μg. Benefits
were greater in the myeloma model, in which median survival time was increased more than 4.5-fold. Because the antibody has little or no toxicity, we are considering using higher doses or extended dosing to perhaps improve on these results in future
studies.



IMMU-110 is the CD74 antibody conjugated with the
cancer drug, doxorubicin. This antibody was chosen as our first drug immunoconjugate because of its rapid internalization into CD74-expressing cells. Preclinical in vitro results demonstrated that IMMU-110 binds specifically to CD74-expressing
non-Hodgkins lymphoma and multiple myeloma cell lines with sub-nanomolar affinity, and produces a cytotoxicity level approaching that of free doxorubicin. No significant difference was observed between the drug immunoconjugate and the naked
antibody in their pharmacokinetic and biodistribution profiles. In vivo efficacy studies in human NHL and multiple myeloma animal models, demonstrated that IMMU-110, given as a single injection, was efficacious with doses as low as 35μg
and administration as late as ten days after tumor cell inoculation. Antibody-targeted selective delivery of anticancer drugs against antigens expressed on cancer cells can potentially improve the therapeutic index of anticancer drugs.



Diagnostic Imaging Products



We have transitioned our focus away from the development of
diagnostic imaging products in order to accelerate the development of our therapeutic product candidates. Consistent with our de-emphasis on our diagnostic business, in the near future the Company will no longer commercialize CEA-Scan. LeukoScan
will continue to be manufactured and commercialized by the Company in territories where regulatory approvals have been granted. Furthermore, as of June 30, 2005, research and development into diagnostic product candidates was no longer a material
portion of our business.



CEA-Scan



The mouse monoclonal anti-CEA antibody fragment in CEA-Scan® is the diagnostic counterpart to IMMU-100, our
humanized antibody described above. It is directed against CEA, which is an antigen associated with virtually all cancers of the colon and rectum as well as many other cancers. In the near future the Company will cease commercializing CEA-Scan® .



LeukoScan



LeukoScan® uses a mouse monoclonal antibody fragment that first targets and then binds to a type
of white blood cell known as a granulocyte. These cells are associated with a potentially wide range of infectious and inflammatory diseases.



Research and Development Programs



We have historically invested heavily in our research and development programs, spending approximately $27,028,000, $21,934,000 and $18,175,000 on these
programs during our fiscal years ended June 30, 2005, 2004 and 2003, respectively, and we intend to continue to commit as much or more in the future. The discussion above is a brief summary of our principal research and development programs as of
August 29, 2005.



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Other Antibody-Directed Therapy Approaches



Our majority owned subsidiary, IBC Pharmaceuticals, Inc. (IBC),
has been working since 1999 on the development of novel cancer radiotherapeutics using patented pre-targeting technologies with proprietary, bi-specific antibodies. This pre-targeting technique involves the administration of an unlabeled antibody to
the patient on day one, followed by the administration of a separate radionuclide or other therapeutic, conjugated to a peptide, a few days later. This delay permits the patients body to eliminate antibodies, which have not bound to the
disease site and are therefore superfluous. A second recognition group is then attached, either to the radionuclide or therapeutic drug, such that the radionuclide or drug is localized to the antibody pre-targeted to the tumor site. Using such
methods in pre-clinical human tumor models, target-to-blood uptake ratios of radionuclide have been improved by up to forty times compared to the use of antibodies radiolabeled in the conventional manner. While this advantage is somewhat offset by
the greater complexity involved in multiple administration and timing of reagents, after achieving promising results from animal studies on this technology, we have decided to continue clinical studies in France using Iodine-131 as the therapeutic
agent and a bi-specific antibody having our humanized anti-CEA antibody.



A Phase I clinical trial, which has defined the maximum tolerated dose of the I-131 peptide, and the optimal dose of the bispecific CEA antibody and the interval between the unlabeled chemically conjugated bispecific
antibody and the labeled peptide, has been completed in France. Evidence of good tolerability and disease stabilization were reported for this trial at scientific meetings, including the June 2004 51stAnnual Meeting of the Society of Nuclear Medicine. Based on the positive outcome of the Phase I study, a multicenter Phase II study in patients with medullary
thyroid cancer (MTC) has been initiated and will be supported, assuming that there is adequate financing available to fund this trial. The primary objective of this study is to confirm feasibility and safety and assess efficacy in this rare disease
with very limited therapeutic alternatives.



Preclinical
studies by IBC continue for the development of new bispecific antibodies (fusion protein) and peptides for improved targeting and treatment strategies, including multiple binding-arms for the tumor-targeting antibody and new carrier peptides that
allow attachment of different kinds of therapeutic and diagnostic isotopes. Some of these results have been published in prominent cancer journals, such as Cancer Research and Clinical Cancer Research, and also at cancer conferences,
such as the 2004 Annual Meeting of the American Association for Cancer Research. One or more of these new forms of each of the two reagents are being studied and tested for potential further clinical development. We believe that this new
pre-targeting system may constitute the next generation of cancer radioimmunotherapy, and may also be applicable for the more targeted delivery of cancer drugs.



Peptides



During the past year, we continued to refine our proprietary methods for the radiolabeling of peptides with technetium-99m (Tc-99m) to the point where we
are now capable of producing these peptides at clinical-scale levels using single-vial kits. These methods will be generally applicable to the preparation of radioconjugates and will enable rapid evaluation of different peptide-receptor systems. In
related work, similar synthetic methods have also been used to prepare peptide conjugates that can be radiolabeled with Gallium-68 (Ga-68), Indium-111 and Yttrium-90, which are being applied to the bi-specific pre-targeting technology that is being
developed through IBC. We believe that these developments may allow for the introduction of a new class of diagnostic imaging agents using both traditional gamma-emitting isotopes, such as Tc-99m, and positron-emitting isotopes, such as Ga-68,
particularly since pre-targeting methods being developed with IBC are showing very high tumor/normal tissue ratios.



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Patents and Proprietary Rights



Our Patents



We have accumulated a sizeable portfolio of patents and patent applications in the course of our business, which we believe constitutes a very valuable
business asset. Some of these patents relate to our diagnostic imaging products and product candidates, while others relate to our therapeutic product candidates. Still others relate to our technologies and other discoveries for which no product
candidate has yet been identified. While the issuance of a patent does not in itself assure us that our intellectual property rights will remain secure, we believe that we have taken all reasonable steps necessary to protect our technologies and
inventions from misappropriation by others. As of August 29, 2005, this portfolio included approximately 90 issued U.S. patents. In addition, as of such date the portfolio included more than 250 issued foreign patents, with a number of U.S. and
foreign patent applications pending.



We are aware of certain
issued patents, as well as other patents pending, which are owned by competitors of ours and, to the extent they are determined to contain valid and enforceable claims, could result in a legal determination that our products or technologies are
infringing. This would result in our needing to obtain a license under such patents, which might not be available on commercially reasonable terms, if at all. While we do not presently believe that this will impair in any material respect our
ability to operate our business and commercialize our therapeutic product candidates, we cannot assure you that it will not adversely affect our business.



Our Licenses



We have obtained licenses from various parties for rights to use proprietary technologies and compounds. Included in the foregoing discussion of patents
is one U.S. patent and foreign counterparts, to which we have a right pursuant to an exclusive license granted by Dr. David M. Goldenberg, our Chairman and Chief Strategic Officer. We also have certain rights with respect to patents and patent
applications owned by the Center for Molecular Medicine and Immunology, or CMMI, by virtue of a license agreement between CMMI and us. In addition, we have certain rights with respect to patents and patent applications assigned solely to the
National Institutes of Health (NIH) or jointly to NIH and us, as well as with respect to certain patent applications assigned to the University of Massachusetts. We also acquired rights to patents and patent applications assigned or
licensed to IBC by virtue of our acquisition of a controlling interest in IBC.



In July 1998, we signed a license agreement with Dako A/B to our worldwide patents for specific anti-CEA monoclonal antibodies, which Dako markets for in vitro use. In June 2002, we granted a non-exclusive
license to Daiichi Pure Chemicals Co. under these patents, which included an up-front payment of $825,300. In addition, we recorded royalty income of $250,000, $183,000 and $265,000 for the years ended June 30, 2005, 2004 and 2003, respectively.



It is our policy to vigorously defend our intellectual
property rights where appropriate. Accordingly, at any time, and from time to time, we may be engaged in licensing discussions with other parties that we believe may be infringing our patents or other intellectual property rights.



Our Trademarks



The mark IMMUNOMEDICS is registered in the United States and 36
foreign countries and a European Community Trademark has been granted. Our logo is also registered in the United States and in two foreign countries. The mark IMMUSTRIP is registered in the United States and Canada. The mark
CEA-SCAN is registered in the United States and 21 foreign countries, and a European Community



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Trademark has been granted. The mark LEUKOSCAN is registered in the United States and 11 foreign countries,
and a European Community Trademark has been granted. The mark LYMPHOSCAN is registered in the United States and nine foreign countries, and a European Community Trademark has been granted. The mark CEA-CIDE is registered in
the United States and 14 foreign countries, and a European Community Trademark has been granted. The mark LYMPHOCIDE is registered in the United States, and a European Community Trademark has been granted. In addition, we have applied
for registration in the United States for several other trademarks for use on products now in development or testing, and for corresponding foreign and/or European Community Trademarks for certain of those marks.



Our Trade Secrets



We also rely upon unpatented trade secrets, and we cannot assure you that
others will not independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose such technology, or that we can meaningfully protect such rights. We require our
employees, consultants, outside scientific collaborators, sponsored researchers and other advisers to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all
confidential information developed or made known to the individual during the course of the individuals relationship with us is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of our
employees, the agreement provides that all inventions conceived by such employees shall be our exclusive property. There can be no assurance, however, that these agreements will provide meaningful protection or adequate remedies for our trade
secrets in the event of unauthorized use or disclosure of such information.



Third Party Rights



Our success also depends in part on our ability to gain access to third party patent and proprietary rights and to operate our business without infringing on third party patent rights. We may be required to obtain licenses to patents or
other proprietary rights from third parties to develop, manufacture and commercialize our product candidates. Licenses required under third-party patents or proprietary rights may not be available on terms acceptable to us, if at all. If we do not
obtain the required licenses, we could encounter delays in product development while we attempt to redesign products or methods or we could be unable to develop, manufacture or sell products requiring these licenses at all.



Strategic Partnering and Relationships



Amgen Inc.



On December 17, 2000, we entered into a Development and License Agreement
(the Amgen Agreement) with Amgen Inc. (Amgen), whereby Amgen obtained exclusive rights to continue the clinical development and commercialization in North America and Australia of our unlabeled, or naked, CD22
antibody compound, epratuzumab, for the treatment of patients with non-Hodgkins lymphoma. We received an up-front payment of $18,000,000 that was recognized, beginning February 2001, as revenue of $750,000 per month over a period of 24 months.



On April 8, 2004, pursuant to a termination agreement between
Amgen and us, Amgen returned all rights for epratuzumab, the humanized CD22 monoclonal antibody therapeutic we licensed to Amgen as part of the Amgen Agreement in December 2000, including rights to second generation molecules and conjugates. As part
of the transaction, we issued to Amgen a five-year warrant to purchase 100,000 shares of our common stock at a price equal to $16.00 per share with an estimated value of $310,000, which was recorded as an expense in 2004. If epratuzumab is approved
for commercialization in the United States for NHL therapy, we will be required to pay Amgen a milestone payment in the amount of $600,000. There are no other financial obligations between the parties as a result of the Amgen Agreement.



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Other Collaborations



We conduct research on a number of our programs in collaboration with a not-for-profit organization called The Center for Molecular Medicine and
Immunology, or CMMI, and its clinical unit, the Garden State Cancer Center. CMMI performs contracted pilot and pre-clinical trials in scientific areas of importance to us and also conducts basic research and pre-clinical evaluations in a number of
areas of potential interest to us. Dr. David M. Goldenberg, our Chairman of the Board and Chief Strategic Officer, is the President and a Trustee of CMMI.



In 2005 the Company received a Phase I Grant Award from the National Institute of Health for a six-month period. The award is for $134,000 and is entitled
Tetravalent bispecific fusion antibody for immunotherapy. The objectives of this Small Business Innovative Research (SBIR) investigation is to develop a tetravalent bispecific fusion protein derived from two different
humanized antibodies against human CD22 and CD20, and to explore the potentials of utilizing this tetravalent bispecific antibody (bsAb) as a single agent for treatment of patients with B-cell cancers to further improve the efficacy,
safety, and convenience of the combination therapy. In Phase I, the fusion bsAb will be engineered by recombinant technology and expressed in a mammalian cell line, and high-level bsAb-producing clones suitable for industrial scale production will
be developed. In this preliminary stage of a new drug development, the physical, biochemical, and immunological properties of the recombinant bsAb will be thoroughly characterized. In addition, in vitro and in vivo characteristics of the bsAb
against malignant B-cells will be evaluated.



In 2004 the
Company received two Small Business Innovation Research Phase I Grant Awards from the National Cancer Institute, one for $86,000, and one for $100,000, each budgeted for a six-month period. The first award, entitled Molecular Imaging by
Affinity Enhancement PET  will be applied to investigate the use of bispecific antibodies and gallium-68-radiolabeled bivalent peptides for specific targeting of disease and possible improved detection using positron emission tomography, or
PET. The combination of bispecific antibodies with rapidly targeting and systemically clearing low molecular weight gallium-68-radiolabeled agents, married to the sensitivity of PET detection techniques, may lead to an entire new class of
disease-specific imaging agents. The second award, entitled Minimal Disease Radioimmunotherapy of Colorectal Cancer, will be applied to study the potential treatment of colorectal cancer using a humanized, high affinity, anti-CEA
humanized monoclonal antibody, hMN-14, and an intracellularly-trapped residualizing form of iodine-131 radionuclide. This iodine-131-radiolabeled antibody, produced using our proprietary radioiodination technology, is designed to solve
the problem of in vivo deiodination associated with directly radioiodinated MAbs, and thereby deliver an enhanced dose of radiation to targeted tumor cells.



In October 2003, we entered into a research collaboration with Schering AG of Berlin, Germany, involving bispecific
antibody, pretargeting technologies for cancer therapy being developed by IBC.



We also collaborate with numerous other academic and research centers. Our academic collaborators have included such institutions as the University of Nijmegen, The Netherlands; INSERM, Nantes, France; University of
Göttingen, Germany; University of Marburg, Germany; New York Presbyterian Hospital  Cornell Medical College; University of Massachusetts; Fox Chase Cancer Center; and Brigham & Womens Hospital-Harvard Medical School. We believe
these ongoing research efforts will identify new and improved products and techniques for diagnosing and treating various cancers and infectious diseases.



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Government Regulation



Regulatory Compliance



Our research and development activities, including testing in laboratory animals and in humans, our manufacture of antibodies, as well as the handling,
labeling and storage of the product candidates that we are developing, are all subject to stringent regulation, primarily by the U.S. Food and Drug Administration (FDA) in the United States and by comparable authorities in other countries. If for
any reason we are unable to comply with applicable requirements there will likely occur various adverse consequences, including one or more delays in approval, or even the refusal to approve, product licenses or other applications, the suspension or
termination of clinical investigations, the revocation of approvals previously granted, as well as fines, criminal prosecution, recall or seizure of products, injunctions against shipping products and total or partial suspension of production and/or
refusal to allow us to enter into governmental supply contracts.



The process of obtaining requisite FDA approval is costly and time consuming even in the best of circumstances. For a new human drug or biological product to be marketed in the United States, current FDA requirements include: (i) the
successful conclusion of pre-clinical tests to gain preliminary information on the products safety; (ii) the filing with the FDA of an Investigational New Drug, or IND, to conduct human clinical trials for drugs or biologics; (iii)
the successful completion of human clinical investigations to establish the safety and efficacy of the product candidate for its intended indication; and (iv) the filing and then acceptance and approval by the FDA of a New Drug Application, or
NDA, for a drug product, or a Biological License Application, or BLA, for a biological product, in either case to allow commercial distribution of the drug or biologic.



Pre-clinical tests involve the evaluation of the product candidate in both
the laboratory and in animal studies to assess safety as well as potential efficacy. The results of the pre-clinical tests, if favorable, are then submitted to the FDA as part of an IND to support the evaluation of the product in human patients.
Historically, the results from pre-clinical testing and early clinical trials have often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have shown promising results in clinical trials, but
subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory approvals. Data obtained from pre-clinical and clinical activities are susceptible to varying interpretations, which may delay, limit or prevent
regulatory approval. In addition, we may encounter regulatory delays or rejections as a result or many factors, including changes in regulatory policy during the period of product development.



Clinical trials involve administration of the product to patients under the
supervision of a qualified principal investigator. Such trials are typically conducted in three sequential phases, although the phases may overlap. Typically, clinical testing involves the following:



| |  |  | In Phase I trials, the initial introduction of the drug into human patients, the product candidate is tested for safety, dosage tolerance, absorption, metabolism, distribution and
excretion;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Phase II trials involve further studies in a limited patient population afflicted with a specified disease to: (i) determine the biological or clinical activity of the product for
specific, targeted indications; (ii) determine dosage tolerance and optimal dosage; and (iii) identify possible adverse effects and safety risks; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In Phase III, large scale, multi-center, comparative clinical trials are conducted
| | - |  | ----------------------------------------------------------------------------------



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with patients afflicted with a target disease in order to provide enough data to statistically evaluate
the efficacy and safety of the product, as required by the FDA. Phase IV studies, or post-marketing studies, may also be required to provide additional data on safety or efficacy.



The results of the pre-clinical and clinical testing of a chemical pharmaceutical product are then submitted to the FDA in
the form of an NDA, or for a biological pharmaceutical product in the form of a BLA, for approval to commence commercial sales. In responding to an NDA or a BLA, the FDA may grant marketing approval, request additional information or deny the
application if it determines that the application does not provide an adequate basis for approval. We cannot assure you that any approval required by the FDA will be obtained on a timely basis, if at all.



Among the conditions for an NDA or a BLA approval is the requirement that the
applicable manufacturing, clinical, pharmacovigilance, quality control and manufacturing procedures conform on an ongoing basis with current Good Clinical Practices, or GCP, current Good Manufacturing Practices, or GMP, and computer information
system validation standards. Before approval of a BLA, the FDA will perform a pre-licensing inspection of clinical sites, manufacturing facilities and the related quality control records to determine its compliance with these requirements. To assure
compliance, applicants must continue to expend time, money and effort in the area of training, production and quality control. After the applicant is licensed for the manufacture of any product, manufacturers are subject to periodic inspections by
the FDA. We will also face similar inspections coordinated by the European Medicine Agency, or EMEA, by inspectors from particular European Union member states that conduct inspections on behalf of the European Union.



The drug approval process is similar in other countries and is also regulated
by specific agencies in each geographic area. Approval by the FDA does not ensure approval in other countries. In addition, even if we can obtain drug approval in other countries, it may require considerable more time to obtain such approval in the
United States. In European Union countries, Canada, and Australia, regulatory requirements and approval processes are similar in principle to those in the United States and can be as rigorous, costly and uncertain. Additionally, depending on the
type of drug for which an applicant is requesting approval, there are currently two potential tracks for marketing approval in European Union countries: mutual recognition and the centralized procedure. These review mechanisms may ultimately lead to
approval in all European Union countries, but each method grants all participating countries some decision-making authority in product approval.



Orphan Drug Act



We generally seek to have our product candidates designated as Orphan Drugs by the FDA under the Orphan Drug Act of 1983, when applicable.
Under the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which generally is a disease or condition that affects fewer than 200,000 individuals in the United States.
Orphan drug designation must be requested before submitting a BLA. After the FDA grants orphan drug designation, the generic identity of the therapeutic agent and its potential orphan use are publicly disclosed by the FDA. Orphan drug designation
does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. If a product which has an orphan drug designation subsequently receives the first FDA approval for the indication for which it has such
designation, the product is entitled to orphan exclusivity, i.e., the FDA may not approve any other applications to market the same drug for the same indication for a period of seven years, except in certain very limited circumstances.



To date, we have successfully obtained Orphan Drug designation for
AFP-Scan, LymphoScan, CEA-Scan®, epratuzumab, PAM4
and labetuzumab. There can be no assurance, however, that our competitors will not receive approval of other different drugs or biologics for treatment of the diseases for which our products and product candidates are targeted.



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Other Regulatory Considerations



We are also subject to regulation under the Occupational Safety and Health
Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, The Clean Air Act, and other current and potential future federal, state, or local regulations. Our research and development activities involve the controlled use of
hazardous materials, chemicals, biological materials and various radioactive compounds. We believe that our procedures comply with the standards prescribed by state and federal regulations; however, the risk of injury or accidental contamination
cannot be completely eliminated.



We are subject to the U.S.
Foreign Corrupt Practices Act, which prohibits corporations and individuals from engaging in certain activities to obtain or retain business or to influence a person working in an official capacity. Under this act, it is illegal to pay, offer to
pay, or authorize the payment of anything of value to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business or to otherwise influence a person working in an
official capacity. Our present and future business has been and will continue to be subject to various other laws and regulations.



Pricing Controls



The levels of revenues and profitability of biopharmaceutical companies may be affected by the continuing efforts of government and third party payers to
contain or reduce the costs of health care through various means. For example, in certain foreign markets, pricing reimbursement or profitability of therapeutic and other pharmaceutical products is subject to governmental control. In the United
States, there have been, and we expect that there will continue to be, a number of federal and state proposals to implement similar governmental pricing control. While we cannot predict whether any such legislative or regulatory proposals will be
adopted, the adoption of such proposals could have a material adverse effect on our business, financial condition and profitability.



Third Party Reimbursement



In addition, in the United States and elsewhere, sales of therapeutic and other pharmaceutical products are dependent in part on the availability of
reimbursement to the consumer from third party payers, such as government and private insurance plans. Third party payers are increasingly challenging the prices charged for medical products and services. We cannot assure you that any of our
products will be considered cost effective and that reimbursement to the consumer will be available or will be sufficient to allow us to sell our products on a competitive and profitable basis.



Competition



Competition in the biopharmaceutical industry is intense and based
significantly on scientific and technological factors such as the availability of patent and other protection for technology and products, the ability to commercialize technological developments and the ability to obtain governmental approval for
testing, manufacturing and marketing. We compete with specialized biopharmaceutical firms in the United States, Europe and elsewhere, as well as a growing number of large pharmaceutical companies. A number of companies, including Biogen Idec,
Genentech, Glaxo SmithKline, Hoffmann-LaRoche, Human Genome Sciences, Ligand Pharmaceuticals, Millennium Pharmaceuticals, Protein Design Laboratories, Genmab, Medarex, Abgenix, Bristol-Myers Squibb and Schering AG, are engaged in the



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development of therapeutic autoimmune and oncology products. Many of these companies have significantly greater
financial, technical and marketing resources than we do. Many major pharmaceutical companies have developed or acquired internal biotechnology capabilities or made commercial arrangements with other biopharmaceutical companies. These companies, as
well as academic institutions, governmental agencies and private research organizations, also compete with us in recruiting and retaining highly qualified scientific, technical and professional personnel and consultants. Our ability to compete
successfully with other companies in the biopharmaceutical field will also depend to a considerable degree on the continuing availability of capital to us.



We are aware of certain products under development or manufactured and commercialized by competitors that are used for the prevention, diagnosis or
treatment of certain diseases that we have targeted for product development. In addition, we are aware of several companies that have potential antibody or other product candidates that target the same antigen as our lead product candidate,
epratuzumab, as well as various other biopharmaceutical products that are likely to compete directly with our product candidates.



We expect that our products under development and in clinical trials will address major markets within the cancer and autoimmune disease sectors. Our
competition will be determined in part by the potential indications for which drugs are developed and ultimately approved by regulatory authorities. Additionally, the timing of market introduction of some of our potential products or of
competitors products may be an important competitive factor. Accordingly, the relative speed with which we can develop products, complete pre-clinical testing, clinical trials and approval processes and supply commercial quantities to market
are expected to be important competitive factors. We expect that competition among products approved for sale will be based on various factors, including product efficacy, safety, reliability, availability, price, availability of reimbursement,
patent position, manufacturing capacity and capability, distribution capability and government action. We cannot assure you that we will be able to compete successfully in any of these areas, and our inability to compete would materially and
adversely affect our business prospects.



Marketing,
Sales and Distribution



At present we have only
limited marketing and sale capabilities as we focus our efforts on developing our therapeutic product candidates. CEA-Scan® has been marketed and sold to physicians in the United States directly by our small internal sales force, which is focused on new customers in major
medical centers. The Company does not intend to continue the manufacturing and commercialization activities related to CEA-Scan. The Company will continue to manufacture and market LeukoScan using our nuclear medicine technicians to work with our
sales force and provide technical support directly to customers. We also have agreements with third parties to market LeukoScan® that provide customer support and distribution of the products.



Our European operations are headquartered in Darmstadt, Germany. We have also established sales representation in most major
European markets. We service other markets through the appointment of local organizations that provide sales and marketing support as well as local product redistribution. In October 2001, we entered into a Distribution Agreement with Logosys
Logistik GmbH. Under this agreement, Logosys packages and distributes LeukoScan® and CEA-Scan® in the
European Union since January 2002, and will continue to package and distribute LeukoScan after our commercialization activities on CEA-Scan have been discontinued. We will continue to evaluate future arrangements and opportunities with respect to
other products we may develop in order to optimize our profits and our distribution, marketing and sales capabilities.



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Manufacturing



We have completed the construction of a large-scale bioreactor facility at our Morris Plains, New Jersey, location. This
facility will be used for the production of all of our therapeutic product candidates for clinical trials, and potentially in commercial quantities as well. We are continuing the process validation, involving the production of antibodies for current
and future clinical trials.



We have historically manufactured
CEA-Scan® and LeukoScan® for commercial sale at our facility in Morris Plains. We also perform antibody
processing and purification of all our therapeutic product candidates at this facility. We have scaled-up our antibody purification and fragmentation manufacturing processes for our diagnostic imaging agents to permit us to produce commercial levels
of product. Our purification area consists of four independent antibody-manufacturing suites, several support areas, and quality control laboratories. The Committee on Proprietary Medicinal Products of the European Commission approved the
manufacturing facility and product manufacturing processes for LeukoScan and CEA-Scan in May 1998. The FDA approved the facility and processes for CEA-Scan® in December 1998.



Reliance on Third Parties



Certain end-stage portions of the manufacturing process for CEA-Scan® and LeukoScan® were performed under a manufacturing agreement with SP Pharmaceuticals. This arrangement was terminated in December 2002. We are currently in the
process of validating our end-stage manufacturing processes at a new manufacturing source for LeukoScan.



We currently rely on third parties to supply raw materials and to perform certain end-stage portions of the manufacturing process for our diagnostic
imaging products, CEA-Scan® and LeukoScan®. We do not currently have the resources necessary to
perform these processes, and if our third party suppliers were to become unwilling or unable to do so for any reason, we would be unable to deliver these products to customers until we entered into an agreement with another qualified manufacturer.
This could cause substantial delays in customer deliveries and adversely affect our results of operations.



On June 1, 2005 we entered into an agreement with PPD Development LP (PPD), a clinical research organization, to administer the
Phase III clinical trials for SLE. The clinical trials are expected to operate over a period of approximately three years. The initial phase of the two clinical trials is expected to generate analytical data from the studies in approximately two
years.



Other Regulatory Considerations



In addition to regulating and auditing human clinical
trials, the FDA regulates and inspects equipment, facilities and processes used in the manufacturing of such products prior to providing approval to market a product. If after receiving clearance from the FDA, a material change is made in
manufacturing equipment, location, or process, additional regulatory review may be required. We must also adhere to current Good Manufacturing Practice and product-specific regulations enforced by the FDA through its facilities inspection program.
The FDA also conducts regular, periodic visits to re-inspect equipment, facilities, and processes following the initial approval. If, as a result of these inspections, the FDA determines that our equipment, facilities or processes do not comply with
applicable FDA regulations and conditions of product approval, the FDA may seek civil, criminal or administrative sanctions and/or remedies against us, including the suspension of our manufacturing operations.



CEA-Scan® and certain of our other imaging agents are derived from the fluids produced in mice. Regulatory authorities,
particularly in Europe, have expressed concerns about the use of these fluids for the production of monoclonal antibodies. These regulatory authorities may determine that our quality control procedures for these products are inadequate. In the event
we have to discontinue the use of mouse fluids, we may not have the resources at the time to acquire the necessary manufacturing equipment and expertise that we will need to make the changes in our development programs.



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Employees



As of August 29, 2005, we employed 118 persons on a full-time basis, of whom 24 were in research and development departments, 17 of whom were engaged in
clinical research and regulatory affairs, 54 of whom were engaged in operations and manufacturing and quality control, and 23 of whom were engaged in finance, administration, sales and marketing. Of these employees, 24 hold M.D., Ph.D. or other
advanced degrees. We believe that while we have been successful to date in attracting skilled and experienced scientific personnel, competition for such personnel continues to be intense and there can be no assurance that we will continue to be able
to attract and retain the professionals we will need to grow our business. Our employees are not covered by a collective bargaining agreement, and we believe that our relationship with our employees is excellent.



Corporate Information



We were incorporated in Delaware in 1982. Our principal offices are located
at 300 American Road, Morris Plains, New Jersey 07950. Our telephone number is (973) 605-8200. In addition to our majority-owned subsidiary, IBC, we also have two foreign subsidiaries, Immunomedics B.V. in The Netherlands and Immunomedics GmbH in
Darmstadt, Germany, to assist us in managing sales and marketing efforts and coordinating clinical trials in Europe.Our web address is www.immunomedics.com. We have not incorporated by reference into this Annual Report on Form 10-K the
information on our website, and you should not consider it to be a part of this document.



Our reports that have been filed with the Securities and Exchange Commission (SEC) are available on our website free of charge, including our annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, Forms 3,4 and 5 filed on behalf of directors and executive officers and any amendments to such reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the Exchange
Act). Copies of this Annual Report on Form 10-K may also be obtained without charge electronically or by paper by contacting Investor Relations, Immunomedics, Inc., 300 American Road, Morris Plains, New Jersey 07950 or by calling (973)
605-8200.



In addition, we make available on our website (i)
the charters for the committees of the Companys Board of Directors, including the Audit Committee, Compensation Committee and Nominating and Board Governance Committee, and (ii) the Companys Code of Business Conduct and Ethics (the
Code of Ethics) governing its directors, officers and employees. Within the time period required by the SEC, we will post on our website any modifications to the Code of Ethics, as required by the Sarbanes-Oxley Act of 2002.



The public may also read and copy the materials we file with the SEC at
its Public Reference Room at 450 Fifth Street NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC.



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Factors That May Affect Our Business and Results of Operations



Our business is subject to certain risks and uncertainties, each of which could materially
adversely affect our business, financial condition, cash flows and results of operations.



Risks Relating to Our Business, Operations and Product Development



We have a long history of operating losses and it is likely that our operating expenses will continue to exceed our revenues for the foreseeable
future.



We have incurred significant operating losses
since our formation in 1982, and have never earned a profit since that time. As of June 30, 2005, we had an accumulated deficit of approximately $175.0 million, including net losses of $26,758,000 and $22,355,000 for the years ended June 30, 2005
and 2004, respectively. The only significant revenue we have earned to date has come from the limited sale of our two diagnostic imaging products in Europe and, to a lesser degree, the United States, and the licensing of our lead therapeutic product
candidate, epratuzumab, to Amgen in 2001. Our agreement with Amgen was terminated in April, 2004. In addition, we have made the strategic decision to de-emphasize sales of our diagnostic products and focus on our therapeutic pipeline. We have never
received revenue from the commercialization of any therapeutic product. We expect to continue to experience significant operating losses as we invest further in our research and development activities while simultaneously attempting to develop and
commercialize our other therapeutic product candidates. If we fail in our attempts to develop commercially viable therapeutic products, it is likely that we will never achieve significant revenues or become profitable, either of which would
seriously jeopardize our ability to continue as a going concern.



We have significant future capital needs and may be unable to raise capital when needed, which could force us to delay or reduce our research and development efforts.



We do not believe we will have adequate cash at our current expected
spending level to fund our research and development programs through the next twelve months. We will require additional financial resources after we utilize our current liquid assets in order to continue our research and development programs as is
currently budgeted for fiscal year 2006. We are actively pursuing various financing alternatives as market conditions permit through additional debt or equity financings and through collaborative marketing and distribution agreements. We continue to
evaluate various programs to raise additional capital and to seek additional revenues from the licensing of our proprietary technologies. At the present time, we are unable to determine whether any of these future activities will be successful and,
if so, the terms and timing of any definitive agreements. If we are unable to raise additional funding in the near term, we will curtail certain programs and implement cost savings programs in order for us to continue our operations at least through
the 2006 fiscal year.



Our most advanced therapeutic
product candidates are still only in the clinical development stage, and will require us to raise capital in the future in order to fund further expensive and time-consuming studies before they can even be submitted for final regulatory approval.



Our most advanced therapeutic product candidates are
still in the clinical development stage and will not be available for commercial sale any time soon, if ever. In order to complete the clinical development process for each of our product candidates, it will be necessary to invest significant
financial resources, and devote a great deal of time and effort, just to reach the point where an application for final FDA or foreign regulatory approval can be submitted. In addition, we will need to raise additional capital to finance the costly
process of obtaining approval for any of our current products should we get to that stage of product development.



Clinical trials involve the administration of a product candidate to patients who are already extremely ill, making patient enrollment often difficult and
expensive. Moreover, even in ideal circumstances where the patients can be enrolled and then followed for the several months or more required to complete the study, the trials can be suspended, terminated or otherwise fail for any number of reasons,
including:



| |  |  | later-stage clinical trials may raise safety or efficacy concerns not readily apparent in earlier trials;
| | - |  | ---------------------------------------------------------------------------------------------------------



| |  |  | unforeseen difficulties in manufacturing the product candidate in compliance with all regulatory requirements and in the quantities needed to complete the trial may be
cost-prohibitive;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | during the long trial process, alternative therapies may become available which make further development of the product candidate impracticable; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | if we are unable to obtain the additional capital we need to fund all of the clinical trials we foresee, we may forced to cancel or otherwise curtail some important trials.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Any failure or substantial delay in successfully completing clinical trials for our product candidates,
particularly the ongoing trials for our most advanced product candidate, epratuzumab, could severely harm our business and results of operation.



Once the clinical development process has been successfully completed, our ability to derive revenues from the sale of therapeutics will depend upon
our first obtaining FDA as well as foreign regulatory approvals, all of which are subject to a number of unique risks and uncertainties.



Even if we are able to demonstrate the safety and efficacy of our product candidates in clinical trials, if we fail to gain timely approval to
commercialize our product candidates from the FDA and other foreign regulatory authorities, we will be unable to generate the revenues we will need to build our business. These approvals may not be granted on a timely basis, if at all, and even if
and when they are granted they may not cover all the indications for which we seek approval. For example, while we may develop a product candidate with the intention of addressing a large, unmet medical need, the FDA may only approve the use of the
drug for indications affecting a relatively small number of patients, thus greatly reducing the market size and our potential revenues. The approvals may also contain significant limitations in the form of warnings, precautions or contraindications
with respect to conditions of use, which could further narrow the size of the market. Finally, even after approval can be obtained, we may be required to recall or withdraw a product as a result of newly discovered safety or efficacy concerns,
either of which would have a materially adverse effect on our business and results of operations.



In order to become a profitable biopharmaceutical company, we will need to raise significant amounts of additional capital. Because it can be
difficult for a small-cap company like ours to raise equity capital on acceptable terms, we cannot assure you that we will be able to obtain the necessary capital when we need it, or on acceptable terms, if at all.



Even if our technologies and product candidates are superior, if we lack the
capital needed to bring our future products to market, we will never be successful. We have obtained the capital necessary to fund our research and development programs to date primarily from the following sources:



| |  |  | Approximately $237.0 million from the public and private sale of our debt and equity securities through June 30, 2005;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



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| |  |  | $18.0 million from Amgen under our epratuzumab licensing agreement, which was terminated in 2004; and
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | limited product sales of CEA-Scan® and LeukoScan®, licenses, grants and interest income from our investments.
| | - |  | -------------------------------------------------------------------------------------------------------------



We will need to obtain additional funds for our research and development programs through the next twelve months or we will be required to curtail
existing programs or incur other significant cost savings programs. We intend to continue expending substantial capital on our research and development programs if funding levels permit. We will need to raise still additional capital in order to
obtain the necessary regulatory approvals and then commercialize our future therapeutic products. Our capital requirements are dependent on numerous factors, including:



| |  |  | the rate at which we progress our research programs and the number of product candidates we have in pre-clinical and clinical development at any one time;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the cost of conducting clinical trials involving patients in the United States, Europe and possibly elsewhere;
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | our need to establish the manufacturing capabilities necessary to produce the quantities of our product candidates we project we will need;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the time and costs involved in obtaining FDA and foreign regulatory approvals;
| | - |  | ------------------------------------------------------------------------------



| |  |  | the cost of first obtaining, and then defending, our patent claims and other intellectual property rights; and
| | - |  | --------------------------------------------------------------------------------------------------------------



| |  |  | our ability to enter into licensing and other collaborative agreements to help off-set some of these costs.
| | - |  | -----------------------------------------------------------------------------------------------------------



We do not believe we will have adequate cash resources to fund our operations
for the next twelve months without curtailing our planned research and development programs or incurring other significant cost savings programs. There may be additional cash requirements for many reasons, including, but not limited to, changes in
our research and development plans, the need for unexpected capital expenditures or costs associated with any acquisitions of other businesses, assets or technologies that we may choose to undertake. If we deplete our existing capital resources, we
will be required to either obtain additional capital quickly, or else significantly reduce our operating expenses and capital expenditures, either of which could have a material adverse effect on us.



Our ability to raise future capital on acceptable terms will depend not only
upon our operating performance, but also on conditions in the public and private debt and equity markets, as well as the overall performance of other companies in the biopharmaceutical and biotechnology sectors. Financing may not be available to us
when we need it on terms we find acceptable, if at all. Furthermore, the terms of any such debt or equity financing may include covenants which limit our future ability to manage the business, contain preferences, privileges and rights superior to
those enjoyed by holders of our common stock or cause substantial dilution to our existing stockholders.



If we cannot successfully and efficiently manufacture the compounds that make up our products and product candidates, our ability to sell products
and conduct clinical trials will be impaired.



Our
ability to conduct our pre-clinical and clinical research and development programs depends, in large part, upon our ability to manufacture our proprietary compounds in accordance with FDA and other regulatory requirements. While we have completed
construction on the major expansion of our manufacturing facilities in New Jersey in anticipation of our current and future needs, we have no historical experience in manufacturing these compounds in significant quantities, and we may not be able



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to do so in the quantities and with the degree of purity that is required. As with any new manufacturing facility, it may
be some time before we become aware of any deficiencies in either the design of the new facility or the in construction itself. Any interruption in manufacturing at this site, whether by natural acts or otherwise, would significantly and adversely
affect our operations, and delay our research and development programs.



Our future success will depend upon our ability to first obtain and then adequately protect our patent and other intellectual property rights, as well avoiding the infringement of the rights of others.



Our future success will be highly dependent upon our ability to first obtain
and then defend the patent and other intellectual property rights necessary for the commercialization of our product candidates. We have filed numerous patent applications on the technologies and processes that we use in the United States and
certain foreign countries. Although we have obtained a number of issued U.S. patents to date, the patent applications owned or licensed by us may not result in additional patents being issued. Moreover, these patents may not afford us the protection
we need against competitors with similar technologies or products.



The successful development of therapeutic products frequently requires the application of multiple technologies that may be subject to the patent or other intellectual property rights of third parties. Although we believe it is likely we
will need to license technologies and processes from third parties in the ordinary course of our business, we are not currently aware of any material conflict involving our technologies and processes with any valid patents or other intellectual
property rights owned or licensed by others. In the event that a third party were to claim such a conflict existed, they could sue us for damages as well as seek to prevent us from commercializing our product candidates. It is possible that a third
party could successfully claim that our products infringe on their intellectual property rights. Uncertainties resulting from the litigation and continuation of patent litigation or other proceedings could have a material adverse effect on our
ability to compete in the marketplace. Any patent litigation or other proceeding, even if resolved in our favor, would require significant financial resources and management time. Some of our competitors may be able to sustain these costs more
effectively than we can because of their substantially greater financial and managerial resources. If a patent litigation or other proceeding is resolved unfavorably to us, we may be enjoined from manufacturing or selling our products without a
license from the other party, in addition to being held liable for significant damages. We may not be able to obtain any such license on commercially acceptable terms, if at all.



In addition to our reliance on patents, we attempt to protect our proprietary technologies and processes by relying on trade
secret laws, nondisclosure and confidentiality agreements and licensing arrangements with our employees and other persons who have access to our proprietary information. These agreements and arrangements may not provide meaningful protection for our
proprietary technologies and processes in the event of unauthorized use or disclosure of such information. In addition, our competitors may independently develop substantially equivalent technologies and processes or otherwise gain access to our
trade secrets or technology, either of which could materially and adversely affect our competitive position.



We face substantial competition in the biotechnology industry and may not be able to compete successfully against one or more of our competitors.



The biotechnology industry is highly competitive,
particularly in the area of diagnostic and therapeutic oncology products. In recent years, there have been extensive technological innovations achieved in short periods of time, and it is possible that future technological changes and discoveries by
others could result in our products and product candidates quickly becoming uncompetitive or obsolete. A number of companies, including Biogen Idec, Genentech, Glaxo SmithKline, Hoffmann-LaRoche, Human Genome Sciences, Ligand Pharmaceuticals,
Millennium Pharmaceuticals, Protein Design



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Laboratories, Genmab, Medarex, Abgenix, Bristol-Myers Squibb and Schering AG, are engaged in the development of
therapeutic autoimmune and oncology products. Many of these companies have significantly greater financial, technical and marketing resources than we do. In addition, many of these companies have more established positions in the pharmaceutical
industry and are therefore better equipped to develop, commercialize and market oncology products. Even some smaller competitors may obtain a significant competitive advantage over us if they are able to discover or otherwise acquire patentable
inventions, form collaborative arrangements or merge with larger pharmaceutical companies.



We expect to face increasing competition from universities and other non-profit research organizations. These institutions carry out a significant amount of research and development in the field of antibody-based
technologies, and they are increasingly aware of the commercial value of their findings. As a result, they are demanding greater patent and other proprietary rights, as well as licensing and future royalty revenues.



We may be liable for contamination or other harm caused by hazardous
materials that we use in the operations of our business.



In addition to laws and regulations enforced by the FDA, we are also subject to regulation under various other foreign, federal, state and local laws and regulations. Our manufacturing and research and development programs involve the
controlled use of viruses, hazardous materials, chemicals and various radioactive compounds. The risk of accidental contamination or injury from these materials can never be completely eliminated, and if an accident occurs we could be held liable
for any damages that result, which could exceed our available resources.



The nature of our business exposes us to significant liability claims, and our insurance coverage may not be adequate to cover any future claims.



The use of our compounds in clinical trials and any future sale exposes us
to liability claims that could be substantial. These claims might be made directly by healthcare providers, medical personnel, patients, consumers, pharmaceutical companies and others selling or distributing our compounds. While we currently have
product liability insurance that we consider adequate for our current needs, we may not be able to continue to obtain comparable insurance in the future at an acceptable cost, if at all. If for any reason we cannot maintain our existing or
comparable liability insurance, our ability to clinically test and market products could be significantly impaired. Moreover, the amount and scope of our insurance coverage, as well as the indemnification arrangements with third parties upon which
we rely, may be inadequate to protect us in the event of a successful product liability claim. Any successful claim in excess of our insurance coverage could materially and adversely affect our financial condition and operating results.



The loss of any of our key employees could adversely affect our
operations.



We are heavily dependent upon the talents
of Dr. Goldenberg, our Chief Strategic Officer and Ms. Sullivan, our President and Chief Executive Officer, as well as certain other key personnel. If Dr. Goldenberg, Ms. Sullivan or any of our other key personnel were to unexpectedly leave our
company, our business and results of operations could be materially and adversely affected. In addition, as our business grows we will need to continue to attract additional management and scientific personnel. Competition for qualified personnel in
the biotechnology and pharmaceutical industries is intense, and we may not be successful in our recruitment efforts. If we are unable to attract, motivate and retain qualified professionals, our operations could be materially and adversely
affected.



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Certain potential for conflicts of interest, both real and perceived, exist which could result in
expensive and time-consuming litigation.



Certain
members of our senior management and Board of Directors have relationships and agreements, both with us as well as among themselves and their respective affiliates, which create the potential for both real, as well as perceived, conflicts of
interest. These include Dr. David M. Goldenberg, our Chairman and Chief Strategic Officer, Ms. Cynthia L. Sullivan, our President and Chief Executive Officer, and certain companies with which we do business, including the Center for Molecular
Medicine and Immunology, also known as the Garden State Cancer Center, or CMMI. For example, Dr. Goldenberg is the President and a Trustee of CMMI, a not-for-profit cancer research center that we use to conduct certain research activities. In fiscal
year 2005, we reimbursed CMMI a total of $3,000 for research activities conducted on our behalf. Further, Dr. Goldenbergs employment agreement with us permits him to devote more of his time working for CMMI than for us, and other key personnel
of our Company also have responsibilities to both CMMI and us.



As a result of these and other relationships, the potential for both real and perceived conflicts of interest exists, and disputes could arise over the allocation of funds, research projects and ownership of intellectual property rights. In
addition, in the event that we become involved in stockholder litigation regarding these potential conflicts, we might be required to devote significant resources and management time defending the company from these claims, which could adversely
affect our results of operations.



Given that autoimmune
and cancer therapeutics such as the ones we are developing can cost upwards of $20,000 per treatment, even if our product candidates become available for sale it is likely that federal and state governments, insurance companies and other payers of
health care costs will try to first limit the use of these drugs to certain patients, and may be reluctant to provide a level of reimbursement that permits us to earn a significant profit on our investment, if any.



Our ability to successfully commercialize therapeutic products will depend,
in significant part, on the extent to which hospitals can obtain appropriate reimbursement levels for the cost of our products and related treatment. Third-party payers are increasingly challenging the prices charged for diagnostic and therapeutic
products and related services. In addition, legislative proposals to reform health care or reduce government insurance programs may result in lower prices or the actual inability of prospective customers to purchase our products. Furthermore, even
if reimbursement is available, it may not be available at price levels sufficient for us to realize a positive return on our investment.



Risks Related to Government Regulation of our Industry



We and our industry are subject to intense regulation from the U.S. Government and such other governments and quasi-official regulatory bodies where
our products are and product candidates may be sold.



These governmental and other regulatory risks include:



| |  |  | Clinical development is a long, expensive and uncertain process, delay and failure can occur at any stage of our clinical trials;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our clinical trials are dependent on patient enrollment and regulatory approvals, we do not know whether our planned trials will begin on time, or at all, or will be completed on
schedule or at all;
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| |  |  | The FDA or other regulatory authorities do not approve a clinical trial protocol or place a clinical trial on hold;
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| |  |  | If the clinical development process is completed successfully, our ability to derive revenues from the sale of therapeutics will depend on our first obtaining FDA or other
comparable foreign regulatory approvals, each of which are subject to unique risks and uncertainties;
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| |  |  | There is no assurance that we will receive FDA or corollary foreign approval for any of our product candidates for any indication; we are subject to government regulation for the
commercialization of our product candidates;
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| |  |  | We have not received regulatory approval in the United States or any foreign jurisdiction for the commercial sale of any of our product candidates; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We may be liable for contamination or other harm caused by hazardous materials used in the operations of our business.
| | - |  | ----------------------------------------------------------------------------------------------------------------------



Risks Related to Our Securities



Our common stock may be delisted from the NASDAQ National Market
System (NASDAQ NMS).



On April 29,
2005, qualified institutional buyers and institutional accredited investors purchased from us $37,675,000 million principal amount of our 5% Senior Convertible Notes due May 1, 2008 (5% Notes) and related common stock purchase warrants
to acquire 2,878,144 shares of common stock (Warrants) in a private placement exempt from the registration requirements of the Securities Act of 1933, as amended (the Securities Act). In June 2005 we were notified by the
staff of the NASDAQ that our common stock will be delisted from trading on the NASDAQ NMS because the staff believes that we violated shareholder approval rules when we sold the 5% Notes and related Warrants. On August 19, 2005, at a special meeting
of our shareholders we obtained the authorization to increase the number of shares of common stock authorized under our certificate of incorporation by 40 million shares and to issue shares of common stock upon conversion of the 5% Notes and
exercise of the Warrants. On September 6, 2005, we received a letter from NASDAQ notifying us that the NASDAQ Listing and Qualifications Panel (Panel) has ruled in favor of the Company and as a result, Immunomedics, Inc. will remain
listed on the NASDAQ NMS. The NASDAQ Listing and Hearing Review Council may on its own motion, determine to review the Panel decision within 45 calendar days after the issuance of the written decision. If the Listing Counsel determines to review the
decision, it may affirm, modify, reverse, dismiss or remand the decision of the Panel.



If there is an unfavorable decision by the Listing Council, we may not be able to persuade NASDAQ to continue to list our common stock on the NASDAQ NMS. We therefore have explored with the American Stock Exchange
(AMEX) the potential for transferring the listing of our common stock to the AMEX. We are continuing to pursue our application to list our common stock on the AMEX, which we filed with the AMEX on June 3, 2005. There is no assurance that
our listing application will be approved by the AMEX or that, if it is approved, such approval will be obtained before the effective date of the delisting of our common stock from the NASDAQ NMS.



If the bid price of our common stock falls below $1.00 for an extended
period, or we are unable to continue to meet NASDAQs listing maintenance standards for any other reason, our common stock could be delisted from the NASDAQ NMS. In recent months, the bid price on our common stock has been below $2.00.



If our common stock is not listed on the NASDAQ NMS or AMEX,
we may face the following additional consequences:



| |  |  | We may have to repurchase the 5% Notes in satisfaction of the holders rights to require that we repurchase these securities on or after January 15, 2007 for 100% of the
principal amount plus unpaid accrued interest to the repurchase date. We cannot assure you that we would have sufficient funds to repurchase the 5% Notes if they were all put to us as described in this paragraph. In that event, we would be in
default under the related indenture, which could give rise to an Event of Default thereunder and possibly to cross-defaults or cross-accelerations to other agreements.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | As a result of the above, we would have less cash (possibly an insufficient amount) to fund the ongoing clinical trials of our product candidates, and to find any of our other
operations at that time.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The delisting of our common stock from the NASDAQ NMS may negatively affect our chance of being accepted for listing on the AMEX. Even if our listing application with the AMEX is
accepted, we cannot assure you of the timing of that acceptance.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If our stock is not accepted for listing on either the NASDAQ NMS or the AMEX, we will make every possible effort to have it listed on the OTC Bulletin Board. If our Common Stock were to be traded on the
OTC Bulletin Board, the Securities Exchange Act of 1934, as amended, and related SEC rules would impose additional sales practice requirements on broker-dealers that sell our securities. These rules may adversely affect the ability of stockholders
to sell our common stock and otherwise negatively affect the liquidity, trading market and price of our common stock.



If our common stock would not be able to be traded on the OTC Bulletin Board, we would make every effort to have it available for trading on the National
Quotation Bureaus Pink Sheets. The Pink Sheets market consists of security firms who act as market makers in the stocks, usually, of very small companies. The bid and asked prices are not quoted electronically, but are quoted daily
in hard copy which is delivered to firms that subscribe. Stocks that trade in the Pink Sheets are usually not as liquid as those that trade in electronic markets and, often time, the difference between the bid and the asked prices are
substantial. As a result, if our common stock were traded on the Pink Sheets, there would likely be a further negative affect on the liquidity, trading market and price of our common stock even compared to that we might suffer if we were traded on
the OTC Bulletin Board.



As a result of the above, we cannot
assure you that our common stock will be listed on a national securities exchange, a national quotation service, the OTC Bulletin Board or the Pink Sheets or, if it is to be listed, whether or not there would be an interruption in the trading of our
common stock. We believe that the listing of our stock on a recognized national trading market, such as the NASDAQ NMS or the AMEX, is an important part of our business and strategy. Such a listing helps our stockholders by providing a readily
available trading market with current quotations. Without that, stockholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock would likely be made more difficult and the trading
volume and liquidity of our stock would likely decline. The absence of such a listing may adversely affect the acceptance of our common stock as currency or the value accorded it by other parties. In that regard, listing on a recognized national
trading market will also affect the companys ability to benefit from the use of its operations and expansion plans, including for use in licensing agreements, joint ventures, the development of strategic relationships and acquisitions, which
are critical to our business and strategy and none of which is currently the subject of any agreement, arrangement or understanding, with respect to any future financing or strategic relationship it may undertake. The delisting from NASDAQ NMS and
the inability to become listed on the AMEX would result in negative publicity and would negatively impact our ability to raise capital in the future.



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If we were delisted from the NASDAQ NMS, and fail to list on the AMEX, we may become subject to the
trading complications experienced by Penny Stocks in the over-the-counter market.



Delisting from the NASDAQ NMS and failure to list on the AMEX may depress the price of our common stock such that we may become a penny stock. The SEC
generally defines a penny stock as an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock is currently less than
$5.00 per share. Penny Stock rules require, among other things, that any broker engaging in a purchase or sale of our securities provide its customers with: (i) a risk disclosure document, (ii) disclosure of market quotations, if any,
(iii) disclosure of the compensation of the broker and its salespersons in the transaction and (iv) monthly account statements showing the market values of our securities held in the customers accounts.



A broker would be required to provide the bid and offer quotations and
compensation information before effecting the transaction. This information must be contained on the customers confirmation. Generally, brokers are less willing to effect transactions in penny stocks due to these additional delivery
requirements. These requirements may make it more difficult for stockholders to purchase or sell our Common Stock. Because the broker, not us, prepares this information, we would not be able to assure that such information is accurate, complete or
current.



Conversion of the 5% Notes and exercise of the
Warrants will dilute the ownership interest of existing stockholders and could adversely affect the market price of our common stock.



The conversion of some or all of the 5% Notes and Warrants will dilute the ownership interests of existing stockholders. Any sales in the public market of
the common stock issuable upon such conversion and exercise could adversely affect prevailing market prices of our common stock. In addition, the existence of the 5% Notes and Warrants may encourage short selling by market participants.



Our 5% Notes and Warrants have full-ratchet anti-dilution protection
which will cause additional dilution to stockholders if triggered.



The conversion price of the 5% Notes and exercise price of the Warrant are subject to adjustment for issuances of common stock and common stock equivalents at prices less than the applicable conversion price and
exercise price, respectively, which means such conversion and exercise prices are automatically reduced to the lower price. In the event the anti-dilution protections of the 5% Notes and Warrants are triggered, stockholders would suffer immediate
dilution.



Our indebtedness and debt service obligations
may adversely affect our cash flow.



As of June 30,
2005, our debt service obligation on the 5% Notes was $37.675 million. We intend to fulfill our current debt service obligations, including repayment of the principal from cash generated by our operations and from our existing cash and investments,
as well as the proceeds from potential licensing agreements and additional financing from equity or debt transactions. If we are unable to generate sufficient cash to meet these obligations and need to use existing cash or liquidate investments in
order to fund our current debt service obligations, including repayment of the principal, we may have to delay or curtail research and development programs.



We may add additional lease lines to finance capital expenditures and may obtain additional long-term debt and lines of credit. If we issue other debt
securities in the future, our debt service obligations will increase further.



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Our indebtedness could have significant additional negative consequences, including, but not limited to:



| |  |  | requiring the dedication of a substantial portion of our expected cash flow from operations to service our indebtedness, thereby reducing the amount of our expected cash flow
available for other purposes, including capital expenditures;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increasing our vulnerability to general adverse economic and industry conditions;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | limiting our ability to obtain additional financing;
| | - |  | ----------------------------------------------------



| |  |  | limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we compete; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | placing us at a possible competitive disadvantage to less leveraged competitors and competitors that have better access to capital resources.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



We may not have the ability to raise the funds necessary to finance any
required redemptions of our outstanding 5% Notes, which might constitute a default by us.



If a Designated Event (as the term is defined in the Indenture under which the 5% Notes were issued) occurs prior to maturity, we may be required to
redeem all or part of the 5% Notes. We may not have enough funds to pay the redemption price for all tendered 5% Notes. Although the indenture governing the 5% Notes allows us in certain circumstances to pay the applicable redemption prices in
shares of our common stock, if a Designated Event were to occur, we may not have sufficient funds to pay the redemption prices for all the 5% Notes tendered.



We have not established a sinking fund for payment of our outstanding 5% Notes, nor do we anticipate doing so. In addition, any future credit agreements
or other agreements relating to our indebtedness may contain provisions prohibiting redemption of our outstanding 5% Notes under certain circumstances, or expressly prohibit our redemption of our outstanding 5% Notes upon a Designated Event or may
provide that a Designated Event constitutes an Event of Default under that agreement. If a Designated Event occurs at a time when we are prohibited from purchasing or redeeming our 5% Notes, we could seek the consent of our lenders to redeem our
outstanding 5% Notes or attempt to refinance this debt. If we do not obtain consent, we would not be permitted to purchase or redeem our outstanding 5% Notes, including the offered 5% Notes. Our failure to redeem tendered 5% Notes would constitute
an Event of Default under the Indenture, which might constitute a default under the terms of our other indebtedness. As a result, we may not be able to fulfill our obligations under the 5% Notes and our stockholders could lose all or part of their
investment.



Shares eligible for future sale may
adversely affect our ability to sell equity securities.



Sales of our common stock (including the issuance of shares upon conversion of convertible debt) in the public market could materially and adversely affect the market price of shares. We have outstanding $37.675 million principal amount of
5% Senior Convertible Notes that convert to common stock at prices equivalent to $2.62 (subject to adjustment for certain dilutive events). Our obligation to convert the 5% Notes upon demand by the holders may depress the price of our common stock
and also make it more difficult for us to sell equity securities or equity-related securities in the future at a time and price that we deem appropriate.



As of August 29, 2005 we had 54,073,059 shares of common stock outstanding, plus (1) $37.675 million of principal amount of 5% Notes convertible into up
to approximately 14,379,771 shares of



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common stock at the conversion rate of $2.62 subject to adjustment based on the anti-dilution provison, (2) 5,556,650
options to purchase shares of common stock with a weighted-average exercise price of $8.19 per share and (3) warrants to purchase 3,128,144 shares of common stock with a weighted-average exercise price of $6.37. Of the shares outstanding, 31,628,151
shares of common stock are freely tradable without restriction. All of the remaining 1,234,225 shares are restricted from resale, except pursuant to certain exceptions under the Securities Act of 1933, as amended (the Securities Act).



Our outstanding convertible notes, options and warrants
may adversely affect our ability to consummate future equity-based financings due to the dilution potential to future investors.



Due to the number of shares of common stock we are obligated to issue pursuant to outstanding convertible notes, options and warrants, potential investors
may not purchase our future equity offerings at market price because of the potential dilution such investors may suffer as a result of the exercise of the outstanding convertible notes, options and warrants.



Our outstanding 5% Notes and related Warrants may adversely affect our
ability to consummate future equity-based financings due to the restrictive covenants contained in the Indenture pursuant to which the 5% Notes were issued and Warrant Agreement under which the Warrants were issued.



Holders of our 5% Notes have certain rights that may inhibit our ability to
raise additional capital. Those rights include (a) full-ratchet anti-dilution protection in the event we sell securities at a price lower than the applicable conversion or exercise price of the 5% Notes or Warrants and (b) the right to pro rata
participation in any future financing.



The market price of our common stock has fluctuated widely in the past, and is likely to continue to fluctuate widely based on a number of factors, many of which are beyond our control.



The market price of our common stock has been, and is likely to continue to
be, highly volatile. Furthermore, the stock market generally and the market for stocks of relatively small biopharmaceutical companies like ours have from time to time experienced, and likely will again experience, significant price and volume
fluctuations that are unrelated to actual operating performance.



From time to time, stock market analysts publish research reports or otherwise comment upon our business and future prospects. Due to a number of factors, we may fail to meet the expectations of securities analysts or investors and our
stock price would likely decline as a result. These factors include:



| |  |  | a decision by the NASDAQ Listing Council to revise the decision by the NASDAQ Panel which allows Immunomedics to continue to be listed on the NASDAQ NMS or to transfer its listing
to the AMEX;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | announcements by us, any future alliance partners or our competitors of clinical results, technological innovations, product sales, new products or product candidates and product
development timelines;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the formation or termination of corporate alliances;
| | - |  | ----------------------------------------------------



| |  |  | developments or disputes concerning our patent or other proprietary rights, and the issuance of patents in our field of business to others;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | government regulatory action;
| | - |  | -----------------------------



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| |  |  | period-to-period fluctuations in the results of our operations; and
| | - |  | -------------------------------------------------------------------



| |  |  | developments and market conditions for emerging growth companies and biopharmaceutical companies, in general.
| | - |  | -------------------------------------------------------------------------------------------------------------



In addition, Internet chat rooms have provided forums where
investors make predictions about our business and prospects, oftentimes without any real basis in fact, that readers may trade on.



In the past, following periods of volatility in the market prices of the securities of companies in our industry, securities class action litigation has
often been instituted against those companies. If we face such litigation in the future, it would result in substantial costs and a diversion of managements attention and resources, which could negatively impact our business.



Our principal stockholder can significantly influence
all matters requiring the approval by our stockholders.



As of June 30, 2005, Dr. Goldenberg, our Chairman and Chief Strategic Officer, together with certain members of his family including Ms. Cynthia L. Sullivan, our President and Chief Executive Officer, who is Dr. Goldenbergs wife, and
other affiliates, controlled the right to vote approximately 16.8% of our common stock. As a result of this voting power, Dr. Goldenberg has the ability to significantly influence the outcome of substantially all matters that may be put to a vote of
our stockholders, including the election of our directors.



We have adopted anti-takeover provisions that may frustrate any unsolicited attempt to acquire our Company or remove or replace our directors and executive officers.



Provisions of our certificate of incorporation, our by-laws and Delaware
corporate law could make it more difficult for a third party to acquire control of our Company in a transaction not approved by our Board of Directors. For example, we have adopted a stockholder rights plan that makes it more difficult for a third
party to acquire control of our Company without the support of our Board of Directors. In addition, our Board of Directors may issue up to ten million shares of preferred stock and determine the price, rights, preferences and privileges, including
voting and conversion rights, of these shares without any further vote or action by our stockholders. The issuance of preferred stock could have the effect of delaying, deterring or preventing an unsolicited change in control of our company, or
could impose various procedural and other requirements that could make it more difficult for holders of our common stock to effect certain corporate actions, including the replacement of incumbent directors and the completion of transactions opposed
by the incumbent Board of Directors. The rights of the holders of our common stock would be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.



We are also subject to Section 203 of the Delaware General Corporation Law
(DGCL), which prohibits us from engaging in a business combination with any interested stockholder (as defined in Section 203 of the DGCL) for a period of three years from the date the person became an interested stockholder,
unless certain conditions are met.



There are limitations
on the liability of our directors, and we may have to indemnify our officers and directors in certain instances.



Our certificate of incorporation limits, to the maximum extent permitted under Delaware law, the personal liability of our directors for monetary damages
for breach of their fiduciary duties as directors. Our bylaws provide that we will indemnify our officers and directors and may indemnify our employees and other agents to the fullest extent permitted by law. These provisions may be in some respects
broader



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than the specific indemnification provisions under Delaware law. The indemnification provisions may require us, among
other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers (other than liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which they could be indemnified and to obtain directors and officers insurance. Section 145 of the Delaware General Corporation Law provides that a corporation may
indemnify a director, officer, employee or agent made or threatened to be made a party to an action by reason of the fact that he or she was a director, officer, employee or agent of the corporation or was serving at the request of the corporation,
against expenses actually and reasonably incurred in connection with such action if he or she acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. Delaware law does not permit a corporation to eliminate a directors duty of care and the provisions of our certificate of incorporation have
no effect on the availability of equitable remedies, such as injunction or rescission, for a directors breach of the duty of care.



We believe that our limitation of officer and director liability assists us to attract and retain qualified employees and directors. However, in the event
an officer, a director or the board of directors commits an act that may legally be indemnified under Delaware law, we will be responsible to pay for such officer(s) or director(s) legal defense and potentially any damages resulting therefrom.
Furthermore, the limitation on director liability may reduce the likelihood of derivative litigation against directors, and may discourage or deter stockholders from instituting litigation against directors for breach of their fiduciary duties, even
though such an action, if successful, might benefit us and our stockholders. Given the difficult environment and potential for incurring liabilities currently facing directors of publicly-held corporations, we believe that director indemnification
is in our and our stockholders best interests because it enhances our ability to attract and retain highly qualified directors and reduce a possible deterrent to entrepreneurial decision-making.



Nevertheless, limitations of director liability may be viewed as limiting the
rights of stockholders, and the broad scope of the indemnification provisions contained in our certificate of incorporation and bylaws could result in increased expenses. Our board of directors believes, however, that these provisions will provide a
better balancing of the legal obligations of, and protections for, directors and will contribute positively to the quality and stability of our corporate governance. Our board of directors has concluded that the benefit to stockholders of improved
corporate governance outweighs any possible adverse effects on stockholders of reducing the exposure of directors to liability and broadened indemnification rights.



We are exposed to potential risks from recent legislation requiring companies to evaluate controls under Section 404
of the Sarbanes-Oxley Act.



The Sarbanes-Oxley Act
requires that we maintain effective internal controls over financial reporting and disclosure controls and procedures. Among other things, we must perform system and process evaluation and testing of our internal controls over financial reporting to
allow management to report on, and our independent registered public accounting firm to attest to, our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Compliance with Section 404 requires substantial
accounting expense and significant management efforts. Our testing, or the subsequent review by our independent registered public accounting firm, may reveal deficiencies in our internal controls that would require us to remediate in a timely manner
so as to be able to comply with the requirements of Section 404 each year. If we are not able to comply with the requirements of Section 404 in a timely manner each year, we could be subject to sanctions or investigations by the SEC, the NASDAQ
National Market System (NASDAQ NMS) or other regulatory authorities that would require additional financial and management resources and could adversely affect the market price of our common stock.



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We may pay vendors in stock as consideration for their services; this may result in stockholder
dilution, additional costs and difficulty retaining certain vendors.



In order for us to preserve our cash resources, we may in the future pay vendors, including alliance partners, in shares, warrants or options to purchase shares of our common stock rather than cash. Payments for
services in stock may materially and adversely affect our stockholders by diluting the value of outstanding shares of our common stock. In addition, in situations where we agree to register the shares issued to a vendor, this will generally cause us
to incur additional expenses associated with such registration. Paying vendors in shares, warrants or options to purchase shares of common stock may also limit our ability to contract with the vendor of our choice should that vendor decline payment
in stock.



We do not intend to pay dividends on our
common stock. Until such time as we pay cash dividends our stockholders must rely on increases in our stock price for appreciation.



We have never declared or paid dividends on our common stock. We intend to retain future earnings to develop and commercialize our products and therefore
we do not intend to pay cash dividends in the foreseeable future. Until such time as we determine to pay cash dividends on our common stock, our stockholders must rely on increases in our common stocks market price for appreciation.



30



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Item 2 Properties



Our headquarters is located at 300 American Road, Morris Plains, New Jersey
07950, where we lease approximately 74,000 square feet of commercial office space. In November 2001, we renewed the lease for an additional term of 20 years expiring in October 2021 at a base annual rate of $545,000, which rate is fixed for the
first five years and increases thereafter every five years. The November 2001 renewal includes an additional 15,000 square feet of space. Our manufacturing, regulatory, medical, research and development laboratories, and our finance, marketing and
executive offices are currently located in this facility. In 2003, we completed the construction and equipping of a 7,500 square-foot, commercial-scale manufacturing facility within our Morris Plains headquarters, which consists of four independent
antibody manufacturing suites, several support areas, and a quality control laboratory. See Item 1, Manufacturing. In addition, our European subsidiary, Immunomedics GmbH, leases executive office space in Darmstadt, Germany.



Item 3 Legal Proceedings



F. Hoffmann-LaRoche



On December 22, 2003, the Dutch Supreme Court, in a case brought by the
Company, held that Immunomedics Dutch part of its European patent for highly specific monoclonal antibodies against the cancer marker, carcinoembryonic antigen (CEA), was valid. The Companys claim of infringement was not finally decided
by the Dutch Supreme Court. Among other things, the Supreme Court held that the Court of Appeal which had ruled that Roche had infringed Immunomedics European Patent had not given Roche sufficient opportunity to comment on an expert opinion filed by
Immunomedics in which it was stated that Roches CEA test kit did satisfy a criterion that is generally satisfied for specific antibodies that bind to CEA. The Company has argued that the Dutch court should enforce the European Patent for all
European countries for which the European Patent was validated, since Roche sold the same product in each country. The Dutch Supreme Court repeated the reasoning of the Dutch District Court that the Brussels Convention should be interpreted to
permit cross-border enforcement of European patents where a related group of companies sells the same product in countries where that same patent has been validated. The Dutch Supreme Court referred this issue to the European Court of Justice (ECJ)
to provide a final interpretation of the Brussels Convention on this point. On January 27, 2005, the ECJ heard oral arguments in the case, and took the matter under consideration.



We believe that the CEA patents that are the subject of our infringement action have been infringed, and we believe that the
Company will prevail in the litigation, although no assurances can be given in this regard. To the extent that Roche contests or challenges our patents, or files appeals or further nullity actions, there can be no assurance that significant costs
for defending such patents may not be incurred.



On May 19,
2004 and July 20, 2004, Roche filed nullity actions in German and United Kingdom courts, respectively, challenging our patents relating to an improved method of disease therapy in combination with cytotoxic agents, wherein cytokines are used to
prevent, mediate or reverse radiation-induced, drug-induced or antibody-induced toxicity, especially to hematopoietic cells. On December 1, 2004, we agreed to settle the United Kingdom patent litigation by surrendering the United Kingdom patent. In
accordance with United Kingdom legal rules, Roche made an application for payment of its attorneys fees and other costs to the court. We agreed on a resolution with Roche, which was subsequently settled. The related charges for this litigation
were included in the General and Administrative expenses in the Statement of Operations. In the German action we are defending the patent with amended claims and believes that we will prevail in such action.



31



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Cytogen, Inc. and C.R. Bard Inc.



In September 2004 a patent infringement suit with Cytogen, Inc. and C.R. Bard was settled for an undisclosed amount without
any admission of fault or liability. In connection with the settlement, the Company settled legal fees associated with the suit with the attorneys representing it in the case. The Company recorded in other income a litigation settlement gain in the
amount of $1,111,750, which includes the reversal of legal fees previously accrued for this patent suit. The specific amount of the settlement, however, is undisclosed in accordance with the terms of the parties settlement agreement.



Willow Bay Associates, LLC



In 2000, a now-defunct finance broker filed suit against the Company in the
United States District Court for the District of Delaware. In the case, the plaintiff claimed that it is entitled to damages in the form of brokerage commissions for breach of an alleged confidentiality and non-circumvention contract. The suit
against the Company was dismissed on summary judgment, but subsequently reinstated. Trial was held in late January 2004, and post-trial submissions were filed in March. A decision by the Court has not been received. Although it is not possible to
forecast the Courts decision, based on the Courts initial ruling of dismissal and the trial, the Company believes that judgment will be entered in its favor. The Company further believes that even in the event of an unfavorable outcome,
this lawsuit will not have a material adverse affect on the Companys financial position and results of operations.



From time to time we are a party to various claims and litigation arising in the normal course of business. We believe that the outcome of such claims and
litigation will not have a material adverse effect on our financial position and results of operations.



Item 4 Submission of Matters to a Vote of Security Holders



No matter was submitted to a vote of our security holders during the fourth quarter of fiscal year 2005.



32



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PART II



Item 5  Market For Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities



Market Price and Dividend Information



Our common stock is quoted on the NASDAQ National Market under the symbol
IMMU. The following table sets forth, for the last two fiscal years, the high and low sales prices for our common stock, as reported by the NASDAQ National Market:



|                     |  |      |      |     |   |     
|-------------------- |  | ---- | ---- | --- | - | ----
|Fiscal Quarter Ended |  | High |      | Low
|September 30, 2003   |  | $    | 9.70 |     | $ | 5.36
|December 31, 2003    |  |      | 8.93 |     |   | 3.23
|March 31, 2004       |  |      | 5.50 |     |   | 3.46
|June 30, 2004        |  |      | 6.24 |     |   | 3.98
|                     |  |     
|September 30, 2004   |  | $    | 4.95 |     | $ | 2.25
|December 31, 2004    |  |      | 3.64 |     |   | 2.60
|March 31, 2005       |  |      | 3.88 |     |   | 2.37
|June 30, 2005        |  |      | 2.55 |     |   | 1.65



As of September 6,
2005, the closing sales price of the Companys common stock on the NASDAQ National Market was $1.99. As of September 6, 2005, there were approximately 680 stockholders of record of the common stock and, according to our estimates, approximately
15,915 beneficial owners of our common stock. We have not paid dividends on our common stock since inception and do not plan to pay cash dividends in the foreseeable future. We currently intend to retain earnings, if any, to finance our growth.



Sale of Unregistered Securities



The Company entered into purchase agreements with a number of purchasers
(each an Agreement) on April 27, 2005 for the sale of (i) maximum of $46 million in aggregate principal amount of Notes and (ii) warrants to purchase up to approximately 3,600,000 shares of common stock (a warrant to purchase 76.394
shares of common stock for each $1,000 principal amount of notes purchased, including a 120 day option to purchase up to an additional 20% of notes and warrants based on their initial purchase.



The Notes bear interest at 5%, mature three years from the date of issuance,
and are convertible into our common stock, at an initial conversion price of $2.62 subject to adjustment based on the anti-dilution provision. Holders of the notes may at their election at any time, and the Company may, subject to certain market
performance targets and other conditions, cause the holders to convert the notes into shares of common stock prior to the maturity date. If the notes are converted prior to the third anniversary of the issue date, the holders will be entitled to
interest through the third anniversary. The warrants will be exercisable commencing on the effective date of the share increase described in the attached press release until the third anniversary of the initial closing date at $2.98 per share of
common stock.



For each $1,000 principal amount of 5% Notes
purchased, the purchaser received a Warrant to purchase approximately 76.394 shares of common stock. The Warrants are detachable from the 5% Notes



33



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and may be traded separately subject to certain restrictions on transfer. The Warrants became exercisable on August 25,
2005 and expire on April 29, 2008. The initial exercise price of the Warrants is $2.98 per share of common stock purchased, subject to specified adjustments. Each purchaser of 5% Notes was also granted an option through August 29, 2005, to purchase
up to an amount equal to 20% of the principal amount of 5% Notes and Warrants purchased by such purchaser on April 29, 2005 (Option) at the initial offering price plus accrued interest on the 5% Notes. If the Option were fully exercised,
we would issue an additional $8,535,000 principal amount of 5% Notes, resulting in an aggregate principal amount of 5% Notes outstanding of $46,210,000, and we could issue additional Warrants to purchase 575,000 shares of common stock, bringing the
total number of shares of common stock issuable under the Warrants to 3,453,256. All of the Options expired on August 29, 2005.



Securities Authorized for Issuance Under Equity Compensation Plans



Information regarding our equity compensation plans as of June 30, 2005, is disclosed in Item 12, Security Ownership of Certain Beneficial Owners
and Management and Related Stockholder Matters.



Issuer Purchases of Equity Securities



None.



34



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Item 6 Selected Financial Data



The following table sets forth our consolidated financial data as of and for
each of the five fiscal years ended June 30, 2005. The selected consolidated financial data as of and for each of the five years ended June 30, 2005, have been derived from our audited consolidated financial statements. The consolidated financial
statements for the years ended June 30, 2005, 2004 and 2003 are included elsewhere in this Annual Report on Form 10-K. The information below should be read in conjunction with the consolidated financial statements (and notes thereon) and
Managements Discussion and Analysis of Financial Condition and Results of Operations included in Item 7.



|                                                    |  |                                          |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|--------------------------------------------------- |  | ---------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | - |  | ---- | ------ | - |  | - | ------ | -
|                                                    |  | Fiscal year ended June 30,               |        
|                                                    |  | 2005                                     |         |   | 2004 |   |         | 2003 |  |   | 2002   |   |  | 2001 |       
|                                                    |  | (In thousands, except per share amounts) |        
|Statements of Operations                            |  |                                          |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|                                                    |  |                                          |         |   |     
|Revenues                                            |  | $                                        | 3,813   |   |      | $ | 4,306   |      |  | $ | 13,719 |   |  | $    | 14,287 |   |  | $ | 8,400  |  
|Cost and expenses                                   |  |                                          | 32,514  |   |      |   | 27,299  |      |  |   | 23,533 |   |  |      | 20,985 |   |  |   | 16,712 |  
|Litigation settlement                               |  |                                          | 1,112   |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Changes in fair value of warrants liability         |  |                                          | 939     |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|Interest (expenses) income  net                    |  |                                          | (599    | ) |      |   | 285     |      |  |   | 1,087  |   |  |      | 2,069  |   |  |   | 2,830  |  
|Minority interest                                   |  |                                          | 110     |   |      |   | 89      |      |  |   | 88     |   |  |      |       |   |  |   |       |  
|Foreign currency transaction (loss) gain            |  |                                          | (4      | ) |      |   | 30      |      |  |   | 85     |   |  |      | (323   | ) |  |   | (72    | )
|                                                    |  |                                          |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Loss before income tax benefit                      |  |                                          | (27,143 | ) |      |   | (22,589 | )    |  |   | (8,554 | ) |  |      | (4,952 | ) |  |   | (5,554 | )
|Income tax benefit                                  |  |                                          | 385     |   |      |   | 234     |      |  |   | 680    |   |  |      | 1,205  |   |  |   | 803    |  
|                                                    |  |                                          |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Net loss                                            |  |                                          | (26,758 | ) |      |   | (22,355 | )    |  |   | (7,874 | ) |  |      | (3,747 | ) |  |   | (4,751 | )
|Preferred stock dividends                           |  |                                          |        |   |      |   |        |      |  |   |       |   |  |      |       |   |  |   |       |  
|                                                    |  |                                          |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Net loss allocable to common stockholders           |  | $                                        | (26,758 | ) |      | $ | (22,355 | )    |  | $ | (7,874 | ) |  | $    | (3,747 | ) |  | $ | (4,751 | )
|                                                    |  |                                          |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Net loss per common share                           |  | $                                        | (0.50   | ) |      | $ | (0.45   | )    |  | $ | (0.16  | ) |  | $    | (0.08  | ) |  | $ | (0.10  | )
|                                                    |  |                                          |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Weighted average shares outstanding                 |  |                                          | 53,684  |   |      |   | 49,886  |      |  |   | 49,878 |   |  |      | 49,652 |   |  |   | 49,498 |  
|                                                    |  |                                          |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|Balance Sheets                                      |  |                                          |         |   |      |   |         |      |  |   |        |   |  |      |        |   |  |   |        |  
|                                                    |  |                                          |         |   |     
|Cash, cash equivalents and marketable securities(1) |  | $                                        | 15,485  |   |      | $ | 13,479  |      |  | $ | 23,796 |   |  | $    | 44,788 |   |  | $ | 53,291 |  
|Restricted securities(1)                            |  |                                          | 18,126  |   |      |   | 5,101   |      |  |   | 6,376  |   |  |      |       |   |  |   |       |  
|Total assets                                        |  |                                          | 47,923  |   |      |   | 32,089  |      |  |   | 45,130 |   |  |      | 54,951 |   |  |   | 59,657 |  
|Long-term debt                                      |  |                                          | 36,743  |   |      |   | 13,826  |      |  |   | 5,101  |   |  |      |       |   |  |   |       |  
|Stockholders (deficit) equity(2)                   |  | $                                        | (1,263  | ) |      | $ | 11,584  |      |  | $ | 33,667 |   |  | $    | 41,096 |   |  | $ | 41,441 |  

---

|(1) | Approximately $14,300,000 of restricted cash became available for use by the Company during the first quarter of fiscal year 2006.
|--- | ----------------------------------------------------------------------------------------------------------------------------------

|(2) | We have never paid cash dividends on our common stock. Subsequent to June 30, 2005 the Company received shareholder approval to authorize an additional 40,000,000 shares of common
stock.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Item 7 Managements Discussion and Analysis of Financial Condition and Results of
Operations



The SEC encourages companies to
disclose forward-looking information so that investors can better understand a companys future prospects and make informed investment decisions. This Annual Report on Form 10-K contains such forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.These statements may be made directly in this Annual Report, and they may also be made a part of this Annual Report by reference to other documents filed with the
SEC, which is known as incorporation by reference.



Words such as may,anticipate,estimate,expects,projects,intends,plans,believes and words and terms of similar substance used in connection with any discussion of future operating or financial performance, are intended to
identify forward-looking statements. All forward-looking statements are managements present expectations of future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those
described in the forward-looking statements. These risks and uncertainties include, among other things: our inability to further identify, develop and achieve commercial success for new products and technologies; the possibility of delays in the
research and development necessary to select drug development candidates and delays in clinical trials; the risk that clinical trials may not result in marketable products; the risk that we may be unable to obtain additional capital through
strategic collaborations, licensing, convertible debt securities or equity financing in order to continue our research and development programs as well as secure regulatory approval of and market our drug candidates; our dependence upon
pharmaceutical and biotechnology collaborations; the levels and timing of payments under our collaborative agreements; uncertainties about our ability to obtain new corporate collaborations and acquire new technologies on satisfactory terms, if at
all; the development of competing products; our ability to protect our proprietary technologies; patent-infringement claims; and risks of new, changing and competitive technologies and regulations in the United States and internationally. Please
also see the discussion of risks and uncertainties under Factors That May Affect Our Business and Results of Operations in Item 1 of this Annual Report.



In light of these assumptions, risks and uncertainties, the results and events discussed in the forward-looking statements
contained in this Annual Report or in any document incorporated by reference might not occur. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Annual Report or the date
of the document incorporated by reference in this Annual Report as applicable. We are not under any obligation, and we expressly disclaim any obligation, to update or alter any forward-looking statements, whether as a result of new information,
future events or otherwise except as may be required by applicable law. All subsequent forward-looking statements attributable to the Company or to any person acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section.



Overview



Immunomedics, Inc. is a biopharmaceutical company focused
on the development of monoclonal, antibody-based products for the targeted treatment of cancer, autoimmune and other serious diseases. We have developed a number of advanced proprietary technologies that allow us to create humanized antibodies that
can be used either alone in unlabeled, or naked, form, or conjugated with radioactive isotopes, chemotherapeutics or toxins, in each case to create highly targeted agents. Using these technologies, we have built a broad pipeline of
therapeutic product candidates that utilize several different mechanisms of action. We believe that our portfolio of intellectual property, which includes approximately 90 issued patents in the United States and approximately 250 other issued
patents worldwide, protects our product candidates and technologies.



36



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In addition to our potential therapeutic products, our proprietary technologies have also enabled us to
develop highly specific diagnostic imaging agents, one of which, LeukoScan®, has been approved in Europe, Canada and Australia, where it is currently being marketed for the detection of bone infections. Consistent with our de-emphasis of our diagnostic business in the near future, the Company
will no longer commercialize CEA-Scan® .



From inception in 1982 until June 30, 2005, we had an
accumulated deficit of approximately $175.0 million and have never earned a profit. In the absence of increased revenues from the sale of current or future products and licensing activities (the amount, timing, nature or source of which cannot be
predicted), our losses will continue as we continue to conduct our research and development activities. These activities are budgeted to expand over time and will require further resources if we are to be successful. As a result, our operating
losses are likely to be substantial over the next several years.



The development and commercialization of successful therapeutic products is subject to numerous risks and uncertainties including, without limitation, the following:



| |  |  | the type of therapeutic compound under investigation and nature of the disease in connection with which the compound is being studied;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability, as well as the ability of our partners, to conduct and complete clinical trials on a timely basis;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | the time required for us to comply with all applicable federal, state and foreign legal requirements, including, without limitation, our receipt of the necessary approvals of the
U.S. Food and Drug Administration;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the financial resources available to us during any particular period; and
| | - |  | -------------------------------------------------------------------------



| |  |  | many other factors associated with the commercial development of therapeutic products outside of our control.
| | - |  | -------------------------------------------------------------------------------------------------------------



Research and Development



As of June 30, 2005, we employed 24 professionals in our research and
development departments and 15 professionals in our pre-clinical and clinical research departments. In addition to salaries and benefits, the other costs associated with research and development include the costs associated with producing
biopharmaceutical compounds, laboratory equipment and supplies, the costs of conducting clinical trials, legal fees and expenses associated with pursuing patent protection, as well as facilities costs. We have spent approximately $27.0 million,
$21.9 million and $18.2 million in the aggregate for the fiscal years ended June 30, 2005, 2004 and 2003 respectively on research and development expenses.



With the completion in fiscal year 2003 of the manufacturing expansion to support our research and development efforts and prepare for future
commercialization of our product candidates, we believe that our facilities are adequate to support our research and development activities for the next few years without the need for any material capital expenditures.



At any one time our scientists are engaged in the research and development of
multiple therapeutic compounds. Because we do not track expenses on the basis of each individual compound



37



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under investigation, but rather aggregate research and development costs for accounting purposes, it is not possible for
investors to analyze and compare the expenses associated with unsuccessful research and development efforts for any particular fiscal period, with those associated with compounds that are determined to be worthy of further development. This may make
it more difficult for investors to evaluate our business and future prospects.



Therapeutics



We
believe that each of our antibodies has therapeutic potential either when administered alone or when conjugated with therapeutic radioisotopes (radiolabeled), chemotherapeutics or other toxins to create unique and potentially more effective
treatment options. The attachment of various compounds to antibodies is intended to allow the delivery of these therapeutic agents to tumor sites with greater precision than conventional radiation therapy or chemotherapeutic approaches. This
treatment method is designed to reduce the total exposure of the patient to the therapeutic agents, which ideally minimizes debilitating side effects. We are currently focusing our efforts on unlabeled, or naked antibodies and antibodies
conjugated with drugs or toxins, and to lesser extent on the use of radioisotopes, such as Yttrium-90, sometimes referred to as Y-90, and Iodine-131, sometimes referred to as I-131.



Epratuzumab



Our most advanced therapeutic product candidate, IMMU-103, is an unlabeled humanized antibody which targets an antigen, known as the CD22 marker, found on
the surface of B-lymphocytes, a type of white blood cells. Since B-lymphocytes are involved in the production of autoantibodies, we reasoned that epratuzumab might show activity in the treatment of autoimmune diseases by affecting B-cell levels and
function. Our humanized CD22 antibody has been shown not to evoke any substantial anti-epratuzumab antibodies in NHL patients, even after repeated dosing, making it a good candidate for treating patients with a chronic, non-malignant disease.



In October 2004, updated clinical results of epratuzumab in
patients with SLE were presented at the 68thannual scientific meeting of American College of
Rheumatology/Association of Rheumatology Health Professionals. The objective of this open label, single-center study was to evaluate the safety, tolerability, lack of immunogenicity and early evidence of efficacy of epratuzumab, which was
administered as a single agent every other week, for a total of four doses. A scoring system called BILAG (British Isle Lupus Assessment Group) was used to measure the level of disease activity in these patients prior to, and, at several time
points, post administration of epratuzumab. Patients with mild to moderate SLE activity (defined by Global BILAG scores of 6-12 prior to treatment) were enrolled. A high BILAG score indicates increased disease activity.



SLE assessments after treatment demonstrated consistent clinical improvement,
with decreased global BILAG scores for all fourteen enrolled patients compared to the pre-therapy scores. Specifically, nine out of fourteen patients (64%) had lowered their global BILAG scores by 50% or more twenty-four hours post-therapy.
Furthermore, six of the seven patients who had returned for their six-month check-up retained clinical benefit. In all patients, the treatment was well tolerated with infusions completed in about one hour, and no evidence of reactions or
immunogenicity.



Based on these positive results, we submitted
an application with the U.S. Food and Drug Administration (FDA) for Fast Track designation and in January, 2005, received notice from the agency granting epratuzumab Fast Track Product designation for the treatment of patients with moderate and
severe SLE. The fast track programs of the FDA are designed to facilitate drug development and to expedite the review of new drugs that are intended to treat serious or life threatening conditions, and that demonstrate the potential to address unmet
medical needs. As such, the fast track designation allows for close and frequent interaction with the agency. A designated fast track drug may also be considered for priority review with a shortened review time, rolling submission, and accelerated
approval if applicable.



38



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In May, 2005, we initiated two pivotal Phase III clinical trials to further evaluate the safety and
efficacy of epratuzumab for the treatment of patients with moderate and severe SLE. These pivotal trials are randomized, double-blinded, placebo-controlled, multi-center studies using the BILAG index to monitor and assess disease activity. The
trials have been named ALLEVIATE or Alleviate Lupus Affliction with Epratuzumab and Validate its Autoimmune Safety and Efficacy. One trial, ALLEVIATE A, is for patients with severe SLE flares, and the second trial, ALLEVIATE B, is for
patients with moderately active SLE. We anticipate completing the initial phase of these trials in approximately two years.



SLE is a serious autoimmune disease affecting approximately 1.5 million Americans, according to the Lupus Foundation of America. In the U.S., women with
SLE outnumber men by a ratio of nine to one, and 80% of female patients develop lupus between the ages of 15 and 45. At present, there is no cure for lupus and no new lupus drug has been approved in the U.S. for nearly 40 years. Lupus most often
results in chronic inflammation and pain affecting various parts of the body, especially the skin, joints, blood, and kidneys. The disease can be serious and life threatening. Current treatments used in medical practice include corticosteroids,
nonsteroidal anti-inflammatory drugs, immunosuppressives, and antimalarials.



Another autoimmune indication that we are targeting with epratuzumab is Sjögrens syndrome, a disease that currently affects between 2 to 4 million Americans. We presented results from our open-label,
non-randomized, two-center Phase I/II trial in June, 2005, at the European League Against Rheumatism (EULAR) Annual European Congress of Rheumatology. Fifteen patients with primary Sjögrens syndrome were enrolled in this study to assess
feasibility, safety, and early evidence of efficacy. Over an eight-week period, patients received 360 mg/m2of
epratuzumab every two weeks for a total of four doses. Fourteen patients received all four infusions without reactions with a median infusion time of fifty minutes. One patient discontinued the third infusion due to an acute infusion reaction, but
completed the fourth infusion with no further reaction.



Patients reported improvements in their clinical signs and symptoms that include: dry eyes, dry mouth, fatigue, tender joints, tender points, tear and salivary flow. Specifically, twenty-four hours after the last treatment, symptomatic
improvements ranging from 100% of patients experiencing tender joints to 33% of patients with salivary flow were observed. Moreover, when these patients were evaluated twelve weeks post therapy, 86% of patients who showed tender joints improvement
retained clinical benefit, as did 20% of patients with increased salivary flow. A final evaluation is planned for six months after the last epratuzumab dose.



Epratuzumab seems to show activity without causing a drastic drop in the number of circulating B-lymphocytes, thus perhaps reducing the risk of infection.
Consistent with our past clinical experience with the antibody, we have found a reduction of 50% to 60% in circulating B-cells in the patients enrolled in both the SLE and Sjögrens syndrome trials. This data suggests that B-cell
modulation may be the primary mechanism of action of epratuzumab, and that complete depletion of B-cells is not necessary to provide a clinical benefit.



IMMU-103 has also demonstrated good safety, tolerability, and clinical efficacy in more than 340 patients with non-Hodgkins lymphoma, resulting in
reports published in The Journal of Clinical Oncologyand Clinical Cancer Research.



While the clinical results to date have been encouraging, we are not able to determine when, if ever, epratuzumab will be approved for sale in the United
States or anywhere else. Even if it is approved, there can be no assurance that it will be commercially successful or that we will ever receive revenues equal to our financial investment in this product candidate.



39



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Other Therapeutic Product Candidates



We also have in development a solid tumor therapeutic product candidate that targets an antigen known as carcinoembryonic antigen, or CEA.
The CEA antigen is abundant at the site of virtually all cancers of the colon and rectum and is associated with many other solid tumors, such as breast and lung cancers. A Phase II trial has been completed in Europe for IMMU-111 (hCEA-I-131) in
patients with proven or suspected metastatic colorectal cancer who failed chemotherapy. We believe that the initial results with IMMU-111 are encouraging. This Phase I/II trial with IMMU-101 (hCEA-Y-90) has completed enrollment in the United States
and in Europe in patients with advanced colorectal and pancreatic cancers. We are not currently conducting clinical trials with our CEA antibody, however, we are providing clinical supplies for an investigator sponsored Phase II clinical trial in
Germany, evaluating repeat dosing with IMMU-111.



We also are
commencing clinical trials with IMMU-106 (anti-CD20) for the treatment of certain autoimmune diseases. We are currently conducting clinical trials in patients with non-Hodgkins lymphoma with IMMU-106, and we are conducting clinical trials with
IMMU-107 (for use in targeting anti-MUC 1 antibody) for pancreatic cancer therapy. In addition to these three product candidates, we have several others in pre-clinical development.



Diagnostics



In 1998, we began to transition our focus away from the development of diagnostic imaging products in order to accelerate the development of our
therapeutic product candidates. As a result, as of June 30, 2005, research and development into diagnostic imaging product candidates was no longer a material portion of our business.



IBC Pharmaceuticals, Inc.



In 1999, we began conducting research involving the selective delivery of therapeutic agents to fight cancer as part of a
collaboration with Beckman Coulter, Inc. (Beckman Coulter). Upon our formation of the joint venture, IBC Pharmaceuticals, LLC, IBC LLC, we granted certain intellectual property to the venture, as did Beckman Coulter. We were
then reimbursed for all of the research activities we conducted on the joint ventures behalf.



In the fourth quarter of fiscal year 2002 we were able to acquire all of the membership interests in IBC LLC held by Beckman Coulter, giving us majority
control of the business. IBC LLC was then reorganized into IBC Pharmaceuticals, Inc., a Delaware corporation (IBC). We currently hold all of the outstanding shares of IBC Series A Preferred stock, representing approximately 74% of the
total shares of voting stock outstanding. As a result of our majority interest in IBC, operating results of IBC are consolidated with the Company.



Critical Accounting Policies



The Companys consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which
require 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 revenue and expenses during the reporting period. Actual results
could differ from these estimates. The following discussion highlights what we believe to be the critical accounting policies and judgments made in the preparation of these consolidated financial statements.



40



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Revenue Recognition



Contract revenue from collaborative research agreements is recorded when earned based on the performance requirements of the
contract. Revenue from non-refundable upfront license fees and certain guaranteed payments where we continue involvement through collaborative development are deferred and recognized as revenue over the period of continuing involvement. We estimate
the period of continuing involvement based on the best available evidential matter available to us at each reporting period. If our estimated time frame for continuing involvement changes, this change in estimate could impact the amount of revenue
recognized in future periods.



Revenue is recognized for
royalties based on license sales of our product (CEA-Scan®) in Japan and in Europe. Royalties are recognized as earned in accordance with the contractual terms when royalty from licenses can be reliably measured and collectability is reasonably assured.



Revenue from product sales is recorded when there is persuasive evidence that
an arrangement exists, delivery has occurred, the price is fixed and determinable and collectability is reasonably assured. Allowances, if any, are established for uncollectible amounts, estimated product returns and discounts. Since allowances are
recorded based on managements estimates, actual amounts may be different in the future.



Foreign Currency Risks



Since Immunomedics operates in countries outside of the United States, it is exposed to various foreign currency risks that arise, from the nature of the contracts Immunomedics executes with its customers, since, from time to time,
contracts are denominated in a currency different than the particular Immunomedics subsidiarys local currency. These risks are generally applicable only to a portion of the contracts executed by the Companys foreign subsidiaries
providing clinical services.



The Company is exposed to foreign
currency risk resulting from the passage of time between the invoicing of customers and affiliates under these contracts and the ultimate collection of customer payments against such invoices. Because the contract is denominated in a currency other
than the subsidiarys local currency, Immunomedics recognizes a receivable at the time of invoicing for the local currency equivalent of the foreign currency invoice amount. Changes in exchange rates from the time the invoice is prepared and
payment from the customer is received will result in Immunomedics receiving either more or less in local currency than the local currency equivalent of the invoice amount at the time the invoice was prepared and the receivable established. This
difference is recognized by Immunomedics as a foreign currency transaction gain or loss, as applicable, and is reported in other expense (income) in the Companys Consolidated Statements of Operations. In addition, for intercompany transactions
for which settlement is planned or anticipated in the foreseeable future, the related foreign currency transaction gains or losses, as applicable, are reported in other expenses (income) in the Companys Consolidated Statement of Operations.



In addition, the Companys consolidated financial
statements are denominated in U.S. dollars. Accordingly, changes in exchange rates between the applicable foreign currency and the U.S. dollar will affect the translation of each foreign subsidiarys financial results into U.S. dollars for
purposes of reporting



41



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the Companys consolidated financial results. The process by which each foreign subsidiarys financial results
are translated into U.S. dollars is as follows: income statement accounts are translated at average exchange rates for the period; balance sheet asset and liability accounts are translated at end of period exchange rates; and equity accounts are
translated at historical exchange rates. Translation of the balance sheet in this manner affects the stockholders equity account, referred to as the cumulative translation adjustment account. This account exists only in the foreign
subsidiarys U.S. dollar balance sheet and is necessary to keep the foreign balance sheet stated in U.S. dollars in balance. To date such cumulative translation adjustments have not been material to the Companys consolidated financial
position.



Stock Based Compensation



Immunomedics grants stock options to its employees at an exercise price
equal to the fair value of the shares at the date of grant and accounts for these stock option grants in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees and related interpretations. Under APB Opinion No. 25,
when stock options are issued with an exercise price equal to the market price of the underlying stock on the date of grant, no compensation expense is recognized in the income statement. However, for purposes of disclosure only, we estimate the
fair value of stock options through the use of option pricing models. In determining the values to use in our option-pricing model, we make several subjective estimates about the characteristics of the underlying stock and the expected timing of
option exercise. Changes to these estimates can change the fair value disclosures in our financial statements. The Companys Board of Directors approved the acceleration of vesting of all outstanding stock options as of June 30, 2005, primarily
to avoid stock based compensation charges upon the adoption of SFAS 123(R) on July 1, 2005. The exercise price of all stock options was above market value of the common stock at the time of the accelerated vesting.



Impairment of Assets



Immunomedics reviews its long-lived assets for impairment, when events or
changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based upon the Companys judgment of its ability to recover the asset from the expected future
undiscounted cash flows of the related operations. Actual future cash flows may be greater or less than estimated.



Results of Operations



Fiscal Year 2005 compared to Fiscal Year 2004



Revenues for the fiscal year ended June 30, 2005 were $3,813,000 as compared to $4,306,000 in the fiscal year ended June 30, 2004, representing a decrease
of $493,000, or 11%, primarily due to lower product sales and a decrease in license fees. Product sales were $258,000 lower in Europe primarily due to a lack of saleable LeukoScan® product, as current production is waiting for submission to the European regulatory authorities. License fee and other
revenues for fiscal year 2005 decreased to $330,000 from $512,000 for the same period in 2004, primarily due to the complete recognition of revenues associated with the Development and License Agreement with Amgen, Inc. (Amgen Agreement)
which declined from $275,000 in 2004 to $0 in 2005.



Total
operating expenses for fiscal year 2005 were $32,514,000 as compared to $27,299,000 in fiscal year 2004, representing an increase of $5,215,000, or 19%. Research and development expenses for fiscal year 2005 increased by $5,094,000, from $21,934,000
in fiscal year 2004 to $27,028,000, primarily due to the beginning of the Phase III trials for epratuzumab for the treatment of systemic lupus erythematosus (SLE), as well as increased research and development efforts including outside
toxicity testing associated with producing compounds to be used in clinical trials. Cost of goods sold for fiscal year 2005 decreased by $106,000 to $607,000 from $713,000 in fiscal year 2004, primarily due to lower sales of in-vitro diagnostic kits
and other imaging products.



42



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Sales and marketing expenses for fiscal year 2005 were $974,000 as compared to $1,331,000 for fiscal year
2004, representing a decrease of $357,000. The decline in marketing expenses was due to de-emphasis of diagnostic product line. General and administrative costs for fiscal year 2005 increased by $585,000 from $3,320,000 in fiscal year 2004 to
$3,905,000. This increase was primarily due to settlement of corporate litigation in 2005 and a $300,000 insurance claim for product contamination that was received in 2004 and not repeated in 2005.



Interest and other income for fiscal year 2005 decreased by $73,000 from
$510,000 in fiscal year 2004 to $437,000 in 2005, primarily due to reduced level of cash available for investment during the year. Interest expense increased from $225,000 in fiscal year 2004 to $1,035,000 in fiscal year 2005. This increase resulted
primarily from the $37,675,000 of 5% senior convertible notes sold in April 2005. Also included in interest expense in 2005 is the amortization expense associated with the debt issuance costs ($139,000) and the debt discount ($205,000).



In September 2004 a patent infringement suit with Cytogen, Inc. and C.R.
Bard was settled for an undisclosed amount without any admission of fault or liability. In connection with the settlement, the Company settled legal fees associated with the suit with the attorneys representing it in the case. The Company recorded a
litigation settlement gain in other income in the amount of $1,111,750, which includes the reversal of legal fees previously accrued for this patent suit. The specific amount of the settlement, however, is undisclosed in accordance with the terms of
the parties settlement agreement.



At June 30, 2005 the
liabilities outstanding related to the warrants from the 5% senior convertible notes were revalued based on the Companys common stock price. The valuation of the liability for these warrants was adjusted as of June 30, 2005 due to the decline
in the Companys common stock from $2.16 per share on April 29, 2005 to $1.71 per share. As such, the gain from the change in fair value of the warrant liability of $938,760 was recorded in the statement of operations.



For fiscal years 2005 and 2004, we recorded a tax benefit of $590,000 and
$428,000, respectively, as a result of our sale of approximately $7,335,000 and $5,313,000 of New Jersey state net operating losses, respectively. These tax benefits were partially offset by income tax provisions of $205,000 and $206,000, primarily
from our European subsidiary for 2005 and 2004, respectively.



Net loss allocable to common stockholders for fiscal year 2005 is $26,758,000, or $0.50 per share, as compared to $22,355,000, or $0.45 per share, in fiscal year 2004.



Fiscal Year 2004 compared to Fiscal Year 2003



Revenues for the fiscal year ended June 30, 2004 were $4,306,000 as compared to $13,719,000 in the fiscal year ended June
30, 2003, representing a decrease of $9,413,000, or 69%, primarily due to a decrease in license fees. License fee and other revenues for fiscal year 2004 decreased to $512,000 from $10,127,000 for the same period in 2003, primarily due to the
complete recognition of the licensing fees associated with the Development and License Agreement with Amgen, Inc. (Amgen Agreement) by February 2003. Revenues derived from the Amgen Agreement declined from $9,693,000 in 2003 to $275,000
in 2004. Product sales for fiscal year 2004 were about the same as 2003 as a result of the Companys decision to transition its focus from the sale of diagnostic imaging products to the development of therapeutic compounds. Revenues from grants
for research and development for fiscal year 2004 increased to $186,000 from $34,000 for the same period of 2003.



43



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Total operating expenses for fiscal year 2004 were $27,299,000 as compared to $23,533,000 in fiscal year
2003, representing an increase of $3,766,000, or 16%. Research and development expenses for fiscal year 2004 increased by $3,759,000, from $18,175,000 in fiscal year 2003 to $21,934,000 primarily due to an increased number of professional staff, as
well as increased research and development efforts including manufacturing expenses such as laboratory supplies associated with producing compounds to be used in clinical trials. Cost of goods sold for fiscal year 2004 increased by $170,000 to
$713,000 from $543,000 in fiscal year 2003, primarily due to increased sales of in-vitro diagnostic kits and other imaging products and establishment of reserves for inventory on hand for product lines that are being de-emphasized.



Sales and marketing expenses for fiscal year 2004 were
$1,331,000 as compared to $1,313,000 for fiscal year 2003, representing a decrease of $18,000. General and administrative costs for fiscal year 2004 decreased by $182,000 from $3,502,000 in fiscal year 2003 to $3,320,000.



Interest and other income for fiscal year 2004 decreased by $586,000 from
$1,096,000 in fiscal year 2003 to $510,000 in 2004, primarily due to lower rates of return on our invested cash and reduced level of cash available for investment. Interest expense increased from $9,000 in fiscal year 2003 to $225,000 in fiscal year
2004. This increase was due to the $6,376,000 bond financing with the New Jersey Economic Authority, completed in May 2003, and the issuance of $10,000,000 of senior convertible notes, which was completed in January 2004.



For fiscal years 2004 and 2003, we recorded a tax benefit of $428,000 and
$745,000, respectively, as a result of our sale of approximately $5,313,000 and $9,246,000 of New Jersey state net operating losses, respectively. These tax benefits were partially offset by income tax provisions of $194,000 and $65,000, primarily
from our European subsidiary for 2004 and 2003, respectively.



Net loss allocable to common stockholders for fiscal year 2004 is $22,355,000, or $0.45 per share, as compared to $7,874,000, or $0.16 per share, in fiscal year 2003.



Research and Development Expenses



Research and development expenses for our products in development were $27,028,000, $21,934,000 and $18,175,000 for the
years ended June 30, 2005, 2004 and 2003, respectively. Research and development expenses increased by $5,094,000 in 2005 or 23% as compared to 2004. Research and development expenses increased by $3,759,000 or 21% as compared to 2003.



Historically the Company does not track expenses on the basis of each
individual compound under investigation or through clinical trials and therefore we do not provide a breakdown of such historical information in that format. The Company evaluates projects under development from an operational perspective, including
such factors as results of individual compounds from laboratory/animal testing, patient results and enrollment statistics in clinical trials. It is important to note that multiple product candidates are often tested simultaneously. It is not
possible to calculate each antibodys supply costs. There are many different development processes and test methods that examine multiple products at the same time. We have, historically, tracked our costs in the categories discussed below,
specifically research costs and product development costs and by the types of costs outlined below.



Our research costs consists of outside costs associated with animal studies and costs associated with research and testing of our product candidates prior
to reaching the clinical stage. Such research costs primarily include personnel costs, facilities, including depreciation, lab supplies, funding of outside contracted research and license fees. Our product development costs consist of costs from
preclinical development (including manufacturing), conducting and administering clinical trials and patent expenses.



44



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The following table sets forth a breakdown of our research and development expenses by those associated
with research and those associated with product development for the periods indicated.



|                          |  |                      |        |      |   |        |  |   |       
|------------------------- |  | -------------------- | ------ | ---- | - | ------ |  | - | ------
|                          |  | Years Ended June 30,
|                          |  | 2005                 |        | 2004 |   | 2003  
|Research Costs            |  | $                    | 6,503  |      | $ | 5,849  |  | $ | 4,959 
|Product Development Costs |  |                      | 20,525 |      |   | 16,085 |  |   | 13,216
|                          |  |                      |        |      |   |        |  |   |       
|Total                     |  | $                    | 27,028 |      | $ | 21,934 |  | $ | 18,175
|                          |  |                      |        |      |   |        |  |   |       



Research Costs



Research costs in total increased by $654,000 or 11%
as compared to 2004. Research costs increased by $890,000 in 2004 or 18% as compared to 2003. The increases in research costs primarily relate to the following:



Animal studies conducted by outside organizations in 2005 were $1,452,000, an increase of $642,000 or 79% over 2004, as
testing for toxicity studies for compounds in the preclinical stage of development. The increase in 2004 over 2003 was $390,000 or a 93% increase, relating to the increased level of toxicity studies performed by outside organizations.



Personnel costs in 2005 were $2,439,000 a decrease of $64,000 or 3% as
compared to 2004. This slight decline resulted from employee attrition and the increased focus to product development as compounds proceeded further in clinical trials. For the 2004 fiscal year personnel costs increased by $313,000 or 14% over 2003
due to increases in personnel levels.



Facility costs in 2005
were $1,046,000, a decrease of $60,000 or 5% as compared to 2004, as a result of a reduction in depreciation expense as assets acquired in previous years became fully depreciated. Facility costs increased $147,000 in 2004 over 2003 levels, or 15%.
This increase resulted primarily from higher utilities and related expenses associated from the expansion in our facility in 2003.



Product Development Costs



Product development costs in total increased by $4,440,000 or 28% as compared to 2004. Product development costs increased by $2,869,000 in 2004 or 22% as
compared to 2003. The increases in product development costs primarily relate to the following:



Personnel costs in 2005 were $4,643,000 an increase of $40,000 or 1% as compared to 2004. This small increase was primarily attributed to salary increases
offset by employee attrition and cost control efforts in the manufacturing and clinical monitoring areas. For the 2004 fiscal year personnel costs increased by $734,000 or 19% over 2003 due to staffing increases brought on by the increased product
development efforts.



Clinical trial expenses in 2005 were
$3,737,000, an increase of $2,213,000 or 145% over 2004. This increase is primarily the result of the beginning of the Phase III clinical trials for epratuzumab for the treatment of Systemic Lupus Erythematosus (SLE), which incurred
approximately $2,865,000 of expenses in 2005. Clinical trial expenses for 2004 were $277,000 or 15% lower than in 2003, due primarily to the timing of patient enrollment for clinical trials taking place.



45



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Patent expenses for 2005 were $3,086,000, as increase of $1,803,000 or 141% over 2004. For the 2004
fiscal year patent expenses were $279,000 lower or 18% below 2003. The increase for patent expenses in 2005 is primarily attributed to increased applications of patents in foreign locations and vigorous defense of existing patents.



Facility costs in 2005 were $4,046,000 an increase of $250,000 or 7% over
2004. Facility costs in 2004 reflect an increase of $1,304,000 or 52% over 2003. The increases in facility costs primarily relates to increased investment in our manufacturing facility and equipment that took place during the 2003 fiscal year. As a
result depreciation, utilities, maintenance and related expenses have increased.



Lab supplies and chemical reagent costs were $2,525,000 in 2005, an increase of $223,000 or 10% over 2004. These expenses were $2,302,000 in 2004, an increase of $513,000 or 29% over 2003. These increases resulted
from the increased production levels of the new manufacturing facility and growth needed for clinical trial demands.



We expect product development costs to increase in the future due to the Phase III clinical trials for SLE and as other products are developed. If we are
not successful in obtaining additional financing over the coming year, it will be necessary to implement cost reductions in research and other areas.



Completion of clinical trials may take several years or more. The length of time varies according to the type, complexity and the disease indication of
the product candidate. We estimate that clinical trials of the type we generally conduct are typically completed over the following periods:



|               |  |                            
|-------------- |  | ---------------------------
|Clinical Phase |  | Estimated Completion Period
|Phase I        |  | 1-2 Years                  
|Phase II       |  | 1-3 Years                  
|Phase III      |  | 2-5 Years                  



The duration and cost
of clinical trials through each of the clinical trial phases may vary significantly over the life of a particular project as a result of, among other things, the following factors:



| |  |  | the length of time required to recruit qualified patients for clinical trials
| | - |  | -----------------------------------------------------------------------------



| |  |  | the duration of patient follow-up in light of trials results
| | - |  | ------------------------------------------------------------



| |  |  | the number of clinical sites required for trials and
| | - |  | ----------------------------------------------------



| |  |  | the number of patients that ultimately participate
| | - |  | --------------------------------------------------



Liquidity and Capital Resources



Since our inception in 1982, we have financed our operations primarily through private sales of our equity securities, revenue earned under licensing
agreements and, to a lesser degree, from sales of CEA-Scan® and LeukoScan®,
research grants from various sources and investment income.



At
June 30, 2005, we had working capital of $23,326,000, representing an increase of $12,991,000 from $10,335,000 at June 30, 2004. The increase in working capital is a result of the April 2005 5% senior convertible debt ($37,675,000) and sale of
common stock through a private placement in August 2004 ($14,000,000), partially offset by the Companys loss on operations of $26,758,000. The increase of current liabilities as of June 30, 2005 was primarily due to $2,200,000 of accruals
relating to our Phase III clinical trials for SLE, which were settled during the first quarter of 2006. At June 30, 2005, we had long-term debt, net of discounts, of $36,743,000, (5% senior convertible notes due 2008 - $34,193,000 and the New Jersey
Economic Development Authority - $2,550,000).



46



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The April 29, 2005 private placement of the 5% senior convertible notes raised total gross proceeds of
$37,675,000. A portion of the proceeds received from the offering of the notes was used for payment of related fees and expenses and to retire $5 million principal amount of the 3.25% senior convertible notes due in January 2006. The resulting net
cash proceeds raised from this transaction was $30,200,000. In addition, $5,000,000 of the 3.25% senior convertible notes was exchanged for $5,000,000 of the 5.0% senior convertible notes.



The 5% senior convertible notes mature three years from their date of
issuance, are convertible into company common stock at a conversion rate of $2.62 per share and bear interest at the rate of 5% per annum. If a note is converted or cancelled prior to maturity, the holder will be paid on the date of conversion or
cancellation any interest that would have otherwise been earned during the three-year term. For each $1,000 principal amount of notes purchase, purchasers were granted a warrant to purchase approximately 76.39 shares of common stock. The warrants
expire three years from the initial closing date and will be exercisable at $2.98 per share.



In August 2004, the Company sold 4,178,116 shares of its common stock, resulting in net proceeds to the Company of approximately $14.0 million. The shares were sold to institutional investors at a price of $3.61 per
share. The shares of common stock were sold pursuant to an effective shelf registration statement filed with the SEC.



Our cash, cash equivalents and marketable securities amounted to $15,485,000 at June 30, 2005, representing an increase of $2,006,000 from $13,479,000 at
June 30, 2004. The increase was primarily attributable to the August 2004 common stock private placement and the April 2005 sale of 5% senior convertible notes, offset by the Companys net loss for 2005. These proceeds will be used for research
and development activities and funding of operating expenses. It is anticipated that working capital, and cash, cash equivalents and marketable securities will be utilized during fiscal year 2006 as a result of planned research and development,
other operating expenses and capital expenditures, partially offset by projected revenues from sales of our diagnostic imaging products. However, there can be no assurance as to the amount of revenues, if any, these imaging products will provide.



We expect to utilize our cash equivalents and short-term
investments to fund our operations for the 2006 fiscal year, which is expected to be at a higher level than in the 2005 fiscal year due to increased spending for clinical trials. However, we do not believe we will have adequate cash at this expected
spending level to fund our research and development programs through the next twelve months. We will require additional funding after we utilize our current liquid assets in order to continue our research and development programs as is currently
budgeted for fiscal year 2006. We are actively pursuing various financing alternatives as market conditions permit through additional debt or equity financings and through collaborative marketing and distribution agreements. We continue to evaluate
various programs to raise additional capital and to seek additional revenues from the licensing of our proprietary technologies. At the present time, we are unable to determine whether any of these future activities will be successful and, if so,
the terms and timing of any definitive agreements. If we are unable to raise additional funding in the near term, we will curtail certain programs and implement cost savings programs in order to continue our operations at least through the 2006
fiscal year.



As of June 30, 2005 there was $14,300,000 of
proceeds from the April 2005 5% senior convertible notes that was held in escrow in money market funds. These funds became available for use by the Company in the first quarter of 2006.



47



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Actual results could differ materially from our expectations as a result of a number of risks and
uncertainties, including the risks described in Item 1, Factors That May Affect Our Business and Results of Operations, and elsewhere in this Annual Report on Form 10-K. Our working capital and working capital requirements are affected
by numerous factors and such factors may have a negative impact on our liquidity. Principal among these are the success of product commercialization and marketing products, the technological advantages and pricing of our products, the impact of the
regulatory requirements applicable to us and access to capital markets that can provide us with the resources when necessary to fund our strategic priorities.



Contractual Commitments



Our major contractual obligations relate to an operating lease for our facility, a loan from the New Jersey Economic Development Authority used to fund
the expansion of our facility, a contract to administer our Phase III SLE clinical trials, the issuance of 5% senior convertible notes and employment contracts in effect for the Companys Chairman of the Board and the President/Chief Executive
Officer. We have identified and quantified the significant commitments in the following table for the fiscal years ending June 30:



|                                      |      |                        |        |            |      |        |      |   |        |  |   |     |  |   |     |  |   |       |  |   |       
|------------------------------------- | ---- | ---------------------- | ------ | ---------- | ---- | ------ | ---- | - | ------ |  | - | --- |  | - | --- |  | - | ----- |  | - | ------
|(in thousands) Contractual
Obligation |      | Payments Due by Period |        | Thereafter |      | Total 
|                                      | 2006 |                        | 2007   |            | 2008 |        | 2009 |   | 2010   |  |  
|Operating Lease(1)                    |      | $                      | 545    |            | $    | 552    |      | $ | 556    |  | $ | 556 |  | $ | 556 |  | $ | 8,542 |  | $ | 11,307
|NJEDA Loan(2)                         |      | $                      | 1,317  |            | $    | 1,301  |      | $ | 1,284  |  | $ |    |  | $ |    |  |   |      |  | $ | 3,902 
|Long Term Contract(3)                 |      | $                      | 7,089  |            | $    | 6,592  |      |   | 1,355  |  |   |    |  |   |    |  |   |      |  | $ | 15,036
|5% Senior convertible Notes(4)        |      |                        | 1,915  |            |      | 1,910  |      |   | 39,580 |  |   |    |  |   |    |  |   |      |  | $ | 43,405
|Employment Contracts                  |      | $                      | 1,245  |            |      | 100    |      |   | 100    |  |   | 100 |  |   |    |  |   |      |  | $ | 1,545 
|                                      |      |                        |        |            |      |        |      |   |        |  |   |     |  |   |     |  |   |       |  |   |       
|TOTAL                                 |      | $                      | 12,111 |            | $    | 10,455 |      | $ | 42,875 |  | $ | 656 |  | $ | 556 |  | $ | 8,542 |  | $ | 75,195

---

|(1) | In November 2001, we renewed our operating lease for our Morris Plains, New Jersey facility for an additional term of 20 years expiring in October 2021 at a base annual rate of
$545,000, which included an additional 15,000 square feet. The rent is fixed for the first five years and increases every five years thereafter.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | In May 2003, we obtained a loan for $6,376,000 at a variable interest rate through the New Jersey Economic Development Authority, repayable monthly in 60 equal installments.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On June 1, 2005, we entered into an agreement with PPD Development LP to operate on the Companys contract research organization to manage the Phase III clinical trials for
SLE. The chart above assumes that we will have adequate cash to continue to fund our clinical trials based on our current forecast. If we are unable to raise additional funds timely, these costs would be deferred to future periods, if incurred at
all.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | On April 29, 2005, we completed a $37,675,000 private placement financing through the issuance of 5% senior convertible notes due April 29, 2008. Interest payments are due
semi-annually beginning November 29, 2005, payable in cash or shares of common stock at the option of the Company. The holders of the notes may convert the notes at any time prior to April 29, 2009 at a conversion price of $2.62 per share, subject
to adjustment based on the anti-dilution provision. In addition, the holders received warrants that may be converted into shares of common stock at a conversion price of $2.98 per share.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



48



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|(5) | We have employment contracts with the Chairman of the Board and the Chief Executive Officer, which expire June 30, 2006. The contract with the Chairman of the Board includes a
royalty agreement, which continues for three years after the termination of his contract.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Recently Issued Accounting Pronouncements



In December 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees,and amends Statement No. 95, Statement of Cash Flows. Statement 123 (R) requires all share-based payments to employees, including grants of employee stock options, to be
recognized in the financial statements based on their fair values. Historically, in accordance with SFAS 123 and SFAS 148, Accounting for Stock-Based Compensation Transition and Disclosure,Immunomedics had elected to follow the
disclosure only provisions of measurement principles of APB Opinion No. 25 and related interpretations. Under APB 25, when stock options are issued with an exercise price equal to the market price of the underlying stock price on the date of grant,
no compensation expense is recognized in the financial statements, and compensation expense is only disclosed in the footnotes to the financial statements. Immunomedics plans to utilize the Black-Scholes valuation method to value stock based
compensation. The Companys Board of Directors approved the acceleration of vesting of all outstanding stock options as of June 30, 2005, primarily to avoid stock based compensation charges upon adoption of SFAS 123(R) on July 1, 2005. The
exercise price of all stock options was above market value at the time of the acceleration. In accordance with Statement 123R the Company will begin recording compensation expense for all new options beginning July 1, 2005.



Item 7A Quantitative and Qualitative Disclosures About Market
Risk



The following discussion about our
exposure to market risk of financial instruments contains forward-looking statements under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those described due to a number of factors, including
uncertainties associated with general economic conditions and conditions impacting our industry.



Our holdings of financial instruments are comprised primarily of corporate debt securities and municipal bonds. All such instruments are classified as
securities available for sale. We do not invest in portfolio equity securities or commodities or use financial derivatives for trading purposes. Our debt security portfolio represents funds held temporarily pending use in our business and
operations. We manage these funds accordingly. We seek reasonable assuredness of the safety of principal and market liquidity by investing in rated fixed income securities while at the same time seeking to achieve a favorable rate of return. Our
market risk exposure consists principally of exposure to changes in interest rates. Our holdings also are exposed to the risks of changes in the credit quality of issuers. We typically invest in highly liquid debt instruments with fixed interest
rates.



The table below presents the amounts and related
weighted average interest rates by fiscal year of maturity for our investment portfolio in marketable and restricted securities as of June 30, 2005:



|                      |  |                |        |   |      |   |       |      |  |      |  |      |  |       |  |   |            |   |  |   |       
|--------------------- |  | -------------- | ------ | - | ---- | - | ----- | ---- |  | ---- |  | ---- |  | ----- |  | - | ---------- | - |  | - | ------
|                      |  | 2006           |        |   | 2007 |   |       | 2008 |  | 2009 |  | 2010 |  | Total |  |   | Fair Value
|                      |  | (in thousands) |        |   |      |   |      
|Fixed rate            |  | $              | 18,627 |   |      | $ | 3,093 |      |  |     |  |     |  |      |  | $ | 21,720     |   |  | $ | 21,673
|Average interest rate |  |                | 2.59   | % |      |   | 1.72  | %    |  |     |  |     |  |      |  |   | 2.47       | % |  |   |      



49



---

We may be exposed to fluctuations in foreign currencies regarding long-term contracts with service
providers in regards to the SLE clinical trials that are in process. Depending on the strengthening or weakening of the U.S. dollar, realized and unrealized currency fluctuations could be significant.



As of June 30, 2005, and through the Special Shareholders Meeting held on
August 19, 2005, the Company was exposed to fluctuations relating to the warrants issued with the 5% senior convertible debt, based on changes to the Companys common stock. Upon the increase in authorized shares approved by the shareholders at
the Special Meeting on August 19, 2005, the warrants are no longer subject to liability accounting and have been reclassified to permanent equity in fiscal year 2006. The Company will record a charge to earnings in the first quarter of approximately
$270,000 reflecting the change in the fair value of the warrant from July 1, 2005 through August 19, 2005.



50



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Item 8  Financial Statements and Supplementary Data



Report of Independent Registered Public Accounting Firm



The Board of Directors and Stockholders

Immunomedics, Inc.



We have audited the accompanying consolidated balance sheets of Immunomedics, Inc. and subsidiaries as of June 30, 2005 and 2004, and the related
consolidated statements of operations and comprehensive loss, stockholders (deficit) equity and cash flows for each of the three years in the period ended June 30, 2005. Our audits also included the financial statement schedule listed in the
Index at Item 15(a). These financial statements and schedule are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.



We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Immunomedics, Inc. and subsidiaries at June 30, 2005 and 2004, and the
consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related consolidated financial
statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.



We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the effectiveness of Immunomedics, Inc.s internal control over financial reporting as of June 30, 2005, based on criteria established in Internal Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission, and our report dated September 7, 2005 expressed an unqualified opinion thereon.



/s/ Ernst & Young LLP



MetroPark, New Jersey

September 7, 2005



51



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IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                      |  |               |              |   |               |   |              |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------------ | - | ------------- | - | ------------ | -
|                                                                                                                                                                      |  | June 30, 2005 |              |   | June 30, 2004 |  
|ASSETS                                                                                                                                                                |  |               |              |   |               |   |              |  
|Current Assets:                                                                                                                                                       |  |               |              |   |               |   |              |  
|Cash and cash equivalents                                                                                                                                             |  | $             | 11,937,483   |   |               | $ | 9,133,297    |  
|Marketable securities                                                                                                                                                 |  |               | 3,547,507    |   |               |   | 4,345,891    |  
|Accounts receivable, net of allowance for doubtful accounts of $150,000 and $344,000 at June 30, 2005 and June 30, 2004,
respectively                                 |  |               | 409,458      |   |               |   | 788,647      |  
|Inventory, net of reserve                                                                                                                                             |  |               | 493,603      |   |               |   | 340,133      |  
|Other current assets                                                                                                                                                  |  |               | 785,677      |   |               |   | 748,921      |  
|Restricted securities  current portion                                                                                                                               |  |               | 15,575,200   |   |               |   | 1,275,200    |  
|                                                                                                                                                                      |  |               |              |   |               |   |              |  
|Total current assets                                                                                                                                                  |  |               | 32,748,928   |   |               |   | 16,632,089   |  
|Property and equipment, net                                                                                                                                           |  |               | 10,152,115   |   |               |   | 11,532,646   |  
|Restricted securities                                                                                                                                                 |  |               | 2,550,400    |   |               |   | 3,825,600    |  
|Other long-term assets                                                                                                                                                |  |               | 2,471,706    |   |               |   | 98,243       |  
|                                                                                                                                                                      |  |               |              |   |               |   |              |  
|                                                                                                                                                                      |  | $             | 47,923,149   |   |               | $ | 32,088,578   |  
|                                                                                                                                                                      |  |               |              |   |               |   |              |  
|LIABILITIES AND STOCKHOLDERS (DEFICIT) EQUITY                                                                                                                        |  |               |              |   |               |   |              |  
|Current Liabilities:                                                                                                                                                  |  |               |              |   |               |   |              |  
|Current portion of long-term debt                                                                                                                                     |  | $             | 1,275,200    |   |               | $ | 1,275,200    |  
|Accounts payable and accrued expenses                                                                                                                                 |  |               | 8,147,723    |   |               |   | 5,021,513    |  
|                                                                                                                                                                      |  |               |              |   |               |   |              |  
|Total current liabilities                                                                                                                                             |  |               | 9,422,923    |   |               |   | 6,296,713    |  
|                                                                                                                                                                      |  |               |              |   |               |   |              |  
|Long-term debt                                                                                                                                                        |  |               | 36,743,233   |   |               |   | 13,825,600   |  
|Other liabilities  warrants                                                                                                                                          |  |               | 2,748,240    |   |               |   |             |  
|Minority interest                                                                                                                                                     |  |               | 272,160      |   |               |   | 382,121      |  
|Commitments and Contingencies                                                                                                                                         |  |               |              |   |               |   |              |  
|Stockholders (deficit) equity:                                                                                                                                       |  |               |              |   |               |   |              |  
|Preferred stock, $.01 par value; authorized 10,000,000 shares; no shares issued and outstanding at June 30, 2005 and June 30,
2004                                    |  |               |             |   |               |   |             |  
|Common stock, $.01 par value; authorized 70,000,000 shares; issued and outstanding, 54,073,059 and 49,893,693 shares at June 30, 2005 and June
30, 2004, respectively |  |               | 540,730      |   |               |   | 498,937      |  
|Capital contributed in excess of par                                                                                                                                  |  |               | 173,417,147  |   |               |   | 159,493,859  |  
|Treasury stock, at cost, 34,725 shares                                                                                                                                |  |               | (458,370     | ) |               |   | (458,370     | )
|Accumulated deficit                                                                                                                                                   |  |               | (175,015,679 | ) |               |   | (148,257,745 | )
|Accumulated other comprehensive income                                                                                                                                |  |               | 252,765      |   |               |   | 307,463      |  
|                                                                                                                                                                      |  |               |              |   |               |   |              |  
|Total stockholders (deficit) equity                                                                                                                                  |  |               | (1,263,407   | ) |               |   | 11,584,144   |  
|                                                                                                                                                                      |  |               |              |   |               |   |              |  
|                                                                                                                                                                      |  | $             | 47,923,149   |   |               | $ | 32,088,578   |  
|                                                                                                                                                                      |  |               |              |   |               |   |              |  



See accompanying notes
to consolidated financial statements.



52



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IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE LOSS



|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|---------------------------------------------------- |  | -------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ---------- | -
|                                                     |  | Years ended June 30, |            
|                                                     |  | 2005                 |             |   | 2004 |   |             | 2003 | 
|Revenues:                                            |  |                      |             |   |      |   |             |      |  |   |            |  
|Product sales                                        |  | $                    | 3,349,483   |   |      | $ | 3,607,413   |      |  | $ | 3,558,435  |  
|License fee and other revenues                       |  |                      | 329,674     |   |      |   | 512,256     |      |  |   | 10,127,327 |  
|Research and development                             |  |                      | 134,285     |   |      |   | 186,171     |      |  |   | 33,710     |  
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Total revenues                                       |  |                      | 3,813,442   |   |      |   | 4,305,840   |      |  |   | 13,719,472 |  
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Costs and Expenses:                                  |  |                      |             |   |      |   |             |      |  |   |            |  
|Costs of goods sold                                  |  |                      | 606,901     |   |      |   | 713,332     |      |  |   | 543,400    |  
|Research and development                             |  |                      | 27,028,272  |   |      |   | 21,934,287  |      |  |   | 18,174,806 |  
|Sales and marketing                                  |  |                      | 973,755     |   |      |   | 1,331,235   |      |  |   | 1,312,863  |  
|General and administrative                           |  |                      | 3,905,331   |   |      |   | 3,320,220   |      |  |   | 3,501,855  |  
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Total costs and expenses                             |  |                      | 32,514,259  |   |      |   | 27,299,074  |      |  |   | 23,532,924 |  
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Operating loss                                       |  |                      | (28,700,817 | ) |      |   | (22,993,234 | )    |  |   | (9,813,452 | )
|Litigation settlement                                |  |                      | 1,111,750   |   |      |   |            |      |  |   |           |  
|Gain on change in fair value of warrants             |  |                      | 938,760     |   |      |   |            |      |  |   |           |  
|Interest and other income                            |  |                      | 436,759     |   |      |   | 509,608     |      |  |   | 1,095,714  |  
|Interest expense                                     |  |                      | (1,035,498  | ) |      |   | (224,743    | )    |  |   | (9,064     | )
|Minority interest                                    |  |                      | 109,961     |   |      |   | 88,923      |      |  |   | 88,178     |  
|Foreign currency transaction (loss) gain             |  |                      | (3,969      | ) |      |   | 30,055      |      |  |   | 84,864     |  
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Loss before income tax benefit                       |  |                      | (27,143,054 | ) |      |   | (22,589,391 | )    |  |   | (8,553,760 | )
|Income tax benefit                                   |  |                      | 385,120     |   |      |   | 234,136     |      |  |   | 679,454    |  
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Net loss                                             |  | $                    | (26,757,934 | ) |      | $ | (22,355,255 | )    |  | $ | (7,874,306 | )
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Per Share Data (basic and diluted):                  |  |                      |             |   |      |   |             |      |  |   |            |  
|Net loss                                             |  | $                    | (0.50       | ) |      | $ | (0.45       | )    |  | $ | (0.16      | )
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Weighted average number of common shares outstanding |  |                      | 53,683,834  |   |      |   | 49,886,484  |      |  |   | 49,877,889 |  
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Comprehensive loss:                                  |  |                      |             |   |      |   |             |      |  |   |            |  
|Net loss                                             |  | $                    | (26,757,934 | ) |      | $ | (22,355,255 | )    |  | $ | (7,874,306 | )
|                                                     |  |                      |            
|Other comprehensive (loss) income, net of tax:       |  |                      |             |   |      |   |             |      |  |   |            |  
|Foreign currency translation adjustments             |  |                      | (39,976     | ) |      |   | 85,737      |      |  |   | 68,297     |  
|Unrealized loss on securities available for sale     |  |                      | (14,722     | ) |      |   | (269,872    | )    |  |   | (90,903    | )
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Other comprehensive income (loss)                    |  |                      | (54,698     | ) |      |   | (184,135    | )    |  |   | (22,606    | )
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  
|Comprehensive loss                                   |  | $                    | (26,812,632 | ) |      | $ | (22,539,390 | )    |  | $ | (7,896,912 | )
|                                                     |  |                      |             |   |      |   |             |      |  |   |            |  



See accompanying notes
to consolidated financial statements.



53



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IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS (DEFICIT) EQUITY



|                                                                               |  |                 |  |              |  |                                    |  |               |         |  |                    |             |  |                                            |          |   |       |   |              |   |  |   |          |   |  |   |             |  
|------------------------------------------------------------------------------ |  | --------------- |  | ------------ |  | ---------------------------------- |  | ------------- | ------- |  | ------------------ | ----------- |  | ------------------------------------------ | -------- | - | ----- | - | ------------ | - |  | - | -------- | - |  | - | ----------- | -
|                                                                               |  | Preferred Stock |  | Common Stock |  | CapitalContributed inExcess of Par |  | TreasuryStock |         |  | AccumulatedDeficit |             |  | AccumulatedOtherComprehensiveIncome/(Loss) |          |   | Total |  
|                                                                               |  | Shares          |  | Amount       |  | Shares                             |  | Amount        |         |  |                    |             | 
|Balance, at June 30, 2002                                                      |  |                |  |             |  | 49,877,443                         |  |               | 498,774 |  |                    | 158,569,476 |  |                                            | (458,370 | ) |       |   | (118,028,184 | ) |  |   | 514,204  |   |  |   | 41,095,900  |  
|Exercise of options to purchase common stock                                   |  |                |  |             |  | 750                                |  |               | 8       |  |                    | 1,328       |  |                                            |         |   |       |   |             |   |  |   |         |   |  |   | 1,336       |  
|Compensation expense associated with issuance of stock options to non-employee |  |                |  |             |  |                                   |  |               |        |  |                    | 360,000     |  |                                            |         |   |       |   |             |   |  |   |         |   |  |   | 360,000     |  
|Compensation expense associated with issuance of stock options to employees    |  |                |  |             |  |                                   |  |               |        |  |                    | 106,440     |  |                                            |         |   |       |   |             |   |  |   |         |   |  |   | 106,440     |  
|Other comprehensive loss                                                       |  |                |  |             |  |                                   |  |               |        |  |                    |            |  |                                            |         |   |       |   |             |   |  |   | (22,606  | ) |  |   | (22,606     | )
|Net loss                                                                       |  |                |  |             |  |                                   |  |               |        |  |                    |            |  |                                            |         |   |       |   | (7,874,306   | ) |  |   |         |   |  |   | (7,874,306  | )
|                                                                               |  |                 |  |              |  |                                    |  |               |         |  |                    |             |  |                                            |          |   |       |   |              |   |  |   |          |   |  |   |             |  
|Balance, at June 30, 2003                                                      |  |                |  |             |  | 49,878,193                         |  | $             | 498,782 |  | $                  | 159,037,244 |  | $                                          | (458,370 | ) |       | $ | (125,902,490 | ) |  | $ | 491,598  |   |  | $ | 33,666,764  |  
|Exercise of options to purchase common stock                                   |  |                |  |             |  | 15,500                             |  |               | 155     |  |                    | 49,045      |  |                                            |         |   |       |   |             |   |  |   |         |   |  |   | 49,200      |  
|Issuance of warrants to purchase common stock                                  |  |                |  |             |  |                                   |  |               |        |  |                    | 310,000     |  |                                            |         |   |       |   |             |   |  |   |         |   |  |   | 310,000     |  
|Compensation expense associated with issuance of stock options to employees    |  |                |  |             |  |                                   |  |               |        |  |                    | 97,570      |  |                                            |         |   |       |   |             |   |  |   |         |   |  |   | 97,570      |  
|                                                                               |  |                 |  |              |  |                                    |  |               |        
|Other comprehensive loss                                                       |  |                |  |             |  |                                   |  |               |        |  |                    |            |  |                                            |         |   |       |   |             |   |  |   | (184,135 | ) |  |   | (184,135    | )
|                                                                               |  |                 |  |              |  |                                    |  |               |        
|Net loss                                                                       |  |                |  |             |  |                                   |  |               |        |  |                    |            |  |                                            |         |   |       |   | (22,355,255  | ) |  |   |         |   |  |   | (22,355,255 | )
|                                                                               |  |                 |  |              |  |                                    |  |               |         |  |                    |             |  |                                            |          |   |       |   |              |   |  |   |          |   |  |   |             |  
|Balance, at June 30, 2004                                                      |  |                |  |             |  | 49,893,693                         |  | $             | 498,937 |  | $                  | 159,493,859 |  | $                                          | (458,370 | ) |       | $ | (148,257,745 | ) |  | $ | 307,463  |   |  | $ | 11,584,144  |  
|Exercise of options to purchase common stock                                   |  |                |  |             |  | 1,250                              |  |               | 12      |  |                    | 4,050       |  |                                            |         |   |       |   |             |   |  |   |         |   |  |   | 4,062       |  
|Issuance of common stock pursuant of private placement, net                    |  |                |  |             |  | 4,178,116                          |  |               | 41,781  |  |                    | 13,919,238  |  |                                            |         |   |       |   |             |   |  |   |         |   |  |   | 13,961,019  |  
|                                                                               |  |                 |  |              |  |                                    |  |               |        
|Other comprehensive loss                                                       |  |                |  |             |  |                                   |  |               |        |  |                    |            |  |                                            |         |   |       |   |             |   |  |   | (54,698  | ) |  |   | (54,698     | )
|                                                                               |  |                 |  |              |  |                                    |  |               |        
|Net loss                                                                       |  |                |  |             |  |                                   |  |               |        |  |                    |            |  |                                            |         |   |       |   | (26,757,934  | ) |  |   |         |   |  |   | (26,757,934 | )
|                                                                               |  |                 |  |              |  |                                    |  |               |         |  |                    |             |  |                                            |          |   |       |   |              |   |  |   |          |   |  |   |             |  
|Balance, at June 30, 2005                                                      |  |                |  |             |  | 54,073,059                         |  | $             | 540,730 |  | $                  | 173,417,147 |  | $                                          | (458,370 | ) |       | $ | (175,015,679 | ) |  | $ | 252,765  |   |  | $ | (1,263,407  | )
|                                                                               |  |                 |  |              |  |                                    |  |               |         |  |                    |             |  |                                            |          |   |       |   |              |   |  |   |          |   |  |   |             |  



See accompanying notes
to consolidated financial statements.



54



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IMMUNOMEDICS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                          |  |                      |             |   |      |   |             |      |  |   |             |  
|----------------------------------------------------------------------------------------- |  | -------------------- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                          |  | Years ended June 30, |            
|                                                                                          |  | 2005                 |             |   | 2004 |   |             | 2003 | 
|Cash flows from operating activities:                                                     |  |                      |             |   |      |   |             |      |  |   |             |  
|Net loss                                                                                  |  | $                    | (26,757,934 | ) |      | $ | (22,355,255 | )    |  | $ | (7,874,306  | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                      |             |   |      |   |             |      |  |   |             |  
|Depreciation                                                                              |  |                      | 1,863,052   |   |      |   | 1,947,683   |      |  |   | 1,558,940   |  
|Minority interest.                                                                        |  |                      | (109,961    | ) |      |   | (88,923     | )    |  |   | (88,178     | )
|Provision (credit) for allowance for doubtful accounts                                    |  |                      | (105,972    | ) |      |   |            |      |  |   | 107,714     |  
|Inventory reserve                                                                         |  |                      | 27,614      |   |      |   | 139,000     |      |  |   |            |  
|Amortization of bond discount                                                             |  |                      | 148,044     |   |      |   | 216,871     |      |  |   | 255,162     |  
|Amortization of debt issuance costs and debt discount                                     |  |                      | 334,097     |   |      |   |            |      |  |   |            |  
|Gain on change in fair value of warrants                                                  |  |                      | (938,760    | ) |      |   |            |      |  |   |            |  
|Non-cash expense relating to issuance of warrants                                         |  |                      |            |   |      |   | 310,000     |      |  |   |            |  
|Non-employee stock based compensation                                                     |  |                      |            |   |      |   |            |      |  |   | 360,000     |  
|Employee stock based compensation                                                         |  |                      |            |   |      |   | 97,570      |      |  |   | 106,440     |  
|Other                                                                                     |  |                      | (39,976     | ) |      |   | 85,737      |      |  |   | 68,297      |  
|Changes in operating assets and liabilities:                                              |  |                      |             |   |      |   |             |      |  |   |             |  
|Accounts receivable                                                                       |  |                      | 485,161     |   |      |   | 141,487     |      |  |   | 68,868      |  
|Inventories                                                                               |  |                      | (181,084    | ) |      |   | 360,347     |      |  |   | (197,794    | )
|Other current assets                                                                      |  |                      | (36,756     | ) |      |   | 76,451      |      |  |   | 976,607     |  
|Other long-term assets                                                                    |  |                      | (5,962      | ) |      |   | (35,086     | )    |  |   | (12,000     | )
|Accounts payable and accrued expenses                                                     |  |                      | 3,126,210   |   |      |   | 405,767     |      |  |   | (1,204,586  | )
|Deferred revenue                                                                          |  |                      |            |   |      |   |            |      |  |   | (7,475,728  | )
|                                                                                          |  |                      |             |   |      |   |             |      |  |   |             |  
|Net cash used in operating activities                                                     |  |                      | (22,182,227 | ) |      |   | (18,698,351 | )    |  |   | (13,350,564 | )
|                                                                                          |  |                      |             |   |      |   |             |      |  |   |             |  
|Cash flows from investing activities:                                                     |  |                      |             |   |      |   |             |      |  |   |             |  
|Purchase of marketable securities                                                         |  |                      | (7,356,984  | ) |      |   | (849,977    | )    |  |   | (10,229,667 | )
|Proceeds from maturities of marketable securities                                         |  |                      | 9,267,802   |   |      |   | 7,487,356   |      |  |   | 25,037,578  |  
|Additions to property and equipment                                                       |  |                      | (482,521    | ) |      |   | (1,181,358  | )    |  |   | (7,296,010  | )
|                                                                                          |  |                      |             |   |      |   |             |      |  |   |             |  
|Net cash from investing activities                                                        |  |                      | 1,428,297   |   |      |   | 5,456,021   |      |  |   | 7,511,901   |  
|                                                                                          |  |                      |             |   |      |   |             |      |  |   |             |  
|Cash flows from financing activities:                                                     |  |                      |             |   |      |   |             |      |  |   |             |  
|Issuance of 5.0% senior convertible notes-net of fees and exchange of 3.25% notes         |  |                      | 30,168,235  |   |      |   |            |      |  |   |            |  
|Proceeds of 5% convertible notes  in restricted cash                                     |  |                      | (14,300,000 | ) |      |   |            |      |  |   |            |  
|Issuance of common stock  net of fees                                                    |  |                      | 13,961,019  |   |      |   |            |      |  |   |            |  
|Issuance of 3.25% senior convertible notes                                                |  |                      |            |   |      |   | 10,000,000  |      |  |   |            |  
|Facility expansion financing                                                              |  |                      |            |   |      |   |            |      |  |   | 6,376,000   |  
|Payments of debt                                                                          |  |                      | (6,275,200  | ) |      |   | (1,275,200  | )    |  |   |            |  
|Exercise of stock options                                                                 |  |                      | 4,062       |   |      |   | 49,200      |      |  |   | 1,336       |  
|                                                                                          |  |                      |             |   |      |   |             |      |  |   |             |  
|Net cash provided by financing activities                                                 |  |                      | 23,558,116  |   |      |   | 8,774,000   |      |  |   | 6,377,336   |  
|                                                                                          |  |                      |             |   |      |   |             |      |  |   |             |  
|Increase (decrease) in cash and cash equivalents                                          |  |                      | 2,804,186   |   |      |   | (4,468,330  | )    |  |   | 538,673     |  
|Cash and cash equivalents at beginning of period                                          |  |                      | 9,133,297   |   |      |   | 13,601,627  |      |  |   | 13,062,954  |  
|                                                                                          |  |                      |             |   |      |   |             |      |  |   |             |  
|Cash and cash equivalents at end of period                                                |  | $                    | 11,937,483  |   |      | $ | 9,133,297   |      |  | $ | 13,601,627  |  
|                                                                                          |  |                      |             |   |      |   |             |      |  |   |             |  
|Supplemental disclosure of noncash financing activities:                                  |  |                      |             |   |      |   |             |      |  |   |             |  
|Cash paid for interest                                                                    |  | $                    | 529,111     |   |      | $ | 76,766      |      |  | $ |            |  
|Cash paid for income taxes                                                                |  | $                    | 330,893     |   |      | $ | 4,232       |      |  | $ | 1,490       |  



See accompanying notes
to consolidated financial statements.



55



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IMMUNOMEDICS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Business Overview



Immunomedics, Inc., a Delaware corporation (Immunomedics or the Company) is a biopharmaceutical company focused on the development of monoclonal antibody-based products for the targeted treatment of cancer,
autoimmune and other serious diseases. Immunomedics currently markets and sells CEA-Scan® in the United States, and CEA-Scan® and LeukoScan®
throughout Europe, Canada and in certain other markets outside the U.S.



Immunomedics is subject to significant risks and uncertainties, including, without limitation, our inability to further identify, develop and achieve commercial success for new products and technologies; the possibility of delays in the
research and development necessary to select drug development candidates and delays in clinical trials; the risk that clinical trials may not result in marketable products; the risk that we may be unable to successfully finance and secure regulatory
approval of and market our drug candidates; our dependence upon pharmaceutical and biotechnology collaborations; the levels and timing of payments under our collaborative agreements; uncertainties about our ability to obtain new corporate
collaborations and acquire new technologies on satisfactory terms, if at all; the development of competing products; our ability to protect our proprietary technologies; patent-infringement claims; and risks of new, changing and competitive
technologies and regulations in the United States and internationally.



The Company expects to utilize its cash equivalents and short-term investments to fund its operations for the 2006 fiscal year, which is expected to be at a higher level than in the 2005 fiscal year due to increased spending for clinical
trials. However, the Company does not believe it will have adequate cash at this expected spending level to fund the research and development programs through the next twelve months. The Company will require additional funding after it utilizes the
current liquid assets in order to continue the research and development programs as is currently budgeted for fiscal year 2006.



The Company is actively pursuing various financing alternatives as market conditions permit through additional debt or equity financings and through
collaborative marketing and distribution agreements. The Company continues to evaluate various programs to raise additional capital and to seek additional revenues from the licensing of our proprietary technologies. At the present time, the Company
is unable to determine whether any of these future activities will be successful and, if so, the terms and timing of any definitive agreements. If the Company is unable to raise additional funding on acceptable terms, it will curtail certain
programs and implement cost savings programs to continue its operations through at least July 1, 2006.



2. Summary of Significant Accounting Policies



Principles of Consolidation and Presentation



The consolidated financial statements include the accounts of Immunomedics and its majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Minority
interest is recorded for a majority-owned subsidiary (see Note 9).



56



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Use of Estimates



The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reported period. Actual results could differ from those estimates.



Foreign Currencies



For subsidiaries
outside of the United States that operate in a local currency environment, income and expense items are translated to United States dollars at the monthly average rates of exchange prevailing during the year, assets and liabilities are translated at
year-end exchange rates and equity accounts are translated at historical exchange rates. Translation adjustments are accumulated in a separate component of stockholders equity in the Consolidated Balance Sheets and are included in the
determination of comprehensive income in the Consolidated Statements of Stockholders Equity. Transaction gains and losses are included in the determination of net income in the Consolidated Statements of Operations.



Cash Equivalents and Marketable Securities



Immunomedics considers all highly liquid investments with original
maturities of three months or less, at the time of purchase, to be cash equivalents.



Immunomedics unrestricted investments in cash equivalents and marketable securities are available for sale to fund operations. The portfolio at June 30, 2005 primarily consists of corporate debt securities and
municipal bonds.



Concentration of Credit Risk



Cash, cash equivalents and marketable securities are
financial instruments that potentially subject the Company to concentration of credit risk. Immunomedics invests its cash in debt instruments of financial institutions and corporations with strong credit ratings. Immunomedics has established
guidelines relative to diversification and maturities that are designed to help ensure safety and liquidity. These guidelines are periodically reviewed to take advantage of trends in yields and interest rates. Immunomedics has historically held the
investments to maturity. However, the Company has the ability to sell these investments before maturity and has therefore classified the investments as available for sale. Immunomedics has never experienced any significant losses on its investments.



Inventory



Inventory is stated at the lower of average cost (which approximates
first-in, first-out) or market, and includes materials, labor and manufacturing overhead.



Property and Equipment



Property and equipment are stated at cost and are depreciated on a straight-line basis over the estimated useful lives (5-10 years) of the respective
assets. Leasehold improvements are capitalized and amortized over the lesser of the initial life of the lease or the estimated useful life of the asset. Immunomedics reviews long-lived assets for impairment whenever events or changes in business
circumstances occur that indicate that the carrying amount of the assets may not be recoverable. Immunomedics assesses the recoverability of long-lived assets held and to be used based on undiscounted cash flows, and measures the impairment, if any,
using discounted cash flows.



57



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Revenue Recognition



Payments received under contracts to fund certain research activities are recognized as revenue in the period in which the
research activities are performed. Payments received in advance that are related to future performance are deferred and recognized as revenue when the research projects are performed. Upfront nonrefundable fees associated with license and
development agreements where the Company has continuing involvement in the agreement are recorded as deferred revenue and recognized over the estimated service period. If the estimated service period is subsequently modified, the period over which
the upfront fee is recognized is modified accordingly on a prospective basis. Revenues from the achievement of research and development milestones are recognized when the milestones are achieved.



Revenue is recognized for royalties based on license sales of our product
(CEA-Scan®) in Japan and in Europe. Royalties are
recognized as earned in accordance with the contractual terms when royalty from licenses can be reliably measured and collectablity is reasonably assured.



Revenue from the sale of diagnostic products is recorded when there is persuasive evidence that an arrangement exists, delivery has occurred, the price is
fixed and determinable and collectability is reasonably assured. Allowances, if any, are established for uncollectible amounts, estimated product returns and discounts.



Research and Development Costs



Research and development costs are expensed as incurred.



Income Taxes



Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities relate to the expected future tax consequences of
events that have been recognized in the Companys consolidated financial statements and tax returns. During fiscal years 2005, 2004 and 2003, the Company recognized tax benefits as a result of the sale of New Jersey net operating loss carry
forwards (see Note 8).



Net Loss Per Share Allocable to
Common Stockholders



Net loss per basic and diluted
common share allocable to common stockholders is based on the net loss for the relevant period, divided by the weighted-average number of common shares outstanding during the period. For the purposes of the diluted net loss per common share
calculations, the exercise or conversion of all potential common shares is not included because their effect would have been anti-dilutive, due to the net loss recorded for the years ended June 30, 2005, 2004 and 2003. The common stock equivalents
excluded from the diluted per share calculation are 8,614,794, 5,095,250 and 4,325,750 for the fiscal years ended June 30, 2005, 2004 and 2003, respectively.



Comprehensive Loss



Comprehensive loss consists of net loss, net unrealized gains (losses) on securities available for sale and certain foreign exchange translation
changes and is presented in the consolidated statements of operations and comprehensive loss.



58



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Employee Stock Options



Immunomedics applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board
(APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, in accounting for its fixed plan stock options. As such, compensation expense would be recorded if on the date of grant the then-current
market price of the underlying stock exceeded the exercise price. When the exercise price of employee or director stock options is less than the fair value of the underlying stock on the grant date, the Company records compensation expense for the
difference over the vesting period of the options. SFAS No. 123, Accounting for Stock-Based Compensation, established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation
plans. As allowed by SFAS No. 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS No. 123.



Had the Company determined compensation cost based on the fair value at the
grant date consistent with the provisions of SFAS No. 123, the Companys net loss allocable to common shareholders and related per share amounts would have been the pro forma amounts indicated below:



|                                                                                                                |  |      |             |   |      |   |             |      |  |   |             |  
|--------------------------------------------------------------------------------------------------------------- |  | ---- | ----------- | - | ---- | - | ----------- | ---- |  | - | ----------- | -
|                                                                                                                |  | 2005 |             |   | 2004 |   |             | 2003 | 
|Net (loss), as reported                                                                                         |  | $    | (26,757,934 | ) |      | $ | (22,355,255 | )    |  | $ | (7,874,306  | )
|Add: Stock-based employee compensation expense                                                                  |  |      |            |   |      |   | 97,570      |      |  |   | 106,440     |  
|                                                                                                                |  |      |            
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards |  |      | (13,960,538 | ) |      |   | (8,251,069  | )    |  |   | (7,332,028  | )
|                                                                                                                |  |      |             |   |      |   |             |      |  |   |             |  
|Pro forma net (loss)                                                                                            |  | $    | (40,718,472 | ) |      | $ | (30,508,754 | )    |  | $ | (15,099,894 | )
|                                                                                                                |  |      |             |   |      |   |             |      |  |   |             |  
|Earnings per share:                                                                                             |  |      |             |   |      |   |             |      |  |   |             |  
|as reported                                                                                                     |  | $    | (0.50       | ) |      | $ | (0.45       | )    |  | $ | (0.16       | )
|pro forma                                                                                                       |  | $    | (0.76       | ) |      | $ | (0.61       | )    |  | $ | (0.30       | )



The fair value of each
option granted during the three years ended June 30, 2005 is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: (i) dividend yield of 0%, (ii) expected term of 7.0 years, 7.5
years and 8.0 years for June 30, 2005, 2004 and 2003, (iii) expected volatility of 117% at June 30, 2005 and June 30, 2004 and 89% at June 30, 2003 and (iv) a risk-free interest rate of 3.94%, 4.51% and 3.53% for the years ended June 30, 2005, 2004
and 2003, respectively. The weighted average fair value at the date of grant for options granted during the years ended June 30, 2005, 2004 and 2003 was $2.21, $5.04 and $9.91 per share, respectively.



The Companys Board of Directors approved the acceleration of vesting of
all outstanding stock options (the Acceleration). The exercise price of all stock options was above market value at the time of the Acceleration. In accordance with SFAS 123, the Company expensed the remaining unrecognized compensation
cost associated with the options with accelerated vesting in the pro forma disclosure. The total additional compensation cost of $8.1 million was recorded in the pro forma table. These actions were taken in order to avoid expense recognition in
future financial statements upon adoption of FAS 123(R) (which will be effective July 1, 2005).



59



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Options or stock awards issued to non-employees and consultants are recorded at their fair value as
determined in accordance with SFAS No. 123 and EITF No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services,and recognized over the related vesting
period and may be subject to remeasurement if performance commitments exist.



Financial Instruments



The carrying amounts of cash and cash equivalents, other current assets and current liabilities, long term debt and restricted securities approximate fair value due to the short-term maturity of these instruments. The fair value, which
equals carrying value, of marketable securities available for sale is based on quoted market prices.



Recently Issued Accounting Pronouncements



In December 2004, the FASB issued Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of Statement No. 123, Accounting
for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees,and amends Statement No. 95, Statement of Cash Flows. Statement 123 (R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Historically, in accordance with SFAS 123 and SFAS 148, Accounting for Stock-Based Compensation
Transition and Disclosure,Immunomedics had elected to follow the disclosure only provisions of measurement principles of APB Opinion No. 25 and related interpretations. Under APB 25, when stock options are issued with an exercise price equal
to the market price of the underlying stock price on the date of grant, no compensation expense is recognized in the financial statements, and compensation expense is only disclosed in the footnotes to the financial statements. Immunomedics utilizes
the Black-Scholes valuation method to value stock based compensation. All of the Company stock options that are outstanding as of June 30, 2005 are fully vested and accordingly, no expenses will be recorded related to those options in future
periods. In accordance with Statement 123R the Company will begin recording compensation expense for all new option awards beginning July 1, 2005.



Reclassification



Certain 2004 and 2003 balances have been reclassified to conform with the 2005 presentation.



3. Marketable Securities and Restricted Securities



Immunomedics utilizes SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, to account for
investments in marketable securities. Under this accounting standard, securities for which there is not the positive intent and ability to hold to maturity are classified as available-for-sale and are carried at fair value. Unrealized holding gains
and losses, which are deemed to be temporary, on securities classified as available-for-sale are carried as a separate component of accumulated other comprehensive income (loss). Immunomedics considers all of its current investments to be
available-for-sale. Marketable securities and restricted securities at June 30, 2005 and 2004 consist of the following (in thousands):



|                          |  |               |        |                     |   |                     |  |   |                     |   |  |   |       
|------------------------- |  | ------------- | ------ | ------------------- | - | ------------------- |  | - | ------------------- | - |  | - | ------
|                          |  | AmortizedCost |        | GrossUnrealizedGain |   | GrossUnrealizedLoss |  |   | EstimatedFair Value
|June 30, 2005             |  |               |        |                     |   |                     |  |   |                     |   |  |   |       
|Money Market Funds        |  | $             | 14,300 |                     | $ |                    |  | $ |                    |   |  | $ | 14,300
|Agency/NJ Municipal Bonds |  |               | 6,307  |                     |   |                    |  |   | (54                 | ) |  |   | 6,253 
|Corporate Debt Securities |  |               | 1,113  |                     |   | 8                   |  |   | (1                  | ) |  |   | 1,120 
|                          |  |               |        |                     |   |                     |  |   |                     |   |  |   |       
|                          |  | $             | 21,720 |                     | $ | 8                   |  | $ | (55                 | ) |  | $ | 21,673
|                          |  |               |        |                     |   |                     |  |   |                     |   |  |   |       
|June 30, 2004             |  |               |        |                     |   |                     |  |   |                     |   |  |   |       
|Agency/NJ Municipal Bonds |  | $             | 7,365  |                     | $ |                    |  | $ | (73                 | ) |  | $ | 7,292 
|Corporate Debt Securities |  |               | 2,114  |                     |   | 43                  |  |   | (2                  | ) |  |   | 2,155 
|                          |  |               |        |                     |   |                     |  |   |                     |   |  |   |       
|                          |  | $             | 9,479  |                     | $ | 43                  |  | $ | (75                 | ) |  | $ | 9,477 
|                          |  |               |        |                     |   |                     |  |   |                     |   |  |   |       



60



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Maturities of debt securities classified as available-for-sale were as follows at June 30, 2005 (in
thousands):



|                                      |  |               |        |                     |   |       
|------------------------------------- |  | ------------- | ------ | ------------------- | - | ------
|                                      |  | AmortizedCost |        | EstimatedFair Value
|Due within one year                   |  | $             | 18,627 |                     | $ | 18,616
|Due after one year through five years |  |               | 3,093  |                     |   | 3,057 
|                                      |  |               |        |                     |   |       
|                                      |  | $             | 21,720 |                     | $ | 21,673
|                                      |  |               |        |                     |   |       



Restricted securities
at 2005 and 2004 of $18,125,000 and $5,100,800, respectively, are included in the tables above.



Unrealized losses in the portfolio relate to various debt securities including U.S. treasury obligations and corporate bonds. For these securities, the
unrealized losses were primarily due to increases in interest rates. The gross unrealized losses in the portfolio of investments represent less than one percent of the total fair value of the portfolio. The Company has concluded that unrealized
losses in its investment securities are not other-than-temporary and the Company has the ability to hold securities to the expected recovery date.



4. Inventory



Inventory consisted of the following at June 30 (in thousands):



|                         |  |      |      |   |      |   |      |  
|------------------------ |  | ---- | ---- | - | ---- | - | ---- | -
|                         |  | 2005 |      |   | 2004 |  
|Work in process          |  | $    | 477  |   |      | $ |     |  
|Finished goods           |  |      | 167  |   |      |   | 479  |  
|Reserve for obsolescence |  |      | (150 | ) |      |   | (139 | )
|                         |  |      |      |   |      |   |      |  
|                         |  | $    | 494  |   |      | $ | 340  |  
|                         |  |      |      |   |      |   |      |  



61



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5. Property and Equipment



Property and equipment consisted of the following at June 30 (in thousands):



|                                          |  |      |         |   |      |   |         |  
|----------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                          |  | 2005 |         |   | 2004 |  
|Machinery and equipment                   |  | $    | 5,683   |   |      | $ | 5,314   |  
|Leasehold improvements                    |  |      | 17,398  |   |      |   | 17,336  |  
|Furniture and fixtures                    |  |      | 786     |   |      |   | 781     |  
|Computer equipment                        |  |      | 1,343   |   |      |   | 1,297   |  
|                                          |  |      |         |   |      |   |         |  
|                                          |  |      | 25,210  |   |      |   | 24,728  |  
|Accumulated depreciation and amortization |  |      | (15,058 | ) |      |   | (13,195 | )
|                                          |  |      |         |   |      |   |         |  
|                                          |  | $    | 10,152  |   |      | $ | 11,533  |  
|                                          |  |      |         |   |      |   |         |  
|Depreciation expense                      |  | $    | 1,863   |   |      | $ | 1,948   |  
|                                          |  |      |         |   |      |   |         |  



6. Other Current Balance Sheet
Detail



Other current assets consisted of the following at
June 30 (in thousands):



|                                                                                            |  |      |       |      |   |      
|------------------------------------------------------------------------------------------- |  | ---- | ----- | ---- | - | -----
|                                                                                            |  | 2005 |       | 2004
|Prepaid insurance                                                                           |  | $    | 335   |      | $ | 310  
|Accrued interest receivable                                                                 |  |      | 103   |      |   | 119  
|Prepaid rent                                                                                |  |      | 63    |      |   | 53   
|Prepaid medical/dental insurance                                                            |  |      | 65    |      |   | 66   
|Miscellaneous other current assets                                                          |  |      | 220   |      |   | 201  
|                                                                                            |  |      |       |      |   |      
|                                                                                            |  | $    | 786   |      | $ | 749  
|                                                                                            |  |      |       |      |   |      
|                                                                                            |  |     
|Accounts payable and accrued expenses consisted of the following at June 30 (in thousands): |  |      |       |      |   |      
|                                                                                            |  |     
|                                                                                            |  | 2005 |       | 2004
|Trade accounts payable                                                                      |  | $    | 3,732 |      | $ | 1,251
|Clinical trial accruals                                                                     |  |      | 1,140 |      |   | 823  
|Various legal counsel                                                                       |  |      | 1,585 |      |   | 1,487
|Deferred rent expense                                                                       |  |      | 432   |      |   | 314  
|Accrued interest expense                                                                    |  |      | 314   |      |   | 152  
|Foreign income taxes payable                                                                |  |      | 291   |      |   | 383  
|Miscellaneous other current liabilities                                                     |  |      | 654   |      |   | 612  
|                                                                                            |  |      |       |      |   |      
|                                                                                            |  | $    | 8,148 |      | $ | 5,022
|                                                                                            |  |      |       |      |   |      
|                                                                                            |  |     
|Other long-term assets consisted of the following at June 30 (in thousands):                |  |      |       |      |   |      
|                                                                                            |  |     
|                                                                                            |  | 2005 |       | 2004
|5% Senior convertible notes                                                                 |  |      |       |      |   |      
|debt issuance costs  net                                                                   |  | $    | 2,368 |      | $ |     
|Insurance  cash surrender value                                                            |  |      | 69    |      |   | 50   
|Other deposits                                                                              |  |      | 35    |      |   | 48   
|                                                                                            |  |      |       |      |   |      
|                                                                                            |  | $    | 2,472 |      | $ | 98   
|                                                                                            |  |      |       |      |   |      



62



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7. Stockholders Equity



On August 19, 2005 at a Special Meeting of Stockholders a majority of holders of common stock of the Company approved an
amendment to the Certificate of Incorporation to increase the number of shares of common stock authorized from 70 million to 110 million shares.



On August 2004, the Company sold 4,178,116 shares of its common stock, resulting in net proceeds to the Company of approximately $14.0 million. The shares
were sold to institutional investors at a price of $3.61 per share. The shares of common stock were sold pursuant to an effective shelf registration statement filed with the Securities and Exchange Commission.



The Certificate of Incorporation of the Company authorizes 10,000,000 shares
of preferred stock, $.01 par value per share. The preferred stock may be issued from time to time in one or more series, with such distinctive serial designations, rights and preferences as shall be determined by the Board of Directors.



As part of an April 2004 agreement between Amgen, Inc. (Amgen)
and the Company (see Note 10), the Company issued to Amgen a five-year warrant to purchase 100,000 shares of our common stock at a price equal to $16.00 per share, with an estimated value of $310,000. This was expensed in the fourth quarter of
fiscal year 2004.



In February 2002, the Companys Board
of Directors made the decision to concurrently redeem all outstanding stockholder rights under its 1998 Stockholder Rights Plan, and declare a dividend of one new right per share pursuant to our 2002 Stockholder Rights Plan (the 2002 Rights
Plan) adopted by the Board of Directors. The 2002 Rights Plan involved the distribution of one Right as a dividend on each outstanding share of the Companys common stock to each holder of record on March 15, 2002. The
redemption cost amounted to $49,739. Each Right entitles the registered holder to purchase from the Company one one-thousandth of a share of Series G Junior Participating Preferred Stock, par value $0.01 per share (the Preferred Shares),
of the Company, at a price of $150.00 per one one-thousandth of a Preferred Share (the Purchase Price), subject to adjustment. The 2002 Rights Plan provides that if a third party acquires more than 15% of the Companys common stock
without prior approval of the Board of Directors, all of the stockholders of the Company (other than the acquiring party) will be entitled to buy either shares of a special series of our Preferred Shares, or shares of the Companys common stock
with a market value equal to double the Exercise Price for each Right they hold. Under these circumstances, the Board of Directors may instead allow each such Right (other than those held by the acquiring party) to be exchanged for one share of the
Companys common stock. The exercise or exchange of these Rights would have a substantial dilutive effect on the acquiring party. The Companys Board of Directors retains the right at all times to discontinue the 2002 Rights Plan through
redemption of all rights or amend the 2002 Rights Plan in any respect. The Rights will expire on March 1, 2012 (the Final Expiration Date), unless the Final Expiration Date is extended or unless the Rights are earlier redeemed by the
Company, in each case, as described in the 2002 Rights Plan. No shareholder has exercised this right as of June 30, 2005.



The Companys Board of Directors approved the acceleration of vesting of all outstanding stock options (the Acceleration). The exercise
price of all stock options was above market value at the time of the Acceleration. In accordance with SFAS 123, the Company expensed the remaining unrecognized compensation cost associated with the options with accelerated vesting in the pro forma
disclosure. The total additional compensation cost of $8.1 million was recorded in the pro forma table. These actions were taken in order to avoid expense recognition in future financial statements upon adoption of FAS 123R (which will be effective
July 1, 2005).



63



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Under the terms of the Companys 1983 Stock Option Plan, as amended (the 1983 Plan),
stock options are granted to employees and members of the Board of Directors, as determined by the Compensation Committee of the Board of Directors, at fair market value, become exercisable at 25% per year on each of the first through fourth
anniversaries of the date of grant, and terminate if not exercised within ten years. In June 1993, the 1983 Plan expired, although options granted under the 1983 plan that have not terminated may continue to be exercised. On November 5, 1992, at the
Companys Annual Meeting of Stockholders, adoption of the Companys 1992 Stock Option Plan (the 1992 Plan and, together with the 1983 Plan, the Plans) was ratified. In September 2002, the 1992 Plan expired, although
options granted under the 1992 plan that have not terminated may continue to be exercised. On December 5, 2001, at the Companys 2001 Annual Meeting of Stockholders, adoption of our 2002 Stock Option Plan (the 2002 Plan and,
together with the 1992 Plan, the Plans) was ratified. The terms of the 2002 Plan are substantially similar to those under the Companys 1992 Plan. Under the 2002 Plan, 8,000,000 shares were reserved for possible future issuance upon
exercise of stock options. At June 30, 2005, 1,304,225 stock options were still available for future grant and shares of common stock were reserved for possible future issuance upon exercise of stock options both currently outstanding and which may
be issued in the future.



Pursuant to the terms of the 2002
Plan, each of the Companys outside Directors who had been a Director prior to July 1st of each year is granted, on the first business day of July of each year, an option to purchase shares of the Companys common stock at fair market
value on the grant date, the amount of which is determined at the discretion of the Companys Board of Directors. On July 1, 2005, 2004 and 2003 stock options to purchase 70,000, 50,000 and 40,000 shares of common stock respectively, were
granted to these Directors. When an outside Director is elected to the Board of Directors, they are awarded options for 10,000 shares of the Companys common stock. There were two new Directors added to the Board during 2005, both of whom
received 10,000 options at the fair market value at the time of their election.



Information concerning options for the years ended June 30, 2005, 2004 and 2003 is summarized as follows:





|                           |  |             |   |  |                    |  |   |  |       
|-------------------------- |  | ----------- | - |  | ------------------ |  | - |  | ------
|                           |  | Fiscal 2005
|                           |  | Shares      |   |  | Option Price Range
|Outstanding, July 1, 2004  |  | 4,845,250   |   |  | $1.44              |  | - |  | $24.56
|Granted                    |  | 928,150     |   |  | 1.75               |  | - |  | 6.05  
|Exercised                  |  | (1,250      | ) |  | 3.25               |  | - |  | 3.25  
|Terminated                 |  | (285,500    | ) |  | 3.13               |  | - |  | 20.94 
|                           |  |             |   |  |                    |  |   |  |       
|Outstanding, June 30, 2005 |  | 5,486,650   |   |  | 1.44               |  | - |  | 24.56 
|                           |  |             |   |  |                    |  |   |  |       
|Exercisable, June 30, 2005 |  | 5,486,650   |   |  | 1.44               |  | - |  | 24.56 
|                           |  |             |   |  |                    |  |   |  |       
|                           | 
|                           |  | Fiscal 2004
|                           |  | Shares      |   |  | Option Price Range
|Outstanding, July 1, 2003  |  | 4,175,750   |   |  | $1.44              |  | - |  | $24.56
|Granted                    |  | 795,000     |   |  | 4.11               |  | - |  | 9.50  
|Exercised                  |  | (15,500     | ) |  | 1.78               |  | - |  | 4.63  
|Terminated                 |  | (110,000    | ) |  | 2.25               |  | - |  | 19.80 
|                           |  |             |   |  |                    |  |   |  |       
|Outstanding, June 30, 2004 |  | 4,845,250   |   |  | 1.44               |  | - |  | 24.56 
|                           |  |             |   |  |                    |  |   |  |       



64



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|                           |  |             |   |  |                    |  |   |  |       
|-------------------------- |  | ----------- | - |  | ------------------ |  | - |  | ------
|                           |  | Fiscal 2003
|                           |  | Shares      |   |  | Option Price Range
|Outstanding, July 1, 2002  |  | 3,174,250   |   |  | $1.44              |  | - |  | $24.56
|Granted                    |  | 1,126,000   |   |  | 3.34               |  | - |  | 7.71  
|Exercised                  |  | (750        | ) |  | 1.78               |  | - |  | 1.78  
|Terminated                 |  | (123,750    | ) |  | 3.25               |  | - |  | 19.14 
|                           |  |             |   |  |                    |  |   |  |       
|Outstanding, June 30, 2003 |  | 4,175,750   |   |  | 1.44               |  | - |  | 24.56 
|                           |  |             |   |  |                    |  |   |  |       



The following table
summarizes information concerning options outstanding under the Plans at June 30, 2005:



|                       |  |                                   |  |                              |       |                                     |     |                                   |           |                              |   |      
|---------------------- |  | --------------------------------- |  | ---------------------------- | ----- | ----------------------------------- | --- | --------------------------------- | --------- | ---------------------------- | - | -----
|Range ofexercise price |  | Numberoutstandingat June 30, 2005 |  | Weightedaverageexerciseprice |       | Weightedaverageremainingterm (yrs.) |     | Numberexercisableat June 30, 2005 |           | Weightedaverageexerciseprice
|$   1.44 - 3.00        |  | 870,650                           |  | $                            | 1.78  |                                     | 8.1 |                                   | 870,650   |                              | $ | 1.78 
|3.01 - 5.00            |  | 1,330,000                         |  |                              | 4.14  |                                     | 5.5 |                                   | 1,330,000 |                              |   | 4.14 
|5.01 - 8.00            |  | 1,759,500                         |  |                              | 6.54  |                                     | 7.6 |                                   | 1,759,500 |                              |   | 6.54 
|8.01-12.00             |  | 204,500                           |  |                              | 9.93  |                                     | 6.3 |                                   | 204,500   |                              |   | 9.93 
|12.01-18.00            |  | 675,000                           |  |                              | 17.03 |                                     | 5.0 |                                   | 675,000   |                              |   | 17.03
|$   18.01-24.56        |  | 647,000                           |  |                              | 20.55 |                                     | 5.9 |                                   | 647,000   |                              |   | 20.55
|                       |  |                                   |  |                              |       |                                     |     |                                   |           |                              |   |      
|                       |  | 5,486,650                         |  | $                            | 8.27  |                                     | 6.6 |                                   | 5,486,650 |                              | $ | 8.27 
|                       |  |                                   |  |                              |       |                                     |     |                                   |           |                              |   |      



On May 18, 2000, the
Board of Directors approved granting an aggregate of 325,000 stock options to Dr. David M. Goldenberg and Cynthia L. Sullivan that were subject to stockholder approval. Such approval was obtained from the stockholders during December 2000. The stock
options were granted with an exercise price of $17.75, representing the stock price on the day of the Board of Directors approval. The difference in the stock price on that date as compared to the stock price of $19.06 on the date on which the
stockholders approval was obtained resulted in compensation cost of $425,750 that was being expensed by the Company over the vesting period of four years. During fiscal years 2004 and 2003, the Company recorded compensation expense of $97,570
and $106,440 respectively, as a component of general and administrative expense.



65



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8. Income Taxes



The benefit for income taxes is as follows:



|                |  |                     |      |   |      |   |      |      |  |   |      |  
|--------------- |  | ------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                |  | Year Ended June 30, |     
|                |  | 2005                |      |   | 2004 |   |      | 2003 | 
|Federal         |  |                     |      |   |      |   |      |      |  |   |      |  
|Current         |  | $                   |     |   |      | $ |     |      |  |   |     |  
|Deferred        |  |                     |     |   |      |   |     |      |  |   |     |  
|                |  |                     |      |   |      |   |      |      |  |   |      |  
|Total Federal   |  |                     |     |   |      |   |     |      |  |   |     |  
|State           |  |                     |      |   |      |   |      |      |  |   |      |  
|Current         |  |                     | (590 | ) |      |   | (440 | )    |  |   | (745 | )
|Deferred        |  |                     |     |   |      |   |     |      |  |   |     |  
|                |  |                     |      |   |      |   |      |      |  |   |      |  
|Total State     |  |                     | (590 | ) |      |   | (440 | )    |  |   | (745 | )
|Foreign         |  |                     |      |   |      |   |      |      |  |   |      |  
|Current         |  |                     | 205  |   |      |   | 206  |      |  |   | 66   |  
|Deferred        |  |                     |     |   |      |   |     |      |  |   |     |  
|                |  |                     |      |   |      |   |      |      |  |   |      |  
|Total Foreign   |  |                     | 205  |   |      |   | 206  |      |  |   | 66   |  
|                |  |                     |      |   |      |   |      |      |  |   |      |  
|Total (benefit) |  | $                   | (385 | ) |      | $ | (234 | )    |  | $ | (679 | )
|                |  |                     |      |   |      |   |      |      |  |   |      |  



A reconciliation of the statutory tax
rates and the effective tax rates for each of the years ended June 30 is as follows:



|                                                |  |       |    |  |       |    |  |       |   
|----------------------------------------------- |  | ----- | -- |  | ----- | -- |  | ----- | --
|                                                |  | 2005  |    |  | 2004  |    |  | 2003  |   
|Statutory rate                                  |  | (34.0 | )% |  | (34.0 | )% |  | (34.0 | )%
|State income taxes (net of Federal tax benefit) |  | (6.3  | )% |  | (5.9  | )% |  | (5.3  | )%
|Foreign income tax                              |  | 0.1   | %  |  | 0.0   | %  |  | (2.4  | )%
|Change in valuation allowance                   |  | 40.2  | %  |  | 34.2  | %  |  | 34.3  | % 
|Other                                           |  | (1.4  | )% |  | 4.7   | %  |  | (0.5  | )%
|                                                |  |       |    |  |       |    |  |       |   
|                                                |  | (1.4  | )% |  | (1.0  | )% |  | (7.9  | )%
|                                                |  |       |    |  |       |    |  |       |   



Immunomedics utilizes
SFAS No. 109, Accounting for Income Taxes, to account for income taxes. For fiscal years 2005, 2004 and 2003, the Company recorded a state tax benefit of $590,000, $440,000 and $745,000, respectively, as a result of its sale of approximately
$7,335,000, $5,313,000 and $9,246,000 of New Jersey state net operating losses, respectively.



The tax effects of temporary differences that give rise to significant portions of the Companys deferred tax assets as of June 30, 2005 and 2004 are presented below (in thousands):



|                                  |  |      |         |   |      |   |         |  
|--------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                  |  | 2005 |         |   | 2004 |  
|Deferred tax assets:              |  |      |         |   |      |   |         |  
|Net operating loss carry forwards |  | $    | 67,010  |   |      | $ | 57,243  |  
|Research and development credits  |  |      | 7,068   |   |      |   | 6,377   |  
|Property and equipment            |  |      | 2,472   |   |      |   | 2,173   |  
|Other                             |  |      | 757     |   |      |   | 611     |  
|                                  |  |      |         |   |      |   |         |  
|Total                             |  |      | 77,307  |   |      |   | 66,404  |  
|Valuation allowance               |  |      | (77,307 | ) |      |   | (66,404 | )
|                                  |  |      |         |   |      |   |         |  
|Net deferred taxes                |  | $    |        |   |      | $ |        |  
|                                  |  |      |         |   |      |   |         |  



66



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A valuation allowance is provided when it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The valuation allowances for fiscal years 2006 and 2005 have been applied to offset the deferred tax assets in recognition of the uncertainty that such tax benefits will be realized as the Company continues
to incur losses. The differences between book income and tax income primarily relates to depreciation.



At June 30, 2005, the Company has available net operating loss carry forwards for federal income tax reporting purposes of approximately $178,000,000 and
for state income tax reporting purposes of approximately $111,000,000, which expire at various dates between fiscal 2006 and 2025. Pursuant to Section 382 of the Internal Revenue Code of 1986, as amended, the annual utilization of a companys
net operating loss and research credit carry forwards may be limited if the Company experiences a change in ownership of more than 50 percentage points within a three-year period. As a result of certain financing arrangements, the Company may have
experienced such ownership changes. Accordingly, the Companys net operating loss carry forwards available to offset future federal taxable income arising before such ownership changes may be limited. Similarly, the Company may be restricted in
using its research credit carry forwards arising before such ownership changes to offset future federal income tax expense. Of the deferred tax asset valuation allowance related to the net operating loss carry forwards, approximately $24,400,000
relates to a tax deduction for non-qualified stock options. Immunomedics will increase capital contributed in excess of par when these benefits are deemed to be more likely than not to be realized for tax purposes. The net operating loss carry
forwards for Federal income tax reporting purposes referred to above excludes certain losses from the Companys operations in The Netherlands, which may also be limited.



9. Related Party Transactions



Certain of the Companys affiliates, including members of its senior management and Board of Directors, as well as their respective family members
and other affiliates, have relationships and agreements among themselves as well as with the Company and its affiliates, that create the potential for both real, as well as perceived, conflicts of interest. These include Dr. David M. Goldenberg, the
Companys Chairman and Chief Strategic Officer, Ms. Cynthia L. Sullivan, the President and Chief Executive Officer, who is the wife of Dr. David M. Goldenberg, and certain companies with which the Company does business, including the Center for
Molecular Medicine and Immunology and IBC Pharmaceuticals, Inc.



Dr.
David M. Goldenberg



Dr. David M. Goldenberg was an
original founder of Immunomedics over 20 years ago and continues to play a critical role in its business. He currently serves as Chairman of the Board of Directors and Chief Strategic Officer, and is married to our President and Chief Executive
Officer, Cynthia L. Sullivan. Dr. Goldenberg is a party to a number of agreements with us involving not only his services, but intellectual property owned by him. In addition Dr. Goldenberg performs services for The Center for Molecular Medicine and
Immunology (CMMI), a not-for-profit specialized cancer research center.



License Agreement. Pursuant to a License Agreement between Immunomedics and Dr. Goldenberg, certain patent applications owned by Dr. Goldenberg were licensed to Immunomedics at the time of
Immunomedics formation in exchange for a royalty in the amount of 0.5% of the first $20,000,000 of annual net sales of all products covered by any of such patents and 0.25% of annual net sales of such products in excess of $20,000,000. Five of
the licensed U.S. patents have since expired. In November 1993 the ownership rights of Immunomedics were extended as part of Dr. Goldenbergs employment agreement, with Immunomedics agreeing to diligently pursue all ideas,



67



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discoveries, developments and products, into the entire medical field, which, at any time during his past or continuing
employment by Immunomedics (but not when performing services for CMMI  see below), Dr. Goldenberg has made or conceived or hereafter makes or conceives, or the making or conception of which he has materially contributed to or hereafter
contributes to, all as defined in the Employment Agreement.



Employment Agreement. Pursuant to the terms of his employment agreement as currently in effect, Dr. Goldenberg is entitled to receive incentive compensation equal to one-half of one percent (0.5%) on the first
$75.0 million of all Annual Net Revenue (as defined therein) of Immunomedics, and one-quarter of one percent (0.25%) on all such Annual Net Revenue in excess thereof. Annual Net Revenue is defined to include the proceeds of certain dispositions of
assets or interests therein, including royalties, certain equivalents thereof and, to the extent approved by the Board of Directors, non-royalty license fees.



Dr. Goldenberg is also entitled to receive Revenue Incentive Compensation during the period of his actual employment with us, and for a period of three
years thereafter, unless he unilaterally terminates his employment without cause or is terminated for cause. With respect to the period that Dr. Goldenberg is entitled to receive Revenue Incentive Compensation on any given products, it will be in
lieu of any other percentage compensation based on sales or revenue due him with respect to such products under his employment agreement or the license agreement. With respect to any periods that Dr. Goldenberg is not receiving such Revenue
Incentive Compensation, he is entitled to receive one-half of one percent (0.5%) on cumulative annual net sales of, royalties on, certain equivalents thereof, and, to the extent approved by the Board of Directors, other consideration received by
Immunomedics for such products, up to a cumulative annual aggregate of $75,000,000, and one-quarter of one percent (0.25%) on any cumulative Annual Net Revenue in excess of $75,000,000. A $100,000 annual minimum payment must be paid in the aggregate
against all Revenue Incentive Compensation and Royalty Payments and the License Agreement. No payments were made in addition to the annual minimum payments.



The terms of his employment agreement also provide that Dr. Goldenberg is entitled to receive a percent, not less than 20 percent (20%), as determined in
good faith by the Board of Directors, of net consideration (including, without limitation, license fees) which Immunomedics receives in connection with any disposition by sale, license or otherwise, of any Undeveloped Assets (as defined therein)
which are not budgeted as part of Immunomedics strategic plan. Pursuant to this provision, Dr. Goldenberg received a 20% profit interest in the membership interests originally acquired by Immunomedics in connection with the formation of the
IBC Pharmaceuticals joint venture with Beckman Coulter in March 1999. Dr. Goldenberg also is compensated by IBC Pharmaceuticals as discussed in greater detail in these notes to the financial statements.



Dr. Goldenberg is not entitled to any incentive compensation with respect to
any products, technologies or businesses acquired from third parties for a total consideration in excess of $5,000,000, unless Immunomedics had made a material contribution to the invention or development of such products, technologies or businesses
prior to the time of acquisition. Except as affected by a Change in Control (as defined therein) or otherwise approved by the Board of Directors, Dr. Goldenberg will also not be entitled to any Revenue Incentive Compensation or Royalty Payments
other than the Annual Minimum Payment with respect to any time during the period of his employment (plus three years, unless employment is terminated by mutual agreement or by Dr. Goldenbergs death or permanent disability) that he is not the
direct or beneficial owner of shares of Immunomedics voting stock with an aggregate market value of at least twenty times his defined annual cash compensation.



68



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Finally, it is a condition to his employment agreement that Dr. Goldenberg be permitted to continue his
involvement with CMMI, as discussed in greater detail below.



In 2001, Dr. Goldenbergs employment agreement was extended for an additional five-year period, expiring on June 30, 2006.



Life Insurance. The Company has also agreed with Dr. Goldenberg to maintain in effect for his benefit a $2,000,000 whole life
insurance policy. If Dr. Goldenberg retires from Immunomedics on or after his agreed retirement, or if his employment ends because of permanent disability, the Company must pay all then outstanding loans, if any, made under such policy, and assign
such policy to Dr. Goldenberg in consideration of the services previously rendered by Dr. Goldenberg to us. There are no outstanding loans as of June 30, 2005. If the employment of Dr. Goldenberg ends for any other reason, except for cause, Dr.
Goldenberg has the option to purchase such policy for a price mutually agreed upon by him and the Board of Directors, but not to exceed the cash value thereof less any outstanding policy loans, or he may purchase such policy at its full cash value,
less any outstanding loans, with the purchase price to the paid out of the proceeds of the policy or any earlier payment or withdrawal of all or any portion of its net cash value. The Company also currently maintains $4,000,000 of key man life
insurance on Dr. Goldenberg for the benefit of the Company.



Additionally, a trust created by Dr. Goldenberg has purchased a $10,000,000 whole life policy on his life. The policy provides funds, which may be used to assist Dr. Goldenbergs estate in settling estate tax obligations and thus
potentially reducing the number of shares of the Common Stock the estate may be required to sell over a short period of time to raise funds to satisfy such tax obligations. During what is estimated to be a 15-year period, the Company is obligated to
pay $143,000 per year towards premiums, compared to an equivalent $250,000 commitment under the previous policies, in addition to amounts required to be paid by Dr. Goldenberg. The Company has an interest in this new policy up to the cumulative
amount of premium payments made by it under the old and new policies, which, through June 30, 2005, amounted to $2,266,000. If Dr. Goldenbergs employment terminates, and the policy is not maintained, the Company would receive payment of only
its invested cumulative premiums, up to the amount of cash surrender value in the policy.



Severance Agreement. In June 2002, the Board of Directors approved (with Dr. Goldenberg and Ms. Sullivan abstaining) a severance agreement for Dr. Goldenberg pursuant to which the Company
is required, under certain circumstances upon his termination for any reason, including as a result of his disability or a change in control of the Company, to sell to Dr. Goldenbergs family partnership a $10.0 million life insurance policy
the Company has purchased insuring his life. In addition, if Dr. Goldenberg is terminated upon his disability or a change in control of the Company within six years of the date of the severance agreement, the Company will reimburse him for the total
purchase price of the life insurance policy. If he is terminated for any other reason, whether voluntarily or involuntarily, the Company will reimburse him for 50% of the purchase price, so long he has remained employed by the Company for three
years after the agreement, plus an additional amount for each month of service in excess of three years.



Cynthia L. Sullivan



Employment Agreement.On March 20, 2001, the Company entered into an employment agreement with Cynthia L. Sullivan that sets
forth the terms of her employment with the Company through March 9, 2006. During the term of her employment, the Company will pay Ms. Sullivan an annual minimum base salary of $275,000 and an annual bonus as determined by the Compensation Committee
of the Companys Board of Directors, which in no event shall be less than 20% of the base salary. Ms. Sullivan shall be awarded a minimum of 150,000 stock options annually on the anniversary of the employment agreement. Under her employment
agreement, Ms. Sullivan may participate in all benefit plans and programs to the extent she is eligible including medical and life insurance.



69



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Under the employment agreement, if Ms. Sullivan is terminated for Cause (as defined in the employment
agreement), by reason of death, unavailability (as defined in the employment agreement), or by reason of voluntary resignation, then the Company shall pay Ms. Sullivan the base salary through such date of termination. If Ms. Sullivan is terminated
for any other reason, then the Company shall continue for a period of four years Ms. Sullivans medical and life insurance and shall pay Ms. Sullivan the sum of (i) the highest base salary paid to Ms. Sullivan during any of the prior three
years, (ii) the highest bonus paid to Ms. Sullivan during the prior three years and (iii) the stock options that Ms. Sullivan would have otherwise received during the period commencing on the termination date and ending on the later of 24 months
from the termination date and March 9, 2006 (such sum, collectively with the extension of benefits is referred to hereinafter as the Severance Payment).



In the event of a Change of Control (as defined in the employment agreement), all previous stock option grants made to Ms.
Sullivan shall immediately vest. If, following the Change of Control, the Company does not agree to allow Ms. Sullivan to remain in her current capacity for a one year period before either consummating a new contract, or the election by Ms. Sullivan
to be paid the Severance Payment, then her employment shall be terminated and the Company shall pay Ms. Sullivan the Severance Payment.



Relationships with The Center for Molecular Medicine and Immunology



The Companys product development has involved, to varying degrees, The Center for Molecular Medicine and Immunology
(CMMI), a not-for-profit specialized cancer research center, for the performance of certain basic research and patient evaluations, the results of which are made available to the Company pursuant to a collaborative research and license agreement.
CMMI, which is funded primarily by grants from the National Cancer Institute (NCI), is located in Belleville, New Jersey. Dr. Goldenberg is the founder, current President and a member of the Board of Trustees of CMMI. Dr. Goldenbergs
employment agreement permits him to devote more of his time working for CMMI than for the Company. Certain of the Companys consultants have employment relationships with CMMI, and Dr. Hans Hansen, the Companys emeritus executive officer,
is an adjunct member of CMMI. Despite these relationships, the Company believes CMMI is independent of Immunomedics, and CMMIs management and fiscal operations are the responsibility of CMMIs Board of Trustees.



The Company has reimbursed CMMI for expenses incurred on behalf of the
Company, including amounts incurred pursuant to research contracts, in the amount of approximately $66,000, $109,000 and $90,000 during the years ended June 30, 2005, 2004 and 2003, respectively. In 2005 the Company incurred $52,000 of legal
expenses on behalf of CMMI for patent related matters. The Company has first rights to license these patents and may decide whether or not to support them. However, any inventions made independently of the Company at CMMI are the property of CMMI.



During the fiscal years 2005, 2004 and 2003, the
Companys Board of Directors authorized and spent grants to CMMI of $3,000, $401,000 and $349,000, respectively, to support research and clinical work being performed at CMMI, such grants to be expended in a manner deemed appropriate by the
Board of Trustees of CMMI.



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IBC Pharmaceuticals



IBC Pharmaceuticals, Inc. (IBC) is a majority owned subsidiary of Immunomedics, Inc. IBC reimbursed Immunomedics
for $206,000 and $271,000 of its research activities in 2005 and 2004, respectively, which were conducted on the joint ventures behalf. The unreimbursed research activities at June 30, 2005 and 2004 are outstanding receivables $1,895,000 and
$774,000 respectively. For the fiscal year ended June 30, 2003 the Company received reimbursement of $1,147,000 from IBC with respect to these research activities. The reimbursements for the fiscal years June 30, 2005, 2004 and 2003 were eliminated
in consolidation.



As of June 30, 2005, the shares of IBC
Pharmaceuticals, Inc. were held as follows:



|                      |  |                                              |  |                     |  
|--------------------- |  | -------------------------------------------- |  | ------------------- | -
|Stockholder           |  | Holdings                                     |  | Percentage of Total |  
|Immunomedics, Inc.    |  | 5,599,705 shares of Series A Preferred Stock |  | 73.26               | %
|Third Party Investors |  | 643,701 shares of Series B Preferred Stock   |  | 8.42                | %
|David M. Goldenberg   |  | 1,399,926 shares of Series C Preferred Stock |  | 18.32               | %
|                      |  |                                              |  |                     |  
|                      |  |                                              |  | 100.00              | %



In the event of a
liquidation, dissolution or winding up of IBC, the Series A, B and C Preferred Stockholders would be entitled to $0.6902, $5.17 and $0.325 per share (subject to adjustment), respectively. The Series A and B stockholders would be paid ratably until
fully satisfied. The Series C stockholders would be paid only after the Series A and B stockholders have been fully repaid. These liquidation payments would be made only to the extent the assets of IBC are sufficient to make such payments.



In each of the fiscal years 2005, 2004 and 2003, Dr.
Goldenberg received $55,000 in compensation for his services to IBC. At June 30, 2005, Dr. Goldenberg was a director of IBC, while Cynthia L. Sullivan, Gerard G. Gorman and Phyllis Parker served as the President, Treasurer and Secretary,
respectively, of IBC.



Other



In fiscal year 2003, compensation expense of $360,000 was recorded which was
associated with the issuance of a fully vested option to acquire 80,000 shares of common stock at a purchase price of $4.94 per share to Dr. Morton Coleman, a non-employee director, in consideration for consulting services to the Company.



10. License and Distribution Agreements



In October 2001, the Company entered into a Distribution Agreement with
Logosys Logistik GmbH, pursuant to which Logosys packages and distributes the Companys diagnostic imaging products, LeukoScan® and CEA-Scan®, within the countries comprising the European Union and certain other countries.



On December 17, 2000, the Company entered into a Development and License Agreement (the Amgen Agreement) with Amgen Inc. (Amgen),
whereby Amgen obtained exclusive rights to continue the clinical development and commercialization in North America and Australia of the Companys unlabeled, or naked, CD22 antibody compound, epratuzumab, for the treatment of
patients with non-Hodgkins lymphoma.



Pursuant to the
Amgen Agreement, the Company received an up-front payment of $18,000,000 that was recognized, beginning February 2001, as revenue of $750,000 per month over a period of 24



71



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months. As of February 2003, this up-front payment was fully recognized as License fee and other revenues.
Accordingly, the Company recognized $5,250,000 as License fee and other revenues for the fiscal year ended June 30, 2003. Costs incurred relating to the manufacture of the materials supplied to Amgen were recorded as research and
development expense as incurred. For the years ended June 30, 2005, 2004 and 2003, the Company incurred $0, $275,000 and $1,245,000, respectively, of costs associated with supplying materials to Amgen.



On April 8, 2004, pursuant to a termination agreement between Amgen and the
Company, Amgen returned all rights for epratuzumab, the humanized CD22 monoclonal antibody therapeutic the Company licensed to Amgen as part of the Amgen Agreement, including rights to second generation molecules and conjugates.



As part of the April 2004 transaction, the Company issued to Amgen a
five-year warrant to purchase 100,000 shares of our common stock at a price equal to $16.00 per share with an estimated value of $310,000 which was expensed as research and development cost in 2004. If epratuzumab is approved for commercialization
in the United States for non-Hodgkins lymphoma therapy, the Company will be required to pay Amgen a milestone payment in the amount of $600,000. There are no other financial obligations between the parties as a result of the termination
agreement.



In June 2002, the Company granted a non-exclusive
license to Daiichi Pure Chemicals Co. under Immunomedics carcinoembryonic antigen (CEA) patents. In addition, the Company recorded a royalty of $250,000, $183,000 and $265,000 for the years ended June 30, 2005, 2004 and 2003, respectively, as
License fee and other revenues under that license.



In October 2003, the Company entered into a research collaboration with Schering AG of Berlin, Germany, involving bispecific antibody, pretargeting technologies for cancer therapy being developed by IBC. The Company has received $31,000 and
$29,000 under this agreement for the years ended June 30, 2005 and 2004, respectively.



11. Commitments and Contingencies



Employment Contracts



On November 1, 1993, Immunomedics and Dr. Goldenberg
entered into a five-year employment agreement (the Agreement) with an additional one-year assured renewal and thereafter automatically renewable for additional one-year periods unless terminated by either party as provided in the
Agreement. This Agreement was amended on July 1, 2001, pursuant to which Dr. Goldenberg will receive an annual minimum base salary of $275,000, an annual bonus to be determined by the Board of Directors but in no event less than 20% of the base
salary, annual stock option grants to purchase at least 150,000 shares of common stock, other benefits and certain change of control protections. Under the Agreement as amended, the Company has agreed to extend Dr. Goldenbergs employment
agreement for a five-year period which expires on June 30, 2006. Further, the Company acknowledged and approved Dr. Goldenbergs continuing involvement with CMMI and IBC.



Pursuant to the Agreement, Dr. Goldenberg may engage in other business and general investment and scientific activities,
provided such activities do not materially interfere with the performance of any of his obligations under the Agreement, allowing for those activities he presently performs for CMMI and IBC (see Note 10). The Agreement extends the ownership rights
of the Company, with an obligation to diligently pursue all ideas, discoveries, developments and products, in the entire medical field, which, at any time during his past or continuing employment by the Company (but not when performing services for
CMMI), Dr. Goldenberg has made or conceived or hereafter makes or conceives, or the making or conception of which he has materially contributed to or hereafter contributes to, all as defined in the Agreement (collectively, Goldenberg
Discoveries).



72



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Further, pursuant to the Agreement, Dr. Goldenberg will receive, subject to certain restrictions,
incentive compensation of 0.5% on the first $75,000,000 of all defined annual net revenue of Immunomedics and 0.25% on all such annual net revenue in excess thereof (collectively, Revenue Incentive Compensation). With respect to the
period that Dr. Goldenberg is entitled to receive Revenue Incentive Compensation on any given products, it will be in lieu of any other percentage compensation based on sales or revenue due him with respect to such products under this Agreement or
the existing License Agreement between the Company and Dr. Goldenberg. With respect to any periods that Dr. Goldenberg is not receiving such Revenue Incentive Compensation for any products covered by patented Goldenberg Discoveries or by certain
defined prior inventions of Dr. Goldenberg, he will receive 0.5% on cumulative annual net sales of, royalties, certain equivalents thereof, and, to the extent approved by the Board, other consideration received by us for such products, up to a
cumulative annual aggregate of $75,000,000 and 0.25% on any cumulative annual aggregate in excess of $75,000,000 (collectively Royalty Payments). A $100,000 annual minimum payment will be paid in the aggregate against all Revenue
Incentive Compensation and Royalty Payments. For each of the years ended June 30, 2005, 2004 and 2003, the Company paid Dr. Goldenberg the minimum required payment of $100,000. Dr. Goldenberg will also receive a percent, not less than 20%, to be
determined by the Board, of net consideration (including license fees) which the Company receives for any disposition, by sale, license or otherwise (discussions directed to which commence during the term of his employment plus three years) of any
of defined Undeveloped Assets of the Company which are not budgeted as part of the Companys strategic plan. Pursuant thereto, Dr. Goldenberg received his interest in IMG (See Note 9).



On March 20, 2001, Cynthia L. Sullivan entered into a five-year employment
agreement with the Company, which was extended to June 30, 2006 by the Board of Directors. Pursuant to this agreement, Ms. Sullivan will receive an annual minimum base salary of $275,000, an annual bonus in an amount to be determined by the Board of
Directors but in no event less than 20% of the base salary, an annual grant of stock options covering not less than 150,000 shares of common stock per year and certain other benefits and change of control protections.



Operating Lease



Immunomedics is obligated under an operating lease for facilities used for research and development, manufacturing and
office space. In November 2001, the Company renewed for an additional term of 20 years expiring in October 2021 at a base annual rate of $545,000, which is fixed for the first five years and increases thereafter every five years. The renewal
includes an additional 15,000 square feet of space. Rental expense related to this lease was approximately $663,000 for each of the 2005, 2004 and 2003 fiscal years.



Including the extension of the facility lease as described above, the minimum lease commitments for facilities are as
follows for fiscal years (in thousands):



|           |  |   |      
|---------- |  | - | -----
|2006       |  | $ | 545  
|2007       |  | $ | 552  
|2008       |  | $ | 556  
|2009       |  | $ | 556  
|2010       |  | $ | 556  
|Thereafter |  | $ | 8,542



73



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Significant Contracts



On June 1, 2005 Immunomedics signed a contract with PPD Development LP (PPD), a clinical research organization,
to manage the two Phase III clinical trials for severe lupus erythematosus (SLE) which the Company is undertaking. This phase of the clinical trials is expected to take place over a period of three years. The anticipated fee to PPD over
the next three years will be approximately $15 million, with payments to be made as part of monthly maintenance fees as well as for achievement of specified milestones in the clinical trials.



Legal Matters



Immunomedics is a party to various claims and litigation arising in the normal course of business, which includes some or
all of certain of our patents. Management believes that the outcome of such claims and litigation will not have a material adverse effect on the Companys consolidated financial position and results of operations. The following is a summary of
certain claims that are outstanding:



F. Hoffmann-La Roche



On December 22, 2003, the Dutch Supreme Court, in a case
brought by the Company, held that Immunomedics Dutch part of its European patent for highly specific monoclonal antibodies against the cancer marker, carcinoembryonic antigen (CEA), was valid. The Companys claim of infringement was not
finally decided by the Dutch Supreme Court. Among other things, the Supreme Court held that the Court of Appeal which had ruled that Roche had infringed Immunomedics European Patent had not given Roche sufficient opportunity to comment on an expert
opinion filed by Immunomedics in which it was stated that Roches CEA test kit did satisfy a criterion that is generally satisfied for specific antibodies that bind to CEA. The Company has argued that the Dutch court should enforce the European
Patent for all European countries for which the European Patent was validated, since Roche sold the same product in each country. The Dutch Supreme Court repeated the reasoning of the Dutch District Court that the Brussels Convention should be
interpreted to permit cross-border enforcement of European patents where a related group of companies sells the same product in countries where that same patent has been validated. The Dutch Supreme Court referred this issue to the European Court of
Justice (ECJ) to provide a final interpretation of the Brussels Convention on this point. On January 27, 2005, the ECJ heard oral arguments in the case, and took the matter under consideration.



We believe that the CEA patents that are the subject of our infringement
action have been infringed, and we believe that the Company will prevail in the litigation, although no assurances can be given in this regard. To the extent that Roche contests or challenges our patents, or files appeals or further nullity actions,
there can be no assurance that significant costs for defending such patents may not be incurred.



On May 19, 2004 and July 20, 2004, Roche filed nullity actions in German and United Kingdom courts, respectively, challenging our patents relating to an
improved method of disease therapy in combination with cytotoxic agents, wherein cytokines are used to prevent, mediate or reverse radiation-induced, drug-induced or antibody-induced toxicity, especially to hematopoietic cells. On December 1, 2004,
the Company agreed to settle the United Kingdom patent litigation by surrendering the United Kingdom patent. In accordance with United Kingdom legal rules, Roche made an application for payment of its attorneys fees and other costs to the
court. We agreed on a resolution with Roche, which was subsequently settled. The related charges for this litigation were included in the General and Administrative expenses in Statement of Operations. In the German action the Company is defending
the patent with amended claims and believes that it will prevail in such action.



74



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Cytogen, Inc. and C.R. Bard Inc.



In September 2004 a patent infringement suit with Cytogen, Inc. and C.R. Bard was settled for an undisclosed amount without
any admission of fault or liability. In connection with the settlement, the Company settled legal fees associated with the suit with the attorneys representing it in the case. The Company recorded in other income a litigation settlement gain in the
amount of $1,111,750, which includes the reversal of legal fees previously accrued for this patent suit. The specific amount of the settlement, however, is undisclosed in accordance with the terms of the parties settlement agreement.



Willow Bay Associates, LLC



In 2000, a now-defunct finance broker filed suit against the Company in the
United States District Court for the District of Delaware. In the case, the plaintiff claimed that it is entitled to damages in the form of brokerage commissions for breach of an alleged confidentiality and non-circumvention contract. The suit
against the Company was dismissed on summary judgment, but subsequently reinstated. A trial held in January 2004 and post-trial submissions were filed in March. No decision by the Court has been received. Although it is not possible to forecast the
Courts decision, based on the Courts initial ruling of dismissal and the trial, the Company believes that judgment will be entered in its favor. The Company further believes that even in the event of an unfavorable outcome, this lawsuit
will not have a material adverse affect on the Companys financial position and results of operations.



12. Debt



In April 2005
the Company issued through a private placement $37,675,000 of 5% senior convertible notes due in May 2008. The net proceeds of $35,200,000 from the financing will be used to fund clinical development programs for epratuzumab in moderate and severe
lupus patients, repay existing indebtedness and fund general working capital requirements. The notes bear interest at a fixed annual rate of 5%, to be paid semiannually in arrears beginning in November 2005. The notes are convertible into the
Companys common stock at $2.62 per share subject to adjustment based on the anti-dilution provision. The holders of the notes may elect to convert the notes into shares of common stock at any time. If the Company forces conversion of the Notes
prior to maturity the holders will be paid on the date of conversion any interest that would have been earned during the three-year term, (a make-whole payment).



The Company had reserved approximately 7.3 million shares of authorized and unissued common stock for conversion of the 5%
notes, (including the shares formerly reserved for conversion of the Companys 3.25% convertible notes). These 7.3 million shares represented all of the currently available and authorized and unissued common stock. To convert all of the 5%
notes outstanding at the initial conversion price would require approximately 14.4 million shares of common stock, or approximately 5.5 million shares more than are currently available. This will require the Company shareholders to approve an
additional 40 million shares of common stock. With this approval the Company will have available the shares of common stock necessary for the potential conversion of all notes and warrants, (see note 16).



If approval for additional shares of common stock is not received from the
shareholders within 120 days of the closing, additional interest will accrue on the notes at an annual rate of 1.0% per month up to a maximum interest rate of 15%. An additional increase of up to 2% in the interest will be charged if the Company is
unable to register with the Securities & Exchange Commission, for a potential maximum annual interest cap of 17%. With the August 19, 2005 stockholder approval for additional shares of common stock discussed in note 16, the additional interest
penalty of 1% per month up to a maximum interest rate of 15% will not be incurred by the Company.



75



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As part of the transaction the Company included detachable warrants to purchase additional shares of
common stock. The conversion of these warrants into common stock is 76.394 shares of common stock for each $1,000 amount of principal Notes. The warrants are exercisable at $2.98 per warrant share. The warrants expire in April 2008. The Company also
included an offer to the note holders an option to purchase up to an additional 20% of the notes & warrants converted by the note holders by August 29, 2005, which has expired without being exercised.



The Company evaluated the proceeds received from the 5% senior convertible
notes under the guidance of APB 14 Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants. The proceeds received from the issuance of debt and stock warrants were allocated between the two components based on
the relative fair values of the two securities at the time of issuance (April 29, 2005). The portion of the proceeds allocated to the warrants was initially valued at $3,687,000. The resulting debt discount will be amortized to interest expense over
the life of the notes, resulting in an adjustment of the stated interest yield. The amortization of debt discount was $205,000 for the year ended June 30, 2005.



The warrants have initially been recorded as a liability in the balance sheets in accordance with EITF 00-19 -Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock,since the Company does not have sufficient authorized and unissued shares available to settle the detachable warrant contract. In accordance with EITF 00-19, all
assets and liability contracts are revalued each reporting period and changes in the fair value of the contract are recorded in earnings. The valuation of the liability for these warrants was adjusted as of June 30, 2005 due to the decline in the
Companys common stock from $2.16 per share on April 29, 2005 to $1.71 per share. As such, the reduction of the liability for warrants ($938,760) was recorded in the statement of operations.



Also, at closing of the Companys 5% Convertible Notes, the Company
retired and exchanged the entire $10,000,000 principal amount of its 3.25% Convertible Notes that were due in January 2006, in two separate transactions. The Company paid approximately $5.09 million, (which includes interest accrued on the 2006
Notes) from the proceeds of the offering to retire $5 million of its outstanding principal. In addition, the Company exchanged $5.0 million of its outstanding 3.25% convertible notes for the newly issued 5% senior convertible notes. Even though the
notes were considered substantially different, as defined by EITF Debtors Accounting for a Substantive Modification and Exchange of Debt Instruments,no gain or loss was recorded on the exchange as the fair value of the newly issued
debt instrument was considered the same as the carrying value of the 3.25% debt instrument exchanged.



The costs incurred as part of the transaction ($2,507,000) are amortized over 36 months and are reported as interest expense ($139,000). Total interest
expense and related amortization expense for the 5% senior convertible notes for the year ended June 30, 2005 was $658,000.



In January 2004, the Company completed a $10,000,000 financing of Senior Convertible Notes, which were due January 12, 2006. The notes bear interest at a
fixed annual rate of 3.25% to be paid semiannually in arrears beginning in July 2004. The holder of the notes could convert the notes at any time prior to the maturity date into shares of the Companys common stock at a conversion price of
$6.09 per share. Immunomedics has filed a registration statement under the Securities Act of 1933, as amended, with the SEC for registration of the notes and the shares of common stock issuable upon conversion of the notes. Proceeds from the
financing were used to continue the Companys development of its cancer and autoimmune disease therapeutics and for working capital and other general corporate purposes. On April 29, 2005 the Company retired and exchanged the entire $10 million
principal amount from proceeds from the 5% senior convertible notes. One half of the total principal ($5 million) was retired, including accrued interest. The remaining principal (5 million) was exchanged for $5 million of the 5% senior convertible
notes due in April 2008. For the year ended June 30, 2005, the Company incurred interest expense of approximately $271,000 and $152,000, respectively.



76



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In May 2003, Immunomedics completed a $6,376,000 bond financing with the New Jersey Economic Development
Authority, pursuant to which Immunomedics was able to refinance its capital investment in a new manufacturing facility at a rate of interest below that which would have otherwise been available. The variable interest rate on the bonds was 3.28% at
June 30, 2005. In connection with this financing, Immunomedics granted certain security interests to the New Jersey Economic Development Authority with respect to its properties and assets, and agreed to become subject to certain customary
affirmative as well as restrictive covenants, none of which it believes will affect its business or operations in any material respect. In addition, the bonds are subject to mandatory redemption, if the fair value of the Companys
collateralized assets falls below the outstanding loan balance. The Companys collateral is recorded as restricted securities in the balance sheet. At June 30, 2005, the Companys indebtedness under this financing was approximately
$3,825,600 due in equal monthly installments over the next 36 months. For the years ended June 30, 2005, 2004 and 2003, the Company incurred interest expense of approximately $107,000, $73,000 and $9,000, respectively. Interest and principal
payments are due monthly.



The following table summarized the
Companys principal payments for the next five years (in thousands):



|     |  |   |       
|---- |  | - | ------
|2006 |  | $ | 1,275 
|2007 |  | $ | 1,275 
|2008 |  | $ | 38,950
|2009 |  | $ |      
|2010 |  | $ |      



13. Geographic Segments



Immunomedics manages its operations as one line of
business of researching, developing, manufacturing and marketing biopharmaceutical products, particularly antibody-based products for the targeted treatment of cancer, autoimmune and other serious diseases, and it currently reports as a single
industry segment. Immunomedics markets and sells its products in the United States and throughout Europe.



77



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The following table presents financial information based on the geographic location of the facilities of
Immunomedics as of and for the years ended (in thousands):



|                                  |  |               |         |   |        |   |       |  |   |         |  
|--------------------------------- |  | ------------- | ------- | - | ------ | - | ----- |  | - | ------- | -
|June 30, 2005                     | 
|                                  |  |               |        
|                                  |  | United States |         |   | Europe |   | Total | 
|Total assets                      |  | $             | 45,605  |   |        | $ | 2,318 |  | $ | 47,923  |  
|Property and equipment, net       |  |               | 10,149  |   |        |   | 3     |  |   | 10,152  |  
|Revenues                          |  |               | 798     |   |        |   | 3,015 |  |   | 3,813   |  
|Income (loss) before tax benefits |  |               | (27,750 | ) |        |   | 607   |  |   | (27,143 | )
|                                 
|June 30, 2004                     | 
|                                  |  |               |        
|                                  |  | United States |         |   | Europe |   | Total | 
|Total assets                      |  | $             | 30,142  |   |        | $ | 1,946 |  | $ | 32,088  |  
|Property and equipment, net       |  |               | 11,528  |   |        |   | 5     |  |   | 11,533  |  
|Revenues                          |  |               | 1,131   |   |        |   | 3,175 |  |   | 4,306   |  
|Income (loss) before tax benefits |  |               | (23,292 | ) |        |   | 703   |  |   | (22,589 | )
|                                 
|June 30, 2003                     | 
|                                  |  |               |        
|                                  |  | United States |         |   | Europe |   | Total | 
|Total assets                      |  | $             | 40,045  |   |        | $ | 5,085 |  | $ | 45,130  |  
|Property and equipment, net       |  |               | 12,293  |   |        |   | 6     |  |   | 12,299  |  
|Revenues                          |  |               | 10,754  |   |        |   | 2,965 |  |   | 13,719  |  
|Income (loss) before tax benefits |  |               | (9,351  | ) |        |   | 797   |  |   | (8,554  | )



14. Defined Contribution Plans



U.S. employees are eligible to participate in the
Companys 401(k) plan, while employees in international locations are eligible to participate in other defined contribution plans. Aggregate Company contributions to its benefit plans totaled approximately $70,000, 72,000 and $55,000 for June
30, 2005, 2004 and 2003, respectively.



78



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15. Quarterly Results of Operations (Unaudited)



|                                                           |  |                                              |         |   |              |   |        |              |  |   |              |   |  |              |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |        |  
|---------------------------------------------------------- |  | -------------------------------------------- | ------- | - | ------------ | - | ------ | ------------ |  | - | ------------ | - |  | ------------ | ------ | - | ------------ | - | ------ | ------------ |  | - | ------------ | - |  | - | ------ | - |  | - | ------ | -
|                                                           |  | Three Months Ended                           |        
|                                                           |  | June 30 2005                                 |         |   | March 312005 |   |        | Dec. 31 2004 |  |   | Sept. 302004 |   |  | June 30 2004 |        |   | March 312004 |   |        | Dec. 31 2003 |  |   | Sept. 302003 |  
|                                                           |  | (In thousands, except for per share amounts) |        
|Consolidated Statements of Operations Data:                |  |                                              |         |   |              |   |        |              |  |   |              |   |  |              |        |   |              |   |        |              |  |   |              |   |  |   |        |   |  |   |        |  
|Revenues                                                   |  | $                                            | 610     |   |              | $ | 1,089  |              |  | $ | 999          |   |  | $            | 1,116  |   |              | $ | 912    |              |  | $ | 1,151        |   |  | $ | 1,057  |   |  | $ | 1,186  |  
|Gross profit (1)                                           |  |                                              | 480     |   |              |   | 729    |              |  |   | 637          |   |  |              | 897    |   |              |   | 490    |              |  |   | 940          |   |  |   | 789    |   |  |   | 675    |  
|Income tax benefit/(provision)                             |  |                                              | 38      |   |              |   | (104   | )            |  |   | 581          |   |  |              | (130   | ) |              |   | (37    | )            |  |   | (58          | ) |  |   | 358    |   |  |   | (29    | )
|Net loss                                                   |  |                                              | (10,094 | ) |              |   | (6,059 | )            |  |   | (6,356       | ) |  |              | (4,249 | ) |              |   | (6,825 | )            |  |   | (5,489       | ) |  |   | (4,858 | ) |  |   | (5,183 | )
|Net loss per common share allocable to common stockholders |  | $                                            | (0.19   | ) |              | $ | (0.11  | )            |  | $ | (0.12        | ) |  | $            | (0.08  | ) |              | $ | (0.14  | )            |  | $ | (0.11        | ) |  | $ | (0.10  | ) |  | $ | (0.10  | )
|Weighted average number of common shares outstanding       |  |                                              | 54,073  |   |              |   | 54,073 |              |  |   | 54,073       |   |  |              | 52,529 |   |              |   | 49,886 |              |  |   | 49,888       |   |  |   | 49,883 |   |  |   | 49,882 |  

---

|(1) | Gross profit is calculated as product sales less cost of goods sold.
|--- | --------------------------------------------------------------------



16. Subsequent Event



On August 19, 2005 at a Special Meeting of Stockholders a majority of holders of common stock of the Company approved an amendment to the Certificate of
Incorporation to increase the number of shares of common stock authorized from 70 million to 110 million shares.



In addition, the shareholders voted to authorize shares of common stock for conversion if required, into common stock for the 5% senior convertible notes
and the warrants. The 5% senior convertible notes and warrants are therefore no longer restricted as to conversion into shares of common stock. The restricted proceeds from these notes and warrants that had been held in escrow ($14.3 million) are
unrestricted. The liability for the warrants was increased by $270,000 on August 19, 2005 to reflect the Companys common stock valuation. This increase in the liability for the warrants will be reflected in the statement of operations. The
warrants are expected to be reclassified to permanent equity during the first quarter 2006.



79



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Immunomedics, Inc. and Subsidiaries

Schedule II  Valuation and Qualifying Reserves

For the Years Ended June
30, 2005, 2004 and 2003



Allowance for Doubtful Accounts



|              |  |                              |          |   |                      |   |                   |  |   |              |     |                          |   |   |  |   |          |  
|------------- |  | ---------------------------- | -------- | - | -------------------- | - | ----------------- |  | - | ------------ | --- | ------------------------ | - | - |  | - | -------- | -
|Year ended:   |  | Balance atBeginning ofPeriod |          |   | Changes toReserve(1) |   | Charges toExpense |  |   | OtherCharges |     | Balance at End of Period |  
|June 30, 2003 |  | $                            | (289,866 | ) |                      | $ | 15,899            |  | $ | (107,714     | )   |                          | $ |  |  | $ | (381,681 | )
|June 30, 2004 |  | $                            | (381,681 | ) |                      | $ | 37,957            |  | $ |             |     |                          | $ |  |  | $ | (343,724 | )
|June 30, 2005 |  | $                            | (343,724 | ) |                      | $ | 88,217            |  | $ | 105,972      | (2) |                          |   |   |  | $ | (149,535 | )

---

|(1) | Uncollectible accounts written off, net of reserves
|--- | ---------------------------------------------------

|(2) | Changes in estimate of reserve due to improved collection efforts
|--- | -----------------------------------------------------------------



Reserve for Inventory Obsolescence



|              |  |                              |          |   |                   |   |                   |  |   |              |   |                          |   |   |  |   |          |  
|------------- |  | ---------------------------- | -------- | - | ----------------- | - | ----------------- |  | - | ------------ | - | ------------------------ | - | - |  | - | -------- | -
|Year ended:   |  | Balance atBeginning ofPeriod |          |   | Changes toReserve |   | Charges toExpense |  |   | OtherCharges |   | Balance at End of Period |  
|June 30, 2003 |  | $                            |         |   |                   | $ |                  |  | $ |             |   |                          | $ |  |  | $ |         |  
|June 30, 2004 |  | $                            |         |   |                   | $ |                  |  | $ | (139,000     | ) |                          | $ |  |  | $ | (139,000 | )
|June 30, 2005 |  | $                            | (139,000 | ) |                   | $ | 16,614            |  | $ | (27,614      | ) |                          | $ |  |  | $ | (150,000 | )



80



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Item 9 Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure



None.



Item 9A Controls and Procedures



Managements Report on Internal Control Over Financial Reporting:Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal
control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Immunomedics; (ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in
accordance with authorizations of our management and our directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on
the financial statements.



Because of its inherent limitations,
internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.



Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2005. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COCO) in Internal Control-Integrated Framework. Based on its assessment and those criteria, our management has concluded that we maintained effective internal control over financial reporting as of June 30,
2005.



Our independent auditors have issued an attestation
report on our managements assessment of Immunomedics internal control over financial reporting.



Changes in internal controls: Such evaluation did not identify any significant changes in our internal controls over financial reporting that
occurred during the year ended June 30, 2005 that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



81



---

Report of Independent Registered Public Accounting Firm



The Board of Directors and Stockholders

Immunomedics, Inc.



We have audited managements assessment, included in Managements Report on Internal Control over Financial Reporting, that Immunomedics, Inc.
maintained effective internal control over financial reporting as of June 30, 2005, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO
criteria). Immunomedics, Inc.s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to
express an opinion on managements assessment and an opinion on the effectiveness of the companys internal control over financial reporting based on our audit.



We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our opinion.



A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



In our opinion, managements assessment that Immunomedics, Inc.
maintained effective internal control over financial reporting as of June 30, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Immunomedics, Inc. maintained, in all material respects, effective
internal control over financial reporting as of June 30, 2005, based on the COSO criteria.



We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets
of Immunomedics, Inc. and subsidiaries as of June 30, 2005 and 2004, and the related consolidated statements of operations and comprehensive loss, shareholders equity (deficit), and cash flows for each of the three years in the period ended
June 30, 2005 of Immunomedics, Inc. and our report dated September 7, 2005 expressed an unqualified opinion thereon.



/s/ Ernst & Young LLP



MetroPark, New Jersey

September 7, 2005



82



---

Item 9B Other Information



None.



83



---

PART III



Item 10 Directors and Executive Officers of the Registrant



The response to this item will be set forth in the Proxy Statement for our
2005 Annual Meeting of Stockholders (the Proxy Statement) and is incorporated by reference herein.



Item 11 Executive Compensation



The response to this item will be set forth in the Proxy Statement and is incorporated by reference herein.



Item 12 Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters



Except as set
forth below, the response to this item will be set forth in the Proxy Statement and is incorporated by reference herein.



Equity Compensation Plan Information



The following table provides information as of June 30, 2005 about our Common Stock that may be issued upon the exercise of options under our
existing equity compensation plans, including the 1992 Stock Option Plan and the 2002 Stock Option Plan.



|                                                           |  |                                                                     |     |  |                                                      |      |                                                                                                                                              |          
|---------------------------------------------------------- |  | ------------------------------------------------------------------- | --- |  | ---------------------------------------------------- | ---- | -------------------------------------------------------------------------------------------------------------------------------------------- | ---------
|Plan Category                                              |  | Number of Securitiesto be Issued UponExercise ofOutstanding Options |     |  | Weighted AverageExercise Price ofOutstanding Options |      | Number of SecuritiesRemaining Available for FutureIssuance Under EquityCompensation Plans (excludingsecurities reflected in
firstcolumn) (a)
|                                                           |  | (a)                                                                 |     |  | (b)                                                  |      | (c)                                                                                                                                         
|Equity Compensation Plans Approved by Security holders     |  | 5,486,650                                                           |     |  | $                                                    | 8.27 |                                                                                                                                              | 1,304,225
|Equity Compensation Plans not Approved by Security holders |  | 0                                                                   | (1) |  |                                                      |     |                                                                                                                                              | 0        
|                                                           |  |                                                                     |     |  |                                                      |      |                                                                                                                                              |          
|Total                                                      |  | 5,486,650                                                           |     |  | $                                                    | 8.27 |                                                                                                                                              | 1,304,225
|                                                           |  |                                                                     |     |  |                                                      |      |                                                                                                                                              |          

---

|(1) | We do not have any compensation plans under which equity securities are authorized for issuance which have not been approved by our stockholders.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------



Item 13 Certain Relationships and Related Transactions



The response to this item will be set forth in the Proxy
Statement and is incorporated by reference herein.



Item 14 Principal Accounting Fees and Services



The response to this item will be set forth in the Proxy Statement and is incorporated by reference herein.



84



---

PART IV



Item 15 Exhibits, Financial Statement Schedules



(a) Documents filed as part of this Report:



|       |  |                                                                                                                                                                                        
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1.     |  | Consolidated Financial Statements:                                                                                                                                                     
|       | 
|       |  | Consolidated Balance Sheets  June 30, 2005 and 2004                                                                                                                                   
|       |  | Consolidated Statements of Operations and Comprehensive Income (Loss) for the years                                                                                                    
|       |  | ended June 30, 2005, 2004 and 2003                                                                                                                                                     
|       |  | Consolidated Statements of Changes in Stockholders Equity for the years                                                                                                               
|       |  | ended June 30, 2005, 2004 and 2003                                                                                                                                                     
|       |  | Consolidated Statements of Cash Flows for the years                                                                                                                                    
|       |  | ended June 30, 2005, 2004 and 2003                                                                                                                                                     
|       |  | Notes to Consolidated Financial Statements                                                                                                                                             
|       |  | Report of Independent Registered Public Accounting Firm  Ernst & Young LLP                                                                                                            
|       | 
|2.     |  | Financial Statement Schedules:                                                                                                                                                         
|       | 
|       |  | Schedule II  Valuation and Qualifying Reserves                                                                                                                                        
|       | 
|3.1(a) |  | Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware on July 6, 1982(c)                                                          
|       | 
|3.1(b) |  | Certificate of Amendment of the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on April 4, 1983(c)                          
|       | 
|3.1(c) |  | Certificate of Amendment of the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on December 14, 1984(c)                      
|       | 
|3.1(d) |  | Certificate of Amendment of the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on March 19, 1986(c)                         
|       | 
|3.1(e) |  | Certificate of Amendment of the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on November 17, 1986(c)                      
|       | 
|3.1(f) |  | Certificate of Amendment of the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on November 21, 1990(d)                      
|       | 
|3.1(g) |  | Certificate of Amendment of the Certificate of Incorporation of the Company, as filed with the Secretary of State of the State of Delaware on November 12, 1992(g)                     
|       | 
|3.1(h) |  | Certification of Amendment of the Certificate of Incorporation of the Company as filed with the Secretary of State of the State of Delaware on November 7, 1996(j)                     
|       | 
|3.1(i) |  | Amended and Restated Certificate of Designations, Preferences and Rights of Series F Convertible Preferred Stock of Immunomedics, Inc.(m)                                              
|       | 
|3.1(j) |  | Certificate of Designation of Series G Junior Participating Preferred Stock of the Company, as filed with the Secretary of State of the State of Delaware on March 15, 2002(t)         
|       | 
|3.1(k) |  | Amendment to the Articles of Incorporation as filed with the Secretary of State of the State of Delaware on August 25, 2005                                                            
|       | 
|3.2    |  | Amended and Restated By-Laws of the Company(t)                                                                                                                                         
|       | 
|4.1    |  | Specimen Certificate for Common Stock(t)                                                                                                                                               
|       | 
|4.2    |  | Rights Agreement, dated as of March 4, 2002, between the Company and American Stock Transfer and Trust Company, as rights agent, and form of Rights Certificate(r)                     
|       | 
|4.3    |  | Warrant For the Purchase of Shares of Common Stock of the Company, dated as of May 23, 2002(s)                                                                                         
|       | 
|4.4    |  | Form of Registration Rights Agreement between Immunomedics, Inc. and several purchasers(x)                                                                                             
|       | 
|4.5    |  | Form of Warrant Agreement between Immunomedics, Inc. and JPMorgan Chase Bank, N.A. as Warrant Agent(x)                                                                                 
|       | 
|4.6    |  | Form of Indenture by and among Immunomedics, Inc., Law Debenture Trust Company of New York as Trustee, and JPMorgan Chase Bank, N.A. as Registrar, Paying Agent and Conversion
Agent(x)



85



---

|      |  |                                                                                                                                                                                                                                   
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      | 
|10.1# |  | Immunomedics, Inc. 1992 Stock Option Plan (j)                                                                                                                                                                                     
|      | 
|10.2# |  | Immunomedics, Inc. 2002 Stock Option Plan, as amended.(t)                                                                                                                                                                         
|      | 
|10.3# |  | Executive Supplemental Benefits Agreement with David M. Goldenberg, dated as of July 18, 1986 (b)                                                                                                                                 
|      | 
|10.4# |  | Amended and Restated Employment Agreement, dated November 1, 1993, between the Company and Dr. David M. Goldenberg (h)                                                                                                            
|      | 
|10.5# |  | Amendment No. 2 to the Amended and Restated Employment Agreement, dated as of July 1, 2001 between the Company and Dr. David M. Goldenberg (q)                                                                                    
|      | 
|10.6# |  | David M. Goldenberg Severance Agreement, dated as of June 18, 2002, between David M. Goldenberg and the Company(t)                                                                                                                
|      | 
|10.7# |  | Employment Agreement, dated March 10, 2001, between the Company and Cynthia L. Sullivan (p)                                                                                                                                       
|      | 
|10.8  |  | Exclusive License Agreement with David M. Goldenberg, dated as of July 14, 1982 (a)                                                                                                                                               
|      | 
|10.9  |  | Amended and Restated License Agreement among the Company, CMMI and David M. Goldenberg, dated December 11, 1990 (e)                                                                                                               
|      | 
|10.10 |  | Amendment, dated March 11, 1995, to the Amended and Restated License Agreement among the Company, CMMI, and David M. Goldenberg, dated December 11, 1990 (i)                                                                      
|      | 
|10.11 |  | License Agreement, dated as of January 21, 1997, between the Company and Center for Molecular Medicine and Immunology, Inc. (k)                                                                                                   
|      | 
|10.12 |  | License Agreement, dated March 5, 1999, by and between the Company and IBC Pharmaceuticals (n)                                                                                                                                    
|      | 
|10.13 |  | Development and License Agreement, dated December 17, 2001, between the Company and Amgen, Inc. (Confidentiality treatment has been granted for certain portions of the Agreement)
(o)                                            
|      | 
|10.14 |  | Agreement among the Company, David M. Goldenberg and the Center for Molecular Medicine and Immunology, Inc., dated May, 1983 (a)                                                                                                  
|      | 
|10.15 |  | Lease Agreement with Baker Properties Limited Partnership, dated January 16, 1992 (f)                                                                                                                                             
|      | 
|10.16 |  | Distribution and Product Services Agreement, dated as of May 15, 1998, between the Company and Integrated Commercialization Solutions, Inc. (Confidentiality treatment has been granted for
certain portions of the Agreement) (l)
|      | 
|10.17 |  | Contract for Services dated effective as of January 1, 2002 between the Company and Logosys Logistik GmbH (q)                                                                                                                     
|      | 
|10.18 |  | Contribution and Assignment Agreement, dated as of June 30, 2002, between IBC Pharmaceuticals, LLC and IBC Pharmaceuticals, Inc.(t)                                                                                               
|      | 
|10.19 |  | Bond Financing Agreement, dated May 27, 2003, between the New Jersey Economic Development Authority, the Company as Borrower, Fleet National Bank as Agent and as Purchaser
(v)                                                   
|      | 
|10.20 |  | Placement Agency Agreement, dated July 28, 2004, by and between the Company and RBC Capital Markets Corporation (w)                                                                                                               
|      | 
|10.22 |  | Form of Purchase Agreement between Immunomedics, Inc. and several purchasers (x)                                                                                                                                                  
|      | 
|21.1* |  | Subsidiaries of the Company                                                                                                                                                                                                       
|      | 
|23.1* |  | Consent of Independent Registered Public Accounting Firm  Ernst & Young LLP                                                                                                                                                      
|      | 
|31.1* |  | Certification of the Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.                                                                                                                        
|      | 
|31.2* |  | Certification of the Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.                                                                                                                        
|      | 
|32.1* |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                          
|      | 
|32.2* |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                          

|    |  |                                                                                                                                                        
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(a) |  | Incorporated by reference from the Exhibits to the Companys Registration Statement on Form S-1 effective October 6, 1983 (Commission File No. 2-84940)



86



---

|    |  |                                                                                                                                                          
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) |  | Incorporated by reference from the Exhibits to the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 1986                          
|(c) |  | Incorporated by reference from the Exhibits to the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 1990                          
|(d) |  | Incorporated by reference from the Exhibits to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1990                
|(e) |  | Incorporated by reference from the Exhibits to the Company Registration Statement on Form S-2 effective July 24, 1991 (Commission File No. 33-41053)     
|(f) |  | Incorporated by reference from the Exhibits to the Companys Registration Statement on Form S-2 effective January 30, 1992 (Commission File No. 33-44750)
|(g) |  | Incorporated by reference from the Exhibits to the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 1993                          
|(h) |  | Incorporated by reference from the Exhibits to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1993               
|(i) |  | Incorporated by reference from the Exhibits to the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 1995                          
|(j) |  | Incorporated by reference from the Exhibits to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1996               
|(k) |  | Incorporated by reference from the Exhibits to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 1996                
|(l) |  | Incorporated by reference from the Exhibits to the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 1998                          
|(m) |  | Incorporated by reference from the Exhibits to the Companys Current Report on Form 8-K, dated December 15, 1998                                         
|(n) |  | Incorporated by reference from the Exhibits to the Companys Current Report on Form 8-K, dated March 23, 1999                                            
|(o) |  | Incorporated by reference from the Exhibits to the Companys Quarterly Report on Form 10-Q (as amended) for the fiscal quarter ended March 31, 2001      
|(p) |  | Incorporated by reference from the Exhibits to the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2001                          
|(q) |  | Incorporated by reference from the Exhibits to the Companys Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2001               
|(r) |  | Incorporated by reference from the Exhibits to the Companys Current Report on Form 8-K, dated March 8, 2002                                             
|(s) |  | Incorporated by reference from the Exhibits to the Companys Registration Statement on Form S-3, as filed with the Commission on June 12, 2002           
|(t) |  | Incorporated by reference from the Exhibits to the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2002                          
|(u) |  | Incorporated by reference from the Exhibits to the Companys Registration Statement on Form S-3, as filed with the Commission on April 23, 2004          
|(v) |  | Incorporated by reference from the Exhibits to the Companys Annual Report on Form 10-K for the fiscal year ended June 30, 2003                          
|(w) |  | Incorporated by reference from the Exhibits to the Companys Current Report on Form 8-K, dated August 2, 2004                                            
|(x) |  | Incorporated by reference from the Exhibits to the Companys Current Report on Form 8-K, dated May 2, 2005                                               
|#   |  | Management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of this report       





87



---

SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



|                         |  |                    |  |                                      
|------------------------ |  | ------------------ |  | -------------------------------------
|                         |  | IMMUNOMEDICS, INC.
|                         |  |                   
|Date: September 12, 2005 |  | By:                |  | /s/ CYNTHIA L. SULLIVAN              
|                         |  |                    |  | Cynthia L. Sullivan                  
|                         |  |                    |  | President and Chief Executive Officer



Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                           |  |                                                                                                 |  |                   
|------------------------------------------ |  | ----------------------------------------------------------------------------------------------- |  | ------------------
|Signature                                  |  | Title                                                                                           |  | Date              
|/s/ DAVID M. GOLDENBERG                    |  | Chairman of the Board                                                                           |  | September 12, 2005
|David M. Goldenberg                        |  |                                                                                                 |  |                   
|                                           |  |                                                                                                
|/s/ CYNTHIA L. SULLIVANCynthia L. Sullivan |  | President, Chief Executive Officer and Director (Principal Executive Officer)                   |  | September 12, 2005
|                                           |  |                                                                                                
|/s/ MARVIN E. JAFFE                        |  | Director                                                                                        |  | September 12, 2005
|Marvin E. Jaffe                            |  |                                                                                                 |  |                   
|                                           |  |                                                                                                
|/s/ RICHARD R. PIVIROTTO                   |  | Director                                                                                        |  | September 12, 2005
|Richard R. Pivirotto                       |  |                                                                                                 |  |                   
|                                           |  |                                                                                                
|/s/ MORTON COLEMAN                         |  | Director                                                                                        |  | September 12, 2005
|Morton Coleman                             |  |                                                                                                 |  |                   
|                                           |  |                                                                                                
|/s/ MARY PAETZOLD                          |  | Director                                                                                        |  | September 12, 2005
|Mary Paetzold                              |  |                                                                                                 |  |                   
|                                           |  |                                                                                                
|/s/ BRIAN A. MARKISON                      |  | Director                                                                                        |  | September 12, 2005
|Brian A. Markison                          |  |                                                                                                 |  |                   
|                                           |  |                                                                                                
|/s/ DON C. STARK                           |  | Director                                                                                        |  | September 12, 2005
|Don C. Stark                               |  |                                                                                                 |  |                   
|                                           |  |                                                                                                
|/s/ GERARD G. GORMANGerard G. Gorman       |  | Vice President Finance and Chief Financial Officer (Principal Financial and Accounting Officer) |  | September 12, 2005



88



---

EXHIBIT LIST

(excludes documents incorporated by reference)



|       |  |                                                                                                                             
|------ |  | ----------------------------------------------------------------------------------------------------------------------------
|3.1(k) |  | Amendment to the Articles of Incorporation as filed with the Secretary of State of the State of Delaware on August 25, 2005.
|21.1   |  | Subsidiaries of the Company.                                                                                                
|       | 
|23.1   |  | Consent of Independent Registered Public Accounting Firm  Ernst & Young LLP.                                               
|       | 
|31.1   |  | Certification of the Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.                  
|       | 
|31.2   |  | Certification of the Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.                  
|       | 
|32.1   |  | Certification of the Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                     
|       | 
|32.2   |  | Certification of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                     



(Exhibits available
upon request)