**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-Q**

**(MarkOne)**

**x**** QUARTERLY REPORTPURSUANT TO SECTION 13 OR 15(d)**

**OF THESECURITIES EXCHANGE ACT OF 1934**

## **For the quarterly period ended March 31, 2007**

**or**

**o****  TRANSITIONREPORT PURSUANT TO SECTION 13 OR 15 (d)**

**OF THESECURITIES EXCHANGE ACT OF 1934**

## **For the transition period from                   to               **

**CommissionFile Number:  333-126031**

**Robcor Properties, Inc.**

(Exact name of Registrant as specified in its charter)

| **Florida**                                                      |   | **20-3215854**                        |
|------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |   | (I.R.S. Employer  Identification No.) |

 

**c/oRedpoint Bio Corporation, 7 Graphics Drive, Ewing, New Jersey 08628**

(Address ofprincipal executive offices) (Zip Code)

**(609)637-9700**

(Registrant’s TelephoneNumber, Including Area Code)

**2005Eastpark Boulevard, Cranbury, New Jersey 08512-3515**

(Former Name,Former Address and Former Fiscal Year, If Changed Since Last Report**)**

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.   Yes  x  No  o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o                             AcceleratedFiler o                             Non-AcceleratedFiler x

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

The number of shares ofthe registrant’s common stock outstanding as of May 14, 2007 was 78,668,675.

 

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**ROBCORPROPERTIES, INC.**

**TABLE OF CONTENTS**
| ** **   | ** **                                                                                                                                                   | ** ** | **Page** | ** ** |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| **PART I:**  | **FINANCIAL INFORMATION**                                                                                                                                    |       |     | 3          |   |   |
| ** **   | ** **                                                                                                                                                   |       |     |       |   |   |
| ITEM 1.      | FINANCIAL STATEMENTS  (unaudited):                                                                                                                           |       |     | 3          |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
|         | Consolidated  Balance Sheets as of December 31, 2006 and March 31, 2007                                                                                      |       |     | 3          |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
|         | Consolidated  Statements of Operations for the Three Months Ended March 31, 2006 and 2007 and the period from August 16,  1995 (inception) to March 31, 2007 |       |     | 4          |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
|         | Consolidated  Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2007  and the period from August 16, 1995 (inception) to March 31, 2007 |       |     | 5          |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
|         | Notes to  Consolidated Financial Statements                                                                                                                  |       |     | 6          |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
| ITEM 2.      | MANAGEMENT’S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                                                  |       |     | 11         |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
| ITEM 3.      | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                                                                  |       |     | 19         |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
| ITEM 4T.     | CONTROLS AND  PROCEDURES                                                                                                                                     |       |     | 20         |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
| **PART II:** | **OTHER INFORMATION**                                                                                                                                        |       |     | 21         |   |   |
| ** **   | ** **                                                                                                                                                   |       |     |       |   |   |
| ITEM 1.      | LEGAL PROCEEDINGS                                                                                                                                            |       |     | 21         |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
| ITEM  1A.    | RISK  FACTORS                                                                                                                                                |       |     | 22         |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
| ITEM 2.      | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                                                                                 |       |     | 41         |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
| ITEM  6.     | EXHIBITS                                                                                                                                                     |       |     | 42         |   |   |
|         |                                                                                                                                                         |       |     |       |   |   |
| SIGNATURES   |                                                                                                                                                         |       |     | 43         |   |   |

 

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**ITEM1.  FINANCIAL STATEMENTS**

**ROBCOR PROPERTIES, INC.****(A DEVELOPMENT-STAGE ENTERPRISE)****CONSOLIDATED BALANCE SHEETS**

**(UNAUDITED)**
| ** **                                                                                                                                                            | ** ** | **December 31,** | ** ** | **March 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|--------------------|------------|
| ** **                                                                                                                                                            | ** ** | **2006**              | ** ** | **2007**           | ** ** |
| **Assets**                                                                                                                                                            | ** ** | ** **            | ** ** | ** **         | ** ** |
| Current assets:                                                                                                                                                       |       |                  |       |               |       |
| Cash and cash  equivalents                                                                                                                                            |       | $                     | 974,378    |               | $          | 16,722,434 |   |
| Accounts  receivable                                                                                                                                                  |       | —                |       | 1,940,851          |       |
| Prepaid expenses  and other current assets                                                                                                                            |       | 72,697                |       | 158,098            |       |
| Total current  assets                                                                                                                                                 |       | 1,047,075             |       | 18,821,383         |       |
| Property and equipment,  net                                                                                                                                          |       | 840,435               |       | 736,019            |       |
| Deferred financing  costs                                                                                                                                             |       | 308,456               |       | —             |       |
| Other assets                                                                                                                                                          |       | 355,816               |       | 308,475            |       |
| Total assets                                                                                                                                                          |       | $                     | 2,551,782  |               | $          | 19,865,877 |   |
| **Liabilities  and Stockholders’ Equity (Deficit)**                                                                                                              |       |                  |       |               |       |
| Current liabilities:                                                                                                                                                  |       |                  |       |               |       |
| Convertible  notes payable                                                                                                                                            |       | $                     | 3,462,359  |               | $          | — |   |
| Current portion  of long-term debt                                                                                                                                    |       | 574,132               |       | 573,590            |       |
| Accounts payable                                                                                                                                                      |       | 833,739               |       | 745,069            |       |
| Accrued expenses                                                                                                                                                      |       | 351,650               |       | 207,655            |       |
| Accrued  compensation                                                                                                                                                 |       | 704,964               |       | 923,149            |       |
| Deferred revenue                                                                                                                                                      |       | —                |       | 1,001,429          |       |
| Total current  liabilities                                                                                                                                            |       | 5,926,844             |       | 3,450,892          |       |
| Long-term debt                                                                                                                                                        |       | 635,344               |       | 497,535            |       |
| Deferred revenue                                                                                                                                                      |       | —                |       | 928,571            |       |
| Total  liabilities                                                                                                                                                    |       | 6,562,188             |       | 4,876,998          |       |
|                                                                                                                                                                  |       |                  |       |               |       |
| Redeemable convertible  preferred stock, $0.0001 par value;                                                                                                           |       |                  |       |               |       |
| Series A  convertible preferred stock; issued and outstanding 6,444,835 shares (liquidation  value of $16,350,586 at December 31, 2006)                               |       | 16,217,778            |       | —             |       |
| Junior preferred  stock; issued and outstanding 236,987 shares (liquidation value of $622,787  at December 31, 2006)                                                  |       | 497,673               |       | —             |       |
|                                                                                                                                                                  |       |                  |       |               |       |
| Stockholders’ equity  (deficit):                                                                                                                                 |       |                  |       |               |       |
| Preferred stock;  20,000,000 shares authorized, none issued                                                                                                           |       | —                |       | —             |       |
| Common stock;  authorized 1,000,000,000 shares; issued and outstanding 4,439,345 at December  31, 2006 and issued and outstanding 62,584,328 shares at March 31, 2007 |       | 1,569,141             |       | 42,556,192         |       |
| Deficit  accumulated during development stage                                                                                                                         |       | (22,294,998           | )          | (27,567,313        | )          |
| Total stockholders’  equity (deficit)                                                                                                                            |       | (20,725,857           | )          | 14,988,879         |       |
| Total liabilities and  stockholders’ equity (deficit)                                                                                                            |       | $                     | 2,551,782  |               | $          | 19,865,877 |   |

 

See accompanying notes to the unaudited consolidatedfinancial statements.

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**ROBCORPROPERTIES, INC.(A DEVELOPMENT-STAGE COMPANY)CONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED**)
| ** **                                           | ** ** | **Three Months Ended March 31,** | ** ** | **August 16 1995  (Inception) to** | ** ** |
|------------------------------------------------------|------------|------------------------------------------------------|------------|---------------------------------------------------|------------|
| ** **                                           | ** ** | **2006**                                             | ** ** | **2007**                                          | ** ** | **March 31, 2007** | ** ** |
|                                                 |       |                                                 |       |                                              |       |   |   |
| Research and  grant revenue                          |       | $                                                    | —     |                                              | $          | 40,851 |   | $ | 4,273,712 |   |
| Operating  expenses:                                 |       |                                                 |       |                                              |       |   |   |
| Research and development                             |       | 908,381                                              |       | 2,568,500                                         |       | 15,092,253 |   |
| General and administrative                           |       | 707,206                                              |       | 911,259                                           |       | 10,995,153 |   |
| Total operating expenses                             |       | 1,615,587                                            |       | 3,479,759                                         |       | 26,087,406 |   |
|                                                 |       |                                                 |       |                                              |       |   |   |
| Operating loss                                       |       | (1,615,587                                           | )          | (3,438,908                                        | )          | (21,813,694 | ) |
|                                                 |       |                                                 |       |                                              |       |   |   |
| Interest income                                      |       | 15,875                                               |       | 20,974                                            |       | 206,171 |   |
| Interest expense                                     |       | (42,274                                              | )          | (1,629,535                                        | )          | (3,266,107 | ) |
| Loss before income taxes                             |       | (1,641,986                                           | )          | (5,047,469                                        | )          | (24,873,630 | ) |
| Income tax  benefit                                  |       | —                                               |       | —                                            |       | 719,206 |   |
| Net loss                                             |       | (1,641,986                                           | )          | (5,047,569                                        | )          | $ | (24,154,424 | ) |
| Accretion of redeemable  convertible preferred stock |       | (283,792                                             | )          | (224,846                                          | )          |   |   |
| Net loss  applicable to common stockholders          |       | $                                                    | (1,925,778 | )                                                 | $          | (5,272,315 | ) |   |   |
| Basic and  diluted net loss per common share         |       | $                                                    | (0.43      | )                                                 | $          | (0.30 | ) |   |   |
| Weighted average of  shares outstanding              |       | 4,493,130                                            |       | 17,321,241                                        |       |   |   |

 

See accompanying notes tothe unaudited consolidated financial statements

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**ROBCOR PROPERTIES, INC.**

**(A DEVELOPMENT-STAGE ENTERPRISE)**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(UNAUDITED)**
| ** **                                                                   | ** ** | ** **                                           | ** ** | ** **         | ** ** | **August 16,  1995  (Inception) to** | ** ** |
|------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|--------------------|------------|------------------------------------------------|------------|
| ** **                                                                   | ** ** | **Three Months Ended March 31,** | ** ** | **March 31,** | ** ** |
| ** **                                                                   | ** ** | **2006**                                             | ** ** | **2007**           | ** ** | **2007**                                       | ** ** |
| Cash flows from  operating activities:                                       |       |                                                 |       |               |       |                                           |       |
| Net loss                                                                     |       | $                                                    | (1,641,986 | )                  | $          | (5,047,469                                     | )          | $ | (24,154,424 | ) |
| Adjustments to reconcile net loss to net cash used  in operating activities: |       |                                                 |       |               |       |                                           |       |
| Depreciation                                                                 |       | 101,458                                              |       | 104,416            |       | 1,120,738                                      |       |
| Options, warrants and stock issued for services and dilution  provisions     |       | 10,237                                               |       | 1,721,160          |       | 2,113,293                                      |       |
| Beneficial conversion feature                                                |       | —                                               |       | 1,228,565          |       | 1,228,565                                      |       |
| Amortization of discount on convertible notes                                |       | —                                               |       | 302,032            |       | 899,935                                        |       |
| Amortization of deferred financing costs                                     |       | (9,907                                               | )          | 31,012             |       | 128,170                                        |       |
| Debt inducement charge                                                       |       | —                                               |       | —             |       | 361,598                                        |       |
| Interest expense on convertible notes                                        |       | —                                               |       | —             |       | 136,075                                        |       |
| Changes in assets and liabilities:                                           |       |                                                 |       |               |       |                                           |       |
| Accounts receivable                                                          |       | —                                               |       | (1,940,851         | )          | (1,940,851                                     | )          |
| Prepaid expenses and other assets                                            |       | (117,334                                             | )          | (99,833            | )          | (758,516                                       | )          |
| Accounts payable                                                             |       | 222,417                                              |       | 219,786            |       | 1,053,525                                      |       |
| Accrued expenses and accrued compensation                                    |       | 53,638                                               |       | 85,020             |       | 1,141,634                                      |       |
| Deferred revenue                                                             |       | —                                               |       | 1,930,000          |       | 1,930,000                                      |       |
| Net cash used in operating activities                                        |       | (1,381,477                                           | )          | (1,466,162         | )          | (16,740,258                                    | )          |
| Cash flows from  investing activities:                                       |       |                                                 |       |               |       |                                           |       |
| Purchases of property and equipment                                          |       | (6,350                                               | )          | —             |       | (1,856,757                                     | )          |
| Net cash used in investing activities                                        |       | (6,350                                               | )          | —             |       | (1,856,757                                     | )          |
| Cash flows from  financing activities:                                       |       |                                                 |       |               |       |                                           |       |
| Proceeds from issuance of long-term debt                                     |       | —                                               |       | —             |       | 2,085,810                                      |       |
| Net proceeds from convertible notes                                          |       | —                                               |       | —             |       | 5,253,811                                      |       |
| Payments of debt                                                             |       | (120,161                                             | )          | (138,351           | )          | (1,014,685                                     | )          |
| Net proceeds from issuance of preferred stock                                |       | —                                               |       | —             |       | 11,883,447                                     |       |
| Net proceeds from issuance of common stock and  warrants                     |       | —                                               |       | 17,352,569         |       | 17,394,187                                     |       |
| Common stock reacquired                                                      |       | —                                               |       | —             |       | (283,121                                       | )          |
| Net cash provided by (used in) financing activities                          |       | (120,161                                             | )          | 17,214,218         |       | 35,319,449                                     |       |
| Net increase (decrease) in cash and cash equivalents                         |       | (1,507,988                                           | )          | 15,748,056         |       | 16,722,434                                     |       |
| Cash and cash  equivalents, beginning of period                              |       | 2,557,680                                            |       | 974,378            |       | —                                         |       |
| Cash and cash  equivalents, end of period                                    |       | $                                                    | 1,049,692  |               | $          | 16,722,434                                     |       | $ | 16,722,434 |   |
| Supplemental  cash flow disclosures:                                         |       |                                                 |       |               |       |                                           |       |
| Noncash investing and financing activities:                                  |       |                                                 |       |               |       |                                           |       |
| Conversion of notes payable and accrued interest to  preferred stock         |       | $                                                    | —     |               | $          | —                                         |       | $ | 1,446,395 |   |
| Conversion of notes payable and accrued interest to  common stock            |       | —                                               |       | 3,896,001          |       | 3,896,001                                      |       |
| Conversion of preferred and junior preferred stock  to common stock          |       | —                                               |       | 16,940,297         |       | 16,940,297                                     |       |
| Accretion of preferred stock                                                 |       | 283,792                                              |       | 224,846            |       | 3,248,857                                      |       |
| Warrants issued in connection with notes payable                             |       | —                                               |       | —             |       | 1,258,642                                      |       |
| Cash paid for  interest                                                      |       | 40,414                                               |       | 27,510             |       | 346,584                                        |       |

 

See accompanying notes to the unaudited consolidated financialstatements.

5

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**ROBCOR PROPERTIES, INC.**

**(A DEVELOPMENT-STAGE ENTERPRISE)**

**NOTES TOCONSOLIDATED FINANCIAL STATEMENTS**

**(UNAUDITED)**

**1**                Basis of Presentation

The accompanying unauditedconsolidated financial statements of Robcor Properties, Inc. (“Robcor” or the “Company”)have been prepared in accordance with generally accepted accounting principlesfor interim financial information and pursuant to the rules and regulations ofthe Securities and Exchange Commission (SEC). Accordingly, they do not includeall of the information and footnotes required by generally accepted accountingprinciples for complete financial statements.

In the opinion ofmanagement, all adjustments (consisting of normal recurring adjustments)considered necessary for a fair presentation have been included. (See Note 2for discussion of impact of reverse merger.) Operating results for thethree-month period ended March 31, 2007 are not necessarily indicative ofthe results that may be expected for the year ending December 31, 2007.

The accompanying consolidatedfinancial statements include the accounts of the Company and its wholly-ownedsubsidiary Redpoint Bio Corporation (“Redpoint”).  Intercompany transactions and balances areeliminated in consolidation.

For further information,refer to the 2006 financial statements and footnotes thereto of Redpointincluded in the Company’s Form 8-K dated March 16, 2007 filed withthe SEC.

**2**                Reverse Merger and Financing

*Completion of Merger*

Robcor, a Floridacorporation, and its newly-formed subsidiary, Robcor Acquisition Corp., aDelaware corporation (“Merger Sub”) entered into an Agreement and Plan ofMerger (the “Merger Agreement”), dated as of March 12, 2007, by and among,Redpoint Bio Corporation, a privately-held Delaware corporation (“Redpoint”),on the one hand, and Robcor, Merger Sub, Robcor LLC, a Kentucky limitedliability company and wholly-owned subsidiary of Robcor (“Robcor LLC”) andHalter Financial Investments, L.P., a Texas limited partnership (“Halter”), andMichael Heitz (“Heitz”), as stockholders of Robcor, on the other hand. Pursuant to the Merger Agreement, Merger Sub, which Robcor had incorporated inthe state of Delaware for the purpose of completing the transaction, mergedinto Redpoint (the “Merger”) on March 12, 2007 (the “Closing” or the “ClosingDate”) with Redpoint continuing as the surviving entity in the Merger.  Asa result of the Merger, Redpoint became a wholly-owned subsidiary of theCompany.  In connection with the Merger, each share of capital stock ofRedpoint was converted into 2.7820 shares of Common Stock of Robcor and all ofRedpoint’s convertible promissory notes were converted into shares of CommonStock of Robcor.

Redpoint was deemed to havebeen the accounting acquirer in the Merger. Accordingly, the financial statements of the Company presented reflectthe historical results of Redpoint prior to the Merger, and of the combinedentities following the Merger, and do not include the historical financialresults of Robcor prior to the consummation of the Merger. Stockholders’ equity(deficit) has been retroactively restated as of December 31, 2006 toreflect the capital structure of Robcor after giving effect to the Merger.

*Private Placement*

Concurrently with thecompletion of the Merger, Robcor received $17.2 million in net proceeds fromthe initial closing of a private placement of approximately 24.7 million sharesCommon Stock at a price of $0.81 per share, and warrants to purchaseapproximately 6.2 million shares of Robcor Common Stock at an exercise price of$1.35 per share (the “Private Placement”).  The initial closing ofthe Private Placement occurred on March 12, 2007, concurrently with thecompletion of the Merger.

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Inconnection with the Private Placement, Redpoint engaged two placement agentswhich were issued five-year warrants to buy approximately 2.0 million shares ofRobcor Common Stock equal to 10% of the number of shares of Common Stock soldin the Private Placement at an exercise price of $0.97 per share; provided,however, no warrants were issued to the placement agents with respect to sharesand warrants sold to existing Redpoint stockholders.

On April 6, 2007, Robcor sold an additional 16.1 million shares ofCommon Stock and warrants to purchase 4.0 million shares of Common Stock whichresulted in net proceeds of approximately $11.2 million.

**3**                Summary of SignificantAccounting Policies

***(a)***                      Use ofEstimates

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

***(b)***                      Cash and CashEquivalents

The Company considers all highly liquid investments that havematurities of three months or less when acquired to be cash equivalents. Cashequivalents consist of bank deposits and investments in money market mutualfunds. Cash equivalents subject the Company to concentrations of credit risk.However, the Company has invested only in money market mutual funds that investsubstantially all of their assets in obligations of the U.S. government.

***(c)***                       Revenue Recognition

Revenue from corporate collaborations and licensing agreements consistsof up-front fees, research and development funding, and milestonepayments. Nonrefundable up-front fees are deferred and recognized asrevenue in the period the earnings process is complete based on the terms ofthe specific agreements. Revenue from research and development agreements andgovernment grants is recognized pursuant to the related agreements as work isperformed and related costs are incurred. Revenue resulting from theachievement of milestone events as defined in the agreements is recognized whenthe milestone is achieved.

***(d)***                      Research andDevelopment

Research and development costs are charged to expense as incurred.These expenses include internal research and development conducted on behalf ofthe Company by third parties, including sponsored university-basedresearch agreements and clinical study vendors. Costs incurred in obtainingtechnology licenses are charged immediately to research and development expenseif the technology licensed has not reached technological feasibility and has noalternative future uses.

***(e)***                       Stock-BasedCompensation

The Company follows Statement of Financial Accounting Standards (SFAS)No. 123 (revised 2004), *Share-Based Payment*(SFAS 123R) under which the Company recognizes compensation cost forawards to employees and nonemployee board members based on the grant-datefair value of stock-based awards over the period during which an awardholder is required to provide service in exchange for the award. Nocompensation cost is recognized for awards for which the award holder does notrender the requisite service.

***(f)***                         Net Loss perShare

Net loss per share is computed in accordance with SFAS No. 128, *Earnings per Share*, by dividing the net loss allocable tocommon stockholders by the weighted average number of shares of Common Stockoutstanding.

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As of March 31, 2007, the Company has outstanding certain optionsand warrants, which have not been used in the calculation of diluted net lossper share because, to do so would be anti-dilutive. As such, thenumerator and the denominator used in computing both basic and diluted net lossper share allocable to common stockholders are equal.

***(g)       Income Taxes***

In July 2006, theFinancial Accounting Standards Board issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes (FIN 48), which is applicable forfiscal years beginning after December 15, 2006. FIN 48 clarifies the accountingfor uncertainty in income taxes recognized in an enterprise’s financialstatements in accordance with SFAS No. 109, Accounting for Income Taxes.  FIN 48 prescribes a recognition threshold andmeasurement attribute for financial statement recognition and measurement of atax position reported or expected to be reported on a tax return. FIN 48 alsoprovides guidance on derecognition, classification, interest and penalties,accounting in interim periods, disclosure, and transition. We adopted theprovisions of FIN 48 on January 1, 2007. Upon adoption of FIN 48 and throughMarch 31, 2007, we determined that we had no liability for uncertain incometaxes as prescribed by FIN 48. Our policy is to recognize potential accruedinterest and penalties related to the liability for uncertain tax benefits, ifapplicable, in income tax expense.  Netoperating loss and credit carryforwards since inception remain open toexamination by taxing authorities, and will for a period post utilization. Wedo not anticipate any events during 2007 that would require the Company to recorda liability related to any uncertain income taxes.

**4**                Convertible Notes Payable

In May, June and October 2006, the Company entered into aconvertible debt financing agreement with certain of its existing investorswhich provided for $4,116,774 in funding. The Company issued 5% securedpromissory notes (the Promissory Notes) with principal amounts totaling$4,093,024 and warrants to purchase shares of a new series of preferred stockthat may be designated in the future in a Qualified Financing, as defined.  The Promissory Notes were due on the earliestto occur of: (i) demand by holders of a majority of the outstandingprincipal at any time after the one year anniversary of the initial Mayclosing; (ii) a Liquidation Event, as defined; and (iii) the two-yearanniversary of the initial May closing. In connection with the Merger, the Promissory Notes and accrued interestwere converted into 5,223,522 shares of Common Stock and warrants wereexercised resulting in the issuance of 2,033,175 shares of Common Stock.

In accordance with APB Opinion No. 14, *Accountingfor Convertible Debt and Debt Issued with Stock Purchase Warrants*,the Company allocated the proceeds from the financing between the PromissoryNotes and warrants based on their relative estimated fair values.  The relative fair value of the warrants of$1,228,565 was recorded against the carrying value of the Promissory Notes asan original issue discount (OID) which was being amortized as interest expenseover the one year anniversary of the initial May issuance date of thePromissory Notes until the closing of Merger. During the three months endedMarch 31, 2007, the Company recognized a noncash charge to interestexpense of $302,032 for the amortization of the OID.

In accordance with Emerging Issues Task Force (EITF) No. 00-27,*Application of Issue No. 98-5 to CertainConvertible Instruments*, and EITF No. 98-5, *Accounting for Convertible Securities with Beneficial ConversionFeatures or Contingently Adjustable Ratios*, after considering theallocation of the proceeds to the Promissory Notes, the Company determined thatthe Promissory Notes contained a contingent beneficial conversion feature(Contingent BCF). The Contingent BCF existed at the date of the issuance of thePromissory Notes due to the fact that the original carrying value of PromissoryNotes, after allocation of the proceeds, would be less than the purchase priceof the new series of preferred stock paid by investors in the new series. Inaccordance with EITF No. 98-5, the Contingent BCF of $1,228,565 wasrecognized as additional interest expense during the three months endedMarch 31, 2007 when the Promissory Notes were converted into shares of theCommon Stock.

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**5**                Stockholders’ Equity

***(a)***                                             Common Stock

The Company was party to a number of agreements that provided fordilution protection to certain investors. In connection with the Merger and closing of the Private Placement, theCompany issued approximately 2.0 million shares of Common Stock to a founderand shareholder of the Company pursuant to certain antidilutionprotection.  The Company recorded acharge of $1.6 million to research and development expenses, which representsthe fair value of these shares.

***(b)***                                             Warrants

As of March 31, 2007, theCompany had the following warrants to purchase Common Stock outstanding:
| Number of shares | ** ** | **Exercise price** | ** ** | **Expiration** | ** **     |
|----------------------------|------------|-------------------------|------------|----------------|----------------|
|                       |       |                    |       |           |           |
| 138,446                    |       | $                       | 0.15       |           | December  2007 |   |
|                       |       |                    |       |           |           |
| 53,038                     |       | $                       | 0.75       |           | December  2012 |   |
|                       |       |                    |       |           |           |
| 6,182,287                  |       | $                       | 1.35       |           | March  2010    |   |
|                       |       |                    |       |           |           |
| 1,977,602                  |       | $                       | 0.97       |           | March 2012     |   |

 

In connection with the April closing of thePrivate Placement, warrants to purchase an additional 4,015,051 shares at $1.35and 1,597,304 shares at $0.97 were issued.

***(c)******                                 ******Stock Option Plans***

In November 2003, theCompany adopted the 2003 Stock Incentive Plan, as amended (the 2003 Plan), thatauthorizes the Company to grant up to 6,523,790 shares of Common Stock toeligible employees, directors, and consultants to the Company in the form ofrestricted stock and stock options. The amount and terms of grants aredetermined by the board of directors. The term of the options may be up to10 years, and options are exercisable in cash or as otherwise determinedby the board of directors. Generally, options vest 25% upon the first anniversaryof the date of grant and ratably each month thereafter through the fourthanniversary of the date of grant.

On March 12, 2007, theCompany adopted the Redpoint Bio Corporation 2007 Omnibus Equity CompensationPlan (“2007 Plan”), which provides for the issuance of up to 13,511,562shares of Common Stock, subject to adjustment in certain circumstances. In connection with the adoption of the 2007 Plan, the 2003 Plan merged with andinto the 2007 Plan and no additional grants may be made thereafter under the2003 Plan.  Outstanding grants under the 2003 Plan will continue in effectin accordance with their terms as in effect before March 12, 2007 and theshares with respect to outstanding grants under the 2003 Plan will be issued ortransferred under the 2007 Plan.  The 2007 Plan is now the Company’s onlyplan in effect.

On April 20, 2007, theCompany approved an amendment to the 2007 Plan, which increased the maximumnumber of shares of Common Stock reserved for issuance under the 2007 Plan byan additional 4,132,705 shares from 13,511,562 to 17,644,267 shares of CommonStock.

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The following is a summaryof stock option activity under the Plan during the three months endedMarch 31, 2007:
|                                   | ** ** | **Number of** | ** ** | **average**             | ** ** | **contractual** | ** ** |
|-----------------------------------|------------|--------------------|------------|-------------------------|------------|-----------------|------------|
| ** **                        | ** ** | **shares**         | ** ** | **exercise price** | ** ** | **term**        | ** ** |
| Outstanding at  December 31, 2006 |       | 5,426,049          |       | $                       | 0.16       |            |       |   |
| Granted                           |       | 4,874,516          |       | 0.81                    |       |            |       |
| Forfeited                         |       | 1,105,690          |       | 0.60                    |       |            |       |
| Outstanding at March  31, 2007    |       | 9,194,875          |       | 0.45                    |       | 8.7 years       |       |
|                                   |            |                    |            |                         |            |                 |            |  |

 

All options granted todate have exercise prices equal to the estimated fair value of the underlying Common Stock on the date of grant as determined by theboard of directors. As of March 31, 2007, there were 4,316,687 shares of Common Stock available for grant under the 2007 Plan.

The per-shareweighted average fair value of the options granted during the three monthsended March 31, 2007 and 2006 was estimated at $0.53 and $0.28,respectively, on the date of grant using the Black-Scholes option-pricingmodel.

TheCompany recognized $109,009 and $10,237 of compensation expense pursuant toSFAS 123R for the three months ended March 31, 2007 and 2006,respectively. As of March 31, 2007, there was $2.1 million of unrecognizedcompensation expense related to unvested stock options, which is expected to berecognized over a weighted average period of 3.9 years.

***(d)******                                ******Registration Rights***

TheCompany intends to file a “resale” registration statement with the SEC coveringall shares of Common Stock issued in the Private Placement and in connectionwith the Merger, including shares of Common Stock into which any warrants areexercisable, no later than 60 days after the final closing of the PrivatePlacement. The Company will use its best efforts to have such “resale”registration statement declared effective by the SEC as soon as possible and,in any event, within 150 days after the final closing of the Private Placement,and to maintain its effectiveness until such time as all securities registeredunder the registration statement have been sold or are otherwise able to be soldunder Rule 144 of the Securities Act without regard to volume limitations,whichever is earlier.  If the “resale” registration statement is nottimely filed or timely declared effective by the SEC, a 1% penalty will beassessed until the registration statement is either filed or declaredeffective, capped at 12%.  The penalty will be payable monthly in eithercash or additional shares of Common Stock, as determined by the Company.

**6**                Research and DevelopmentCollaboration

On March 27, 2007,Redpoint entered into a Joint Research and Development and License Agreement(the “Agreement”) with Givaudan Schweiz AG, a Swiss company (“Givaudan”), forthe development and commercialization of compounds that enhance sweetness orsavory sensation, as well as compounds that block or desensitize bitter tastefor use in the food and beverage industry. Under terms of the Agreement, Redpoint will receive an upfront paymentof $1.3 million and research funding over the initial 3.5 year term of theAgreement, of up to $11.6 million. Redpoint will also be eligible to receive milestone payments of up to$2.5 million as well as royalty payments based on global sales of Givaudanproducts that contain flavor systems incorporating compound developed under thecollaboration.  As of March 31, 2007, theCompany has recorded a receivable and corresponding deferred revenue balancerelated to the upfront payment and $600,000 of research and development fundingthat the Company is contractually owed for the second quarter of 2007.  The upfront payment of $1.3 million will berecognized as revenue on a straight-line basis over the initial term of theAgreement.

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**ITEM 2.****                   ****MANAGEMENT’S DISCUSSION ANDANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

**Cautionary Note Regarding Forward-Looking Statements**

The Securities and Exchange Commission (the SEC) encourages companiesto disclose forward-looking information so that investors can better understanda company’s future prospects and make informed investment decisions.  Certain statements that we may make from timeto time, including, without limitation, statements contained in this QuarterlyReport on Form 10-Q, constitute “forward-looking statements” within the meaningof the Private Securities Litigation Reform Act of 1995.  These statements may be made directly in thisQuarterly Report, and they may also be made a part of this Quarterly Report byreference to other documents filed with the SEC, which is known as “incorporationby reference.”

Words such as “may,” “anticipate,” “estimate,” “expects,”“projects,” “intends,” “plans,” “believes” and words and terms of similarsubstance used in connection with any discussion of future operating orfinancial performance, identify forward-looking statements.  All forward-looking statements are management’spresent expectations of future events and are subject to a number of risks anduncertainties that could cause actual results to differ materially from thosedescribed in the forward-looking statements. These risks and uncertainties include, among other things:  our need for additional capital to fund thecurrent level of our research and development programs, our inability tofurther identify, develop and achieve commercial success for new products andtechnologies; the possibility of delays in the research and developmentnecessary to select drug development candidates and delays in clinical trials;the risk that clinical trials may not result in marketable products; the riskthat we may be unable to successfully finance and secure regulatory approval ofand market our drug candidates; our dependence upon food, ingredient andpharmaceutical and biotechnology collaborations; the levels and timing ofpayments under our collaborative agreement; uncertainties about our ability toobtain new corporate collaborations and acquire new technologies onsatisfactory terms, if at all; the development of competing diagnostic andtherapeutic products; our ability to protect our proprietary technologies;patent-infringement claims; risks of new, changing and competitive technologiesand regulations in the United States and internationally; and other factorsdiscussed under the heading Item 1A “Risk Factors” in this Quarterly Report onForm 10-Q.

In light of these assumptions, risks and uncertainties,the results and events discussed in the forward-looking statements contained inthis Quarterly Report or in any document incorporated by reference might notoccur.  You are cautioned not to placeundue reliance on forward-looking statements, which speak only as of the dateof this Quarterly Report or the date of the document incorporated by referencein this Quarterly Report.  We are notunder any obligation, and we expressly disclaim any obligation, to update oralter 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 statementsattributable to Robcor Properties, Inc. (Robcor), Robcor’s wholly-ownedsubsidiary, Redpoint Bio Corporation (Redpoint), or to any person authorized toact on our behalf are expressly qualified in their entirety by the cautionarystatements contained or referred to in this section.

**Introduction**

Robcor was organized on May6, 2005 as a Florida corporation to acquire all the interests of Robcor, LLC, aKentucky limited liability company, through an exchange of Robcor shares formember interests in Robcor, LLC.  ThroughRobcor, LLC, Robcor was engaged in the ownership and leasing of industrialbuildings.

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On May 9, 2006, Robcor’sstockholder, Michael Heitz entered into a Stock Purchase Agreement with HalterFinancial Investments, L.P., a Texas limited partnership, also referred toherein as HFI, pursuant to which Mr. Heitz sold 1,290,000 shares of Robcor’scommon stock, no par value, to HFI for a purchase price of $500,000.  Also on May 9, 2006, HFI, Mr. Heitz andRobcor entered into a Put Option Agreement providing that Mr. Heitz may requireHFI to purchase up to 50,000 shares of common stock of Robcor at a price pershare of $3.00 at any time during the period of time commencing January 2007and ending six months after Robcor’s completion of a transaction whereby Robcoracquires operating control, or substantially all of the assets, of a privatelyheld corporation generating revenues as reported in financial statementsaudited in conformity with accounting practices generally accepted in theUnited States.  In addition, under theterms of the agreement, Heitz was required to deliver to Robcor 1,150,000shares of common stock of Robcor in exchange for Robcor’s membership interestin Robcor, LLC simultaneous with the closing of a going public transaction.

On March 12, 2007, Robcorentered into the Agreement and Plan of Merger, by and among Redpoint, on theone hand, and Robcor, Robcor Acquisition Corp., a Delaware corporation andwholly-owned subsidiary of Robcor (Merger Sub), Robcor, LLC, a Kentucky limitedliability company and wholly-owned subsidiary of Robcor (Robcor, LLC) andHalter Financial Investments, L.P., a Texas limited partnership, and MichaelHeitz, as stockholders of Robcor, on the other hand, which we refer to as theReverse Merger Agreement.  Thetransactions contemplated by the Reverse Merger Agreement (the Closing) wereconsummated on March 12, 2007 (the Closing Date).

Pursuant to the ReverseMerger Agreement, on the Closing Date, Merger Sub merged with and intoRedpoint, which we refer to as the Reverse Merger, with Redpoint being thesurviving corporation and becoming a wholly-owned subsidiary of Robcor, and theoutstanding shares of capital stock, convertible notes and certain warrants topurchase capital stock of Redpoint were converted into an aggregate of35,073,259 shares of common stock of Robcor in accordance with the DelawareGeneral Corporation Law, or DGCL, on the terms and conditions as set forth inthe Reverse Merger Agreement.

Additionally, on the ClosingDate, Robcor cancelled and extinguished 1,150,000 shares of common stock ofRobcor held by its stockholder Michael Heitz in exchange for the transfer toMr. Heitz, simultaneous with the Closing, of Robcor’s membership interest inRobcor, LLC held prior to the Closing Date. This summary of the Reverse Merger is qualified in its entirety byreference to the actual agreement, a copy of which was filed as an exhibit toRobcor’s Current Report on Form 8-K, filed with the SEC, on March 13, 2007.

Contemporaneously with theReverse Merger, Redpoint and Robcor completed the first closing of a privateplacement, which we refer to as the Private Placement, of an aggregate of24,729,060 shares of common stock of Robcor at a price of $0.81 per share,together with three-year warrants to buy 25% of the number of shares of commonstock of Robcor purchased at a cash exercise price of $1.35 per share (theInvestor Warrants), raising approximately $20.0 million of gross proceeds.  On April 6, 2007, Redpoint and Robcorcompleted the second and final closing of the Private Placement of an aggregateof 16,084,347 shares of common stock of Robcor at a price of $0.81 per share,together with Investor Warrants,raising an additional $13 million of gross proceeds, bringing the totalPrivate Placement gross proceeds to $33 million.  Upon the completion of the final closing ofthe Private Placement, Robcor had a total of 78,668,675 shares of common stockof Robcor issued and outstanding, and the former stockholders of Redpoint andthe investors in the Private Placement hold in the aggregate approximately98.2% of such outstanding shares of common stock of Robcor.  The consummation of the transactionscontemplated by the Reverse Merger Agreement resulted in a change of control ofRobcor.

Following the Reverse Mergeron March 12, 2007 in which Redpoint became our wholly-owned operatingsubsidiary, the business of Redpoint constitutes all of our operations.  Redpoint was deemed to have been theaccounting acquirer in the Reverse Merger. Accordingly, the financial statements of the

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Company presented in Item 1 “Financial Statements”reflect the historical results of Redpoint prior to the Reverse Merger, and ofthe combined entities following the Reverse Merger, and do not include thehistorical financial results of Robcor prior to the consummation of the ReverseMerger.  Stockholders’ equity (deficit)has been retroactively restated as of December 31, 2006 to reflect the capitalstructure of Robcor after giving effect to the Reverse Merger.

This discussion and analysisshould be read in conjunction with the financial statements and notes, andother financial information included in this report and the financialstatements of Redpoint included in our Form 8-K dated March 16, 2007.  With respect to this discussion, the terms “Redpoint,”the “Company,” “we,” “us,” and “our” refer to Redpoint Bio Corporation.

**Overview**

Redpoint is a developmentstage biotechnology company focused on discovering, developing, andcommercializing ingredients that improve the taste of medicines and consumerhealth care products and enhance the nutritional value of foods andbeverages.  We use our technology to discoverand develop products for partners and for our own pipeline.

Since its inception in 1995,Redpoint has incurred losses and negative cash flows from operations, and suchlosses have continued subsequent to March 31, 2007.  As of March 31, 2007,Redpoint had an accumulated deficit of $27.6 million and anticipates incurringadditional losses for at least the next several years.  We expect to spendsignificant resources over the next several years to enhance our technologiesand to fund research and development of our pipeline of potential products. Through March 31, 2007, substantially all of our revenue has been derived fromcorporate collaborations, license agreements, and government grants.  Inorder to achieve profitability, we must continue to develop products andtechnologies that can be commercialized by us or through existing and futurecollaborations.

On March 12, 2007, wecompleted the first closing of our private placement of shares of common stockand warrants to purchase shares of common stock raising approximately $17.2million of net proceeds.  On April 6,2007, we completed the final closing of the private placement raising anadditional $11.2 million of net proceeds, bringing the total private placementnet proceeds to $28.4 million.

OnMarch 27, 2007, we entered into a Joint Research and Development and LicenseAgreement, which we refer to as the Givaudan Agreement, with Givaudan SchweizAG, a Swiss company (Givaudan), for the development and commercialization ofcompounds that enhance sweetness or savory sensation (Enhancer Compounds), aswell as compounds that block or desensitize bitter taste (Bitter BlockerCompounds) for use in the food and beverage industry, which we refer to as theField.  Under the Givaudan Agreement, Redpoint and Givaudan willcollaborate exclusively with each other to discover and develop EnhancerCompounds and Bitter Blocker Compounds that act primarily through themodulation of the TRPM5 channel (Collaboration Compounds) pursuant to theresearch plan and the development plan, respectively.  In consideration ofour agreement to conduct research and develop Collaboration Compounds and grantexclusive licenses and other rights to Givaudan pursuant to the terms andconditions of the Givaudan Agreement, Givaudan agreed to pay us an upfronttechnology fee in the amount of $1.3 million and provide research funding to usover the initial 3.5 year term of the Givaudan Agreement of up to $11.6million.  Givaudan will also reimburse us for costs incurred by Redpointin connection with obtaining certain regulatory approvals.  In addition,Givaudan also agreed to pay us milestone payments of up to $2.5 million uponthe achievement of specified development and commercialization events set forthin the Givaudan Agreement.  Givaudan will make royalty payments to us, includingan annual minimum royalty and royalty payments based on net sales of Givaudanproducts that contain the Collaboration Compounds for use in the Field. We will make certain limited payments to Givaudan relating to the use of theCollaboration Compounds outside the Field.

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Our discovery programscapitalize on advances in taste science and our know-how to create newproducts.  We believe these products may have the potential to makeprocessed foods and beverages healthier and enhance the acceptability, safetyand efficacy of many types of pharmaceutical products.  We have developedan integrated discovery platform and identified prototype compounds for bothenhancement of sweet and savory taste and blocking bitter taste.  Toleverage our technology in the food and beverage markets, in addition to ourexisting agreement with Givaudan, we intend to partner with other majoringredient suppliers, or food and beverage companies, to develop andcommercialize taste enhancers through strategic collaborations and licensingagreements.  In addition, we plan to use our technology to discoveraversive taste blockers, principally to develop a pipeline of proprietarytaste-modified pharmaceutical products.  We may develop such productsourselves or partner with pharmaceutical companies who are seeking to extendthe patent life or enhance the performance of their products.  We haveidentified several categories of products where patient acceptability, or thepotential for novel formulation options, are currently limited due to theintense bitter or other aversive taste of the active pharmaceutical ingredient(API).  We plan to incorporate the proprietary bitter taste or aversivetaste blockers found through our discovery programs with drugs of proven safetyand efficacy to create novel, valued-added formulations.  We have not yetdeveloped any products that are commercially available.

Our research and developmentefforts are currently focused upon the identification of two novel compoundsfor taste modification.  We are working to identify a compound that can beused to enhance the taste of both sweet and savory flavors in a wide variety offood and beverage applications.  Additionally, we are working to identifya compound that could act as a universal bitter taste blocker for use both inour pharmaceutical product pipeline and for collaborative formulationdevelopment programs with major pharmaceutical companies.  We intend todesign our compounds to be safe and effective in minute quantities, and to beable to incorporate them into food and pharmaceutical products through the GRAS(Generally Recognized as Safe) determination/notification process. Although the GRAS process involves extensive testing to insure safety in use,the overall time required (estimated to be 18-24 months) and development costsincurred (estimated to be $1-2 million per compound) are modest compared to thesize of the accessible markets.  Moreover, a single GRAS-determined tasteenhancer can potentially be used in a wide range of food applications.  Inaddition, a GRAS determination is heavily relied upon by the Food and DrugAdministration (FDA) to evaluate the safety and inclusion of flavor modifiersinto pharmaceutical products.  A single aversive taste blocker canpotentially be used to create a multitude of new drug formulations that in manycases may be patentable in their own right.  New drug product or productvariations will require FDA approval through the new drug approval, or NDA,process.  We believe there may be additional potential applications forour technology for the modification of aversive taste sensations in foodproducts, as well as potential for discovering novel compounds for otherpharmaceutical applications.

**Revenue**

To date, our revenue hascome solely from corporate collaborations, licensing agreements and governmentgrants.  Since our inception, we have undertaken research projects forwhich we were the recipient of several Small Business Innovative Research, orSBIR, Awards. The SBIR Awards were sponsored by the National Institutes ofHealth. The last SBIR related research project was completed in 2004.

To leverage our technologyin the food and beverage markets, in March 2007, we entered into the GivaudanAgreement where we are collaborating exclusively with each other to discoverand develop Enhancer Compounds and Bitter Blocker Compounds that act primarilythrough the modulation of the TRPM5 channel. We also intend to partner with other major ingredient suppliers, or foodand beverage companies, to develop and commercialize taste enhancers that actthrough a variety of other newly discovered mechanisms of taste sensation inexchange for technology access fees, research funding, product developmentmilestones, and product royalties.

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In addition to developingour own pharmaceutical formulations, we plan to form agreements withpharmaceutical companies to develop and market liquid and innovativepharmaceutical formulations in exchange for technology access fees, researchfunding, product development milestones and product royalties. We haveidentified a broad selection of potential products for development, includingboth liquid formulations and innovative formulations that we believe would beattractive licensing candidates.  In general, our strategy involves thedevelopment of a prototype formulation demonstrating the effectiveness of ourtechnology by combining the target API with our GRAS-approved bitter or otheraversive taste blocker.  Some products could incorporate third-party APIsthat could constitute line extensions to be marketed to the API patentholder.  Additional prototype products could be developed with eithersoon-to-be or patent-expired APIs.  These products could either belicensed to the original patent holder to create a line extension, or to a genericscompany wishing to market a differentiated or branded generic product.

Any failure to maintain orestablish licensing or collaboration arrangements on favorable terms couldadversely affect our business prospects, financial condition or ability todevelop and commercialize our product candidates.

**Research and Development**

Our research and developmentexpense consist primarily of internal costs associated with our bitter blockerand taste enhancer research programs as well as amounts paid to third partiesto conduct research on our behalf.  Our internal research and developmentcosts are comprised of salaries and related benefits, facilities anddepreciation on laboratory equipment, compound acquisition costs and researchsupplies.  We charge research and development costs to operations asincurred.

**General and Administrative**

Our general andadministrative expenses consist primarily of salaries and related benefitexpenses for business development, financial, legal and other administrativefunctions.  In addition, we incur external costs for professional fees forlegal, patent and accounting services.  We expect that our general andadministrative expenses, both internal and external, will increase as we arenow a public company.

**Results of Operations**

**Threemonths ended March 31, 2007 compared to March 31, 2006**

*Researchand Grant Revenue*. We recorded revenue of $41,000 during the three months ended March 31, 2007from the commencement of the Givaudan Agreement, which began on March 27, 2007,for the development and commercialization of compounds that enhance sweetnessor savory sensation as well as compounds that block or desensitize bitter tastefor use in the food and beverage industry.  During the three months endedMarch 31, 2006 we did not generate any research and grant revenue, as wefocused our efforts on advancing our technologies and did not enter into anydiscovery collaborations.

*Researchand Development Expenses.*  Our research and development expenses were $2.6 million for thethree months ended March 31, 2007 compared to $0.9 million for the three monthsended March 31, 2006.  The increase was primarily attributable to a $1.6million non-cash charge in connection with the issuance of approximately 2.0million shares of our common stock related to anti-dilution protection for Dr.Margolskee, the Company’s founder. Dr. Margolskee’s anti-dilution protection terminated uponcompletion of the private placement on April 6, 2007.  We anticipate that research and developmentexpenses will increase as we advance our research and development programscovering our bitter blocker and taste enhancer programs.

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*Generaland Administrative Expenses.* Our general and administrative expenses were $0.9 million for thethree months ended March 31, 2007 compared to $0.7 million for the three monthsended March 31, 2006.  The increase of $0.2 million was primarily relatedto a separation agreement that we entered into with a former officer.  We anticipate that general and administrativeexpenses will increase as we begin to incur costs relating to our operations asa public company and increase our investment in business development requiredto support our research and development efforts.

*InterestExpense. *Interestexpense was $1.6 million for the three months ended March 31, 2007 compared to$42,000 for the three months ended March 31, 2006.  In May 2006, weentered into a convertible debt financing agreement with certain of ourinvestors, which provided for $4.1 million in funding.  In addition to theissuance of 5% secured promissory notes, our investors received warrants topurchase additional shares of our stock.  We allocated the proceeds fromthe financing between the notes and the warrants based on their relative fairvalues.  The fair value of the warrants were recorded against the carryingvalue of the notes as an original issue discount (OID) which was beingamortized as interest expense over a one-year period from the original issuancedate of the notes.  During the threemonths ended March 31, 2007, we recognized a non-cash charge to interestexpense of $0.3 million for the amortization of the OID, which was fullyexpensed upon the completion of the first closing of our private placement whenthe promissory notes were converted to common stock.  Furthermore, in accordance with EmergingIssues Task Force (EITF) No. 00-27, *Applicationof Issue No. 98-5 to Certain Convertible Instruments*, and EITFNo. 98-5, *Accounting for ConvertibleSecurities with Beneficial Conversion Features or Contingently AdjustableRatios*, after considering the allocation of the proceeds to thepromissory notes, the Company determined that the promissory notes contained acontingent beneficial conversion feature (Contingent BCF). The Contingent BCFexisted at the date of the issuance of the promissory notes due to the factthat the original carrying value of promissory notes, after allocation of theproceeds, would be less than the purchase price of the new series of stock paidby investors in the new series.  Inaccordance with EITF No. 98-5, the Contingent BCF of $1.2 million wasrecognized as additional non-cash interest expense when the promissory noteswere converted into shares of common stock.

During 2005, we borrowed$2.0 million to finance the purchase of laboratory and office equipment at interestrates ranging between 9.4% and 10.4%. Interest expense on these borrowings was $28,000 and $40,000 for thethree months ended March 31, 2007 and 2006, respectively.

**Liquidity and Capital Resources**

At March 31, 2007, we hadcash and cash equivalents of $16.7 million and working capital of $15.4million.  Since inception, we have used$16.7 million of cash to fund our operating activities and $1.9 million forcapital expenditures.  Through March 31, 2007, we have fundedsubstantially all of our operations and capital expenditures through privateplacements of equity and convertible debt securities totaling $34.0 million,cash received from corporate collaborations totaling $2.4 million, governmentgrants totaling $1.8 million, and capital equipment financing totaling $2.1million.

On March 12, 2007, wecompleted the first closing of our private placement of shares of common stockand warrants to purchase shares of common stock raising approximately $17.2million of net proceeds.  On April 6, 2007we completed the final closing of our private placement raising an additional$11.2 million of net proceeds, bringing the total private placement netproceeds to $28.4 million.  On March 27,2007, we entered into the Givaudan Agreement for the development and commercializationof compounds that enhance sweetness or savory sensation as well as compoundsthat block or desensitize bitter taste for use in the food and beverageindustry.  Pursuant to the GivaudanAgreement, Givaudan agreed to pay us an upfront technology fee in the amount of$1.3 million and provide research funding to us over the initial 3.5 year termof the Givaudan Agreement of up to $11.6 million.  We believe that the net proceeds ofapproximately $28.4 million received from the private placement, and thefunding we are

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receiving from Givaudan, should be sufficient tomeet our operating and capital requirements at least through December 2008.

We expect that substantiallyall of our revenue for the foreseeable future will come from corporate collaborations,license agreements and interest earned on the proceeds from our sales ofsecurities.  In the next nine months (through December 31, 2007), weexpect to recognize $2.1 million as revenue from the Givaudan Agreement, whichincludes $0.3 million of the upfront technology fee which is being recognizedas revenue over the related performance period and $1.8 million pursuant toresearch funding.  We are subject tothose risks associated with any biotechnology company that has substantialexpenditures for research and development.  There can be no assurance thatour research and development projects will be successful, that productsdeveloped will obtain necessary regulatory approval, or that any approvedproduct will be commercially viable.  In addition, we operate in anenvironment of rapid technological change and we are largely dependent on theservices of our employees and consultants.  For us to fund our operationsand to commercially develop our products, additional equity and/or debtfinancing will be required.  There is no assurance that such financingwill be available to us as needed.

**Summary of Contractual Obligations**

The following tablesummarizes our obligations to make future payments under our currentcontractual obligations as of March 31, 2007:
| ** **       | ** ** | **Payments Due by Period** | ** ** |
|------------------|------------|-------------------------------------------|------------|
| ** **       | ** ** | **Total**                                 | ** ** | **Less than 1  year** | ** ** | **1-3 years** | ** ** | **4-5 years** | ** ** | **After 5 years** | ** ** |
| Operating leases |       | $                                         | 138,000    |   | $ | 138,000 |   | — |   | — |   | — |   |
| Long-term debt   |       | 1,071,000                                 |       | 574,000 |   | $ | 497,000 |   | — |   | — |   |
| License payments |       | 325,000                                   |       | 25,000 |   | 75,000 |   | $ | 50,000 |   | $ | 175,000 |   |
|             |       | $                                         | 1,534,000  |   | $ | 737,000 |   | $ | 572,000 |   | $ | 50,000 |   | $ | 175,000 |   |

 

In November 2005, we enteredinto a new 10 year lease agreement for space we intend to begin to occupyduring May 2007.  The term of the lease commences on the date the space isready for occupancy, as defined in the lease agreement.  The initialannual base rent is $0.3 million, subject to annual 2% increases.  Thelandlord has also agreed to finance, at interest rates ranging between 11% and12%, up to $3.3 million of leasehold improvements that we would pay for asadditional rent over the term of the lease.

**Critical Accounting Policies**

Our discussion and analysisof our financial condition and results of operations are based on our financialstatements, which have been prepared in accordance with U.S. generally acceptedaccounting principles, or GAAP. The preparation of these financial statementsrequires us to make estimates and judgments that affect the reported amounts ofassets, liabilities, the disclosure of contingent assets and liabilities at thedate of the financial statements, and reported amount of revenue and expensesduring the reporting period. On an ongoing basis, we evaluate our judgments andestimates, including those related to revenue recognition, long-lived assets, accruedliabilities, share-based payments and income taxes. We base our judgment andestimates on historical experience and various other factors that we believe tobe reasonable under the circumstances, the results of which form the basisfor making judgments about the carrying values of assets and liabilities.Actual results may differ from these estimates under different assumptionsor conditions.

While our significantaccounting policies are described in more detail in Note 3 to our financialstatements, we believe the following accounting policies to be critical to thejudgments and estimates used in the preparation of our financial statements:

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***Revenue Recognition***

Revenue from corporatecollaborations and licensing agreements consist of up-front fees, research anddevelopment funding, and milestone payments.  Nonrefundable up-front feesare deferred and recognized as revenue over the related performanceperiod.  We estimate the performance period based on the specific terms ofeach collaborative agreement, but the actual performance may vary.  Weadjust the performance periods based on available facts andcircumstances.  Revenue from research and development agreements andgovernment grants is recognized pursuant to the related agreements as work isperformed and related costs are incurred.  Revenue resulting from theachievement of substantive milestone events as defined in the agreements isrecognized when the milestone is achieved.

***Stock-Based Compensation***

We follow SFAS No. 123(revised 2004), Share-Based Payment (SFAS 123R) under which we recognizecompensation cost for awards to employees and non-employee board members basedon the grant-date fair value of stock-based awards over the period during whichan award holder is required to provide service in exchange for the award. No compensation is recognized for awards for which the award holder does nottender the requisite service.  At March31, 2007, total unrecognized compensation expense related to non-vested stockoptions granted prior to that date was $2.1 million, which is expected to berecognized over a weighted average period of 3.9 years.

Prior to 2006, we appliedthe intrinsic-value-based method of accounting prescribed by AccountingPrinciples Board (APB) Opinion No. 25, Accounting for Stock Issued toEmployees, and related interpretations, to account for fixed-plan stock optionsgranted to employees and directors.  Under APB Opinion No. 25, we did notrecord compensation expense for stock options since the current fair value ofthe underlying stock equaled the exercise price of the options.

In estimating the fair valueof stock options, we use the Black-Scholes option-pricing model which requiresus to make estimates about certain inputs regarding the volatility of ourcommon stock and the expected term of our options.  Until there issignificant public trading activity in our common stock, we will use theaverage historical volatility of a group of pubic company peers.  Inaddition, we have used the “simplified” method as described in SEC StaffAccounting Bulletin No. 108 to determine the expected life of our options.

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### **ITEM 3.     QUANTITATIVE ANDQUALITATIVE DISCLOSURES ABOUT MARKET RISK**

Ourcarrying values of cash and cash equivalents, accounts receivable, accountspayable, accrued expenses and debt are a reasonable approximation of their fairvalue.  The estimated fair values offinancial instruments have been determined by us using available marketinformation and appropriate valuation methodologies.

Wehave not entered into and do not expect to enter into, financial instrumentsfor trading or hedging purposes.  We donot currently anticipate entering into interest rate swaps and/or similarinstruments.  Our primary market riskexposure with regard to financial instruments is to changes in interest rates,which would impact interest income earned on such instruments.  We have no material currency exchange orinterest rate risk exposure as of March 31, 2007.  Therefore, there will be no ongoing exposureto a potential material adverse effect on our business, financial condition orresults of operation for sensitivity to changes in interest rates or to changesin currency exchange rates.

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**ITEM4T.     CONTROLS AND PROCEDURES**

(a)                                  *Disclosure Controls andProcedures:* We maintain controls and procedures designedto ensure that we are able to collect the information we are required todisclose in the reports we file with the SEC, and to record, process, summarizeand disclose this information within the time periods specified in the rulespromulgated by the SEC.  Our ChiefExecutive and Chief Financial Officers are responsible for establishing andmaintaining these disclosure controls and procedures (as defined in Rules13a-15(e) and 15d-15(e) under Exchange Act) and, as required by the rules ofthe SEC, to evaluate their effectiveness. Based on their evaluation of our disclosure controls and procedures as of the end of the period covered by thisQuarterly Report on Form 10-Q, our Chief Executive and Chief Financial Officersbelieve that these procedures are effective to ensure that we are able tocollect, process and disclose the information we are required to disclose inthe reports we file with the SEC within the required time periods.

(b)                                *Changes in InternalControls.*  Therewere no significant changes in our internal control over financial reporting(as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act),identified in connection with the evaluation of such internal control thatoccurred during our last fiscal quarter, that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

We are not currently required to comply withSection 404 (Management’s Annual Report on Internal Control Over FinancialReporting) of the Sarbanes-Oxley Act of 2002 because we are not an “acceleratedfiler,” as defined by Rule 12b-2 under the Exchange Act.  We will be required to comply with Section404 for the first time, and will be required to provide a management report oninternal control over financial reporting, in connection with our Annual Reporton Form 10-K for the year ending December 31, 2007.  In addition, we will be required to provideboth a management report and an independent registered public accounting firmattestation report on internal controls in connection with our Annual Report onForm 10-K for the year ending December 31, 2008.  While we are not yet required to comply withSection 404 for this reporting period, we are preparing for future compliancewith Section 404 by strengthening, assessing and testing our system of internalcontrols to provide the basis for our report.

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**PARTII.  OTHER INFORMATION**

**ITEM 1.    LEGAL PROCEEDINGS**

The Company’s management knows of no material existing or pending legalproceedings or claims against the Company, nor is the Company involved as aplaintiff in any material proceeding or pending litigation.  To the Company’s knowledge, no director,officer or affiliate of the Company, and no owner of record or beneficial ownerof more than five percent (5%) of the Company’s securities, or any associate ofany such director, officer or security holder is a party adverse to the Companyor any of its subsidiaries or has a material interest adverse to the Company orany of its subsidiaries in reference to pending litigation.

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**ITEM 1A.    RISK FACTORS**

**Risks Related To Our Business and Our Industry**

***Redpoint is a development-stagecompany.  We have incurred losses sinceinception and expect to incur significant net losses in the foreseeable futureand may never become profitable.***

Since our inception we have incurred significant losses and negativecash flows from operations.  As of March31, 2007, we had an accumulated deficit of $27.6 million, and anticipateincurring additional losses for at least the next several years.  We expect to spend significant resources overthe next several years to enhance our technologies and to fund research anddevelopment of our pipeline of potential products.  We have not generated significant revenues inany particular year since our inception. To date, substantially all of our revenue has been derived fromcorporate collaborations, license agreements, and government grants.  In order to achieve profitability, we mustdevelop products and technologies that can be commercialized by us or throughfuture collaborations.  Our ability togenerate revenues and become profitable will depend on our ability, alone orwith potential collaborators, to timely, efficiently and successfully completethe development of our product candidates, which may include****conducting pre-clinical and clinical tests, obtainingnecessary regulatory approvals, and manufacturing and marketing our productcandidates.  There can be no assurancethat any such events will occur or that we will ever become profitable.  Even if we do achieve profitability, wecannot predict the level of such profitability. If we sustain losses over an extended period of time, we may be unableto continue our business.

***We will needsubstantial additional funding to develop our products and for our futureoperations.  If we******are unableto obtain the funds necessary to do so, we may be required to delay, scale backor eliminate our product development or may be unable to continue our business.***

The development of our product candidates will require a commitment ofsubstantial funds to conduct the costly and time-consuming research, which mayinclude****pre-clinical and clinical testing,necessary to obtain regulatory approvals****and bring ourproducts to market.  We believe ourcurrent capital resources will satisfy our planned capital needs throughDecember 2008, but our activities will be limited.  Our future capital requirements will dependon many factors, including:

·                                          the progress of our research and developmentprograms, including our ability to discover and develop taste enhancers andaversive taste blockers;

·                                          our ability, or our partners’ ability andwillingness, to formulate these taste enhancers and aversive taste blockersinto food, beverage and pharmaceutical products;

·                                          the cost of prosecuting, defending andenforcing patent claims and other intellectual property rights;

·                                          the progress, scope and results of ourpre-clinical and clinical testing of any future pharmaceutical products;

·                                          the time and cost involved in obtainingregulatory approvals;

·                                          the cost of manufacturing our productcandidates;

·                                          competing technological and marketdevelopments; and

·                                          our ability to establish and maintaincollaborative and other arrangements with third parties to assist in bringingour products to market and the cost of such arrangements.

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There can be no assurance that we will not need additional capitalsooner than currently anticipated.

We will need to raise substantial additional capital to fund our futureoperations.  We cannot be certain thatadditional financing will be available on acceptable terms, or at all.  In recent years, it has been difficult forcompanies to raise capital due to a variety of factors, which may or may notcontinue.  To the extent we raiseadditional capital through the sale of equity securities, the ownershipposition of our existing stockholders could be substantially diluted.  If additional funds are raised through theissuance of preferred stock or debt securities, these securities are likely tohave rights, preferences and privileges senior to our common stock.  Fluctuating interest rates could alsoincrease the costs of any debt financing we may obtain.

Failure to successfully address ongoing liquidity requirements willhave a material adverse effect on our business. If we are unable to obtain additional capital on acceptable terms whenneeded, we may be required to take actions that harm our business and ourability to achieve cash flow in the future, including possibly the surrender ofour rights to some technologies or product opportunities, delaying our clinicaltrials or curtailing or ceasing operations.

***We are an earlystage company and currently have no products available for sale, license oruse.  Our product candidates requireadditional research, development, testing, expert reviews and/or and regulatoryapprovals before marketing.  We may beunable to develop, obtain regulatory approval or market any of our productcandidates.  If our product candidatesare delayed or fail, our financial condition will be negatively affected, andwe may have to curtail or cease our operations.***

We are in the early stage of product development and we are dependenton new discoveries.  We currently do notsell or license any products to third parties and do not expect to have anyproducts commercially available for several years, if at all.  You must evaluate us in light of theuncertainties and complexities affecting an early stage biotechnology company.Our product candidates require additional research and development,pre-clinical testing, clinical testing (for our pharmaceutical products) andregulatory review and/or approvals clearances before marketing. There are manyreasons that our product candidates may fail or not advance tocommercialization, including the possibility that:

·                                          our product candidates may be ineffective,unsafe or associated with unacceptable side effects;

·                                          our product candidates may fail to receivethe necessary regulatory approvals or otherwise fail to meet applicableregulatory standards;

·                                          experts may not agree that our food productcandidates are generally recognized as safe;

·                                          our product candidates may be too expensiveto develop, manufacture or market;

·                                          other parties may hold or acquire proprietaryrights that could prevent us or our potential collaborators from developing ormarketing our product candidates;

·                                          physicians, patients, third-party payers orthe medical community in general may not accept or use our contemplatedpharmaceutical products;

·                                          our potential collaborators may withdrawsupport for or otherwise impair the development and commercialization of ourproduct candidates; or

·                                          others may develop equivalent or superiorproducts.

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In addition, we may not succeed in developing taste enhancers andaversive taste blockers with the appropriate attributes required for use insuccessful commercial products. Successful taste enhancers and aversive tasteblockers require, among other things, appropriate biological activity,including the correct taste enhancer and aversive taste blocker properties forthe product application, an acceptable safety profile, including lack oftoxicity or allergenicity, and appropriate physical or chemical properties,including relative levels of stability, volatility and resistance to heat.Successful taste enhancers and aversive taste blockers must also becost-efficient. We may not be able to develop taste enhancers and aversivetaste blockers that meet these criteria.

If our product candidates are delayed or we fail to successfullydevelop and commercialize our product candidates, our financial condition maybe negatively affected, and we may have to curtail or cease our operations.

***We may notsuccessfully establish and maintain collaborative and licensing arrangements,which could adversely affect our ability to develop and commercialize ourproduct candidates.***

A key element of our food and beverage strategy is to commercialize ourtaste enhancers through product discovery and development collaborations withmajor ingredient suppliers and/or end users. Our pharmaceutical strategy includes developing our own taste-improveddrug formulations as well as establishing collaborations and licensingagreements with major pharmaceutical, over-the-counter and generic companies,such as the Givaudan Agreement.  We maynot be able to maintain or expand these licenses and collaborations orestablish additional licensing and collaboration arrangements necessary todevelop and commercialize our product candidates.  Even if we are able to maintain or establishlicensing or collaboration arrangements, these arrangements may not be onfavorable terms and may contain provisions that will restrict our ability todevelop, test and market our product candidates.  Any failure to maintain or establishlicensing or collaboration arrangements on favorable terms could adverselyaffect our business prospects, financial condition or ability to develop andcommercialize our product candidates.

We expect to rely at least in part on third party collaborators toperform a number of activities relating to the development andcommercialization of our product candidates, including the manufacturing ofproduct materials, the design and conduct of clinical trials for ourpharmaceutical formulations, and potentially the obtaining of regulatoryapprovals and marketing and distribution of any successfully developedproducts.  Our collaborative partners mayalso have or acquire rights to control aspects of our product development andclinical programs.  As a result, we maynot be able to conduct these programs in the manner or on the time schedule wecurrently contemplate. In addition, if any of these collaborative partnerswithdraw support for our programs or product candidates or otherwise impairtheir development, our business could be negatively affected.  To the extent we undertake any of theseactivities internally, our expenses may increase.

In addition, our success depends on the performance of ourcollaborators of their responsibilities under these arrangements.  Some potential collaborators may not performtheir obligations in a timely fashion or in a manner satisfactory to us. ** **Because such agreementsmay be exclusive, we may not be able to enter into a collaboration agreementwith any other company covering the same product field during the applicablecollaborative period.  In addition, ourcollaborators’ competitors may not wish to do business with us at all due toour relationship with our collaborators. If we are unable to enter into additional product discovery anddevelopment collaborations, our ability to sustain or expand our business willbe significantly diminished.

***If we or ourcollaborators are unable to obtain and maintain the GRAS determination orregulatory approval required before any taste enhancers or aversive tasteblockers can be incorporated into products that are sold, we would be unable tocommercialize our taste enhancers and aversive taste blockers and our businesswould be adversely affected.***

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In the United States, the development, sale and incorporation of ourtaste enhancers and aversive taste blockers into products are subject toregulation by the FDA, and in some instances, other government bodies.  Obtaining and maintaining a GRASdetermination or regulatory approval is typically costly and can take manyyears.

Depending on the amount or intended use of a particular taste enhanceror aversive taste blocker added to a product and the number of productcategories in which the flavor or flavor enhancer will be incorporated,specific testing, safety assessment protocols, and regulatory processes must besatisfied before we or our collaborators can commercially market and sell productscontaining any taste enhancers and aversive taste blockers that we maydiscover.  A key element of our strategyis to develop flavors and flavor enhancers that will be evaluated by the FEMA(Flavor and Extracts Manufacturers Association) GRAS Panel, which we expectwill take 18 to 24 months and which is less expensive than the alternative offiling a food additive petition with the FDA, which can take eight years ormore.  The FEMA GRAS review process maytake longer than 24 months and cost more than we currently anticipate ifadditional safety studies are requested by the FEMA GRAS Panel or are necessaryto explain unexpected safety study findings. There is a risk that one or more of our product candidates may notqualify for a FEMA GRAS determination. This may occur for a variety of reasons, including the taste enhancer’sor aversive taste blocker’s intended use, the amount of the taste enhancer oraversive taste blocker intended to be added to packaged foods and beverages,the number of product categories in which the taste enhancers or aversive tasteblockers will be incorporated, whether the taste enhancer imparts sweetness,the safety profile of the taste enhancers or aversive taste blockers and theFEMA GRAS Panel’s interpretation of the safety data.  Even if we obtain a GRAS determination withrespect to a taste enhancer or aversive taste blocker, the FDA has the abilityto challenge such determination, which could materially adversely affect ourability to market products on schedule or at all.  In the event that a particular taste enhanceror aversive taste blocker does not qualify for a FEMA GRAS determination, wemay be required to pursue a lengthy FDA approval process to reach the U.S.market, or dedicate our development efforts to alternative compounds, whichwould further delay commercialization. In addition, laws, regulations or FDA practice governing the regulatoryapproval process, the availability of the GRAS determination process or themanufacture or labeling of such products, may change in a manner that couldadversely affect our ability to commercialize products on schedule or at all.

Sales of our taste enhancers and aversive taste blockers outside of theUnited States will be subject to foreign regulatory requirements.  In most cases, whether or not a GRASdetermination or FDA approval has been obtained, approval of a product by thecomparable regulatory authorities of foreign countries must still be obtainedprior to manufacturing or marketing the product in those countries.  A GRAS determination or FDA approval in theUnited States or in any other jurisdiction does not ensure approval in otherjurisdictions because the requirements from jurisdiction to jurisdiction mayvary widely.  Obtaining foreign approvalscould result in significant delays, difficulties and costs for us and requireadditional safety studies and additional expenses. If we fail to comply withthese regulatory requirements or to obtain and maintain required approvals, ourability to generate revenue will be diminished.

We and our collaborators may not be successful in overcoming theseregulatory hurdles, which could result in product launch delays, unanticipatedexpenses, termination of collaborations, and flavors and flavor enhancers notbeing approved for incorporation into consumer products.  These consequences would have a materialadverse effect on our business financial condition and results of operations.

***Even if we orour collaborators receive a GRAS determination or regulatory approval andincorporate our taste enhancers or aversive taste blockers into products, thoseproducts may never be commercially successful.***

Even if we discover and develop taste enhancers and aversive tasteblockers that obtain the necessary GRAS determination or regulatory approval,our success depends to a significant degree upon the commercial success ofpackaged food and beverage products and pharmaceutical products

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incorporatingthose taste enhancers or aversive taste blockers. If these products fail toachieve or subsequently maintain market acceptance or commercial viability, ourbusiness would be significantly harmed because our royalty revenue is dependentupon consumer sales of these products. In addition we could be unable tomaintain our existing collaborations or attract new product discovery anddevelopment collaborators. Many factors may affect the market acceptance andcommercial success of any potential products incorporating taste enhancers oraversive taste blockers that we may discover, including:

·                                          health concerns, whether actual or perceived,or unfavorable publicity regarding our taste enhancers and aversive tasteblockers or those of our competitors;

·                                          the timing of market entry as compared tocompetitive products;

·                                          the rate of adoption of products by ourcollaborators and other companies in the flavor industry; and

·                                          any product labeling that may be required bythe FDA or other United States or foreign regulatory agencies for productsincorporating our taste enhancers and aversive taste blockers.

***We may experiencedelays in clinical trials and regulatory approval relating to our products thatcould adversely affect our financial results and our commercial prospects forour pharmaceutical products.***

Our pharmaceutical strategy is to incorporate our taste enhancers andaversive taste blockers into proprietary formulations of medicines thatpotentially offer improved acceptability and compliance, thus enhancingefficacy and possibly providing broader indications or patient populations.  In addition to the regulatory or otherrequirements for our taste enhancers and aversive taste blockers, we will alsorequire regulatory approvals of our pharmaceutical formulations.  In such case, we may be required to conductclinical trials to demonstrate safety and efficacy of the new formulation.  For product candidates that advance toclinical testing, we cannot be certain that we or a collaborator willsuccessfully complete the clinical trials necessary to receive regulatoryproduct approvals.  This process islengthy and expensive.

We intend to seek approval for our pharmaceutical formulations throughthe FDA 505(b)(2) approval process.  Ifwe are unable to approve our pharmaceutical formulations through the 505(b)(2)process, we may be required to pursue the more expensive and time consuming505(b)(1) approval process.  Section505(b) of the Federal Food, Drug, and Cosmetic Act describes two types of NDAapplications that an applicant may submit for approval of innovator medicines.  The first type of NDA, described undersection 505(b)(1), consists of a full report of investigations of safety andeffectiveness conducted by or for the applicant or for which the applicant hasthe right of reference for the information. The second type of NDA, described under section 505(b)(2), consists of afull report of investigations of safety and effectiveness where at least someportion of the information submitted for approval comes from sources other thanstudies performed or sponsored by the applicant.  Drugs that may be approved via the 505(b)(2)process include drugs that have the same active ingredients as previouslyapproved products, but now are formulated in a different delivery mechanism orother new dosage forms or with different indications.  The basis for the 505(b)(2) application isthat there already is a certain amount of information that is known about theactive ingredient. As such, repeating all the clinical studies required for a505(b)(1) application would be significantly more expensive and time consumingthan the 505(b)(2) process.

To obtain regulatory approvals, we must, among other requirements,complete clinical trials showing that our products are safe and effective for aparticular indication.  Under the505(b)(2) approval process, although we may not have performed some of thestudies ourselves, we must submit clinical and non-clinical data to demonstratethe medication is safe and effective.  Wealso must be able to provide

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dataand information, including bioavailability or comparative bioavailabilitystudies, to establish sufficiently the appropriateness of relying on materialwithout the right of reference.

We do not know when clinical trials for our products will commence orwhether we will complete any of our clinical trials on schedule or at all.  There can be no assurance that clinicaltrials will in fact demonstrate that our products are safe or effective.

Additionally, we may not be able to find acceptable patients or mayexperience delays in enrolling patients for our clinical trials.  The FDA or we may suspend our clinical trialsat any time if either believes that we are exposing the subjects participatingin the trials to unacceptable health risks. The FDA or institutional review boards and/or institutional biosafety committeesat the medical institutions and healthcare facilities where we seek to sponsorclinical trials may not permit a trial to proceed or may suspend any trialindefinitely if they find deficiencies in the conduct of the trials.

Product development costs to us and our potential collaborators willincrease if we have delays in testing or approvals or if we need to performmore or larger clinical trials than planned. We expect to continue to rely on third party clinical investigators atmedical institutions and healthcare facilities to conduct our clinical trials,and, as a result, we may face additional delaying factors outside ourcontrol.  Significant delays mayadversely affect our financial results and the commercial prospects for ourproduct candidates and delay our ability to become profitable.

***If ourpharmaceutical product candidates do not successfully complete the clinicaltrial process, we will not be able to market them. Even successful clinicaltrials may not result in a marketable product and may not be entirelyindicative of a product’s safety or efficacy.***

Many factors, known and unknown, can adversely affect clinical trialsand the ability to evaluate a product’s efficacy.  During the course of treatment, patients candie or suffer other adverse events for reasons that may or may not be relatedto the proposed product being tested. Even if unrelated to our product, certain events can neverthelessadversely impact our clinical trials.  Asa result, our ability to ultimately develop and market the products and obtainrevenues would suffer.

Even promising results in pre-clinical studies and initial clinicaltrials do not ensure successful results in later clinical trials, which testbroader human use of our products.  Manycompanies in our industry have suffered significant setbacks in advancedclinical trials, despite promising results in earlier trials.  Even successful clinical trials may notresult in a marketable product or be indicative of the efficacy or safety of aproduct. Many factors or variables could affect the results of clinical trialsand cause them to appear more promising than they may otherwise be.  Product candidates that successfully completeclinical trials could ultimately be found to be unsafe or ineffective.

In addition, our ability to complete clinical trials depends on manyfactors, including obtaining adequate clinical supplies and having a sufficientrate of patient recruitment.  Forexample, patient recruitment is a function of many factors, including:

·                                          the size of the patient population;

·                                          the proximity of patients to clinical sites;

·                                          the eligibility criteria for the trial;

·                                          the perceptions of investigators and patientsregarding safety; and

·                                          the availability of other treatment options.

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Even if patients are successfully recruited, we cannot be sure that theywill complete the treatment process. Delays in patient enrollment or treatment in clinical trials may resultin increased costs, program delays or both.

With respect to markets in other countries, we or a partner will alsobe subject to regulatory requirements governing clinical trials in thosecountries.  Even if we complete clinicaltrials, we may not be able to submit a marketing application.  If we submit an application, the regulatoryauthorities may not review or approve it in a timely manner, if at all.

***Because wecannot predict whether or when we will obtain regulatory approval tocommercialize our pharmaceutical product candidates, we cannot predict thetiming of any future revenue from these product candidates.***

We cannot commercialize any of our pharmaceutical product candidates togenerate revenue until the appropriate regulatory authorities have reviewed andapproved the applications for our product candidates.  We cannot assure you that the regulatoryagencies will complete their review processes in a timely manner or that wewill obtain regulatory approval for any product candidate we or our potentialcollaborators develop.  Satisfaction ofregulatory requirements typically takes many years, is dependent upon the type,complexity and novelty of the product and requires the expenditure ofsubstantial resources.  Regulatoryapproval processes outside the United States include all or many of the risksassociated with the FDA approval process and potentially others as well.  In addition, we may experience delays orrejections based upon additional government regulation from future legislationor administrative action or changes in FDA policy, or the policies of otherrelevant governmental or nongovernmental entities during the period of productdevelopment, pre-clinical and clinical trials and FDA regulatory review.

***We will rely onthird parties to manufacture taste enhancers, aversive taste blockers andpharmaceutical product candidates. There can be no guarantee that we can obtainsufficient and acceptable quantities of our taste enhancers or aversive tasteblockers or pharmaceutical product candidates on acceptable terms, which maydelay or impair our ability to develop, test and market such products.***

Our business strategy relies on third parties to manufacture andproduce our taste enhancers and aversive taste blockers and pharmaceuticalproduct candidates in accordance with good manufacturing practices establishedby the FDA, or similar regulations in other countries.  Our taste enhancers and aversive tasteblockers and pharmaceutical product candidates may be in competition with otherproducts for access to these facilities and may be subject to delays inmanufacture if third parties give other products greater priority than ourproduct candidates. These third parties also may not deliver sufficientquantities of our taste enhancers and aversive taste blockers andpharmaceutical product candidates, manufacture our taste enhancers and aversivetaste blockers and pharmaceutical product candidates in accordance withspecifications, or comply with applicable government regulations. Additionally,if the manufactured products fail to perform as specified, our business andreputation could be severely impacted.

We expect to enter into manufacturing agreements for the production ofproduct materials.  If any manufacturingagreement is terminated or any third party collaborator experiences asignificant problem that could result in a delay or interruption in the supplyof product materials to us, there are very few contract manufacturers whocurrently have the capability to produce our taste enhancers and aversive tasteblockers and pharmaceutical product candidates on acceptable terms, or on atimely and cost-effective basis.  Therecan be no assurance that manufacturers on whom we will depend will be able tosuccessfully produce our taste enhancers and aversive taste blockers andpharmaceutical product candidates on acceptable terms, or on a timely orcost-effective basis.  There can also beno assurance that manufacturers will be able to manufacture our products inaccordance with our product specifications, or

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willmeet FDA or other requirements. We must have sufficient and acceptablequantities of our product materials to conduct our clinical trials and tomarket our product candidates, if and when such products have been approved bythe FDA for marketing.  If we are unableto obtain sufficient and acceptable quantities of our product material, we maybe required to delay the clinical testing and marketing of our products.

***If we do notcomply with applicable regulatory requirements in the manufacture anddistribution of our product candidates, we may incur penalties that may inhibitour ability to commercialize our products and adversely affect our revenue.***

Our failure or the failure of our potential collaborators or thirdparty manufacturers to comply with applicable FDA or other regulatoryrequirements including manufacturing, quality control, labeling, safetysurveillance, promoting and reporting may result in criminal prosecution, civilpenalties, recall or seizure of our products, total or partial suspension ofproduction or an injunction, as well as other regulatory action against ourproduct candidates or us.  Discovery ofpreviously unknown problems with a product, supplier, manufacturer or facilitymay result in restrictions on the sale of our products, including a withdrawalof such products from the market.  Theoccurrence of any of these events would negatively impact our business andresults of operations.

***If we areunable to create and maintain sales, marketing and distribution capabilities orenter into agreements with third parties to perform those functions, we willnot be able to commercialize our product candidates.***

We currently have no sales, marketing or distributioncapabilities.  Therefore, tocommercialize our product candidates, if and when such products have beenapproved and are ready for marketing, we expect to collaborate with thirdparties to perform these functions.  Wehave no experience in developing, training or managing a sales force and willincur substantial additional expenses if we decide to market any of our futureproducts directly.  Developing amarketing and sales force is also time consuming and could delay launch of ourfuture products.  In addition, we willcompete with many companies that currently have extensive and well-fundedmarketing and sales operations.  Ourmarketing and sales efforts may be unable to compete successfully against thesecompanies.

***Many potentialcompetitors, including those who have greater resources and experience than wedo, may develop products or technologies that make ours obsolete ornoncompetitive.***

We believe our taste technology approach is applicable to a wide rangeof food and pharmaceutical products representing many and diverse competitivecompanies and approaches.  The lifesciences and other technology industries are characterized by rapidtechnological change, and the area of sensory or taste research is a rapidlyevolving field.  Our future success willdepend on our ability to maintain a competitive position with respect totechnological advances. Technological developments by others may result in ourtaste enhancers or aversive taste blockers and technologies, as well as our pharmaceuticalformulations, becoming obsolete.

We face substantial competition from companies pursuing thecommercialization of products and services relevant to taste using variousmethods for the discovery of taste enhancers and aversive taste blockers.  These competitors include leading flavorcompanies, such as International Flavors & Fragrances Inc., Givaudan SA,Symrise and Firmenich.  Among foodmanufacturers, at least Nestlé has an active program cloning and expressingreceptors for in vitro screening assays. In addition, Senomyx, Inc. is a public biotechnology company taking abiochemical approach to taste modulation, both in foods and pharmaceuticalproducts.  Senomyx is principally focusedin the area of taste enhancement for food products and uses a high throughputscreening technology and synthetic chemistry to discover novel flavorenhancers, which it licenses to end users in the food industry.  Senomyx was initially focused on sweetnessand savory flavor enhancers, but is now also developing programs to discoverbitter blockers

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forfood and pharmaceutical products. Chemcom is another company that is developing a biotechnology approachto finding novel taste enhancers.  Wecurrently compete and will continue to compete in the future with these companiesin collaborating with and selling flavor products and technologies tomanufacturers of packaged food and beverage products.

We also face substantial competition from a number of companies in thepharmaceutical formulations industry. Taste masking has a long history in thepharmaceutical industry.  A traditionalmethod of taste masking for pharmaceutical products is to mix the activepharmaceutical ingredient with flavorings and sugar syrup to mask unpleasanttaste.  This approach is most commonly usedfor pediatric liquid formulations as well as many over-the-counter cough-coldremedies.  FlavorRx supplies flavors atdrug store pharmacies that can be compounded by the pharmacist to make certainliquid formulations more palatable.  Inthe pharmaceutical sector there are a number of drug delivery companies thathave developed proprietary taste masking technologies.  These competing technologies and companiesinclude OraSolv and DuraSolv from CIMA Labs (recently acquired by Cephalon),MicroCaps and Liquitard from Eurand, FlavorTech and MicroMask from KVPharmaceuticals, EnVel from Cardinal Health and WOWTab from Yamanouchi.  Virtually all of these approaches includingOralSolv, DuraSolv, MicroCap, Liquitard, EnVel and the technology used in Zydisproducts utilize a physical approach to sequester the active drug substanceaway from the taste receptors on the tongue. These include coating the drug,microencapsulation, immobilization, use of cyclodextran carriers, orstabilization of the drug in a micellar or insoluble phase, as the principlemeans of taste masking.

Many of these companies have substantially greater capital resources,research and development resources and experience, manufacturing capabilities,regulatory expertise, sales and marketing resources, established relationshipswith consumer products companies and production facilities.

We may in the future face competition from life sciences and othertechnology companies and other commercial enterprises.  These entities engage as we do in biotechnology,biology or chemistry and could apply this technology to the discovery anddevelopment of taste enhancers and aversive taste blockers and new formulationsof pharmaceutical products. We cannot guarantee that products developed as aresult of our competitors’ existing or future collaborations will not competewith our taste enhancers and aversive taste blockers and new pharmaceuticalformulations.

Universities and public and private research institutions are alsopotential competitors.  While these organizationsprimarily have educational objectives, they may develop proprietarytechnologies related to the sense of taste or secure patent protection that wemay need for the development of our technologies and products.  We may attempt to license these proprietarytechnologies, but these licenses may not be available to us on acceptableterms, if at all.

Our competitors, either alone or with their collaborative partners, maysucceed in developing technologies or discovering taste enhancers and aversivetaste blockers that are more effective, safer, more affordable or more easilycommercialized than ours, and our competitors may obtain intellectual propertyprotection or commercialize products sooner than we do.  Developments by others may render our productcandidates or our technologies obsolete. In addition, our current product discovery and development collaboratorsare not prohibited from entering into research and development collaborationagreements with third parties in any product field.  Our failure to compete effectively would havea significant adverse effect on our business, financial condition and resultsof operations.

***If we areunable to attract and retain key personnel and advisors, it may adverselyaffect our ability to obtain financing, pursue collaborations or develop ourproduct candidates.***

We are highly dependent on F. Raymond Salemme, Ph.D., our ChiefExecutive Officer and President, as well as other executive and scientificofficers, including Scott Horvitz, Chief Financial Officer and Robert Bryant,Ph.D., Vice President, Discovery Research.

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Our future success depends on our ability to attract, retain andmotivate highly qualified management and scientific, development and commercialpersonnel and advisors.  To pursue ourbusiness strategy, we will need to hire or otherwise engage qualified personneland managers, including personnel with expertise in discovery, development,clinical trials, government regulation, manufacturing, marketing andsales.  Competition for qualifiedpersonnel is intense among companies, academic institutions and otherorganizations.  If we are unable toattract and retain key personnel and advisors, it may negatively affect ourability to successfully develop, test and commercialize our product candidates.

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

Our products and processes will involve the controlled storage, use anddisposal of certain hazardous and biological materials and waste products.  We and our suppliers and other collaboratorsare subject to federal, state and local regulations governing the use,manufacture, storage, handling and disposal of materials and waste products.  Even if we and these suppliers andcollaborators comply with the standards prescribed by law and regulation, therisk of accidental contamination or injury from hazardous materials cannot becompletely eliminated. In the event of an accident, we could be held liable forany damages that result, and any liability could exceed the limits or falloutside the coverage of any insurance we may obtain and exceed our financialresources.  We may not be able tomaintain insurance on acceptable terms, or at all.  We may incur significant costs to comply withcurrent or future environmental laws and regulations.

***We may be suedfor product liability, which could adversely affect our business.***

Because our business strategy involves the development and sale byeither us or our collaborators of commercial products incorporating our tasteenhancers or aversive taste blockers, we may be sued for product liability. Wemay be held liable if any product we develop and commercialize, or any productour collaborators commercialize that incorporates any of our taste enhancers oraversive taste blockers, causes injury or is found otherwise unsuitable duringproduct testing, manufacturing, marketing, sale or consumer use. In addition,the safety studies we must perform and the FEMA GRAS determination we mustobtain prior to incorporating our taste enhancers and aversive taste blockersinto a commercial product, and the regulatory approvals required tocommercialize our pharmaceutical products, will not protect us from any such liability.

If we and our collaborators commence sale of commercial products wewill need to obtain product liability insurance, and this insurance may beprohibitively expensive, or may not fully cover our potential liabilities.  Inability to obtain sufficient insurancecoverage at an acceptable cost or otherwise to protect against potentialproduct liability claims could prevent or inhibit the commercialization ofproducts developed by us or our product discovery and developmentcollaborators.  We may be obligated toindemnify our product discovery and development collaborators for productliability or other losses they incur as a result of our taste enhancers andaversive taste blockers.  Anyindemnification we receive from such collaborators for product liability thatdoes not arise from our taste enhancers or aversive taste blockers may not besufficient to satisfy our liability to injured parties. If we are sued for anyinjury caused by our taste enhancers or aversive taste blockers or productsincorporating our taste enhancers or aversive taste blockers or any otherproducts we develop, our liability could exceed our total assets.

**Risks Related To Intellectual Property**

***If our productcandidates are not effectively protected by valid, issued patents or if we arenot otherwise able to protect our proprietary information, it could harm ourbusiness.***

The success of our operations will depend in part on our ability andthat of our licensors to:

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·                                          obtain patent protection for our tastescreening technology and our taste enhancers and aversive taste blockers bothin the United States and in other countries with substantial markets;

·                                          obtain patent protection for ourpharmaceutical formulations including those created using our taste enhancers;

·                                          defend patents once obtained;

·                                          maintain trade secrets and operate withoutinfringing upon the patents and proprietary rights of others; and

·                                          obtain appropriate licenses upon reasonableterms to patents or proprietary rights held by others that are necessary oruseful to us in commercializing our technology, both in the United States andin other countries with substantial markets.

In the event we are not able protect ourintellectual property and proprietary information, our business will bematerially harmed.

***We may not haveadequate protection for our unpatented proprietary information, which couldadversely affect our competitive position.***

In addition to patents, we will substantially rely on trade secrets,know-how, continuing technological innovations and licensing opportunities todevelop and maintain our competitive position. However, others may independently develop substantially equivalentproprietary information and techniques or otherwise gain access to our tradesecrets or disclose our technology.  Toprotect our trade secrets, we may enter into confidentiality agreements withemployees, consultants and potential collaborators.  However, these agreements may not providemeaningful protection of our trade secrets or adequate remedies in the event ofunauthorized use or disclosure of such information.  Likewise, our trade secrets or know-how maybecome known through other means or be independently discovered by ourcompetitors.  Any of these events couldprevent us from developing or commercializing our product candidates.

***Our ability tocompete in the ingredient, food and beverage market and the pharmaceuticalmarket may decline if we do not adequately protect our proprietarytechnologies.***

Because of the substantial length of time and expense associated withthe development of new products, we, along with the rest of the ingredient,food and beverage industry and pharmaceutical industry, place considerableimportance on obtaining and maintaining patent protection for new technologies,products and processes.  Our successdepends in part on our ability to obtain and maintain intellectual propertythat protects our technologies, taste enhancers or aversive taste blockers andour pharmaceutical products.  Patentpositions may be highly uncertain and may involve complex legal and factualquestions, including the ability to establish patentability of sequencesrelating to taste receptors, proteins, chemical synthesis techniques, compoundsand methods for using them to modulate taste for which we seek patentprotection.  No consistent standardregarding the allowance or enforceability of claims in many of our pendingpatent applications has emerged to date. As a result, we cannot predict the breadth of claims that willultimately be allowed in our patent applications, if any, including those wehave in-licensed or the extent to which we may enforce these claims against ourcompetitors. The degree of future protection for our proprietary rights istherefore highly uncertain and we cannot assure you that:

·                                          we were the first to file patent applicationsor to invent the subject matter claimed in patent applications relating to thetechnologies upon which we rely;

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·                                          others will not independently develop similaror alternative technologies or duplicate any of our technologies;

·                                          others did not publicly disclose our claimedtechnology before we conceived the subject matter included in any of our patentapplications;

·                                          any of our patent applications will result inissued patents;

·                                          any of our patent applications will notresult in interferences or disputes with third parties regarding priority ofinvention;

·                                          any patents that may be issued to us, ourcollaborators or our licensors will provide a basis for commercially viableproducts or will provide us with any competitive advantages or will not bechallenged by third parties;

·                                          we will develop additional proprietarytechnologies that are patentable;

·                                          the patents of others will not have anadverse effect on our ability to do business; or

·                                          new proprietary technologies from thirdparties, including existing licensors, will be available for licensing to us onreasonable commercial terms, if at all.

In addition, patent law outside the United States is uncertain and inmany countries intellectual property laws are undergoing review and revision.The laws of some countries do not protect intellectual property rights to thesame extent as domestic laws. It may be necessary or useful for us toparticipate in opposition proceedings to determine the validity of ourcompetitors’ patents or to defend the validity of any of our or our licensor’sfuture patents, which could result in substantial costs and would divert ourefforts and attention from other aspects of our business.

Technologies licensed to us by others, or in-licensed technologies, areimportant to our business. In particular, we depend on certain technologiesrelating to taste biology licensed from the Mount Sinai School ofMedicine.  In addition, we may in thefuture acquire rights to additional technologies by licensing such rights fromexisting licensors or from third parties. Such in-licenses may be costly. Also, we generally do not control the patent prosecution, maintenance orenforcement of in-licensed technologies. Accordingly, we are unable to exercise the same degree of control overthis intellectual property as we do over our internally developed technologies.Moreover, some of our academic institution licensors, collaborators andscientific advisors have rights to publish data and information to which wehave rights.  If we cannot maintain theconfidentiality of our technologies and other confidential information inconnection with our collaborations, our ability to protect our proprietaryinformation or obtain patent protection in the future may be impaired, whichcould have a significant adverse effect on our business, financial conditionand results of operations.

***Many of thepatent applications we and our licensors have filed have not yet beensubstantively examined and may not result in patents being issued.***

Many of the patent applications filed by us and our licensors werefiled recently with the United States Patent and Trademark Office and most havenot been substantively examined and may not result in patents beingissued.  It is difficult to predictwhether any of our or our licensors’ applications will ultimately be found tobe patentable or, if so, to predict the scope of any allowed claims.  In addition, the disclosure in our or ourlicensors’ patent applications, particularly in respect of the utility of ourclaimed inventions, may not be sufficient to meet the statutory requirementsfor patentability in all cases.  As aresult, it is difficult to predict whether any of our or our licensors’applications will be allowed, or, if so,

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topredict the scope of any allowed claims or the enforceability of thepatents.  Even if enforceable, others maybe able to design around any patents or develop similar technologies that arenot within the scope of such patents. Our and our licensors’ patent applications may not issue as patents thatwill provide us with any protection or competitive advantage.

***Disputesconcerning the infringement or misappropriation of our proprietary rights orthe proprietary rights of others could be time consuming and extremely costlyand could delay our research and development efforts.***

Our commercial success, if any, will be significantly harmed if weinfringe the patent rights of third parties or if we breach any license orother agreements that we have entered into with regard to our technology orbusiness.

We are aware of other companies and academic institutions that havebeen performing research in the areas of taste modulation and taste enhancersand aversive taste blockers.  Inparticular, other companies and academic institutions have announced that theyhave conducted taste-receptor research and have published data on tastereceptor sequence information and taste receptors or filed patent applicationsor obtained patent protection on taste modulation or taste receptors and theiruses.  To the extent any of thesecompanies or academic institutions currently have, or obtain in the future,broad patent claims, such patents could block our ability to use variousaspects of our discovery and development process and might prevent us fromdeveloping or commercializing newly discovered taste enhancers and aversivetaste blockers or otherwise conducting our business.  In addition, it is possible that some of thetaste enhancers or aversive taste blockers that are discovered using ourtechnology may not be patentable or may be covered by intellectual property ofthird parties.

We are not currently a party to any litigation, interference,opposition, protest, reexamination or any other potentially adversegovernmental, ex parte or inter-party proceeding with regard to our patent ortrademark positions.  However, the lifesciences and other technology industries are characterized by extensivelitigation regarding patents and other intellectual property rights.  Many life sciences and other technologycompanies have employed intellectual property litigation as a way to gain acompetitive advantage.  If we becomeinvolved in litigation, interference proceedings, oppositions, reexamination,protest or other potentially adverse intellectual property proceedings as aresult of alleged infringement by us of the rights of others or as a result ofpriority of invention disputes with third parties, we might have to spendsignificant amounts of money, time and effort defending our position and we maynot be successful.  In addition, anyclaims relating to the infringement of third-party proprietary rights orproprietary determinations, even if not meritorious, could result in costlylitigation, lengthy governmental proceedings, divert management’s attention andresources, or require us to enter into royalty or license agreements that arenot advantageous to us.

Should any person have filed patent applications or obtained patentsthat claim inventions also claimed by us, we may have to participate in aninterference proceeding declared by the relevant patent regulatory agency todetermine priority of invention and, thus, the right to a patent for theseinventions in the United States.  Such aproceeding could result in substantial cost to us even if the outcome isfavorable.  Even if successful onpriority grounds, an interference action may result in loss of claims based onpatentability grounds raised in the interference action.  Litigation, interference proceedings or otherproceedings could divert management’s time and efforts.  Even unsuccessful claims could result insignificant legal fees and other expenses, diversion of management’s time anddisruption in our business. Uncertainties resulting from initiation and continuation of any patentproceeding or related litigation could harm our ability to compete and couldhave a significant adverse effect on our business, financial condition andresults of operations.

An adverse ruling arising out of any intellectual property dispute,including an adverse decision as to the priority of our inventions, couldundercut or invalidate our intellectual property position.  An

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adverseruling could also subject us to significant liability for damages, includingpossible treble damages, prevent us from using technologies or developing products,or require us to negotiate licenses to disputed rights from third parties.  Although patent and intellectual propertydisputes in the technology area are often settled through licensing or similararrangements, costs associated with these arrangements may be substantial andcould include license fees and ongoing royalties.  Furthermore, necessary licenses may not beavailable to us on satisfactory terms, if at all.  Failure to obtain a license in such a casecould have a significant adverse effect on our business, financial conditionand results of operations.

**Risks Relatedto Our Fluctuating Operating Results, Possible Acquisitions and Management ofGrowth**

***We expect thatour results of operations will fluctuate from period to period, and this fluctuationcould cause our stock price to decline, causing investor losses.***

Our operating results have fluctuated in the past and are likely tovary significantly in the future based upon a number of factors, many of whichwe have little or no control over.  Weoperate in a highly dynamic industry and future results could be subject tosignificant fluctuations.  Thesefluctuations could cause us to fail to meet or exceed financial expectations ofsecurities analysts or investors, which could cause our stock price to declinerapidly and significantly.  Revenue andexpenses in future periods may be greater or less than revenue and expenses inthe immediately preceding period or in the comparable period of the prior year.  Therefore, period-to-period comparisons ofour operating results are not necessarily a good indication of our futureperformance.  Some of the factors thatcould cause our operating results to fluctuate include:

·                                          our ability to discover and develop tasteenhancers and aversive taste blockers;

·                                          our ability or the ability of our productdiscovery and development collaborators to incorporate our taste enhancers andaversive taste blockers into packaged food and beverage products andpharmaceutical products;

·                                          our receipt of milestone payments in anyparticular period;

·                                          the ability and willingness of collaboratorsto commercialize products incorporating our taste enhancers and aversive tasteblockers on expected timelines, or at all;

·                                          our ability to enter into product discoveryand development collaborations and technology collaborations, or to extend theterms of any existing collaboration agreements, and our payment obligations,expected revenue and other terms of any other agreements of this type;

·                                          our ability, or our collaborators’ ability,to successfully satisfy all pertinent regulatory requirements;

·                                          the demand for our future products and ourcollaborators’ products containing our taste enhancers or aversive tasteblockers; and

·                                          general and industry specific economicconditions, which may affect our collaborators’ research and developmentexpenditures.

***If we acquireproducts, technologies or other businesses, we will incur a variety of costs,may have integration difficulties and may experience numerous other risks thatcould adversely affect our business.***

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To remain competitive, we may decide to acquire additional businesses,products and technologies.  We currentlyhave no commitments or agreements with respect to, and are not activelyseeking, any material acquisitions.  Wehave limited experience in identifying acquisition targets, successfullyacquiring them and integrating them into our current infrastructure.  We may not be able to successfully integrateany businesses, products, technologies or personnel that we might acquire inthe future without a significant expenditure of operating, financial andmanagement resources, if at all.  Inaddition, future acquisitions could require significant capital infusions andcould involve many risks, including, but not limited to, the following:

·                                          we may have to issue convertible debt orequity securities to complete an acquisition, which would dilute ourstockholders and could adversely affect the market price of our common stock;

·                                          an acquisition may negatively impact ourresults of operations because it may require us to incur large one-time chargesto earnings, amortize or write down amounts related to goodwill and otherintangible assets, or incur or assume substantial debt or liabilities, or itmay cause adverse tax consequences, substantial depreciation or deferredcompensation charges;

·                                          we may encounter difficulties in assimilatingand integrating the business, technologies, products, personnel or operationsof companies that we acquire;

·                                          certain acquisitions may disrupt ourrelationship with existing collaborators who are competitive to the acquiredbusiness;

·                                          acquisitions may require significant capitalinfusions and the acquired businesses, products or technologies may notgenerate sufficient revenue to offset acquisition costs;

·                                          an acquisition may disrupt our ongoingbusiness, divert resources, increase our expenses and distract our management;

·                                          acquisitions may involve the entry into ageographic or business market in which we have little or no prior experience;and

·                                          key personnel of an acquired company maydecide not to work for us.

Any of the foregoing risks could have a significant adverse effect onour business, financial condition and results of operations.

***To the extentwe enter markets outside of the United States, our business will be subject topolitical, economic, legal and social risks in those markets, which couldadversely affect our business.***

There are significant regulatory and legal barriers in markets outsidethe United States that we must overcome to the extent we enter or attempt toenter markets in countries other than the United States.  We will be subjectto the burden of complying with a wide variety of national and local laws,including multiple and possibly overlapping and conflicting laws.  We also may experience difficulties adaptingto new cultures, business customs and legal systems.  Any sales and operations outside the UnitedStates would be subject to political, economic and social uncertaintiesincluding, among others:

·                                          changes and limits in import and exportcontrols;

·                                          increases in custom duties and tariffs;

·                                          changes in currency exchange rates;

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·                                          economic and political instability;

·                                          changes in government regulations and laws;

·                                          absence in some jurisdictions of effectivelaws to protect our intellectual property rights; and

·                                          currency transfer and other restrictions andregulations that may limit our ability to sell certain products or repatriateprofits to the United States.

Any changes related to these and other factors could adversely affectour business to the extent we enter markets outside the United States.

***We mayencounter difficulties managing our growth, which could adversely affect ourbusiness.***

Our strategy includes entering into and working on simultaneous tasteenhancer and aversive taste blocker discovery and development programs acrossmultiple markets that include both the food and beverage industry and thepharmaceutical industry.  We expect tocontinue to grow to meet our strategic objectives. If our growth continues, itwill continue to place a strain on us, our management and our resources. Ourability to effectively manage our operations, growth and various projectsrequires us to continue to improve our operational, financial and managementcontrols, reporting systems and procedures and to attract and retain sufficientnumbers of talented employees.  We maynot be able to successfully implement these tasks on a larger scale and,accordingly, we may not achieve our research, development and commercializationgoals.  If we fail to improve ouroperational, financial and management information systems, or fail toeffectively monitor or manage our new and future employees or our growth, ourbusiness would suffer significantly. In addition, no assurance can be made thatwe will be able to secure adequate facilities to house our staff, conduct ourresearch or achieve our business objectives.

**Risks Related to our Common Stock; Liquidity Risks**

***The price ofour common stock is expected to be volatile.***

The market price of our common stock, and the market prices forsecurities of biotechnology companies in general, are expected to be highlyvolatile.  The following factors, inaddition to other risk factors described in this Quarterly Report onForm 10-Q, and the potentially low volume of trades in our common stock, mayhave a significant impact on the market price of our common stock, some ofwhich are beyond our control:

·                                          announcements of technological innovationsand discoveries by the Company or its competitors;

·                                          developments concerning any research anddevelopment, clinical trials, manufacturing, and marketing collaborations;

·                                          new products or services that the Company orits competitors offer;

·                                          actual or anticipated variations in operatingresults;

·                                          the initiation, conduct and/or outcome of intellectualproperty and/or litigation matters;

·                                          changes in financial estimates by securitiesanalysts;

·                                          conditions or trends in bio-pharmaceutical orother healthcare industries;

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·                                          regulatory developments in the United Statesand other countries;

·                                          changes in the economic performance and/ormarket valuations of other biotechnology and flavor companies;

·                                          the Company’s announcement of significantacquisitions, strategic partnerships, joint ventures or capital commitments;

·                                          additions or departures of key personnel;

·                                          global unrest, terrorist activities, andeconomic and other external factors; and

·                                          sales or other transactions involving commonstock.

The stock market in general has recently experienced relatively largeprice and volume fluctuations.  In particular, market prices of securities ofbiotechnology companies have experienced fluctuations that often havebeen unrelated or disproportionate to the operating results of thesecompanies.  Continued market fluctuationscould result in extreme volatility in the price of our common stock, whichcould cause a decline in the value of our common stock.  Investors should also be aware that pricevolatility may be worse if the trading volume of our common stock is low.

***We do notexpect to pay cash dividends in the foreseeable future.***

We currently intend to retain any future earnings to finance the growthand development of our business; therefore,we do not expect to pay any cash dividends in the foreseeable future. Anyfuture dividends will depend on our earnings, if any, and our financialrequirements.

***BecauseRedpoint became a wholly-owned subsidiary of a public company as a result ofthe Reverse Merger and not through a traditional underwritten initial publicoffering of securities, the Company may not attract the attention of majorbrokerage firms.  Additionally, as apublic company, we will incur substantial expenses.***

As a result of the Reverse Merger, Redpoint became a wholly-ownedsubsidiary of a publicly-traded company and, accordingly, will be subject tothe information and reporting requirements of the United States securitieslaws.  The costs to public companies ofpreparing and filing annual and quarterly reports, proxy statements and otherinformation with the SEC and furnishing audited reports to stockholders willcause the Company’s expenses to be higher than they would be if it were aprivately-held company.  In addition, theCompany will incur substantial expenses in connection with the preparation ofthe registration statement and related documents with respect to theregistration of the common stock issued in the Private Placement and theReverse Merger.  Security analysts ofmajor brokerage firms may not provide coverage of the Company.  No assurance can be given that brokeragefirms will want to conduct any secondary offerings on behalf of the Company inthe future.

***A significantnumber of our shares of common stock will be eligible for sale, and their salecould depress the market price of common stock.***

The sale of a significant number of our shares of common stock in thepublic market following the Private Placement could harm the market price ofour common stock. As additional shares of common stock become graduallyavailable for resale in the public market pursuant to the registration of thoseshares and releases of lock-up agreements, the supply of shares of common stockwill increase, which could decrease its market price. The Company issued sharesof common stock to investors in the Private Placement and additional shares toexisting Redpoint stockholders in connection with the Reverse Merger. Some orall of the shares of common stock may be offered from time to time in the openmarket

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pursuantto Rule 144 (or pursuant to a registration statement, if one is effective), andthese sales may have a depressive effect on the market for the shares of commonstock.  In general, a person who has heldrestricted shares for a period of one year may, upon filing of a notificationon Form 144 with the SEC, sell into the market common stock in an amount up tothe greater of 1% of the outstanding shares or the average weekly number ofshares sold in the last four weeks before such sale.  Such sales may be repeated once each threemonths, and any of the restricted shares may be sold by a non-affiliate afterthey have been held two years.  TheCompany’s officers, directors, employees and most stockholders currently owninggreater than 4% of our issued and outstanding common stock are subject tolock-up provisions relating to shares of our common stock that they owned priorto the Reverse Merger that prevent the sale or transfer of common stock fromthe date of the initial close of the Private Placement until 180 days after theeffective date of the resale registration statement, which will register theshares issued in the Private Placement.

***It is notanticipated that there will be an active public market for shares of our commonstock in the near term and stockholders may have to hold their shares of commonstock for an indefinite period of time. Stockholders may be unable to resell a large number of their shares ofcommon stock within a short time frame or at or above their purchase price.***

To have purchased shares of our common stock and warrants to purchasecommon stock in the Private Placement, an investor must have represented thatit was acquiring such shares and warrants for investment and not with a view todistribution or resale, that the investor understood that neither the commonstock nor the warrants are readily transferable and, in any event, that it mustbear the economic risk of an investment in the common stock for an indefiniteperiod of time because neither the common stock nor the warrants have beenregistered under the Securities Act of 1933, as amended (the Securities Act),or applicable state “Blue Sky” or securities laws, and that neither the commonstock nor the warrants can be sold unless they are subsequently registered oran exemption from such registration is available.  There is not an active public or othertrading market for the common stock, and there can be no assurance that anymarket will develop or be sustained after the Reverse Merger.  Because our common stock is expected to bethinly traded, an investor cannot expect to be able to liquidate its investmentin case of an emergency or if it otherwise desires to do so.  Large transactions in common stock may bedifficult to conduct in a short period of time. Further, the sale of shares of common stock may have adverse federalincome tax consequences.

***If we do notcomply with registration rights granted to certain holders of our restrictedsecurities, we may be required to pay damages to such holders.***

We intend to file a “resale” registrationstatement with the SEC covering all shares of common stock issued in connectionwith the Private Placement, including shares of common stock into which anywarrants are exercisable, no later than 60 days after the final closing of thePrivate Placement.  We will use our bestefforts to have such “resale” registration statement declared effective by theSEC as soon as possible and, in any event, within 150 days after the finalclosing of the Private Placement, and to maintain its effectiveness until suchtime as all securities registered under the registration statement have beensold or are otherwise able to be sold under Rule 144 of the Securities Actwithout regard to volume limitations, whichever is earlier.  We cannot assure you that we will be able toobtain or maintain such effective registration statement.  If the “resale” registration statement is nottimely filed or timely declared effective by the SEC, a 1% penalty will beassessed until the registration statement is either filed or declaredeffective, capped at 12%.  The penaltywill be payable monthly in either cash or additional shares of common stock, asdetermined by the Company.  In addition,there are other issues affecting the liquidity of the securities required to beincluded in the “resale” registration statement.

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***Our common stock maybe considered “a penny stock” and may be difficult to sell.***

The SEC has adopted regulations that generally define “penny stock” tobe an equity security that has a market or exercise price of less than $5 pershare, subject to specific exemptions. Initially, the market price of ourcommon stock is likely to be less than $5 per share and therefore may bedesignated a “penny stock” under SEC rules. This designation requires any broker or dealer selling our common stockto disclose certain information about the transaction, obtain a writtenagreement from the investor and determine that the investment in our commonstock by the investor is a reasonably suitable investment for suchinvestor.  These rules may restrict theability of brokers or dealers to sell our common stock and, as a result, mayaffect the ability of investors to sell their shares. In addition, unless anduntil our common stock is listed for trading on the American Stock Exchange orNASDAQ Capital Market or similar market, investors may find it difficult toobtain accurate quotations of the price of our common stock and may experiencea lack of buyers to purchase such stock or a lack of market makers to supportthe stock price. Resale restrictions on transferring “penny stocks” aresometimes imposed by some states, which may make transactions in our stock moredifficult and may reduce the value of your investment.

***Substantialfuture issuances of******our******common stock could depress our stock price.***

The market price for our common stock could decline, perhapssignificantly, as a result of issuances of a large number of shares of ourcommon stock in the public market or even the perception that such issuancescould occur.  Under our RegistrationRights Agreement, certain holders of our outstanding shares of our common stockand other securities have demand and Form S-3 registration rights.  Sales of a substantial number of these sharesof common stock, or the perception that holders of a large number of sharesintend to sell their shares, could depress the market price of our commonstock.  The existence of suchregistration rights could also make it more difficult for us to raise fundsthrough future offerings of our equity securities.

***Ourstockholders may experience additional dilution upon the exercise of warrantsor options.***

As of the final closing of the Private Placement, we issued warrants toinvestors to acquire approximately 10.2million shares of common stock and warrants to the placement agents toacquire approximately 3.6 millionshares of common stock in the Private Placement, which is an aggregate of 13.8 million shares of common stockunderlying such warrants that, if exercised or converted, could decrease thenet tangible book value of our common stock. In addition, there are 17.6million shares of common stock underlying options that have been or maybe granted pursuant to the Redpoint Bio Corporation 2007 Omnibus EquityCompensation Plan.  If the holders ofthose options exercise those options, you may experience dilution in the nettangible book value of our common stock.

***Directors andofficers of the Company will have a high concentration of******our******common stock ownership.***

Based on the aggregate number of shares of our common stock that areoutstanding as of the closing of the Reverse Merger, our officers and directorsbeneficially own approximately 36.26% of our outstanding common stock.  Such a high level of ownership by suchpersons may have a significant effect in delaying, deferring or preventing anypotential change in control of the Company. Additionally, as a result of their high level of ownership, our officersand directors might be able to strongly influence the actions of the Company’sboard of directors, and the outcome of actions brought to our stockholders forapproval. Such a high level of ownership may adversely affect the voting andother rights of our stockholders.

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

OnMarch 12, 2007, we completed the first closing of a private placement, which werefer to as the Private Placement, of an aggregate of 24,729,060 shares ofunregistered common stock of Robcor at a price of $0.81 per share, togetherwith three-year warrants to buy 25% of the number of shares of common stock ofRobcor purchased at a cash exercise price of $1.35 per share (the InvestorWarrants), raising approximately $20.0 million of gross proceeds.

OnApril 6, 2007, we completed the second and final closing of the PrivatePlacement of an aggregate of 16,084,347 unregistered shares of common stock ofRobcor at a price of $0.81 per share, together with Investor Warrants, raisingan additional $13 million of gross proceeds, bringing the total privateplacement gross proceeds to $33 million.

Nounderwriters were used for the sale of common stock.  The shares of stock were sold pursuant to anexemption from registration under Rule 506 of Regulation D.

Weintend to file a “resale” registration statement with the SEC covering allshares of unregistered common stock issued in connection with the PrivatePlacement, including shares of common stock into which any warrants areexercisable, no later than 60 days after the final closing of the PrivatePlacement.  We will use our best effortsto have such “resale” registration statement declared effective by the SEC assoon as possible and, in any event, within 150 days after the final closing ofthe Private Placement, and to maintain its effectiveness until such time as allsecurities registered under the registration statement have been sold or areotherwise able to be sold under Rule 144 of the Securities Act without regardto volume limitations, whichever is earlier. We cannot provide assurance that we will be able to obtain or maintainsuch effective registration statement.

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**ITEM6.     EXHIBITS**
| Exhibit No. | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                          |
|-------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 10.1        |       | Separation Agreement and General Release, dated as  of April 25, 2007, by and between Redpoint Bio Corporation and Susan Welsh  (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on  Form 8-K, filed on April 26, 2007).                                                                                                             |
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 10.2        |       | Joint Research and Development and License  Agreement, dated March 27, 2007, by and between Givaudan Schweiz AG and  Redpoint Bio Corporation (filed herewith).*                                                                                                                                                                                                    |
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 10.3        |       | Agreement and Plan of Merger, dated March 12,  2007, by and among, Redpoint Bio Corporation, Robcor Properties, Inc., Robcor  Acquisition Corp., Robcor LLC, Halter Financial Investments, L.P. and  Michael Heitz (incorporated by reference to Exhibit 10.1 to the Company’s  Current Report on Form 8-K, filed on March 13, 2007). |
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 31.1        |       | Certification of Chief Executive Officer pursuant to  Section 302(a) of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 31.2        |       | Certification of Chief Financial Officer pursuant to  Section 302(a) of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 32.1        |       | Certifications of Chief Executive Officer and Chief  Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  (furnished herewith).                                                                                                                                                                                                             |

 

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*                                         Portionsof this exhibit have been omitted under a request for confidential treatmentand filed separately with the United States Securities and Exchange Commission.

42

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**SIGNATURES**

Pursuant to therequirements of the Securities Exchange Act of 1934, the Registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.
|              | ROBCOR PROPERTIES, INC.                           |                   |
|--------------|---------------------------------------------------|------------------------|
|         |                                              |                   |
|         |                                              |                   |
| May 15, 2007 | By:                                               | /s/ F. Raymond Salemme |   |
|         | F. Raymond Salemme                                |                   |
|         | President and Chief Executive  Officer            |                   |
|         | (Principal Executive Officer)                     |                   |
|         |                                              |                   |
|         |                                              |                   |
| May 15, 2007 | By:                                               | /s/ Scott M. Horvitz   |   |
|         | Scott M. Horvitz                                  |                   |
|         | Chief Financial Officer,  Treasurer and Secretary |                   |
|         | (Principal Financial and  Accounting Officer)     |                   |
|              |                                                   |                        |  |  |  |

 

43

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**EXHIBITINDEX**
| Exhibit No. | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                          |
|-------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 10.1        |       | Separation Agreement and General Release, dated as  of April 25, 2007, by and between Redpoint Bio Corporation and Susan Welsh  (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on  Form 8-K, filed on April 26, 2007).                                                                                                             |
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 10.2        |       | Joint Research and Development and License  Agreement, dated March 27, 2007, by and between Givaudan Schweiz AG and  Redpoint Bio Corporation (filed herewith).*                                                                                                                                                                                                    |
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 10.3        |       | Agreement and Plan of Merger, dated March 12,  2007, by and among, Redpoint Bio Corporation, Robcor Properties, Inc., Robcor  Acquisition Corp., Robcor LLC, Halter Financial Investments, L.P. and  Michael Heitz (incorporated by reference to Exhibit 10.1 to the  Company’s Current Report on Form 8-K, filed on March 13, 2007). |
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 31.1        |       | Certification of Chief Executive Officer pursuant to  Section 302(a) of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 31.2        |       | Certification of Chief Financial Officer pursuant to  Section 302(a) of the Sarbanes-Oxley Act of 2002 (filed herewith).                                                                                                                                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                                                                                |
| 32.1        |       | Certifications of Chief Executive Officer and Chief  Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002  (furnished herewith).                                                                                                                                                                                                             |

 

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*                                         Portionsof this exhibit have been omitted under a request for confidential treatmentand filed separately with the United States Securities and ExchangeCommission.

44

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