UNITED STATES
                       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, 2006.

                                       or

|_|     TRANSITION  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
        EXCHANGE  ACT OF 1934 for the transition period from _______ to _______.

                        Commission file number: 000-25669

                         IMMTECH PHARMACEUTICALS, INC.
      -------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

               Delaware                                  39-1523370
---------------------------------------       ----------------------------------
   (State or other jurisdiction of                    (I.R.S. Employer
    incorporation or organization)                  Identification No.)

                 One North End Avenue, New York, New York 10282
--------------------------------------------------------------------------------
  (Address of principal executive offices)          (Zip Code)

                  Registrant's telephone number: (847) 573-0033

--------------------------------------------------------------------------------
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 |_|

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer or a  non-accelerated  filer.  See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2.

Large Accelerated filer |_|   Accelerated Filer |X|   Non-Accelerated Filer |_|

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act. Yes |_|  No |X|

As of August 8, 2006,  14,014,356  shares of the Registrant's  common stock, par
value $0.01 per share ("Common Stock"), were outstanding.



<PAGE>



                                Table Of Contents

                                                                         Page(s)


PART I         FINANCIAL INFORMATION...........................................2

Item 1           Condensed Consolidated Financial Statements...................2
Item 2           Management's Discussion and Analysis of
                  Financial Condition and Results of Operations...............21
Item 3           Quantitative and Qualitative Disclosures about
                  Market Risk.................................................24
Item 4           Controls and Procedures......................................24


PART II        OTHER INFORMATION..............................................25

Item 1           Legal Proceedings............................................25
Item 1A          Risk Factors.................................................25
Item 2           Unregistered Sales of Equity Securities and
                  Use of Proceeds.............................................26
Item 3           Defaults Upon Senior Securities..............................26
Item 4           Submission of Matters to a Vote of Security
                  Holders.....................................................26
Item 5           Other Information............................................27
Item 6           Exhibits.....................................................27



                                      -i-
<PAGE>



                       PART I.        FINANCIAL INFORMATION

        Item 1.      Condensed Consolidated Financial Statements.
                     -------------------------------------------

IMMTECH PHARMACEUTICALS, INC. AND
SUBSIDIARIES
(A Development Stage Enterprise)

<TABLE>
<CAPTION>

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
------------------------------------------------------------------------------------------------------

                                                                       June 30,            March 31,
ASSETS                                                                   2006                 2006
<S>                                                             <C>                 <C>
CURRENT ASSETS:
  Cash and cash equivalents                                     $     11,916,610    $       14,137,867
  Restricted funds on deposit                                          4,767,171               530,186
  Other current assets                                                   394,877               193,059
                                                                ----------------    ------------------

           Total current assets                                       17,078,658            14,861,112

PROPERTY AND EQUIPMENT - Net                                           3,550,715             3,555,965


OTHER ASSETS                                                             136,942               137,341
                                                                ----------------    ------------------

TOTAL                                                           $     20,766,315    $       18,554,418
                                                                ================    ==================


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                              $      2,747,231   $         2,328,965
  Accrued expenses                                                       234,135               226,749

  Deferred revenue                                                     4,103,076               395,779
                                                                ----------------    ------------------

           Total current liabilities                                   7,084,442             2,951,493



           Total liabilities                                           7,084,442             2,951,493
                                                                ----------------    ------------------


STOCKHOLDERS' EQUITY:

  Preferred stock, par value $0.01 per share, 3,913,000
    shares authorized and unissued as of June 30, 2006 and
    March 31, 2006.
  Series A convertible preferred stock, par value $0.01 per
    share, stated value $25 per share, 320,000 shares
    authorized, 58,400 shares issued and outstanding as of
    June 30, 2006 and March 31, 2006; aggregate liquidation
    preference of $1,477,945 as of June 30, 2006.                      1,477,945             1,499,785
  Series B convertible preferred stock, par value $0.01 per
    share, stated value

</TABLE>

-2-

<PAGE>

<TABLE>
<S>                                                             <C>                 <C>
    $25 per share, 240,000 shares authorized, 13,464 shares
    issued and outstanding as of June 30, 2006 and March 31,
    2006; aggregate liquidation preference of $341,907 as of
    June 30, 2006.                                                       341,907               348,621
  Series C convertible preferred stock, par value $0.01 per
    share, stated value $25 per share, 160,000 shares
    authorized, 45,536 shares issued and outstanding as of
    June 30, 2006 and March 31, 2006; aggregate liquidation
    preference of $1,157,639 as of June 30, 2006.                      1,157,639             1,180,345
  Series D convertible preferred stock, par value $0.01 per
    share, stated value $25 per share, 200,000 shares
    authorized, 117,200 shares issued and outstanding as of
    June 30, 2006 and March 31, 2006; aggregate liquidation
    preference of $2,967,085 as of June 30, 2006.                      2,967,085             3,010,914
  Series E convertible preferred stock, par value $0.01 per
    share, stated value $25 per share, 167,000 shares
    authorized, 110,600 and 156,600 shares issued and
    outstanding as of June 30, 2006 and March 31, 2006,
    respectively; aggregate liquidation preference of
    $2,800,031 as of June 30, 2006.                                    2,800,031             3,975,528
  Common stock, par value $0.01 per share, 100,000,000
    shares authorized, 13,995,666 and 13,758,506 shares
    issued and outstanding as of June 30, 2006 and March 31,
    2006, respectively                                                   139,957               137,585
  Additional paid-in capital                                          96,378,926            94,292,235

  Deficit accumulated during the developmental stage                 (91,581,617)          (88,842,088)

           Total stockholders' equity                                 13,681,873            15,602,925
                                                                ----------------    ------------------

TOTAL                                                           $     20,766,315    $       18,554,418
                                                                ================    ==================


See notes to condensed consolidated financial statements.

</TABLE>



-3-

<PAGE>



IMMTECH PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)

<TABLE>
<CAPTION>

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
-----------------------------------------------------------------------------------------------------



                                                                                         October 15,
                                                             Three Months Ended             1984
                                                                  June 30,             (Inception) to
                                                         --------------------------       June 30,
                                                             2006          2005             2006

<S>                                                      <C>           <C>             <C>
REVENUES                                                 $  1,941,609  $  1,478,580    $  22,706,349
                                                         ------------  ------------    -------------

EXPENSES:
  Research and development                                  2,468,836     2,269,207       53,822,390

  General and administrative                                2,219,855     2,732,273       57,102,655


  Equity in loss of joint venture                                                            135,002
                                                         ------------  ------------    -------------

           Total expenses                                   4,688,691     5,001,480      111,060,047
                                                         ------------  ------------    -------------

LOSS FROM OPERATIONS                                       (2,747,082)   (3,522,900)     (88,353,698)
                                                         ------------  ------------    -------------


OTHER INCOME (EXPENSE):
  Interest income                                             150,361        57,587        1,094,548

  Interest expense                                                                        (1,129,502)

  Loss on sales of investment securities - net                                                (2,942)

  Cancelled offering costs                                                                  (584,707)

  Gain on extinguishment of debt                                                           1,427,765
                                                         ------------  ------------    -------------

           Other income                                       150,361        57,587          805,162
                                                         ------------  ------------    -------------


NET LOSS                                                   (2,596,721)   (3,465,313)     (87,548,536)


CONVERTIBLE PREFERRED STOCK DIVIDENDS AND CONVERTIBLE
  PREFERRED STOCK PREMIUM DEEMED DIVIDENDS                   (142,808)     (118,822)      (6,402,980)


REDEEMABLE PREFERRED STOCK CONVERSION, PREMIUM
  AMORTIZATION AND DIVIDENDS                                                               2,369,899
                                                         ------------  ------------    -------------

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS             $ (2,739,529) $ (3,584,135)   $ (91,581,617)
                                                         ============  ============    =============



BASIC AND DILUTED NET LOSS PER SHARE ATTRIBUTABLE

</TABLE>



-4-

<PAGE>


<TABLE>
<S>                                                      <C>           <C>
    TO COMMON STOCKHOLDERS:
  Net loss                                               $      (0.19) $      (0.30)
  Convertible preferred stock dividends and convertible
    preferred stock premium deemed dividends                    (0.01)        (0.01)

BASIC AND DILUTED LOSS PER SHARE ATTRIBUTABLE
  TO COMMON STOCKHOLDERS                                 $      (0.20) $      (0.31)
                                                         ============  ============

WEIGHTED AVERAGE SHARES USED IN COMPUTING
  BASIC AND DILUTED NET LOSS PER SHARE                     13,920,324    11,390,899
                                                         ============  ============



See notes to condensed consolidated financial statements.

</TABLE>







-5-
<PAGE>



IMMTECH PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A Development Stage Enterprise)


<TABLE>
<CAPTION>

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
----------------------------------------------------------------------------------------------------


                                                                                         October 15,
                                                             Three Months Ended             1984
                                                                  June 30,             (Inception) to
                                                         --------------------------       June 30,
                                                             2006          2005             2006

<S>                                                      <C>           <C>             <C>
OPERATING ACTIVITIES:
  Net loss                                               $ (2,596,721) $ (3,465,313)   $ (87,548,536)


  Adjustments to reconcile net loss to net cash
    used in operating activities:

    Compensation recorded related to issuance of
      common stock, common stock options and
      warrants                                                676,080        37,281       28,417,607



    Depreciation and amortization of property and
      equipment                                                39,262        38,322        1,075,682


    Equity in loss of joint venture                                                          135,002

    Loss on sales of investment securities - net                                               2,942

    Amortization of debt discounts and issuance
      costs                                                                                  134,503

    Gain on extinguishment of debt                                                        (1,427,765)

    Changes in assets and liabilities:

      Other current assets                                   (201,818)     (323,002)        (394,877)
      Other assets                                                399           128         (136,942)
      Accounts payable                                        418,266      (816,104)       3,074,766
      Accrued expenses                                          7,386       986,442          897,148
      Deferred revenue                                      3,707,297      (478,580)       4,103,076
                                                         ------------  ------------    -------------

           Net cash provided by (used in)
             operating activities
                                                            2,050,151    (4,020,826)     (51,667,394)
                                                         ------------  ------------    -------------

INVESTING ACTIVITIES:
  Purchase of property and equipment                          (34,012)      (23,971)      (1,599,467)
  Restricted funds on deposit                              (4,236,985)      287,914       (4,767,171)
  Advances to joint venture                                                                 (135,002)
  Proceeds from maturities of investment
    securities                                                                             1,800,527
  Purchases of investment securities                                                      (1,803,469)
                                                         ------------  ------------    -------------

           Net cash provided by (used in)
             investing activities                          (4,270,997)      263,943       (6,504,582)
                                                         ------------  ------------    -------------

FINANCING ACTIVITIES:
  Advances from stockholders and affiliates                                                  985,172
  Proceeds from issuance of notes payable                                                  2,645,194
  Principal payments on notes payable                                                       (218,119)
  Payments for debt issuance costs                                                           (53,669)

</TABLE>


-6-

<PAGE>


<TABLE>
<S>                                                                                         <C>
  Payments for extinguishment of debt                                                       (203,450)
  Net proceeds from issuance of redeemable
    preferred stock                                                                        3,330,000
  Net proceeds from issuance of convertible
    preferred stock and warrants                                                          17,085,434
  Payments of convertible preferred stock
    dividends and for fractional shares of common
    stock resulting from the conversions of
    convertible preferred stock                                  (405)         (536)          (5,219)
  Net proceeds from issuance of common stock                       (6)       39,441       46,277,684


  Additional capital contributed by stockholders                                             245,559
                                                         ------------  ------------    -------------

           Net cash provided by (used in) provided
             by financing activities                             (411)       38,904       70,088,586
                                                         ------------  ------------    -------------


NET INCREASE (DECREASE) IN CASH AND CASH
      EQUIVALENTS                                          (2,221,257)   (3,717,979)      11,916,610

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD             14,137,867     9,471,694                -
                                                         ------------  ------------    -------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                 $ 11,916,610  $  5,753,715    $  11,916,610
                                                         ============  ============    =============

NON-CASH FINANCING ACTIVITY - DEFERRED OFFERING
      COSTS FINANCED WITH ACCOUNTS PAYABLE

See notes to condensed consolidated financial statements.

</TABLE>





-7-

<PAGE>



IMMTECH PHARMACEUTICALS, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
--------------------------------------------------------------------------------


1.   BASIS OF PRESENTATION

     The  accompanying  condensed  consolidated  financial  statements have been
     prepared  by  Immtech  Pharmaceuticals,  Inc.  and  its  subsidiaries  (the
     "Company")  pursuant to the rules and  regulations  of the  Securities  and
     Exchange Commission ("SEC") and, in the opinion of management,  include all
     adjustments necessary for a fair statement of results for each period shown
     (unless  otherwise noted herein,  all adjustments are of a normal recurring
     nature).  Certain information and footnote disclosures normally included in
     financial  statements  prepared in accordance  with  accounting  principles
     generally  accepted in the United States of America have been  condensed or
     omitted  pursuant to such SEC rules and  regulations.  The Company believes
     that the disclosures made are adequate to prevent the financial information
     given  from  being  misleading.   It  is  suggested  that  these  financial
     statements be read in conjunction  with the financial  statements and notes
     thereto included in the Company's latest Annual Report on Form 10-K.

2.   COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Description  of Business - Immtech  Pharmaceuticals,  Inc.  (a  development
     stage enterprise) and its subsidiaries  (the "Company") are  pharmaceutical
     companies working to commercialize oral drugs to treat infectious  diseases
     by applying their proprietary  aromatic cation  technology  platform to the
     treatment of cancer,  diabetes and other diseases. The Company has advanced
     clinical  programs that include new  treatments  for malaria,  Pneumocystis
     pneumonia ("PCP") and African sleeping sickness (trypanosomiasis), and drug
     development programs for fungal infections,  hepatitis C, and tuberculosis.
     The Company has worldwide licensing and exclusive  commercialization rights
     to a large  library of  well-defined  compounds  from  which a pipeline  of
     therapeutic products could be developed.

     The Company holds worldwide patents and patent  applications,  and licenses
     and rights to license  technology,  primarily from a scientific  consortium
     that has granted to the Company exclusive rights to commercialize  products
     from,  and license  rights to the  technology.  The  scientific  consortium
     includes  scientists  from The  University of North Carolina at Chapel Hill
     ("UNC-CH"),  Georgia State University  ("Georgia  State"),  Duke University
     ("Duke   University")   and   Auburn   University   ("Auburn   University")
     (collectively,  the "Scientific Consortium").  The Company is a development
     stage  enterprise and, since its inception on October 15, 1984, has engaged
     in research and  development  programs,  expanded its network of scientists
     and scientific advisors and licensing  technology  agreements,  and work to
     commercialize the aromatic cation  pharmaceutical  technology platform (the
     Company acquired its rights to the aromatic cation  technology  platform in
     1997  and  promptly  thereafter   commenced   development  of  its  current
     programs).  The Company  uses the  expertise  and  resources  of  strategic
     partners and third parties in a number of areas, including:  (i) laboratory
     research,   (ii)  animal  and  human  trials  and  (iii)   manufacture   of
     pharmaceutical drugs.

     The Company does not have any products currently available for sale, and no
     products are  expected to be  commercially  available  for sale until after
     March 31, 2007, if at all.

                                      -8-

<PAGE>



     Since  inception,  the  Company  has  incurred  accumulated  net  losses of
     approximately $87,549,000.  Management expects the Company will continue to
     incur  significant  losses  during the next  several  years as the  Company
     continues  development  activities,  clinical trials and  commercialization
     efforts.  In addition,  the Company has various  research  and  development
     agreements with third parties and is dependent upon such parties' abilities
     to perform  under  these  agreements.  There can be no  assurance  that the
     Company's  activities will lead to the  development of commercially  viable
     products.  The  Company's  operations  to date  have  consumed  substantial
     amounts of cash.  The  negative  cash flow from  operations  is expected to
     continue in the foreseeable  future.  The Company  believes it will require
     substantial  additional  funds to commercialize  its drug  candidates.  The
     Company's cash requirements may vary materially from those now planned when
     and if the  following  become known:  results of research and  development,
     results of clinical  testing,  responses to grant  requests,  formation and
     development of relationships with strategic partners,  changes in the focus
     and  direction  of  development  programs,  competitive  and  technological
     advances, requirements in the regulatory process and other factors. Changes
     in  circumstances  in any of the above  areas may  require  the  Company to
     allocate  substantially  more funds than are  currently  available  or than
     management intends to raise.

     Management  believes  the  Company's  existing  unrestricted  cash and cash
     equivalents,  and the grants received or awarded and awaiting  disbursement
     of, will be sufficient to meet the Company's planned  expenditures  through
     at least the next twelve  months,  although  there can be no assurance  the
     Company will not require  additional funds.  Management may seek to satisfy
     future  funding   requirements  through  public  or  private  offerings  of
     securities,  by collaborative or other arrangements with  pharmaceutical or
     biotechnology companies or from other sources or by issuance of debt.

     The Company's  ability to continue as a going concern is dependent upon its
     ability to generate sufficient funds to meet its obligations as they become
     due, complete the development and commercialization of drug candidates and,
     ultimately,  to generate  sufficient  revenues for  profitable  operations.
     Management's  plans  for  the  forthcoming  year,  in  addition  to  normal
     operations,  include  continuing  financing efforts,  obtaining  additional
     research grants and entering into research and development  agreements with
     other entities.

     Principles of Consolidation - The consolidated financial statements include
     the  accounts  of  Immtech  Pharmaceuticals,  Inc.  and  its  wholly  owned
     subsidiaries.   All  inter-company  balances  and  transactions  have  been
     eliminated.

     Restricted  Funds on Deposit - Restricted  funds on deposit consist of cash
     in two  accounts  on  deposit  at banks  which  are  restricted  for use in
     accordance with (i) a clinical research  subcontract  agreement with UNC-CH
     and (ii) a malaria drug  development  agreement  with Medicines for Malaria
     Venture ("MMV").

     Concentration of Credit Risk - The Company maintains its cash in commercial
     banks.  Balances on deposit are  insured by the Federal  Deposit  Insurance
     Corporation ("FDIC") up to specified limits.

     Investment  -  The  Company   accounts  for  its   investment   in  NextEra
     Therapeutics,  Inc.  ("NextEra") on the equity method.  As of June 30, 2006
     and March 31, 2006, the Company owned  approximately


                                      -9-

<PAGE>



     28% of the  issued and  outstanding  shares of NextEra  common  stock.  The
     Company has recognized an equity loss in NextEra to the extent of the basis
     of its investment,  and the investment  balance is zero as of June 30, 2006
     and March 31,  2006.  Recognition  of any  investment  income on the equity
     method by the Company for its  investment  in NextEra will occur only after
     NextEra has earnings in excess of previously  unrecognized  equity  losses.
     The  Company  does  not  provide,  and  has  not  provided,  any  financial
     guarantees to NextEra.

     Property and  Equipment - Property and  equipment  are recorded at cost and
     depreciated and amortized using the straight-line method over the estimated
     useful lives of the respective  assets,  ranging from three to fifty years.
     Leasehold  improvements  are  amortized  over the lesser of the life of the
     related lease or their useful life.

     Long-Lived Assets - The Company  periodically  evaluates the carrying value
     of  its  property  and  equipment.   Long-lived  assets  are  reviewed  for
     impairment  whenever events or changes in  circumstances  indicate that the
     carrying amount may not be  recoverable.  If the sum of the expected future
     undiscounted  cash flows is less than the  carrying  amount of an asset,  a
     loss is  recognized  for the  asset  which is  measured  by the  difference
     between the fair value and the carrying value of the asset.

     Deferred  Rental  Obligation  -  Rental  obligations  with  scheduled  rent
     increases are recognized on a straight-line basis over the lease term.

     Revenue  Recognition - Grants to perform research are the Company's primary
     source of  revenue  and are  generally  granted  to  support  research  and
     development  activities for specific  projects or drug candidates.  Revenue
     related to grants to perform  research and  development  is  recognized  as
     earned based on the performance requirements of the specific grant. Upfront
     cash payments from research and development grants are reported as deferred
     revenue until such time as the research and development  activities covered
     by the grant are performed.

     Research  and  Development  Costs -  Research  and  development  costs  are
     expensed as incurred and include costs  associated with research  performed
     pursuant  to  collaborative  agreements.  Research  and  development  costs
     consist of direct and indirect  internal costs related to specific projects
     as well as fees  paid to  other  entities  that  conduct  certain  research
     activities on the Company's behalf.

     Income  Taxes - The Company  accounts  for income  taxes using an asset and
     liability approach. Deferred income tax assets and liabilities are computed
     annually for differences  between the financial  statement and tax bases of
     assets and liabilities that will result in taxable or deductible amounts in
     the future based on enacted tax laws and rates applicable to the periods in
     which the differences are expected to affect taxable income. In addition, a
     valuation  allowance is  recognized if it is more likely than not that some
     or all of the deferred income tax assets will not be realized.  A valuation
     allowance is used to offset the related net deferred  income tax assets due
     to  uncertainties  of realizing the benefits of certain net operating  loss
     and tax credit carry-forwards and other deferred income tax assets.

     Net Income  (Loss) Per Share - Net income (loss) per share is calculated in
     accordance  with Statement of Financial  Accounting  Standard  ("SFAS") No.
     128, "Earnings Per Share." Basic net income (loss) and diluted net loss per
     share are computed by dividing  net income  (loss)  attributable  to common
     stockholders by the weighted  average number of common shares  outstanding.
     Diluted net income per share, when applicable,  is computed by dividing net
     income  attributable to common  stockholders by the weighted average number
     of common shares outstanding  increased by the number of potential dilutive
     common  shares based on the  treasury  stock  method.  Diluted net


                                      -10-

<PAGE>



     loss per  share  was the same as the basic net loss per share for the three
     month  periods  ended  June 30,  2006 and  June  30,  2005,  as none of the
     Company's  outstanding  common stock  options,  warrants and the conversion
     features  of  Series  A, B, C, D and E  Convertible  Preferred  Stock  were
     dilutive.

     Comprehensive Loss - There were no differences  between  comprehensive loss
     and net loss for the three  month  periods  ended  June 30,  2006 and 2005,
     respectively.

     Use of Estimates - The  preparation  of financial  statements in conformity
     with  accounting  principles  generally  accepted  in the United  States of
     America  requires  management to make estimates and assumptions that affect
     the reported amounts of assets and liabilities and disclosure of contingent
     assets and  liabilities  at the date of the  financial  statements  and the
     reported  amounts of revenues and  expenses  during the  reporting  period.
     Actual results could differ materially from these estimates.



3.   STOCKHOLDERS' EQUITY

     On January 7, 2004, the stockholders of the Company approved an increase in
     the number of  authorized  common  stock  from 30  million  to 100  million
     shares.  On June 14, 2004, the Company filed with the Secretary of State of
     the State of Delaware an Amended and Restated  Certificate of Incorporation
     implementing,  among other things, the approved authorized 70 million share
     common  stock  increase  from 30  million to 100  million  shares of common
     stock.

     Series A Convertible  Preferred  Stock - On February 14, 2002,  the Company
     filed a Certificate of Designation with the Secretary of State of the State
     of  Delaware   designating   320,000  shares  of  the  Company's  5,000,000
     authorized  shares of  preferred  stock as Series A  Convertible  Preferred
     Stock, $0.01 par value, with a stated value of $25.00 per share.  Dividends
     accrue at a rate of 6.0% per annum on the $25.00 stated value per share and
     are payable semi-annually on April 15 and October 15 of each year while the
     shares are  outstanding.  The  Company  has the option to pay the  dividend
     either  in cash or in  equivalent  shares  of  common  stock,  as  defined.
     Included in the carrying value of the Series A Convertible  Preferred Stock
     in the accompanying  condensed  consolidated balance sheets are $17,945 and
     $39,785 of accrued preferred stock dividends at June 30, 2006 and March 31,
     2006, respectively.  Each share of Series A Convertible Preferred Stock may
     be converted by the holder at any time into shares of our common stock at a
     conversion  rate  determined by dividing the $25.00 stated value,  plus any
     accrued  and  unpaid  dividends  (the  "Liquidation  Price"),  by  a  $4.42
     conversion   price  (the   "Conversion   Price  A"),   subject  to  certain
     adjustments,  as defined in the Series A  Certificate  of  Designation.  On
     April 15,  2006,  the Company  issued 5,547 shares of common stock and paid
     $47 in lieu of  fractional  common  shares as  dividends  on the  preferred
     shares.  On April 15, 2005, the Company issued 3,469 shares of common stock
     and paid  $117 in lieu of  fractional  common  shares as  dividends  on the
     preferred  shares.  During the three month  periods ended June 30, 2006 and
     2005 there were no conversions.

     The Company may at any time require that any or all  outstanding  shares of
     Series A  Convertible  Preferred  Stock be  converted  into  shares  of the
     Company's common stock, provided that the shares of common stock into which
     the Series A Convertible  Preferred  Stock are  convertible  are registered
     pursuant to an effective registration  statement, as defined. The number of
     shares  of common  stock to be  received  by the  holders  of the  Series A
     Convertible  Preferred Stock upon a mandatory  conversion by the Company is
     determined by (i) dividing the Liquidation Price by the Conversion Price A,
     provided that the closing bid price for the Company's  common stock exceeds
     $9.00 for 20  consecutive  trading  days within 180 days prior to notice of
     conversion, as defined, or (ii) if the requirements of (i) are not met, the
     number of shares of common  stock is  determined  by  dividing


                                      -11-

<PAGE>



     110% of the  Liquidation  Price by the  Conversion  Price A. The Conversion
     Price is  subject  to  certain  adjustments,  as  defined  in the  Series A
     Certificate of Designation.

     The  Company  may at any  time,  upon 30 days'  notice,  redeem  any or all
     outstanding  shares of the Series A Convertible  Preferred Stock by payment
     of the  Liquidation  Price to the holder of such shares,  provided that the
     holder  does not  convert  the Series A  Convertible  Preferred  Stock into
     shares of common stock during the 30 day period.  The Series A  Convertible
     Preferred Stock has a preference in liquidation  equal to $25.00 per share,
     plus any accrued and unpaid  dividends,  over the common  stock and is pari
     passu with all other outstanding series of preferred stock. Each issued and
     outstanding share of Series A Convertible Preferred Stock shall be entitled
     to 5.6561 votes (subject to adjustment) with respect to any and all matters
     presented to the Company's  stockholders for their action or consideration.
     Except  as  provided  by law or by the  provisions  establishing  any other
     series of preferred stock, Series A Convertible Preferred  stockholders and
     holders of any other  outstanding  preferred stock shall vote together with
     the holders of common stock as a single class.

     Series B Convertible  Preferred  Stock - On September 25, 2002, the Company
     filed a Certificate of Designation with the Secretary of State of the State
     of  Delaware   designating   240,000  shares  of  the  Company's  5,000,000
     authorized  shares of  preferred  stock as Series B  Convertible  Preferred
     Stock, $0.01 par value, with a stated value of $25.00 per share.  Dividends
     accrue at a rate of 8.0% per annum on the $25.00 stated value per share and
     are payable semi-annually on April 15 and October 15 of each year while the
     shares are  outstanding.  The  Company  has the option to pay the  dividend
     either  in cash or in  equivalent  shares  of  common  stock,  as  defined.
     Included in the carrying value of the Series B Convertible  Preferred Stock
     in the accompanying  condensed  consolidated  balance sheets are $5,307 and
     $12,021 of accrued  preferred stock dividends as of June 30, 2006 and March
     31, 2006, respectively.  Each share of Series B Convertible Preferred Stock
     may be converted by the holder at any time into shares of common stock at a
     conversion  rate  determined by dividing the $25.00 stated value,  plus any
     accrued  and  unpaid  dividends  (the  "Liquidation  Price"),  by  a  $4.00
     conversion   price  (the   "Conversion   Price  B"),   subject  to  certain
     adjustments,  as defined in the Series B  Certificate  of  Designation.  On
     April 15,  2006,  the Company  issued 1,703 shares of common stock and paid
     $31 in lieu of  fractional  common  shares as  dividends  on the  preferred
     shares.  On April 15, 2005, the Company issued 1,526 shares of common stock
     and  paid $49 in lieu of  fractional  common  shares  as  dividends  on the
     preferred  shares.  During the three month  periods ended June 30, 2006 and
     2005, there were no conversions.

     The Company may at any time require that any or all  outstanding  shares of
     Series B  Convertible  Preferred  Stock be  converted  into  shares  of the
     Company's common stock, provided that the shares of common stock into which
     the Series B Convertible  Preferred  Stock are  convertible  are registered
     pursuant to an effective registration  statement, as defined. The number of
     shares  of common  stock to be  received  by the  holders  of the  Series B
     Convertible  Preferred Stock upon a mandatory  conversion by the Company is
     determined by (i) dividing the Liquidation Price by the Conversion Price B,
     provided that the closing bid price for the Company's  common stock exceeds
     $9.00 for 20  consecutive  trading  days within 180 days prior to notice of
     conversion, as defined, or (ii) if the requirements of (i) are not met, the
     number of shares of common  stock is  determined  by  dividing  110% of the
     Liquidation  Price by the  Conversion  Price B. The  Conversion  Price B is
     subject to certain  adjustments,  as defined in the Series B Certificate of
     Designation.

     The  Company  may at any  time,  upon 30 days'  notice,  redeem  any or all
     outstanding  shares of the Series B Convertible  Preferred Stock by payment
     of the  Liquidation  Price to the holder of such shares,  provided that the
     holder  does not  convert  the Series B  Convertible  Preferred  Stock into
     shares of common stock during the 30 day period.  The Series B  Convertible
     Preferred Stock has a preference in liquidation  equal to $25.00 per share,
     plus any accrued and unpaid  dividends,  over the


                                      -12-

<PAGE>



     common  stock  and is pari  passu  with all  other  outstanding  series  of
     preferred stock.  Each issued and outstanding share of Series B Convertible
     Preferred  Stock shall be entitled  to 6.25 votes  (subject to  adjustment)
     with respect to any and all matters presented to the Company's stockholders
     for their  action or  consideration.  Except as  provided  by law or by the
     provisions  establishing  any other  series of  preferred  stock,  Series B
     Convertible  Preferred  stockholders  and holders of any other  outstanding
     preferred  stock shall vote  together with the holders of common stock as a
     single class.

     Series C Convertible Preferred Stock - On June 6, 2003, the Company filed a
     Certificate  of  Designation  with the  Secretary  of State of the State of
     Delaware  designating 160,000 shares of the Company's 5,000,000  authorized
     shares of preferred stock as Series C Convertible  Preferred  Stock,  $0.01
     par value,  with a stated value of $25.00 per share.  Dividends accrue at a
     rate of 8.0% per annum on the $25.00 stated value per share and are payable
     semi-annually  on April 15 and October 15 of each year while the shares are
     outstanding.  The Company has the option to pay the dividend either in cash
     or in  equivalent  shares of common  stock,  as  defined.  Included  in the
     carrying  value  of  the  Series  C  Convertible  Preferred  Stock  in  the
     accompanying  condensed consolidated balance sheets are $19,239 and $41,945
     of accrued  preferred  stock  dividends  as of June 30,  2006 and March 31,
     2006, respectively.  Each share of Series C Convertible Preferred Stock may
     be  converted  by the holder at any time into  shares of common  stock at a
     conversion  rate  determined by dividing the $25.00 stated value,  plus any
     accrued  and  unpaid  dividends  (the  "Liquidation  Price"),  by  a  $4.42
     conversion   price  (the   "Conversion   Price  C"),   subject  to  certain
     adjustments,  as defined in the Series C  Certificate  of  Designation.  On
     April 15,  2006,  the Company  issued 5,761 shares of common stock and paid
     $95 in lieu of  fractional  common  shares as  dividends  on the  preferred
     shares.  On April 15, 2005, the Company issued 4,625 shares of common stock
     and paid  $212 in lieu of  fractional  common  shares as  dividends  on the
     preferred  shares.  During the three month period ended June 30, 2006 there
     were no  conversions.  During the three month  period  ended June 30, 2005,
     certain  preferred   stockholders   converted  9,116  shares  of  Series  C
     Convertible Preferred stock, including accrued dividends, for 51,622 shares
     of common stock.

     The Company may at any time require that any or all  outstanding  shares of
     Series C  Convertible  Preferred  Stock be  converted  into  shares  of the
     Company's common stock, provided that the shares of common stock into which
     the Series C Convertible  Preferred  Stock are  convertible  are registered
     pursuant to an effective registration  statement, as defined. The number of
     shares  of common  stock to be  received  by the  holders  of the  Series C
     Convertible  Preferred Stock upon a mandatory  conversion by the Company is
     determined by (i) dividing the Liquidation  Price by the Conversion Price C
     provided that the closing bid price for the Company's  common stock exceeds
     $9.00 for 20  consecutive  trading  days within 180 days prior to notice of
     conversion, as defined, or (ii) if the requirements of (i) are not met, the
     number of shares of common  stock is  determined  by  dividing  110% of the
     Liquidation  Price by the  Conversion  Price C. The  Conversion  Price C is
     subject to certain  adjustments,  as defined in the Series C Certificate of
     Designation.

     The  Company  may at any  time,  upon 30 days'  notice,  redeem  any or all
     outstanding  shares of the Series C Convertible  Preferred Stock by payment
     of the  Liquidation  Price to the holder of such shares,  provided that the
     holder  does not  convert  the Series C  Convertible  Preferred  Stock into
     shares of common stock during the 30 day period.  The Series C  Convertible
     Preferred Stock has a preference in liquidation  equal to $25.00 per share,
     plus any accrued and unpaid  dividends,  over the common  stock and is pari
     passu with all other outstanding series of preferred stock. Each issued and
     outstanding share of Series C Convertible Preferred Stock shall be entitled
     to 5.6561 votes (subject to adjustment) with respect to any and all matters
     presented to the Company's  stockholders for their action or consideration.
     Except  as  provided  by law or by the  provisions  establishing  any other
     series of preferred stock, Series C Convertible Preferred  stockholders and
     holders of any other  outstanding  preferred stock shall vote together with
     the holders of common stock as a single class.


                                      -13-

<PAGE>




     Series D  Convertible  Preferred  Stock - On January 15, 2004,  the Company
     filed a Certificate of Designation with the Secretary of State of the State
     of  Delaware   designating   200,000  shares  of  the  Company's  5,000,000
     authorized  shares of  preferred  stock as Series D  Convertible  Preferred
     Stock, $0.01 par value, with a stated value of $25.00 per share.  Dividends
     accrue at a rate of 6.0% per annum on the $25.00 stated value per share and
     are payable semi-annually on April 15 and October 15 of each year while the
     shares are  outstanding.  The  Company  has the option to pay the  dividend
     either  in cash or in  equivalent  shares  of  common  stock,  as  defined.
     Included in the carrying value of the Series D Convertible  Preferred Stock
     in the accompanying  condensed  consolidated balance sheets are $37,084 and
     $80,914 of accrued  preferred stock dividends as of June 30, 2006 and March
     31, 2006, respectively.  Each share of Series D Convertible Preferred Stock
     may be converted by the holder at any time into shares of common stock at a
     conversion  rate  determined by dividing the $25.00 stated value,  plus any
     accrued  and  unpaid  dividends  (the  "Liquidation  Price"),  by  a  $9.00
     conversion   price  (the   "Conversion   Price  D"),   subject  to  certain
     adjustments,  as defined in the Series D  Certificate  of  Designation.  On
     April 15, 2006,  the Company  issued 11,134 shares of common stock and paid
     $79 in lieu of  fractional  common  shares as  dividends  on the  preferred
     shares.  On April 15, 2005, the Company issued 9,219 shares of common stock
     and paid  $135 in lieu of  fractional  common  shares as  dividends  on the
     preferred  shares.  During the three month  periods ended June 30, 2006 and
     2005, there were no conversions.

     The Company may at any time,  require that any or all outstanding shares of
     Series D Convertible Preferred Stock be converted into shares of our common
     stock,  provided  that the  shares of common  stock into which the Series D
     Convertible  Preferred Stock are convertible are registered  pursuant to an
     effective  registration  statement,  as  defined.  The  number of shares of
     common  stock to be  received  by the  holders of the Series D  Convertible
     Preferred  Stock upon a mandatory  conversion  by us is  determined  by (i)
     dividing the Liquidation  Price by the Conversion Price D provided that the
     closing bid price for the  Company's  common  stock  exceeds  $18.00 for 20
     consecutive trading days within 180 days prior to notice of conversion,  as
     defined,  or (ii) if the  requirements  of (i) are not met,  the  number of
     shares of common stock is determined  by dividing  110% of the  Liquidation
     Price by the  Conversion  Price D. The  Conversion  Price D is  subject  to
     certain adjustments, as defined in the Certificate of Designation.

     The Series D Convertible  Preferred  Stock has a preference in  liquidation
     equal to $25.00 per share, plus any accrued and unpaid dividends,  over the
     common  stock  and is pari  passu  with all  other  outstanding  series  of
     preferred stock.  Each issued and outstanding share of Series D Convertible
     Preferred  Stock shall be entitled to 2.7778 votes  (subject to adjustment)
     with respect to any and all matters presented to the Company's stockholders
     for their  action or  consideration.  Except as  provided  by law or by the
     provisions  establishing  any other  series of  preferred  stock,  Series D
     Convertible  Preferred  stockholders  and holders of any other  outstanding
     preferred  stock shall vote  together with the holders of common stock as a
     single class.

     Series E  Convertible  Preferred  Stock -On December 13, 2005,  the Company
     filed a Certificate of Designation with the Secretary of State of the State
     of  Delaware   designating   167,000  shares  of  the  Company's  5,000,000
     authorized  shares of  preferred  stock as Series E  Convertible  Preferred
     Stock, $0.01 par value, with a stated value of $25.00 per share.  Dividends
     accrue at a rate of 6.0% per annum on the $25.00 stated value per share and
     are payable semi-annually on April 15 and October 15 of each year while the
     shares are  outstanding.  The  Company  has the option to pay the  dividend
     either  in cash or in  equivalent  shares  of  common  stock,  as  defined.
     Included in the carrying value of the Series E Convertible  Preferred Stock
     in the accompanying  condensed  consolidated balance sheets are $35,031 and
     $60,528 of accrued  preferred stock dividends as of June 30, 2006 and March
     31, 2006, respectively.  Each share of Series E Convertible Preferred Stock
     may be converted by the holder at any time into shares of common stock at a
     conversion  rate  determined


                                      -14-

<PAGE>



     by dividing the $25.00 stated value,  plus any accrued and unpaid dividends
     (the  "Liquidation  Price"),  by a $7.04  conversion price (the "Conversion
     Price  E"),  subject  to  certain  adjustments,  as defined in the Series E
     Certificate  of  Designation.  On April 15, 2006,  the Company issued 8,819
     shares of common stock and paid $135 in lieu of fractional common shares as
     dividends on the preferred shares. During the three month period ended June
     30, 2006, certain preferred  stockholders converted 46,000 shares of Series
     E Convertible  Preferred Stock,  including accrued  dividends,  for 163,847
     shares of common stock.

     The Company may at any time after December 1, 2006, require that any or all
     outstanding  shares of Series E  Convertible  Preferred  Stock be converted
     into shares of our common  stock,  provided that the shares of common stock
     into which the Series E Convertible  Preferred  Stock are  convertible  are
     registered pursuant to an effective registration statement, as defined. The
     number of  shares of common  stock to be  received  by the  holders  of the
     Series E Convertible  Preferred Stock upon a mandatory  conversion by us is
     determined by (i) dividing the Liquidation  Price by the Conversion Price E
     provided that the closing bid price for the Company's  common stock exceeds
     $10.56 for 20 out of 30  consecutive  trading days within 180 days prior to
     notice of conversion,  as defined,  or (ii) if the  requirements of (i) are
     not met,  the number of shares of common  stock is  determined  by dividing
     110% of the  Liquidation  Price by the  Conversion  Price E. The Conversion
     Price E is subject to certain adjustments, as defined in the Certificate of
     Designation.

     The Series E Convertible  Preferred  Stock has a preference in  liquidation
     equal to $25.00 per share, plus any accrued and unpaid dividends,  over the
     common  stock  and is parri  passu  with all  other  outstanding  series of
     preferred stock.  Each issued and outstanding share of Series E Convertible
     Preferred  Stock is entitled to 3.5511 votes (subject to  adjustment)  with
     respect to any and all matters presented to the Company's  stockholders for
     their  action  or  consideration.  Except  as  provided  by  law  or by the
     provisions  establishing  any other  series of  preferred  stock,  Series E
     Convertible  Preferred  stockholders  and holders of any other  outstanding
     preferred  stock shall vote  together with the holders of common stock as a
     single class.

     The Company  will, on December 13, 2008,  at the  Company's  election,  (i)
     redeem the Series E Convertible Preferred Stock plus any accrued and unpaid
     interest for cash,  (ii) convert the Series E Convertible  Preferred  Stock
     and any accrued and unpaid  interest into common stock, or (iii) redeem and
     convert the Series E Convertible  Preferred Stock in any combination of (i)
     or (ii).

     Common  Stock -On May 26,  2006,  restricted  shares in the amount of 5,000
     shares of common  stock  were  issued to Tulane  University  as part of the
     Tulane License  Agreement  granting to us an exclusive  license to develop,
     manufacture  and  commercialize  a group of 4 -  aminoquinoline  drugs  for
     treatment,  prophylaxis  and  diagnosis of  infectious  diseases.  The lead
     candidate,  AQ-13, is targeted as a candidate for treatment and prophylaxis
     for malaria.

     On May 26, 2006,  restricted shares in the amount of 5,000 shares of common
     stock were  issued to T.  Stephen  Thompson as part of his  retirement  and
     consulting agreement dated May 1, 2006.

     Warrants - No warrants were  exercised in the three month period ended June
     30, 2006.  During the three month  period ended June 30, 2005,  warrants to
     purchase 1,800 shares of common stock were exercised, resulting in proceeds
     to the Company of $11,646.

     Incentive Stock Programs - At the  stockholders'  meeting held November 12,
     2004,  the  stockholders  approved  the second  amendment to the 2000 Stock
     Incentive  Plan  which  increased  the  number of  shares  of common  stock
     reserved for issuance from 1,100,000  shares to 2,200,000  shares.  Options
     granted under the 2000 Stock Incentive Plan that expire are available to be
     reissued.  During the


                                      -15-

<PAGE>




     three month periods ended June 30, 2006 and 2005, 9,166 and 42,750 options,
     respectively,  previously  granted  under  the 2000  Stock  Incentive  Plan
     expired and were  available to be reissued.  During the three month periods
     ended June 30, 2006 and 2005, the Company issued 56,000 and 30,000 options,
     respectively, to purchase shares of common stock. Additionally, the Company
     granted 5,000  restricted  stock awards.  As of June 30, 2006, there were a
     total of 710,249 shares  available for grant.  The purchase price of shares
     must be at least equal to the fair market  value of the common stock on the
     date of grant,  and the maximum term of an option is 10 years.  The options
     generally  vest over periods  ranging  from 0 to 4 years.  During the three
     month  period  ended June 30,  2006,  32,263  options  were  exercised on a
     cashless  basis  resulting  in 30,349  common  shares  being issued with an
     exercise  price of $0.47,  while for the three month  period ended June 30,
     2005, 10,900 options were exercised with an exercise price of $2.55.






The following table summarizes information about stock options outstanding as of
June 30, 2006:

<TABLE>
<CAPTION>
                           Options Outstanding                       Options Exercisable
                                 Weighted                                   Weighted
                                  Average     Weighted                      Average      Weighted
                                 Remaining     Average                     Remaining     Average
                    Shares      Contractual   Exercise       Shares       Contractual    Exercise
                  Outstanding   Life-Years      Price      Exercisable     Life-Years      Price
<S>                  <C>           <C>             <C>        <C>             <C>             <C>
April 1, 2006        1,554,380     5.75            $9.25      1,115,167       5.75            $9.56
Granted                 56,000                      7.35
Exercised                                           0.47
  (total
  intrinsic
  value was
    $237,942)....     (32,263)
Lapsed                 (9,166)                      9.56
                 -------------  -----------  -----------  -------------  --------------  ----------
June 30, 2006        1,568,951     6.05            $9.76      1,150,740       5.93            $9.76
                 =============  ===========  ===========  =============  ==============  ==========
</TABLE>

     The aggregate  intrinsic  value of options  outstanding  and exercisable at
     June 30, 2006 was  approximately  $1,598,000 and $1,597,000,  respectively.
     The  total  unrecognized  compensation  cost  related  to  all  share-based
     compensation  plans at June 30, 2006 amounted to  approximately  $2,530,000
     and is expected to be recognized over the next two years.

     On April 1, 2006,  the  company  adopted the  provisions  of  Statement  of
     Financial   Accounting   Standards   ("SFAS")  no.  123   (revised   2004),
     "Share-Based  Payment,"  which  requires that the fair value of share-based
     awards  be  recorded  in the  results  of  operations.  Under  the  revised
     standard,  awards issued prior to 2007 for which the requisite  service has
     not been rendered are charged to expense under the prior rules,  and awards
     issued  after 2006 are charged to expense  under the revised  rules.  Total
     non-cash  compensation  expense  charged against income in the period ended
     June 30, 2006 for share-based plans totaled approximately $605,000. Through
     March 31, 2006, the Company measured  compensation cost using the intrinsic
     value-based method of accounting for stock options granted to employees and
     directors.  The Company used the modified  prospective  method of adoption.
     Under this method, prior years' financial results do not include the impact
     of recording  stock options using fair value.  Had  compensation  cost been
     determined using the fair


                                      -16-

<PAGE>



     value-based  accounting  method in the three  month  period  ended June 30,
     2005,  pro forma net income and earnings per share  ("EPS")  amounts  would
     have been as follows:

<TABLE>
<CAPTION>
                                                               Three Months Ended June 30,
                                                               ---------------------------
                                                                      2005

<S>                                                               <C>
Net loss attributable to common shareholders - as reported        $(3,584,834)

Add:  stock-based compensation expense included in reported
  net loss                                                                  0

Deduct:  total stock-based compensation expense determined
  under fair value method for all awards                           (1,022,828)
                                                                  -----------
Net loss attributable to common stockholders - pro forma          $(4,606,963)
                                                                  ===========
Basic and diluted net loss per share attributable to common
  stockholders - as reported                                          $ (0.31)
                                                                  ===========
Basic and diluted net loss per share attributable to common
  stockholders - pro forma                                            $ (0.40)
                                                                  ===========
</TABLE>


     The  weighted  average  fair value of an option  granted in the three month
     periods  ended June 30, 2006 and 2005 was $7.35 and  $11.86,  respectively.
     The fair value of an option  grant was  estimated  using the  Black-Scholes
     option pricing model with the following assumptions:

<TABLE>
<CAPTION>
                                                          Three Months Ended June 30,

                                                                 2006   2005

<S>                                                              <C>    <C>
     Risk free interest rate                                     4.89%  4.12%
     Average life of options (years)                             6.0    10.0
     Volatility                                                  69%     92%
     Dividend yield                                              -0-    -0-

</TABLE>

     The average  risk-free  interest  rate is based on yields on ten-year  zero
     coupons - U.S.  Treasury strips in effect as of the grant date. The average
     life of the options is based upon historical  data. We determined  expected
     volatility in the  Black-Scholes  model based upon two year historical data
     at the end of each  month for the three  months  ended June 30,  2005,  and
     implied  volatility based upon exchange traded options for our common stock
     for the  three  months  ended  June 30,  2006.  Implied  volatility  better
     reflects future market conditions and better indicates expected  volatility
     than purely historical volatility. There is no dividend yield.

4.   COLLABORATIVE RESEARCH AND DEVELOPMENT ACTIVITIES

     The Company earns revenue under various collaborative  research agreements.
     Under the terms of these arrangements,  the Company generally has agreed to
     perform best efforts research and development and, in exchange, the Company
     may receive  advanced cash funding,  an allowance for management  overhead,
     and may also earn additional fees for the attainment of certain milestones.


                                      -17-

<PAGE>



     The Company initially acquired its rights to the aromatic cation technology
     platform  developed by a consortium of  universities  consisting of UNC-CH,
     Georgia State University, Duke University and Auburn University pursuant to
     an  agreement,   dated  January  15,  1997  (as  amended,  the  "Consortium
     Agreement")  among the Company,  UNC-CH and a third-party (to which each of
     the other members of the scientific  consortium  shortly thereafter joined)
     (the "original licensee").  The Consortium Agreement commits the parties to
     collectively  research,  develop,  finance the research and development of,
     manufacture  and market  both the  technology  and  compounds  owned by the
     scientific  consortium and previously  licensed or optioned to the original
     licensee  and  licensed to the Company in  accordance  with the  Consortium
     Agreement  (the  "Current  Compounds"),  and all  technology  and compounds
     developed by the scientific  consortium after January 15, 1997, through use
     of   Company-sponsored   research  funding  or  National  Cooperative  Drug
     Development grant funding made available to the scientific  consortium (the
     "Future  Compounds"  and,  collectively  with the  Current  Compounds,  the
     "Compounds").

     The  Consortium  Agreement  contemplated  that upon the  completion  of our
     initial  public  offering  ("IPO") of shares of its common stock with gross
     proceeds of at least  $10,000,000  by April 30,  1999,  the  Company,  with
     respect to the Current Compounds,  and UNC-CH, (on behalf of the Scientific
     Consortium),  with respect to Current Compounds and Future Compounds, would
     enter into license agreements for the intellectual property rights relating
     to the  Compounds  pursuant to which the Company  would pay  royalties  and
     other payments based on revenues received for the sale of products based on
     the Compounds.

     The Company  completed  an IPO on April 26,  1999,  with gross  proceeds in
     excess of  $10,000,000  thereby  earning a worldwide  license and exclusive
     rights to commercially use, manufacture, have manufactured,  promote, sell,
     distribute,  or  otherwise  dispose  of  any  products  based  directly  or
     indirectly on all of the Current Compounds and Future Compounds.

     As a result of the closing of the IPO,  the Company  issued an aggregate of
     611,250 shares of common stock,  of which 162,500 shares were issued to the
     Scientific  Consortium  and  448,750  shares  were  issued to the  original
     licensee or persons designated by the original licensee.

     As  contemplated  by the  Consortium  Agreement,  on January 28, 2002,  the
     Company  entered into a License  Agreement with the  Scientific  Consortium
     whereby the Company  received the exclusive  license to  commercialize  the
     aromatic cation technology  platform and compounds developed or invented by
     one or more of the Consortium  scientists  after January 15, 1997 and which
     also  incorporated  into such  License  Agreement  the  Company's  existing
     license  with  the  Scientific   Consortium  with  regard  to  the  Current
     Compounds. Also pursuant to the Consortium Agreement, the original licensee
     transferred  to the Company the worldwide  license and  exclusive  right to
     commercially use, manufacture, have manufactured, promote, sell, distribute
     or otherwise  dispose of any and all products  based directly or indirectly
     on aromatic cations  developed by the Scientific  Consortium on or prior to
     January 15, 1997 and previously  licensed (together with related technology
     and patents) to the third-party.

     The  Consortium  Agreement  provides that the Company is required to pay to
     UNC-CH on behalf of the Scientific  Consortium  reimbursement of patent and
     patent-related  fees, certain milestone payments and royalty payments based
     on  revenue  derived  from  the  Scientific  Consortium's  aromatic  cation
     technology  platform.  Each month on behalf of the  inventor  scientist  or
     university,  as the case may be,  UNC-CH  submits an invoice to the Company
     for payment of  patent-related  fees related to current compounds or future
     compounds  incurred prior to the invoice date. The Company is also required
     to make milestone payments in the form of the issuance of 100,000 shares of
     its common stock to the Consortium when it files its first initial New Drug
     Application  ("NDA") or an


                                      -18-

<PAGE>



     Abbreviated New Drug Application  ("ANDA") based on Consortium  technology.
     The Company is also  required to pay to UNC-CH on behalf of the  Scientific
     Consortium (other than Duke University) (i) royalty payments of up to 5% of
     our net  worldwide  sales  of  "current  products"  and  "future  products"
     (products  based  directly or  indirectly  on current  compounds and future
     compounds, respectively) and (ii) a percentage of any fees we receive under
     sublicensing   arrangements.   With   respect  to  products  or   licensing
     arrangements  emanating  from Duke  University  technology,  the Company is
     required  to  negotiate  in good  faith  with  UNC-CH  (on  behalf  of Duke
     University)  royalty,  milestone  or other fees at the time of such  event,
     consistent with the terms of the Consortium Agreement.

     Under the License  Agreement,  the Company must also  reimburse the cost of
     obtaining  patents and assume  liability  for future  costs to maintain and
     defend patents so long as the Company chooses to retain the license to such
     patents.

     During the three month  periods  ended June 30, 2006 and 2005,  the Company
     expensed approximately $237,000 and $211,000,  respectively, of payments to
     UNC-CH and certain  other  Scientific  Consortium  universities  for patent
     related costs and other contracted  research.  Included in accounts payable
     as of June 30, 2006 and March 31, 2006, were  approximately  $660,000,  and
     $601,000,  respectively, due to UNC and certain other Scientific Consortium
     universities.

     In  November  2000,  The Bill &  Melinda  Gates  Foundation  ("Foundation")
     awarded a  $15,114,000  grant to UNC to  develop  new drugs to treat  Human
     Trypanosomiasis (African sleeping sickness) and leishmaniasis. On March 29,
     2001,  UNC-CH entered into a clinical research  subcontract  agreement with
     the Company,  whereby the Company was to receive up to $9,800,000,  subject
     to certain terms and conditions, over a five year period to conduct certain
     clinical and research studies related to the Foundation grant.

     In April 2003, the Foundation awarded a supplemental grant of approximately
     $2,700,000 to UNC-CH for the expansion of phase IIB/III  clinical trials to
     treat  human  Trypanosomiasis  (African  sleeping  sickness)  and  improved
     manufacturing processes. The Company has received, pursuant to the clinical
     research  subcontract  with  UNC-CH,   inclusive  of  its  portion  of  the
     supplemental grant, a total amount of funding of approximately $11,700,000.
     Grant  funds paid in advance of the  Company's  delivery  of  services  are
     treated as  restricted  funds and must be  segregated  from other funds and
     used only for the purposes  specified.  In March 2006, the Company  amended
     and restated the clinical  research  subcontract  with UNC-CH and UNC-CH in
     turn  obtained  an  expanded   funding   commitment   for  the  Company  of
     approximately  $13.6  million  from the  Foundation.  Under the amended and
     restated agreement,  the Company received on May 24, 2006 the first payment
     of  approximately  $5,649,000  of the five year  approximately  $13,601,000
     contract.

     Approximately  $829,000 and $852,000 was utilized for clinical and research
     purposes conducted and expensed during the three months ended June 30, 2006
     and  2005,   respectively.   The   Company  has   recognized   revenues  of
     approximately  $1,759,000  and $852,000  during the three months ended June
     30,  2006 and  2005,  respectively.  The  remaining  amount  (approximately
     $3,890,000 as of June 30, 2006) has been deferred and will be recognized as
     revenue over the term of the agreement as the services are performed.

     On  November  26,  2003,  the  Company  entered  into a  testing  agreement
     ("Testing  Agreement")  with  Medicines  for  Malaria  Venture  ("MMV"),  a
     foundation  established  in  Switzerland,  and UNC,


                                      -19-

<PAGE>



     pursuant to which the Company, with the support of MMV and UNC-CH, pursuant
     to which the Company, with the support of MMV and UNC-CH, conducted a proof
     of concept study of the dicationic  first drug candidate  pafuramidine  for
     the treatment of malaria.

     Under the terms of the Testing  Agreement,  MMV  committed to pay for human
     clinical trials and, subject to certain milestones,  regulatory preparation
     and filing costs for the approvals to market pafuramidine to treat malaria.
     In return for MMV's funding, the Company is required,  when selling malaria
     drugs  derived from this  research  into  "malaria-endemic  countries,"  as
     defined,  to sell such drugs at affordable  prices.  An affordable price is
     defined in the  Testing  Agreement  to mean a price not to be less than the
     cost to  manufacture  and  deliver the drugs plus  administrative  overhead
     costs (not to exceed 10% of the cost to  manufacture)  and a modest profit.
     There are no price  constraints  on product sales into  non-malaria-endemic
     countries. The Company must, however, pay to MMV a royalty not to exceed 7%
     of net  sales,  as  defined,  on  product  sales  into  non-malaria-endemic
     countries,  until the amount funded under the Testing Agreement and amounts
     funded  under a  related  discovery  agreement  between  MMV and  UNC-CH is
     refunded to MMV at face value.  The Company and MMV agreed to terminate the
     Testing  Agreement  effective  as of  February  10,  2006.  The Company has
     received approximately $5,636,000 under this contract.

     The Company  recognized  revenues of  approximately  $182,000  and $627,000
     during the three month periods ended June 30, 2006 and 2005,  respectively,
     for expenses incurred related to activities within the scope of the Testing
     Agreement.  At June  30,  2006,  the  Company  has  approximately  $213,000
     recorded as deferred revenue with respect to this agreement.

     As discussed elsewhere in the document,  the Company received  notification
     of an award by the Arbitral Tribunal on June 9, 2006 finding that Neurochem
     has breached the testing  agreement  and awarded the Company  approximately
     $1.9 million in damages and  attorney's  fees and costs,  subject to review
     and corrections by both parties within 30 days of the notification date. In
     July the Company requested certain corrections to the award. The Company is
     awaiting final resolution from the tribunal prior to recording the award in
     the Company's consolidated financial statements.


                                   * * * * * *





                                      -20-

<PAGE>



     Item 2.   Management's  Discussion  and Analysis of Financial Condition and
               Results of Operations.
               ----------------------

Forward Looking Statements
--------------------------

Certain  statements  contained  in this  quarterly  report and in the  documents
incorporated by reference herein constitute "forward-looking  statements" within
the  meaning  of the  Private  Securities  Litigation  Reform  Act of 1995.  All
statements  other  than  statements  of  historical  fact  may be  deemed  to be
forward-looking  statements.  Forward-looking  statements  frequently,  but  not
always, use the words "may", "intends",  "plans",  "believes",  "anticipates" or
"expects" or similar words and may include statements concerning our strategies,
goals and  plans.  Forward-looking  statements  involve a number of  significant
risks and  uncertainties  that could cause our actual results or achievements or
other events to differ  materially from those reflected in such  forward-looking
statements.  Such  factors  include,  among others  described in this  quarterly
report, the following: (i) we are in an early stage of product development, (ii)
the  possibility  that  favorable  relationships  with  collaborators  cannot be
established or, if established,  will be abandoned by the  collaborators  before
completion  of  product  development,  (iii)  the  possibility  that  we or  our
collaborators will not successfully  develop any marketable  products,  (iv) the
possibility that advances by competitors  will cause our product  candidates not
to be viable,  (v)  uncertainties  as to the requirement  that a drug product be
found  to be  safe  and  effective  after  extensive  clinical  trials  and  the
possibility  that the results of such trials,  if completed,  will not establish
the safety or efficacy of our drug product  candidates,  (vi) risks  relating to
requirements for approvals by governmental  agencies,  such as the Food and Drug
Administration,  before products can be marketed and the  possibility  that such
approvals  will  not be  obtained  in a  timely  manner  or at all  or  will  be
conditioned  in a manner  that would  impair our  ability to market our  product
candidates successfully, (vii) the risk that our patents could be invalidated or
narrowed in scope by judicial actions or that our technology could infringe upon
the patent or other  intellectual  property rights of third parties,  (viii) the
possibility  that we will  not be able to  raise  adequate  capital  to fund our
operations  through the process of  commercializing a successful product or that
future  financing will be completed on unfavorable  terms,  (ix) the possibility
that  any  products  successfully  developed  by  us  will  not  achieve  market
acceptance  and (x) other  risks  and  uncertainties  that may not be  described
herein.  We  undertake  no  obligation  to update or revise any  forward-looking
statements, whether as a result of new information, future events or otherwise.

Results of Operations
---------------------

With the exception of certain research funding agreements and certain grants, we
have not generated any revenue from  operations.  For the period from  inception
(October  15,  1984) to June 30,  2006,  we  incurred  cumulative  net losses of
approximately  $87,549,000.  We have incurred  additional losses since such date
and we expect to incur additional  operating losses for the foreseeable  future.
We expect that our cash sources for at least the next year will be limited to:

     o    payments from foundations and other  collaborators  under arrangements
          that may be entered into in the future;

     o    grants from the United States  government  and other  governments  and
          entities; and

     o    the issuance of securities or borrowing of funds.

The timing and  amounts  of grant and  payment  revenues,  if any,  will  likely
fluctuate sharply and depend upon the achievement of specified  milestones,  and
results  of  operations  for any  period  may be  unrelated  to the  results  of
operations for any other period.



                                      -21-
<PAGE>



Three Month  Period  Ended June 30, 2006  Compared  with the Three Month  Period
Ended June 30, 2005.

Revenues  under   collaborative   research  and   development   agreements  were
approximately  $1,942,000  and $1,479,000 for the three month periods ended June
30, 2006 and June 30, 2005, respectively.  For the three month period ended June
30,  2006,  we  recognized  revenues of  approximately  $1,759,000  related to a
clinical research  subcontract  agreement between us and The University of North
Carolina at Chapel Hill ("UNC-CH") and approximately $183,000 related to a grant
from  Medicines  for  Malaria  Venture  ("MMV")  to fund  clinical  studies  and
licensure of DB289 for treatment of malaria  which has since  lapsed,  while for
the three month period ended June 30, 2005, revenues recognized of approximately
$852,000 related to the abovementioned  UNC-CH clinical research subcontract and
$627,000 related to the abovementioned MMV grant for treatment of malaria.

 The  clinical  research  subcontract  agreement  relates  to  a  grant  from  a
philanthropic  foundation (the  "Foundation")  to UNC-CH to develop new drugs to
treat  trypanosomiasis  (African sleeping sickness) and leishmaniasis.  MMV also
receives  funding  from the  Foundation.  Grant  and  research  and  development
agreement  revenue is recognized as completed  under the terms of the respective
agreements,  according to Company estimates.  Grant and research and development
funds received prior to completion under the terms of the respective  agreements
are recorded as deferred revenues.

Interest income for the three month period ended June 30, 2006 was approximately
$150,000.  Interest income during the three month period ended June 30, 2005 was
approximately  $58,000.  The increase is  primarily  due to an increase in funds
invested from the prior corresponding  quarter.  There were no interest expenses
during the three month periods ended June 30, 2006 and June 30, 2005.

Research and development  expenses  increased to  approximately  $2,469,000 from
$2,269,000  for the three month  periods  ended June 30, 2006 and June 30, 2005,
respectively.  Expenses  relating  to the  MMV  testing  agreement  and  the UNC
subcontract, respectively, decreased from approximately $624,000 and $849,000 in
the three  month  period  ended  June 30,  2005 to  approximately  $182,000  and
$825,000 in the three month period ended June 30, 2006.  Additionally,  contract
services  relating to trials for treatment of pneumocystis  pneumonia  increased
from  approximately  $385,000 to  approximately  $1,125,000 in the same periods.
Non-cash   options  expense  under  research  and  development   increased  from
approximately  $11,000  in the  three  month  period  ended  June  30,  2005  to
approximately  $177,000 in the three month period ended June 30, 2006.  Adopting
SFAS 123(R)  accounted for  approximately  $143,000 of the $177,000 in the three
month period  ended June 30,  2006.  Other  research  and  development  expenses
decreased approximately $240,000 from the three month period ended June 30, 2005
to the three month period ended June 30, 2006.

General and administrative  expenses decreased to approximately  $2,220,000 from
approximately $2,732,000 during the three month periods ended June 30, 2006, and
June 30, 2005,  respectively.  The  decrease was largely due to decreased  legal
fees,  primarily  concerning legal proceedings with Neurochem (see Part II, Item
1), which  decreased  from  approximately  $1,400,000  in the three month period
ended June 30, 2005, to  approximately  $182,000 in the three month period ended
June 30, 2006. Patent fees remained fairly constant over the three month periods
ended  June 30,  2005 and 2006,  with  charges  of  approximately  $165,000  and
$163,000,  respectively.  Payroll and  related  costs also  remained  relatively
constant having decreased from approximately  $391,000 in the three month period
ended June 30, 2005 to  approximately  $384,000 in the three month  period ended
June 30, 2006.  Non-cash  general and  administrative  expenses  increased  from
approximately  $26,000  in the  three  month  period  ended  June  30,  2005  to
approximately  $499,000 in the three month period ended June 30, 2006.  Adopting
SFAS 123 (R) accounted for  approximately  $413,000 of the $499,000 in the three
month  period  ended June 30,  2006.  Other  general  and  administrative  costs
increased by approximately $242,000 over the same periods.



                                      -22-
<PAGE>



Our net loss decreased to approximately $2,597,000 from approximately $3,465,000
during  the  three  month  periods  ended  June 30,  2006  and  June  30,  2005,
respectively.  The decrease was primarily  attributable to the decrease in legal
costs offset by the adoption of SFAS 123(R).

Liquidity and Capital Resources

As of June 30, 2006, cash and cash equivalents were approximately $11,917,000.

We spent  approximately  $34,000 on equipment  purchases  during the three month
period  ended June 30,  2006,  compared  to $24,000 for  equipment  expenditures
during  the same  period in the  previous  year.  No  significant  purchases  of
equipment are anticipated by us during the year ending March 31, 2007.

We  periodically  receive  cash from the  exercise of common  stock  options and
warrants.  During the three month period ended June 30, 2006, we did not receive
any proceeds  for the  exercise of options or  warrants.  During the three month
period ended June 30, 2005, we received  approximately $27,000 from the exercise
of options.  Warrant  holders  exercised  warrants to purchase  1,800  shares of
common stock resulting in gross proceeds to us of  approximately  $12,000.

We believe our existing unrestricted cash and cash equivalents and the grants we
have  received or have been  awarded and are awaiting  disbursement  of, will be
sufficient  to meet our  planned  expenditures  through  at least  August  2007,
although there can be no assurance we will not require additional funds.

Through June 30, 2006, we financed our operations with:

     o    proceeds   from  various   private   placements  of  debt  and  equity
          securities,  an initial public  offering,  and other cash  contributed
          from  stockholders,   which  in  the  aggregate  raised  approximately
          $70,089,000;

     o    payments from research  agreements,  foundation grants and SBIR grants
          and STTR program grants of approximately $22,706,000; and

     o    the use of stock, options and warrants in lieu of cash compensation.

Our  cash   resources   have   been   used  to   finance,   develop   and  begin
commercialization  of drug product  candidates,  including  sponsored  research,
conduct of human clinical trials, capital expenditures, expenses associated with
development of product  candidates  pursuant to an agreement,  dated January 15,
1997,  (the  "Consortium  Agreement"),  among us and UNC (to which  each of Duke
University,  Auburn  University  and Georgia  State  University  agreed  shortly
thereafter  to become a party,  and all of  which,  collectively  with UNC,  are
referred  to as  the  "Consortium")  and,  as  contemplated  by  the  Consortium
Agreement, under a license agreement dated January 28, 2002 ("Consortium License
Agreement") with the Consortium,  and general and administrative  expenses. Over
the next several years we expect to incur  substantial  additional  research and
development   costs,   including  costs  related  to  research  in  pre-clinical
(laboratory) and human clinical trials,  administrative  expenses to support our
research and development operations and marketing expenses to launch the sale of
any commercialized product that may be developed.

Our future  working  capital  requirements  will depend upon  numerous  factors,
including the progress of research,  development and commercialization  programs
(which  may vary as  product  candidates  are added or  abandoned),  results  of
pre-clinical  testing  and human  clinical  trials,  achievement  of  regulatory



                                      -23-
<PAGE>



milestones,  third party  collaborators  fulfilling their obligations to us, the
timing and cost of seeking regulatory approvals,  the level of resources that we
devote to the engagement or development of manufacturing  capabilities including
the  build-out of our  subsidiary's  facility in China,  our ability to maintain
existing and to establish new collaborative  arrangements with others to provide
funding to support these  activities,  and other factors.  In any event, we will
require  substantial  additional funds in addition to our existing  resources to
develop product candidates and to otherwise meet our business objectives.

Management's  plans for the  remainder of the fiscal year, in addition to normal
operations,  include  continuing their efforts to create joint ventures,  obtain
additional  grants and to develop and enter into  research,  development  and/or
commercialization  agreements  with others.  Subject to  management's  strategic
development  plan,  we are  going  to  continue  financing  efforts  by  raising
additional capital through equity or debt issuance.

     Item 3.    Quantitative and Qualitative Disclosures about Market Risk.
                -----------------------------------------------------------

The exposure of market risk  associated with  risk-sensitive  instruments is not
material,  as our  operations  are  conducted  primarily in U.S.  dollars and we
invest   primarily  in  short-term   government   obligations   and  other  cash
equivalents.  We intend to develop policies and procedures to manage market risk
in the future if and when circumstances require.

     Item 4.   Controls and Procedures.
               ------------------------

Disclosures and Procedures

We  maintain  controls  and  procedures  designed  to ensure that we are able to
collect the  information we are required to disclose in the reports we file with
the SEC, and to process, summarize and disclose this information within the time
periods specified in the rules of the SEC. Our Chief Executive Officer and Chief
Financial  Officer  are  responsible  for  establishing  and  maintaining  these
procedures   and,  as  required  by  the  rules  of  the  SEC,   evaluate  their
effectiveness.  Based  on  their  evaluation  of  our  disclosure  controls  and
procedures,  which  took  place  as of the  end of the  period  covered  by this
Quarterly  Report on Form 10-Q, our Chief Executive  Officer and Chief Financial
Officer  believe that these  procedures are effective to ensure that we are able
to collect,  process and disclose the information we are required to disclose in
the reports we file with the SEC within the required time periods.

Internal Controls

We  maintain  a system of  internal  controls  designed  to  provide  reasonable
assurance that: (1)  transactions  are executed in accordance with  management's
general or specific authorization and (2) transactions are recorded as necessary
to (a) permit  preparation of financial  statements in conformity with generally
accepted  accounting  principles  and (ii) maintain  accountability  for assets.
Access to assets is permitted only in accordance  with  management's  general or
specific  authorization and the recorded  accountability  for assets is compared
with the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.

Changes in Internal Controls

We have not made any  material  changes in our internal  control over  financial
reporting during the quarter ended June 30, 2006 that have materially  affected,
or are  reasonably  likely to  materially  affect,  our  internal  control  over
financial reporting.



                                      -24-
<PAGE>



                        PART II.      OTHER INFORMATION

     Item 1.   Legal Proceedings.
               ------------------

Immtech International, Inc., et al. v. Neurochem, Inc., et al.

On August  12,  2003,  the  Company  filed a  lawsuit  against  Neurochem,  Inc.
("Neurochem")  alleging  that  Neurochem  misappropriated  the  Company's  trade
secrets  by  filing  a series  of  patent  applications  relating  to  compounds
synthesized and developed by the scientific  consortium with whom Immtech has an
exclusive licensing  agreement.  The misappropriated  intellectual  property was
provided to  Neurochem  pursuant to a testing  agreement  under which  Neurochem
agreed to test the compounds to determine if they could be successfully  used to
treat amyloid diseases. Pursuant to the terms of the agreement, Neurochem agreed
to keep all information confidential, not to disclose or exploit the information
without  Immtech's prior written consent,  to immediately  advise Immtech if any
invention was discovered and to cooperate with Immtech and its counsel in filing
any patent applications.

Since the filing of the complaint,  Neurochem had aggressively sought to have an
International  Chamber of Commerce ("ICC")  arbitration panel hear this dispute,
as  opposed to the  federal  district  court in which the action was  originally
filed.  The Company  agreed to have a three  member ICC  arbitration  panel (the
"Arbitration  Panel") hear and rule on the dispute on the  expectation  that the
Arbitration Panel would reach a more timely and economical resolution.

        The ICC hearing was held September 7 to September 20, 2005. Final papers
were filed by both  parties on November  2, 2005.  The ICC  tribunal  closed the
hearing  on  April  17,  2006.  On June 9,  2006,  the  International  Court  of
Arbitration of the ICC notified the parties that (i) the Arbitral Tribunal found
that Neurochem breached the testing agreement and awarded Immtech  approximately
$1.9 million in damages and  attorneys'  fees and costs,  and (ii) denied all of
Neurochem's claims against Immtech.

        Gerhard Von der Ruhr et al. v. Immtech International, Inc. et. al.
In  October  2003,  Gerhard  Von der Ruhr et al (the "Von der Ruhr  Plaintiffs")
filed a complaint in the United States District Court for the Northern  District
of Illinois against the Company and certain officers and directors.  The Von der
Ruhr Plaintiff's complaint alleged that (i) the Company refused to authorize the
Company's  transfer  agent to  remove  the  restrictive  legends  from the stock
certificates of the Von der Ruhr  Plaintiffs,  (ii) the Company refused to honor
the Von der Ruhr  Plaintiffs'  exercise of certain  stock  options and (iii) the
Company refused to honor an agreement regarding certain technology.  The Von der
Ruhr Plaintiffs also allege that certain officers and directors  interfered with
the Von der Ruhr  Plaintiffs'  contracts with the Company.  The complaint sought
unspecified  monetary  damages and  punitive  damages,  in addition to equitable
relief and costs.  In a filing  made in late  February,  2005,  the Von der Ruhr
Plaintiffs  specified damages of approximately  $44.5 million in damages,  which
includes $42 million related to the alleged  technology  agreement claim,  which
the Company  believes is meritless.  In 2005,  one of the counts in the case was
dismissed upon the Company's motion for summary judgment.  The Company has filed
pre-trial  motions  regarding  the evidence to be introduced at the trial of the
remaining counts,  including a motion to preclude  disclosure of evidence of Von
der Ruhr's alleged  damages.  Those pre-trial  motions are pending.  The case is
likely to be set for trial sometime in 2006 or 2007.

        Item 1A.      Risk Factors
                      ------------

There are no material changes in risk factors previously disclosed in Item 1A to
Part I of our Form  10-K for the  fiscal  year  ended  March 31,  2006.





                                      -25-
<PAGE>



      Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.
                ------------------------------------------------------------


Recent Sales of Unregistered Securities.
----------------------------------------

        All such shares of common stock herein described as issuances below were
made pursuant to Section 4(2) of the Securities Act of 1933, as amended.

Restricted Stock

        On May 26, 2006,  restricted  stock in the amount of 5,000 common shares
was issued to Tulane  University  under the terms of the license  agreement  for
rights to AQ-13. On May 26, 2006 restricted  stock in the amount of 5,000 common
shares was issued to an individual for services rendered.

Option Exercise

On April 12, 2006,  options to purchase  32,263 shares with an exercise price of
$0.47 per share were exercised on a cashless basis.  Common shares in the amount
of 30,349 were issued along with a check for $6 in lieu of fractional shares.

Conversion of Preferred Stock to Common Stock.

During May 2006 certain holders of Series E Convertible  Preferred Stock,  $0.01
par value ("Series E Stock") converted an aggregate of 46,000 shares of Series E
Preferred Stock into an aggregate of 163,847 shares of our common stock.

Preferred Stock Dividend Payment.

On April 15,  2006,  we issued  32,964  shares of common  stock as  payment of a
dividend earned on outstanding  preferred stock to the holders thereof:  holders
of Series A Stock  earned  5,547  shares of common  stock on 58,400  outstanding
shares;  holders of Series B Stock earned 1,703 shares of common stock on 13,464
outstanding  shares;  holders of Series C Stock  earned  5,761  shares of common
stock on 45,536  outstanding  shares;  holders of Series D Stock  earned  11,134
shares of common stock on 117,200  outstanding  shares;  and holders of Series E
Stock earned 8,819 shares of common stock on 156,600 outstanding shares. We also
paid  holders  of our  outstanding  preferred  stock  $387  in  cash  in lieu of
fractional shares.

     Item 3.   Defaults Upon Senior Securities.
               --------------------------------

None

     Item 4.   Submission of Matters to a Vote of Security Holders.
               ----------------------------------------------------

None

     Item 5.   Other Information.
               ------------------

None

     Item 6.   Exhibits.
               ---------

Exhibits
--------




                                      -26-
<PAGE>



                                  Exhibit Index
                                  -------------



        3.1 (5)               Amended and Restated  Certificate of Incorporation
                              of the Company, dated June 14, 2004

        3.2 (6)               Certificate   of  Correction  to   Certificate  of
                              Incorporation dated December 14, 2005.

        3.3 (7)               Certificate   of   Amendment   (Name   Change)  to
                              Certificate of Incorporation dated March 22, 2006.

        3.4 (1)               Certificate   of   Designation    for   Series   A
                              Convertible  Preferred  Stock  Private  Placement,
                              dated February 14, 2002

        3.5 (2)               Certificate   of   Designation    for   Series   B
                              Convertible  Preferred  Stock  Private  Placement,
                              dated September 25, 2002

        3.6 (3)               Certificate   of   Designation    for   Series   C
                              Convertible  Preferred  Stock  Private  Placement,
                              dated June 6, 2003

        3.7 (4)               Certificate   of   Designation    for   Series   D
                              Convertible  Preferred  Stock  Private  Placement,
                              dated January 15, 2004

        3.8 (6)               Certificate   of   Designation    for   Series   E
                              Convertible  Preferred  Stock  Private  Placement,
                              dated December 13, 2005

        3.9 (7)               Amended  and   Restated   Bylaws  of  the  Company
                              effective as of March 22, 2006.

        31.1                  Certification of Chief Executive  Officer pursuant
                              to Section 302 of the Sarbanes-Oxley Act of 2002

        31.2                  Certification of Chief Financial  Officer pursuant
                              to Section 302 of the Sarbanes-Oxley Act of 2002

        32.1                  Certification of Chief Executive  Officer pursuant
                              to Section 906 of the Sarbanes-Oxley Act of 2002

        32.2                  Certification of Chief Financial  Officer pursuant
                              to Section 906 of the Sarbanes-Oxley Act of 2002






                                      -27-
<PAGE>





(1) Incorporated  by  Reference to our Form 8-K (File No.  000-25669),  as filed
    with the Securities and Exchange Commission on February 14, 2002.

(2) Incorporated  by  Reference to our Form 8-K (File No.  001-14907),  as filed
    with the Securities and Exchange Commission on September 25, 2002.

(3) Incorporated  by  Reference to our Form 8-K (File No.  001-14907),  as filed
    with the Securities and Exchange Commission on June 10, 2003.

(4) Incorporated  by  Reference to our Form 8-K (File No.  001-14907),  as filed
    with the Securities and Exchange Commission on January 21, 2004.

(5) Incorporated  by Reference to our Form 10-K (File No.  001-14907),  as filed
    with the Securities and Exchange Commission on June 14, 2004.

(6) Incorporated  by  Reference to our Form 8-K (File No.  001-14907),  as filed
    with the Securities and Exchange Commission on December 14, 2005.

(7) Incorporated  by  Reference to our Form 8-K (File No.  001-14907),  as filed
    with the Securities and Exchange Commission on March 23, 2006.




                                      -28-
<PAGE>


                                   SIGNATURES

Pursuant to 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.


                                IMMTECH PHARMACEUTICALS, INC.



Date:  August 9, 2006           By:  /s/ Eric L. Sorkin
                                     ------------------
                                Eric L. Sorkin
                                President and Chief Executive Officer



Date:  August 9, 2006           By:  /s/ Gary C. Parks
                                     -----------------
                                Gary C. Parks
                                Treasurer, Secretary and Chief Financial Officer
                                (Principal Financial and Accounting Officer)