SECURITIES
        AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C. 20549
 
 **FORM
        10-Q**
 
 (Mark
        One)
 
 x
              QUARTERLY
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
 
 **For
        the quarterly period ended** **June
        30, 2008**
 
 OR
 
 o
              TRANSITION
                  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                  ACT OF
                  1934
  **For
        the transition period from**  **to**
 
 Commission
        file number 001-16043
 
 **SYNVISTA
        THERAPEUTICS, INC.**
 (Exact
        name of registrant as specified in its charter)
 **Delaware**
                
                **13-3304550**(State
                    or other jurisdiction ofincorporation or organization)
                
                (I.R.S.
                    Employer Identification No.)
  **221
        West Grand Avenue, Suite 200, Montvale, New Jersey
        07645**
 (Address
        of principal executive offices)
 (Zip
        Code)
 
 (201)
        934-5000
 (Registrant's
        telephone number, including area code)
 
 Not
        Applicable
 (Former
        name, former address and former fiscal year,
 if
        changed since last report)
 
 Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
        the
        preceding 12 months (or for such shorter period that the registrant was required
        to file such reports), and (2) has been subject to such filing requirements
        for
        the past 90 days.
 Yes
x No
        o
 
 Indicate
        by check mark whether the registrant is a
        large
        accelerated filer, an
        accelerated filer , a
        non-accelerated filer, or a smaller reporting company. See definitions of
“large
        accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
        12b-2 of the Exchange Act. (Check one):
  Large
                  accelerated filer o
              
              Accelerated
                  filer o
              
              Non-accelerated
                  filer o
              
              (Do
                  not check if a smaller reporting company)
                Smaller
                  reporting company x






Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
o
      No x





On
      August
      1, 2008, 2,586,326 shares of the registrant’s Common Stock were
      outstanding.










**SYNVISTA
      THERAPEUTICS, INC.**





**INDEX**


PagePART
                    I - FINANCIAL INFORMATIONItem
                    1. Condensed Consolidated Financial Statements (Unaudited)Condensed
                    Consolidated Balance Sheets as of June 30, 2008 and December
                    31,
                    2007
                
                3Condensed
                    Consolidated Statements of Operations for the three and six months
                    ended
                    June 30, 2008 and 2007
                
                4Condensed
                    Consolidated Statement of Changes in Stockholders’ Equityfor
                    thesix
                    months ended June 30, 2008
                
                5Condensed
                    Consolidated Statements of Cash Flows for the six months ended
                    June 30,
                    2008 and 2007
                
                6Notes
                    to Condensed Consolidated Financial Statements
                
                7Item
                    2. Management’s Discussion and Analysis ofFinancial
                    Condition and Results of Operations
                
                12Item
                    3. Quantitative and Qualitative Disclosures About Market
                    Risk
                
                18Item
                    4T. Controls and Procedures
                
                18PART
                    II - OTHER INFORMATIONItem
                    1A. Risk Factors
                
                19Item
                    6. Exhibits
                
                19SIGNATURES
                
                20INDEX
                    TO EXHIBITS
                
                21


2




**PART
      I - FINANCIAL INFORMATION**





**ITEM
      l.**   **Condensed
      Consolidated Financial Statements (Unaudited).**





**SYNVISTA
      THERAPEUTICS, INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(Unaudited)**


**June
                  30,**
              
              **December
                  31,****2008**
              
              **2007****(Note
                  1)****ASSETS****Current
                  Assets:**Cash
                  and cash equivalents
              
              $
              10,097,972
              
              $
              15,646,225Other
                  current assets
              
              
              515,513
              
              
              234,338Total
                  current assets
              
              
              10,613,485
              
              
              15,880,563Property
                  and equipment, net
              
              
              18,773
              
              
              17,096Other
                  assets
              
              
              352,895
              
              
              807,646Total
                  assets
              
              $
              10,985,153
              
              $
              16,705,305**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Current
                  Liabilities:**Accounts
                  payable
              
              $
              626,215
              
              $
              1,503,355Accrued
                  expenses
              
              
              717,809
              
              
              458,731Preferred
                  stock dividends payable
              
              
              1,875,000
              
              
              875,000Total
                  current liabilities
              
              
              3,219,024
              
              
              2,837,086**Stockholders'
                  Equity:**Preferred
                  stock, $.01 par value; 15,000,000 shares authorized, 400,000 shares
                  designated as Series A, none issued and outstanding, 12,500,000
                  shares
                  designated as Series B convertible preferred stock, 10,000,000
                  shares
                  issued and outstanding (aggregate liquidation preference of $25,000,000)
                  at June 30, 2008 and December 31, 2007
              
              
              100,000
              
              
              100,000Common
                  stock, $.01 par value; 300,000,000 shares authorized, 2,586,326
                  shares
                  issued and outstanding at June 30, 2008 and 2,586,377 issued and
                  outstanding at December 31, 2007
              
              
              25,863
              
              
              25,864Additional
                  paid-in capital
              
              
              280,665,438
              
              
              276,834,875Accumulated
                  deficit
              
              
              (273,025,172
              )
              
              (263,092,520
              )Total
                  stockholders' equity
              
              
              7,766,129
              
              
              13,868,219Total
                  liabilities and stockholders' equity
              
              $
              10,985,153
              
              $
              16,705,305





The
      accompanying notes are an integral part of these unaudited
      condensed consolidated financial statements.





3





**SYNVISTA
      THERAPEUTICS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF OPERATIONS**


**(Unaudited)**


**Three
                    Months Ended June 30,**
                
                **Six
                    Months Ended June 30,****2008**
                
                **2007**
                
                **2008**
                
                **2007**License
                    and other revenue
                
                $
                51,724
                
                $
                50,000
                
                $
                53,957
                
                $
                50,000Operating
                    expenses:Research
                    and development
                
                
                1,669,647
                
                
                1,652,658
                
                
                3,389,989
                
                
                2,401,077General
                    and administrative
                
                
                962,451
                
                
                692,073
                
                
                1,857,363
                
                
                1,640,378Selling
                    and marketing
                
                
                141,858
                
                
                -
                
                
                141,858
                
                
                -Total
                    operating expenses
                
                
                2,773,956
                
                
                2,344,731
                
                
                5,389,210
                
                
                4,041,455Loss
                    from operations
                
                
                (2,722,232
                )
                
                (2,294,731
                )
                
                (5,335,253
                )
                
                (3,991,455
                )Investment
                    income
                
                
                75,002
                
                
                26,686
                
                
                209,765
                
                
                63,046Interest
                    expense
                
                
                (1,864
                )
                
                (3,229,734
                )
                
                (3,008
                )
                
                (5,235,316
                )Other
                    income/(expense)
                
                
                (400,000
                )
                
                -
                
                
                (400,000
                )
                
                -Net
                    loss
                
                
                (3,049,094
                )
                
                (5,497,779
                )
                
                (5,528,496
                )
                
                (9,163,725
                )Preferred
                    stock dividends - Series B
                
                
                500,000
                
                
                -
                
                
                1,000,000
                
                
                -Deemed
                    dividends to Series B preferred stockholders on beneficial conversion
                    feature
                
                
                1,702,078
                
                
                -
                
                
                3,404,156
                
                
                -Net
                    loss applicable to common shares
                
                $
                (5,251,172
                )
                $
                (5,497,779
                )
                $
                (9,932,652
                )
                $
                (9,163,725
                )Net
                    loss per common share:Basic
                    and diluted
                
                $
                (2.03
                )
                $
                (2.13
                )
                $
                (3.84
                )
                $
                (3.54
                )Weighted
                    average common shares outstanding:Basic
                    and diluted
                
                
                2,586,326
                
                
                2,586,377
                
                
                2,586,326
                
                
                2,586,377





The
      accompanying notes are an integral part of these unaudited
      condensed consolidated financial statements.





4





**SYNVISTA
      THERAPEUTICS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENT OF CHANGES IN**


**STOCKHOLDERS’
      EQUITY**


**(Unaudited)**


Preferred
                  Stock
              
              Common
                  Stock
              
              Additional
                  Paid-in
              
              Accumulated
              
              Total
                  Stockholders'Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Deficit
              
              EquityBalances,
                  December 31, 2007
              
              
              10,000,000
              
              $
              100,000
              
              
              2,586,377
              
              $
              25,864
              
              $
              276,834,875
              
              $
              (263,092,520
              )
              $
              13,868,219Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (5,528,496
              )
              
              (5,528,496
              )Fractional
                  shares
              
              
              -
              
              
              -
              
              
              (51
              )
              
              (1
              )
              
              1
              
              
              -
              
              
              -Deemed
                    dividends to Series B preferred stockholders onbeneficial
                    conversion feature
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              3,404,156
              
              
              (3,404,156
              )
              
              -Series
                  B preferred stock dividend payable
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (1,000,000
              )
              
              (1,000,000
              )Stock-based
                  compensation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              416,964
              
              
              -
              
              
              416,964Options
                  issued for consulting services
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              4,106
              
              
              -
              
              
              4,106Compensation
                  costs related to restricted stock
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              5,336
              
              
              -
              
              
              5,336Balances,
                  June 30, 2008
              
              
              10,000,000
              
              $
              100,000
              
              
              2,586,326
              
              $
              25,863
              
              $
              280,665,438
              
              $
              (273,025,172
              )
              $
              7,766,129


The
      accompanying notes are an integral part of these unaudited
      condensed consolidated financial statements.




5





**SYNVISTA
      THERAPEUTICS, INC.**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(Unaudited)**


**Six
                  Months Ended June 30,****2008**
              
              **2007**Cash
                  Flows from Operating Activities:Net
                  loss
              
              $
              (5,528,496
              )
              $
              (9,163,725
              )Adjustments
                  to reconcile net loss to cash used in operating
                  activities:Stock-based
                  compensation
              
              
              416,964
              
              
              84,562Options
                  issued for consulting services
              
              
              4,106
              
              
              2,732Compensation
                  costs related to restricted stock
              
              
              5,336
              
              
              52,515Amortization
                  of debt discount
              
              
              -
              
              
              4,636,364Amortization
                  of deferred financing costs
              
              
              -
              
              
              463,322Depreciation
                  and amortization
              
              
              6,523
              
              
              4,290Write-off of
                  investment in Oxis stock
              
              
              400,000
              
              
              -Changes
                  in operating assets and liabilities:Other
                  current assets
              
              
              (281,175
              )
              
              6,661Other
                  assets
              
              
              54,751
              
              
              39,491Accounts
                  payable and accrued expenses
              
              
              (618,062
              )
              
              148,886Net
                  cash used in operating activities
              
              
              (5,540,053
              )
              
              (3,724,902
              )Cash
                  Flows from Investing Activities:Capital
                  expenditures
              
              
              (8,200
              )
              
              (12,066
              )Net
                  cash used in investing activities
              
              
              (8,200
              )
              
              (12,066
              )Cash
                  Flows from Financing Activities:Proceeds
                  from debt financing
              
              
              -
              
              
              6,000,000Deferred
                  debt financing costs
              
              
              -
              
              
              (758,063
              )Net
                  cash provided by financing activities
              
              
              -
              
              
              5,241,937Net
                  increase/(decrease) in cash and cash equivalents
              
              
              (5,548,253
              )
              
              1,504,969Cash
                  and cash equivalents, beginning of period
              
              
              15,646,225
              
              
              1,478,780Cash
                  and cash equivalents, end of period
              
              $
              10,097,972
              
              $
              2,983,749Supplemental
                  disclosures of non-cash investing and financing
                  activities:Deemed
                  dividends to Series B preferred stockholders on beneficial
                  conversion
              
              $
              3,404,156
              
              $
              -Series
                  B stock dividends payable
              
              $
              1,000,000
              
              $
              -Accrual
                  of deferred financing costs
              
              $
              -
              
              $
              172,867Warrants
                    issued and embedded conversion feature associatedwith
                    debt financing
              
              $
              -
              
              $
              6,000,000Accrued
                    liability recognized pursuant to a share purchaseagreement
                    (Oxis),net
                    of $100,000 premuim expensed during the period.
              
              $
              -
              
              $
              400,000





The
      accompanying notes are an integral part of these unaudited
      condensed consolidated financial statements.





6




**SYNVISTA
      THERAPEUTICS, INC.**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**





**Note
      1 - Significant Accounting Policies**





***Basis
      of Presentation***





The
      accompanying unaudited financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial information and the instructions to Form 10-Q and Rule
      10-01 of Regulation S-X. Accordingly, they do not include all of the information
      and footnotes required by accounting principles generally accepted in the United
      States of America for complete financial statements. In the opinion of
      management, all adjustments (consisting of only normal recurring adjustments)
      considered necessary for a fair presentation have been included. Operating
      results for the six months ended June 30, 2008 are not necessarily indicative
      of
      the results that may be expected for the year ending December 31, 2008. For
      further information, refer to the financial statements and footnotes thereto
      included in the Company's Annual Report on Form 10-K for the year ended December
      31, 2007, as filed with the Securities and Exchange Commission (the “Form
      10-K”). The December 31, 2007 balance sheet is derived from the audited balance
      sheet included in the Form 10-K.





***Principles
      of Consolidation***





The
      accompanying condensed consolidated financial statements include the accounts
      of
      Synvista Therapeutics, Inc. and its wholly owned subsidiary, HaptoGuard, Inc.
      All inter-company accounts and transactions have been eliminated in
      consolidation.





***Reclassifications***





Certain
      prior period balances have been reclassified to conform to the current
      presentation.





**Note
      2 - Liquidity**





The
      Company has devoted substantially all of its resources to research, drug
      discovery and development programs. To date, it has not generated any revenues
      from the sale of products and does not expect to generate any such revenues
      for
      a number of years, if at all. As a result, the Company has incurred net losses
      since inception, has an accumulated deficit of $273,025,172 as of June 30,
      2008,
      and expects to incur net losses, potentially greater than losses in prior years,
      for a number of years, assuming the Company is able to continue as a going
      concern, of which there can be no assurance.





The
      Company has financed its operations through proceeds from the sale of common
      and
      preferred equity securities, debt securities, revenue from former collaborative
      relationships, reimbursement of certain of its research and development expenses
      by collaborative partners, investment income earned on cash and cash equivalent
      balances and short-term investments and the sale of a portion of the Company’s
      New Jersey state net operating loss carryforwards and research and development
      tax credit carryforwards.





As
      of
      June 30, 2008, the Company had working capital of $7,394,461, including
      $10,097,972 of cash and cash equivalents. The Company’s net cash used in
      operating activities for the six months ended June 30, 2008 was $5,540,053
      and
      for the year ended December 31, 2007 was $7,947,000.





In
      August
      2007, we entered into a share purchase agreement for the purchase of $500,000
      of
      newly issued shares of Oxis International Limited (“Oxis”) common stock at a
      premium over the then current market price. It is our understanding that Oxis
      held some value as of June 30, 2008, but it is our position that we will not
      recoup our investment in Oxis. On June 19, 2008, Oxis received a Notice of
      Disposition of Collateral from certain debenture holders. Our investment in
      Oxis
      of $400,000 was written off as of June 30, 2008. This security was restricted
      for sale until the early part of February 2009.





The
      Company expects to continue to utilize cash and cash equivalents to fund its
      operating activities, including continued development of SYI-2074, alagebrium
      and its diagnostic test kits. The amount and timing of the Company’s future
      capital requirements will depend on numerous factors, including the progress of its research
      and development programs, the number and characteristics of product candidates
      that the Company pursues, the conduct of preclinical tests and clinical studies,
      the status and timelines of regulatory submissions, the costs associated with
      protecting patents and other proprietary rights, the ability to complete
      strategic collaborations and the availability of third-party funding, if any.
      The Company expects to have sufficient cash and cash equivalents to satisfy
      its
      working capital requirements into the first quarter of 2009. At the request
      of
      the holders of its Series B preferred stock, the Company may be required to
      pay
      accrued dividends on its Series B preferred stock, totaling $1,875,000 as of
      June 30, 2008, in cash rather than in shares of its Series B preferred
      stock.  While this would reduce the Company’s liquidity, the Company
      believes that its ability to adjust spending levels in a number of its programs
      will permit its continued operations into the first quarter of 2009, regardless
      of the form of dividend payment elected by the holders of its Series B preferred
      stock.




7





The
      Company anticipates that it will require substantial new funding in 2009 to
      pursue development and commercialization of its product candidates and to
      continue its operations. The Company believes that satisfying these capital
      requirements over the long term will require successful commercialization of
      its
      product candidates and/or its diagnostic test kits. However, it is uncertain
      whether any of its products or diagnostic test kits will be approved or will
      be
      commercially successful.





Selling
      securities to satisfy its capital requirements may have the effect of materially
      diluting the current holders of the Company’s outstanding stock. The Company may
      also seek additional funding through corporate collaborations and other
      financing vehicles. There can be no assurances that such funding will be
      available at all or on terms acceptable to the Company. If funds are obtained
      through arrangements with collaborative partners or others, the Company may
      be
      required to relinquish rights to its technologies or product candidates and
      alter its plans for the development of its technologies or product candidates.
      If the Company is unable to obtain the necessary funding, it will likely be
      forced to cease operations.




**Note
      3 - Stock-Based Compensation**





The
      Company has stockholder-approved stock incentive plans for employees, directors,
      officers and consultants.





The
      Company follows Statement of Financial Accounting Standards No. 123(R) (“SFAS
      123(R)”), “Share-Based Payment,” for employee options and uses the Black-Scholes
      option pricing model in valuing its options granted to employees and Directors.





The
      following table shows the weighted average assumptions the Company used to
      develop the fair value estimates for the determination of compensation charges
      relating to its option grants:


Six
                  months endedJune
                  302008
              
              2007Expected
                  volatility
              
              
              107
              %
              
              148
              %Dividend
                  yield
              
              
              -
              
              
              -Expected
                  term (in years)
              
              
              8.31
              
              
              6.12Risk-free
                  interest rate
              
              
              3.88
              %
              
              4.88
              %





Options
      granted to consultants and other non-employees are accounted for in accordance
      with Emerging Issue Task Force No. 96-18 "Accounting for Equity
      Instruments That Are Issued to Other than Employees for Acquiring, or in
      Conjunction with Selling, Goods or Services."  Accordingly, such options
      are recorded at fair value at the date of grant and subsequently adjusted to
      fair value at the end of each reporting period until such options
      vest, and the fair value of the options, as adjusted, is charged to consulting
      expense over the related vesting period.  For the six-months ended
      June 30, 2008, the Company recognized research and development consulting
      expenses of $4,106.




8





For
      the
      three and six month periods ended June 30, 2008, the Company recognized
      share-based employee compensation cost of $194,384 and $222,580, respectively,
      in accordance with SFAS 123(R), “Share-Based Payment,” which was recorded as
      general and administrative and research and development expense. This expense
      related to the granting of stock options to employees, directors and officers
      on
      or after January 1, 2006. None of this expense resulted from the grants of
      stock
      options prior to January 1, 2006. The Company recognized compensation expense
      related to these stock options, taking into consideration a forfeiture rate
      of
      approximately 1% based on historical experience, on a straight-line basis over
      the vesting period. The Company did not capitalize any share-based compensation
      cost.





As
      of
      June 30, 2008, the total compensation cost related to non-vested option awards
      not yet recognized is $1,274,693. The weighted-average period over which this
      cost is expected to be recognized is approximately 2.29 years.





A
      summary
      of the status of the Company’s stock options outstanding as of June 30, 2008 and
      changes during the six months then ended is presented below:


Shares
              
              Weighted
                average
                exercise
                price
              
              Weighted
                Average
                Remaining
                Contractual
                Term
                  (years)
              
              Aggregate
                Intrinsic
                ValueOutstanding
                  atDecember
                  31, 2007
              
              
              876,706
              
              $
              16.00Granted
              
              
              16,000
              
              
              1.88Exercised
              
              
              -
              
              
              -Cancelled
              
              
              (23,801
              )
              
              100.64Outstanding
                  atJune
                  30, 2008
              
              
              868,905
              
              $
              13.42
              
              
              8.29
              
              $
              450.00Options
                  exerciseable atJune
                  30, 2008
              
              
              239,622
              
              $
              40.74
              
              
              5.83
              
              $
              -




*Restricted
      Stock*





The
      Company periodically grants awards of restricted stock to its Board of Directors
      as compensation for service on the Board of Directors. The awards vest during
      various periods ranging from one to three years. There were no shares of
      restricted stock granted during the period ended June 30, 2008. There were
      19,200 shares of restricted stock granted during the year ended December 31,
      2006, of which 6,400 were forfeited in prior periods. Of the 8,520 shares of
      restricted stock that vested, the vesting of 4,280 shares had been accelerated
      by the Board of Directors. The Company recognized compensation cost of $2,668
      and $5,336 for the three and six months ended June 30, 2008, respectively,
      which
      was recorded as general and administrative expense.


9





A
      summary
      of the status of the Company’s non-vested shares as of June 30, 2008 and changes
      during the six months ended June 30, 2008, is presented below:




Nonvested
                  Shares
              
              Shares
              
              Weighted
                  average
                grant
                  date fair
                valueNonvested
                  atDecember 31,
                  2007
              
              
              4,280
              
              $
              7.50Granted
              
              
              -
              
              
              -Vested
              
              
              -
              
              
              -Forfeited
              
              
              -
              
              
              -Nonvested
                  atJune
                  30, 2008
              
              
              4,280
              
              $
              7.50





As
      of
      June 30, 2008, there was $11,286 of total unrecognized compensation cost related
      to nonvested share-based compensation arrangements granted. That cost is
      expected to be recognized over a weighted-average period of 1 year.





**Note
      4 - Net Loss Per Share Applicable to Common Stockholders**





Basic
      net
      loss per share is computed by dividing net loss applicable to common
      stockholders by the weighted average number of shares outstanding during the
      period. Diluted net loss per share is the same as basic net loss per share
      applicable to common stockholders, since the assumed exercise of stock options
      and warrants and the conversion of preferred stock would be antidilutive. The
      amount of potentially dilutive shares excluded from the calculation as of June
      30, 2008 and 2007, was 14,412,421 and 1,194,932 shares,
      respectively.





**Note
      5 - Collaborative Research and Development Agreement**





On
      January 20, 2008, the Company entered into a License Agreement (the “Agreement”)
      with Novel Therapeutic Technology Inc. (“NTT”). The Agreement states that NTT
      will develop a formulation of the Company’s product candidate SYI-2074. The
      Agreement also states that NTT will grant the Company an exclusive worldwide
      license to the product formulation developed as well as to the intellectual
      property rights resulting under the Agreement. An insignificant upfront payment
      was made in January 2008. The Company will also make specified payments to
      NTT
      upon the occurrence of certain milestone events in the clinical development
      of
      the product formulated under the Agreement. In addition, the Company would
      also
      have to pay NTT royalties on any sales of the developed product and a separate
      fee if any of the rights granted under the Agreement are sublicensed by the
      Company.





The
      license granted under the Agreement will be terminated upon the earlier to
      occur
      of (i) the date the Company notifies NTT that it does not intend to proceed
      further with development of formulation of SYI-2074 subject to the Agreement,
      (ii) the date the Company notifies NTT that it does not intend to continue
      to
      commercialize the products developed pursuant to the Agreement, and (iii) the
      later of (a) the expiration of the last valid patent covering the formulation
      of
      the Company’s intellectual property pursuant to the Agreement, which, absent the
      Agreement, would infringe an existing patent, or (b) 15 years from the date
      of
      the first commercial sale of a product pursuant to the Agreement.





**Note
      6 - Series B Preferred Stock and Warrant Purchase
      Agreement**





On
      July
      20, 2007, at the Company’s annual meeting of stockholders, the stockholders of
      the Company approved the
      issuance of securities pursuant to the Series B Preferred Stock and Warrant
      Purchase Agreement dated as of January 11, 2007, as amended. At the closing
      of
      the financing on July 25, 2007, the Company issued 10,000,000 shares of its
      Series B Preferred Stock and warrants to purchase 2,500,000 shares of Series
      B
      Preferred Stock to the investors. The Series B Preferred Stock accrues dividends
      at a rate of 8% per year on the original issue price of $2.50 per share for
      a
      period of five years from the date on which the shares of Series B Preferred
      Stock were issued. As of July 31, 2008, the holders of the Series B Preferred
      Stock have not designated their dividends as payable either in cash or preferred
      stock.




10





**Note
      7 - Subsequent Events**




On
      July
      22, 2008, at the Company’s annual meeting of stockholders, the stockholders of
      the Company approved an amendment to the Company’s 2005 Stock Plan (the “Plan”)
      that increased the number of shares of common stock reserved for issuance under
      the Plan from 1,060,000  shares
      to
      2,000,000 shares.




The
      stockholders of the Company also approved an amendment to the Company’s Restated
      Certificate of Incorporation to decrease the number of shares of common stock
      authorized for issuance from 300,000,000 to 150,000,000. The Company amended
      its
      Restated Certificate of Incorporation to reflect this change on July 24, 2008.




11




**ITEM
        2.**  **Management's
        Discussion and Analysis of Financial Condition**  **and
        Results of Operations.**
  **Overview**





We
      are a
      product-based biotechnology company developing diagnostic and therapeutic
      products to deliver personalized medicine. Our primary therapeutic interest
      is
      the cardiovascular complications of diabetes. Our diagnostic products under
      development are being designed to identify patients at risk for cardiovascular
      complications of diabetes such as stroke, heart attack and death, and may be
      used to guide medical therapy.





We
      are
      developing a diagnostic kit to identify the subset of patients with diabetes
      who
      are at increased risk for cardiovascular disease. The technology underlying
      this
      kit relates to a serum protein called haptoglobin, or Hp. A common variant
      of
      this protein, known as Hp2-2, which is found in 40% of the population, is
      associated with increased cardiovascular risk in diabetic patients. We own
      intellectual property relating to typing using haptoglobin, which is a protein
      found in the blood. This diagnostic test can be used to determine a patient’s
      risk for adverse cardiovascular events. It may also be used to identify a subset
      of diabetic patients in whom daily use of vitamin E could potentially reduce
      the
      rate of heart attack by 50% annually. We are evaluating commercial arrangements
      that would allow our technology or intellectual property to be used by
      commercial enterprises for the aforementioned purposes. Further, we are
      developing a kit that may be submitted to the U.S. Food and Drug Administration
      for pre marketing approval under the 510k pathway for use in determining
      cardiovascular disease risk in diabetic patients. Any successful
      commercialization of such a kit could generate revenues for us in future years
      and could help focus the development of one of our therapeutic product programs,
      known as glutathione peroxidase mimetics, described below.





We
      also
      own intellectual property relating to CML testing. CML, or
      carboxy-methyl-lysine, is a marker of cardiovascular aging that can predict
      adverse health outcomes in the general population and a subpopulation with
      heart
      failure in particular. A “Research Use Only” kit for quantifying CML levels,
      using our proprietary reagents, has been sold in the research community in
      recent years. Given the correlation of CML levels and cardiovascular outcomes
      that has been appearing in the scientific literature, the Company believes
      that
      a CML test may strategically complement the haptoglobin test in the clinical
      diagnostic setting.





Research
      and discovery relating to haptoglobin testing has revealed that some patients,
      identified using the haptoglobin test, exhibit dysfunction in their HDL, or
      high
      density lipoprotein. This HDL dysfunction may explain the increased
      atherosclerosis and adverse cardiovascular outcomes observed in this patient
      population. We have developed a family of new chemical entities that work by
      virtue of their ability to reduce oxidized lipids. Some of these compounds
      have
      been shown to reverse the HDL dysfunction seen in some diabetic patients. We
      are
      evaluating these personalized medicines in animal models designed to better
      characterize HDL function.


As
        previously reported, one of our GPx mimetics, SYI-2074, under development
        for
        the treatment of diabetic patients with Haptoglobin subtype 2-2, did not
        demonstrate a dose-related improvement in all oxidized lipids and all markers
        of
        oxidative stress after treatment with SYI-2074 for one month in Trial 201.
        In
        addition, in Trial 203, SYI-2074 did not provide evidence of protection against
        cardiac injury in diabetic patients who were undergoing angioplasty. The
        Company
        has therefore decided not to advance the development of SYI-2074 as a treatment
        for acute coronary syndrome, while it continues to review and analyze the
        results of these studies.


One
      of
      our product candidates, SYI-2074, which is an older in-licensed family of
      compounds that can reduce oxidized lipids, has been formulated into an ointment
      that may permit topical application and the treatment of mild-moderate plaque
      psoriasis.





We
      are
      developing a compound relevant to the CML marker described above. Alagebrium
      chloride, or alagebrium (formerly ALT-711), is an Advanced Glycation End-product
      Crosslink Breaker being developed for diastolic heart failure and diabetic
      nephropathy. Alagebrium has demonstrated potential efficacy in two clinical
      trials in heart failure, as well as in animal models of heart failure,
      nephropathy, hypertension and erectile dysfunction. These diseases represent
      rapidly growing markets of unmet medical needs, particularly common among
      diabetic patients. The compound has been tested in approximately 1,000 patients,
      which represents a sizeable human safety database, in a number of Phase 2
      clinical studies.





During
      the second quarter of 2008, we announced that we had dosed the first patient
      in
      a 160-patient Phase 2 study of alagebrium in patients with diastolic heart
      failure. BREAK ( **B** eginning
      a **R** andomized **E** valuation
      of the **A.** G.E.
      (Advanced Glycation End Product) Brea **k** er
      Alagebrium in Diastolic Heart Failure) is a randomized, double-blind, placebo
      controlled study to assess the effect of six months of oral treatment with
      400mg
      (200mg twice daily) alagebrium versus placebo in patients diagnosed with
      diastolic heart failure as verified by echocardiography. The trial is ultimately
      expected to enroll 80 patients per cohort and be conducted in as many as 25
      centers in the United States. Investigators intend that at least half of the
      study subjects will have diabetes mellitus. The primary efficacy measure of
      the
      study is improvement of exercise tolerance as assessed by the six-minute walk
      test, an accepted regulatory endpoint. In addition, there will be a number
      of
      secondary and tertiary measurements including the effect of alagebrium on CML
      levels. The Company has also surpassed 50% enrollment in the BENEFICIAL study.
      This trial, being conducted at the University of Gronigen, The Netherlands,
      is
      designed to test the efficacy of alagebrium in heart failure patients with
      low
      ejection fractions, by measuring their improvement in maxVO2 (maximum oxygen
      consumption), a measure of exercise tolerance.




12





***Future
      Development Plans***





We
      are
      also managing a discovery and development program aiming to produce small
      molecule drugs that mimic the enzyme glutathione peroxidase, or GPx. We believe
      that GPx is one of the only enzymes in the human body that reduces oxidized
      lipids. By recreating the activity of this enzyme in a small molecule we may
      be
      able to treat diseases in which oxidized lipids are thought to play a
      significant role.





In
      January 2008, we announced the signing of an agreement with privately-held
      Novel
      Therapeutic Technologies Inc. to provide us with formulation work for a topical
      cream formulation of one of our GPx mimetics, SYI-2074, for the treatment of
      psoriasis. This work will be performed at a major clinical institution in
      Israel. SYI-2074 may have potential i n
      the
      treatment of plaque psoriasis because SYI-2074 can block TNF-α activated
      expression of cell adhesion molecules, I-CAM and V-CAM, which may be essential
      for cellular migration. TNF-α is an established target for drug development in
      psoriasis and othe r
      autoimmune diseases. We have identified sites in Israel to perform a planned
      Phase 2 clinical trial beginning in the third quarter of 2008, pending approval
      from the Ministry of Health in Israel.





As
      previously reported, we also expect that alagebrium will be studied in a
      clinical trial of patients with Type I diabetes and microalbuminuria (protein
      in
      the urine), funded by the Juvenile Diabetes Research Foundation. This study
      has
      already dosed its first patient, but as observers of the trial without
      responsibility for its performance, we cannot project the date or likelihood
      of
      this trial’s completion.





We
      continue to evaluate potential pre-clinical and clinical studies in other
      therapeutic indications in which alagebrium and SYI-2074 may address significant
      unmet needs. For alagebrium, in addition to our anticipated clinical studies
      in
      heart failure, we have conducted preclinical studies focusing on
      atherosclerosis; Alzheimer's disease; photoaging of the skin; eye diseases,
      including age-related macular degeneration, and glaucoma; and other diabetic
      complications, including renal diseases.





Since
      our
      inception in October 1986, we have devoted substantially all of our resources
      to
      research, drug discovery and development programs. To date, we have not
      generated any revenues from the sale of products and do not expect to generate
      any such revenues for a number of years, if at all. We have incurred an
      accumulated deficit of $273,025,172 as of June 30, 2008, and expect to incur
      net
      losses, potentially greater than losses in prior years, for a number of
      years.





We
      have
      financed our operations through proceeds from public offerings of common stock,
      private placements of common and preferred equity and debt securities, revenue
      from former collaborative relationships, reimbursement of certain of our
      research and development expenses by our collaborative partners, investment
      income earned on cash and cash equivalent balances and short-term investments
      and the sale of a portion of our New Jersey State net operating loss
      carryforwards and research and development tax credit
      carryforwards.





Our
      business is subject to significant risks including, but not limited to, (1)
      our
      ability to obtain and maintain sufficient financial resources to conduct and
      continue enrollment in our clinical studies of SYI-2074 and alagebrium, (2)
      the
      risks associated with our development of a diagnostic kit, (3) the risks
      inherent in our research and development efforts, including clinical trials
      and
      the length, expense and uncertainty of the process of seeking regulatory
      approvals for our product candidates, (4) uncertainties associated with
      obtaining and enforcing our patents and with the patent rights of others, (5)
      uncertainties regarding government healthcare reforms and product pricing and
      reimbursement levels, (6) technological change and competition, (7)
      manufacturing uncertainties, and (8) dependence on collaborative partners and
      other third parties. Even if our product candidates appear promising at an
      early
      stage of development, they may not reach the market for numerous reasons. These
      reasons include the possibilities that the products will prove ineffective
      or
      unsafe during preclinical or clinical studies, will fail to receive necessary
      regulatory approvals, will be difficult to manufacture on a large scale, will
      be
      uneconomical to market or will be precluded from commercialization by
      proprietary rights of third parties, or that we will be unable to develop and
      commercialize our proposed diagnostic kit. These risks and others are discussed
      in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007
      that we filed with the Securities and Exchange Commission on March 31, 2008
      under the heading “Item 1A - Risk Factors.”




13





**Results
      of Operations**





**Three
      Months ended June 30, 2008 and 2007**





*License
      and Other Revenue*





Total
      license and other revenue for the three months ended June 30, 2008 and 2007,
      was
      $52,000 and $50,000, respectively, inclusive of $50,000 received from a
      licensing agreement with Avon Products, Inc., which we entered into in June
      2005.





*Other
      Income/Expense*





Investment
      income for the three months ended June 30, 2008 and 2007, was $75,000 and
      $27,000, respectively. Income was derived from interest earned on cash and
      cash
      equivalents and short-term investments. The increase in investment income was
      due to higher cash balances as a result of our preferred stock financing in
      July
      2007.





Our
      interest expense was $2,000 for the three months ended June 30, 2008, compared
      to $3,230,000 for the period ended June 30, 2007. The decrease was the result
      of
      interest expense relating to our private debt financing completed in January
      2007.





We
      recognized $400,000 of other expense in June 2008, as a result of the write-off
      of our investment in Oxis International common stock.





*Operating
      Expenses*





Total
      operating expenses were $2,774,000 for the three months ended June 30, 2008,
      compared to $2,345,000 for the three months ended June 30, 2007, and consisted
      primarily of research and development expenses and general and administrative
      expenses in 2008 and 2007. Research and development expenses normally include
      third-party expenses associated with pre-clinical, clinical, and diagnostic
      studies, manufacturing costs, including the development and preparation of
      clinical supplies, personnel and personnel-related expenses, and facility
      expenses.





*Research
      and Development*





Research
      and development expenses were $1,670,000 for the three months ended June 30,
      2008, as compared to $1,653,000 for the same period in 2007, an increase of
      $17,000, or 1%. This increase was attributed to higher research study costs
      and
      personnel-related costs, partially offset by $800,000 of lower license fees.





For
      the
      three months ended June 30, 2008, personnel-related research and development
      costs totaled $227,000, compared to $54,000 for the same period in 2007, an
      increase of $173,000, or 320%. This increase was primarily driven by the hiring
      of additional personnel within the Clinical, Pre-Clinical, and Diagnostic
      departments.





Outside
      of license fees, research study costs were higher for the three months ended
      June 30, 2008 as compared to 2007. For the three months ended June 30, 2008,
      the
      total amount spent on research study costs was $1,415,000, inclusive of $778,000
      of clinical trial costs, $298,000 of third party consulting costs, $117,000
      of
      manufacturing and storage expenses, $80,000 of patent expenses, $53,000 of
      product liability insurance, $44,000 of regulatory costs, and $35,000 of
      sponsored research and research funding expenses. For the same period in 2007,
      we incurred $1,587,000 of research study costs, inclusive of $800,000 of license
      fees, $534,000 of clinical trial expenses, $121,000 of third party consulting
      expenses, $85,000 of patent expenses, and $36,000 of product liability
      insurance.




14





*General
      and Administrative*





General
      and administrative expenses were $962,000 for the three months ended June 30,
      2008, as compared to $692,000 for the same period in 2007, for an increase
      of
      $270,000, or 39%. The increase in 2008 was primarily related to higher
      personnel-related expenses by $234,000 and an increase in investor relations
      costs of $81,000, partially offset by lower administrative and consulting
      expenses.





*Selling
      and Marketing*





In
      the
      second quarter of 2008, we began commercial planning efforts surrounding our
      haptoglobin diagnostic kits. Selling and marketing expenses for the three months
      ended June 30, 2008, were $142,000, inclusive of $89,000 of personnel-related
      expenses, and $28,000 of medical education expenses. There were no such expenses
      during the comparable period in 2007.





*Net
      Loss*




We
      had
      net losses of $3,049,000, and $5,498,000 in the three months ended June 30,
      2008
      and 2007, respectively. We had net losses applicable to common stockholders
      for
      the three months ended June 30, 2008 and 2007, of $5,251,000 and $5,498,000,
      respectively, inclusive of preferred
      stock dividends of $2,202,000 and $0 for the three months ended June 30, 2008
      and 2007, respectively.





**Six
      Months ended June 30, 2008 and 2007**





*License
      and Other Revenue*





Total
      license and other revenue for the six months ended June 30, 2008 and 2007,
      was
      $54,000 and $50,000, respectively, inclusive of $50,000 received from a
      licensing agreement with Avon Products, Inc., which we entered into in June
      2005. In 2008, we also received $2,000 from a royalty agreement with ARUP
      Laboratories, which was entered into in June 2004.





*Other
      Income/Expense*





Investment
      income for the six months ended June 30, 2008 and 2007, was $210,000 and
      $63,000, respectively. Income was derived from interest earned on cash and
      cash
      equivalents and short-term investments. The increase in investment income was
      due to higher cash balances as a result of our preferred stock financing in
      July
      2007.





Our
      interest expense was $3,000 for the six months ended June 30, 2008, compared
      to
      $5,235,000 for the period ended June 30, 2007. The decrease was the result
      of
      interest expense relating to our private debt financing completed in January
      2007.





We
      recognized $400,000 of other expense in June 2008, as a result of the write-off
      of our investment in Oxis International common stock.





*Operating
      Expenses*





Total
      operating expenses were $5,389,000 for the six months ended June 30, 2008,
      compared to $4,041,000 for the six months ended June 30, 2007, and consisted
      primarily of research and development expenses and general and administrative
      expenses in 2008 and 2007. Research and development expenses normally include
      third-party expenses associated with pre-clinical, clinical, and diagnostic
      studies, manufacturing costs, including the development and preparation of
      clinical supplies, personnel and personnel-related expenses, and facility
      expenses.





15





*Research
      and Development*





Research
      and development expenses were $3,390,000 for the six months ended June 30,
      2008,
      as compared to $2,401,000 for the same period in 2007, an increase of $989,000
      or 41%. This increase was attributed to higher personnel-related costs and
      higher research study costs offset by $800,000 of lower license fees.





For
      the
      six months ended June 30, 2008, personnel-related research and development
      costs
      totaled $453,000, compared to $156,000 for the same period in 2007, an increase
      of $297,000, or 190%. This increase was primarily driven by the hiring of
      additional personnel within the Clinical, Pre-Clinical, and Diagnostic
      departments.





For
      the
      six months ended June 30, 2008, research study costs totaled $2,876,000,
      compared to $2,205,000 for the same period in 2007, an increase of $671,000,
      or
      30%. In 2008, research study costs included $1,456,000 of clinical trial costs,
      $404,000 of manufacturing and storage expenses, $394,000 of third party
      consulting costs, $218,000 of sponsored research and research funding, $215,000
      of patent expense, $75,000 of product liability insurance, $52,000 of regulatory
      costs, and $40,000 of license fees. Comparatively, in 2007, research study
      costs
      consisted of $811,000 of clinical trial costs, $800,000 of license fees,
      $366,000 of patent expense, and $180,000 of third party consulting
      costs.





*General
      and Administrative*





General
      and administrative expenses were $1,857,000 for the six months ended June 30,
      2008, as compared to $1,640,000 for the same period in 2007, for an increase
      of
      $217,000, or 13%. The increase in 2008 was primarily related to higher
      personnel-related expenses by $296,000, an increase in investor relations costs
      of $89,000, higher franchise taxes of $56,000, higher repairs and maintenance
      costs by $37,000, and an increase in fees relating to Sarbanes-Oxley compliance
      of $31,000. These increases were partially offset by lower administrative and
      consulting expenses of $120,000 and $78,000, respectively, as well as lower
      legal costs by $41,000, facility costs by $26,000, and insurance costs by
      $25,000.





*Selling
      and Marketing*





In
      the
      second quarter of 2008, we began commercial planning surrounding our haptoglobin
      diagnostic kits. Selling and marketing expenses for the six months ended June
      30, 2008, were $142,000, inclusive of $89,000 of personnel-related expenses,
      and
      $28,000 of medical education related expenses. There were no such expenses
      during the comparable period in 2007.





*Net
      Loss*




We
      had
      net losses of $5,528,000 and $9,164,000 in the six months ended June 30, 2008
      and 2007, respectively. We had net losses applicable to common stockholders
      for
      the six months ended June 30, 2008 and 2007, of $9,933,000 and $9,164,000,
      inclusive of preferred
      stock dividends of $4,404,000 and $0 for the six months ended June 30, 2008
      and
      2007, respectively.





**Liquidity
      and Capital Resources** ****




We
      had
      cash and cash equivalents at June 30, 2008, of $10,098,000, compared to
      $15,646,000 at December 31, 2007. The decrease is primarily attributable to
      $5,540,000 of net cash used in operating activities. At June 30, 2008, we had
      working capital of $7,394,000.





We
      do not
      have any approved products and currently derive cash from sales of our
      securities, sales of our New Jersey state net operating loss carryforwards
      and
      interest on cash and cash equivalents. We are highly susceptible to conditions
      in the global financial markets and in the pharmaceutical industry. Positive
      and
      negative movement in those markets will continue to pose opportunities and
      challenges to us. Previous downturns in the market valuations of biotechnology
      companies and of the equity markets more generally have restricted our ability
      to raise additional capital on favorable terms.




16




In
      August
      2007, we entered into a share purchase agreement for the purchase of $500,000
      of
      newly issued shares of Oxis International Limited (“Oxis”) common stock at a
      premium over the then current market price. It is our understanding that Oxis
      held some value as of June 30, 2008, but it is our position that we will not
      recoup our investment in Oxis. On June 19, 2008, Oxis received a Notice of
      Disposition of Collateral from certain debenture holders. Our investment in
      Oxis
      was written off as of June 30, 2008. This security was restricted for sale
      until
      the early part of February 2009.





On
      July
      25, 2007, institutional investors purchased $25,000,000 of newly created Series
      B Preferred Stock and warrants to purchase shares of Series B Preferred Stock.
      At the closing of the financing, we issued 10,000,000 shares of our Series
      B
      Preferred Stock and warrants to purchase 2,500,000 shares of Series B Preferred
      Stock. The Series B Preferred Stock accrues dividends at a rate of 8% per year
      on the original issue price of $2.50 per share for a period of five years from
      the date on which the shares of Series B Preferred Stock were issued. The
      warrants are exercisable for a period of five years commencing on July 25,
      2007
      at an exercise price of $2.50 per share.





We
      expect
      to utilize cash and cash equivalents to fund our operating activities, including
      continued development of SYI-2074 and alagebrium and development of a diagnostic
      kit. Based on our projected spending levels, the remaining cost of our current
      trials and the development of such a diagnostic kit, which are expected to
      continue into 2009, exclusive of our internal costs, is estimated to be
      $4,000,000. The cost includes executed, but cancelable, agreements with outside
      organizations. The amount and timing of our future capital requirements will
      depend on numerous factors, including the
      progress and timing of our
      research and development programs, the number and characteristics of product
      candidates that we pursue, the conduct of preclinical tests and clinical
      studies, the status and timelines of regulatory submissions, the costs
      associated with protecting patents and other proprietary rights, the ability
      to
      complete strategic collaborations and the availability of third-party funding,
      if any. We expect to have sufficient cash and cash equivalents to satisfy our
      working capital requirements into the first quarter of 2009. The Company may
      be
      required to pay accrued dividends on its preferred stock, totaling $1,875,000
      as
      of June 30 in cash, rather than in stock, at the request of the Preferred Stock
      holders.  While this would reduce the Company’s liquidity, the Company
      believes that its ability to adjust spending levels in a number of programs
      will
      permit its continued operations into the first quarter of 2009, regardless
      of
      the form of dividend payment elected by the holders of our Series B preferred
      stock.





We
      will
      require, over the longer term, substantial additional funding to continue
      development and commercialization of SYI-2074, alagebrium and our other product
      candidates and to continue our operations. We believe that satisfying these
      capital requirements over the long term will require successful
      commercialization of our product candidates. However, it is uncertain whether
      any product candidates will be approved or will be commercially
      successful.





Selling
      securities to satisfy our capital requirements may have the effect of materially
      diluting the current holders of our outstanding stock. We may also seek
      additional funding through corporate collaborations and other financing
      vehicles. There can be no assurances that such funding will be available at
      all
      or on terms acceptable to us. If funds are obtained through arrangements with
      collaborative partners or others, we may be required to relinquish rights to
      our
      technologies or product candidates and alter our plans for the development
      of
      our product candidates. If we are unable to obtain the necessary funding, we
      may
      be forced to cease operations. There can be no assurance that the products
      or
      technologies that we are currently developing will result in revenues to us
      or
      any meaningful return on investment to our stockholders.





**Critical
      Accounting Policies******





As
      of the
      date of the filing of this quarterly report, we believe there have been no
      material changes to our critical accounting policies and estimates during the
      six months ended June 30, 2008.





***Forward-Looking
      Statements and Cautionary Statements***





Statements
      in this Form 10-Q that are not statements or descriptions of historical facts
      are "forward-looking" statements under Section 21E of the Securities Exchange
      Act of 1934, as amended, and the Private Securities Litigation Reform Act of
      1995, and are subject to numerous risks and uncertainties. These forward-looking
      statements and other forward-looking statements made by us or our
      representatives are based on a number of assumptions. The words "believe,"
      "expect," "anticipate," "intend," "estimate" or other expressions, which are
      predictions of or indicate future events and trends and which do not relate
      to
      historical matters, identify forward-looking statements. Readers are cautioned
      not to place undue reliance on these forward-looking statements, as they involve
      risks and uncertainties, and actual results could differ materially from those
      currently anticipated due to a number of factors, including those set forth
      in
      this section and elsewhere in this Form 10-Q.




17





The
      forward-looking statements represent our judgments and expectations as of the
      date of this Report. We assume no obligation to update any such forward-looking
      statements.





**ITEM
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk.**





Our
      exposure to market risk for changes in interest rates relates primarily to
      our
      investment in marketable securities. We do not use derivative financial
      instruments in our investments. All of our investments reside in money market
      accounts. Accordingly, we do not believe that there is any material market
      risk
      exposure with respect to derivative or other financial instruments that would
      require disclosure under this Item.





**ITEM
      4T.**  **Controls
      and Procedures.**





a)  *Evaluation* ****** *of
      Disclosure Controls and Procedures.* Our
      management has evaluated, with the participation of our Chief Executive Officer
      and our Director of Finance and Administration, Principal Financial Officer,
      the
      effectiveness of our disclosure controls and procedures (as defined in Rule
      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
      (the "Exchange Act")) as of the end of the fiscal quarter covered by this
      Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Executive
      Officer and the Director of Finance and Administration, Principal Financial
      Officer have concluded that as of the end of such fiscal quarter, our current
      disclosure controls and procedures as
      of
      that date were effective to ensure that information required to be disclosed
      in
      the reports filed under the Exchange Act was recorded, processed, summarized
      and
      reported on an accurate and timely basis.





b)   *Changes
      in Internal Control Over Financial Reporting.* There
      were no changes in our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended
      June 30, 2008 that have materially affected, or are reasonably likely to
      materially affect, our internal control over financial reporting.





18




**PART
      II - OTHER INFORMATION**





**Item
      1A. Risk Factors.**





**Risks
      Related To Our Business**





***We
      will continue to need additional capital, but access to such capital is
      uncertain.***




As
      of
      June 30, 2008, we had cash and cash equivalents on hand of $10,097,972. Our
      future capital needs will depend on many factors, including our research and
      development activities and the success thereof, the scope of our clinical trial
      programs, the timing of regulatory approval for our products under development
      and the successful commercialization of our products. Our needs may also depend
      on the magnitude and scope of our activities, the progress and the level of
      success in our clinical trials, the costs of preparing, filing, prosecuting,
      maintaining and enforcing patent claims and other intellectual property rights,
      competing technological and market developments, changes in or terminations
      of
      existing collaboration and licensing arrangements, the establishment of new
      collaboration and licensing arrangements and the cost of manufacturing scale-up
      and development of marketing activities, if undertaken by us. In addition,
      the
      holders of our Series B preferred stock have the option to receive dividends
      in
      the form of cash or additional shares of Series B preferred stock. As of June
      30, 2008, the amount of the accrued dividend on our outstanding shares of Series
      B preferred stock was $1,875,000. Accordingly, the amount of funds that we
      will
      have available in the future for the development of our product candidates
      may
      be reduced if the holders of our Series B preferred stock choose to receive
      dividends in the form of cash. We currently do not have committed external
      sources of funding and may not be able to secure additional funding on any
      terms
      or on terms that are favorable to us. If we raise additional funds by issuing
      additional stock, further dilution to our existing stockholders will result, and
      new investors may negotiate for rights superior to existing stockholders. If
      adequate funds are not available, we may be required to:





·
              delay,
                  reduce the scope of or eliminate one or more of our development
                  programs;




·
              obtain
                  funds through arrangements with collaboration partners or others
                  that may
                  require us to relinquish rights to some or all of our technologies,
                  product candidates or products that we would otherwise seek to
                  develop or
                  commercialize ourselves;




·
            license
                rights to technologies, product candidates or products on terms that
                are
                less favorable to us than might otherwise be
                available;




·
              seek
                  a buyer for all or a portion of our business;
                  or




·
              wind
                  down our operations and liquidate our assets on terms that are
                  unfavorable
                  to us.




**ITEM
      6.**  **Exhibits.**





Exhibits





See
      the
“Exhibit Index” on page 21 for exhibits required to be filed with this Quarterly
      Report on


Form
      10-Q.





19




**SIGNATURES**





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





Date:
      August 14, 2008


**SYNVISTA
                THERAPEUTICS, INC.**By:
            /s/
              Noah
              Berkowitz, M.D., Ph.D.Noah
                Berkowitz, M.D., Ph.D.
              President
                and Chief Executive Officer
              (principal
                executive officer)




By:
            /s/
              Wendy A. MiliciWendy
                  A. Milici
                (principal
                  financial officer)




By:
            /s/
              Alex
              D’AmicoAlex
                    D’Amico
                  (principal
                    accounting officer)




20




**EXHIBIT
      INDEX**




Exhibit
                  No.
              
              Description
                  of Exhibit3.1
              
              Restated
                  Certificate of Incorporation, as amended, of Synvista Therapeutics,
                  Inc.31.1
              
              Certification
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.31.2
              
              Certification
                  Pursuant to Section 302 of the Sarbanes-Oxley Act of
                  2002.32.1
              
              Certification
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.




21