U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                 Form 10-KSB/A2


   (Mark One)
           X       Annual report under Section 13 or 15(d) of the Securities
     -----   Exchange Act of 1934. For the fiscal year ended June 30, 2003.


                                       OR

                  Transition report under Section 13 or 15(d) of the Securities
     -----   Exchange Act of 1934 for the transition period from

                      ________________ to ________________.

                         Commission File Number: 0-18299

                                BIOENVISION, INC.
                                -----------------
                 (Name of Small Business Issuer in Its Charter)

                          Delaware                              13-4025857
                -----------------------------                   ----------
               (State or Other Jurisdiction of                (IRS Employer
               Incorporation or Organization)               Identification No.)

                               509 Madison Avenue
                                    Suite 404
                               New York, New York        10022
                               ------------------        ------
               (Address of Principal Executive Offices) (Zip Code)

       Registrant's telephone number, including area code: (212) 750-6700

Securities Registered Pursuant to Section 12(b) of the Act:
                              Title of Each Class:
                               -------------------
                         Common Stock, $0.001 par value

Securities Registered Pursuant to Section 12(g) of the Act:  None

Check whether the issuer:  (1) filed all reports required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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

                                     --- ---

Check if there is no  disclosure of  delinquent  filers  pursuant to Item 405 of
Regulation S-B is contained in this form,  and no disclosure  will be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

The issuer's revenues for its most recent fiscal year were $504,857.


The aggregate market value of the voting stock held by  non-affiliates  computed
by reference to the last price at which the stock was sold,  as of May 18, 2004,
was $256,127,866. The number of shares of common stock outstanding as of May 18,
2004 was 26,002,829.



<PAGE>


                                     PART I

         Except for historical  information contained herein, this annual report
on Form 10-KSB  contains  forward-looking  statements  within the meaning of the
Section 21E of the  Securities  and  Exchange  Act of 1934,  as  amended,  which
involve certain risks and uncertainties. Forward-looking statements are included
with  respect to, among other  things,  the  Company's  current  business  plan,
"Factors that May Effect our Business",  and Managements Discussion and Analysis
of Results of Operations".  These  forward-looking  statements are identified by
their use of such terms and phrases as "intends," "intend,"  "intended," "goal,"
"estimate,"    "estimates,"    "expects,"   "expect,"   "expected,"   "project,"
"projected,"  "projections,"  "plans," "anticipates,"  "anticipated,"  "should,"
"designed to," "foreseeable  future," "believe,"  "believes" and "scheduled" and
similar  expressions.  The  Company's  actual  results  or  outcomes  may differ
materially  from those  anticipated.  Readers are  cautioned  not to place undue
reliance on these  forward-looking  statements,  which speak only as of the date
the statement was made. The Company  undertakes no obligation to publicly update
or  revise  any  forward-looking   statements,   whether  as  a  result  of  new
information, future events or otherwise.

Item 1.  Description of Business.

         Bioenvision  is an  emerging  biopharmaceutical  company.  Our  primary
business focus is the  acquisition,  development  and  distribution  of drugs to
treat  cancer.  We  have a  broad  range  of  products  and  technologies  under
development, but our two lead drugs are Clofarabine and Modrenal(R).

         We believe that our two lead products  have the  following  competitive
advantages over existing products at market:

Modrenal(R)(emerging endocrine resistance technology)

O        Novel mode of action on estrogen receptors

O        Increases estrogen binding to ER(beta) resulting in decreased cancer
         cell proliferation

O        35% overall clinical benefit rate in multi-center clinical trial:
         meta-analysis of 714 patients with advanced progressive post-menopausal
         breast cancer

O        55% clinical benefit rate in patients who have become resistant to
         tamoxifen therapy

O        Possible synergistic combination therapy with tamoxifen

O        Phase II clinical trial commencing in prostate cancer Q2 of calendar
         2004



Clofarabine (purine nucleoside anti-metabolite technology)

O        Next generation, halogenated-purine nucleoside analogue, designed to
         overcome the limitations and incorporate the best qualities of both
         fludarabine (Fludara(R)) and cladribine (Leustatin(R)).

O        Multiple Mechanisms of Action:

         o        Potent Inhibition of DNA Synthesis and Repair(active in
                  dividing cancer cells).

         o        Induces Apoptotic (cell death) Pathway (active in non-dividing
                  cancer cells).

0        Potent ability to kill cancer cells in a wide range of cell lines,
         including leukemia, non-small cell lung, colon, melanoma, ovarian,
         renal, prostate, and breast cancer lines.

0        Significant clinical benefit demonstrated in both pediatric and adult
         leukemias:

         o        Overall response rates in relapsed/refractory pediatric acute
                  leukemias of between 25% and 36% achieved.

         o        Overall response rates in relapsed/refractory adult acute
                  myeloid leukemia (AML) and chronic myeloid leukemia in blast
                  crisis (CML-BP) of between 55% and 64% achieved.

0        Solid tumor studies initiated with both the oral and intravenous
         formulations of clofarabine.


                                      -1-
<PAGE>


Anti-Cancer Product Portfolio
-----------------------------

Our  anti-cancer   product  portfolio  includes  three  products,   Modrenal(R),
Clofarabine,  Gossypol, used or which may be useful in eight indications and one
technology, Gene Therapy, which may be useful in two indications.

         Modrenal(R)

We have the exclusive  right to market and distribute  Modrenal(R)  (trilostane)
throughout the world for all human  applications.  Our exclusive license expires
upon the last to expire of the  patents  used or useful in  connection  with the
marketing of Modrenal(R). Given that we have new patent applications filed which
are subject to issuance,  we expect the last to expire of our underlying patents
will be 2020.

Modrenal(R)  is currently at market in the United  Kingdom for the  treatment of
women  with  advanced  post  menopausal  breast  cancer.  We  have a very  small
marketing  team that markets  Modrenal(R) in the United  Kingdom,  and we record
revenues accordingly.

Modrenal is in Phase II clinical studies in prostate cancer trials, and in Q2-Q3
2004, we intend to commence a Phase IV study in postmenopausal breast cancer and
a Phase II study in pre-menopausal breast cancer.

         Clofarabine

We have the exclusive  right to manufacture,  market and distribute  Clofarabine
for all  human  applications  in all  areas of the world  other  than  Japan and
Southeast Asia. We sublicensed  the right to manufacture,  market and distribute
Clofarabine in the U.S. and Canada to ILEX Oncology, Inc. solely with respect to
human cancer  applications.  We maintain our exclusive  rights until the last to
expire of the patents used or useful in our  development and sales efforts which
we expect to occur in 2020.

Currently,  Clofarabine is in pivotal Phase II Clinical Trials for the treatment
of pediatric acute leukemias. The final part of a rolling NDA will be filed with
the FDA by early Q2, 2004. The drug has a Fast Track  Designation  and therefore
we expect an FDA ruling by Q3,2004. As indicated in the previous paragraph, ILEX
has the rights to market  Clofarabine in the U.S. and we would receive a royalty
on U.S. annual net sales.

Clofarabine  is also in Phase II  Clinical  Trials  in a range of  hematological
cancers and Phase I clinical trials in solid tumors.

         Gossypol

We have the  exclusive  world-wide  right to  manufacture  and market an optical
isomer of gossypol for human and veterinary applications. Currently gossypol, to
which we have ascribed the provisional trade name of Velostan, is completing the
manufacturing  process.  We have  developed  a novel  method of  separating  the
enantiomers of gossypol and we are seeking patent protection for the process. We
expect to  initiate  Phase I  clinical  trials  with the drug in Q2,  2004.  The
primary indication we are targeting for the drug is in bladder cancer,  although
the drug may show efficacy in other tumor indications

         Gene Therapy

         We have the exclusive  world-wide right to develop products from a gene
therapy platform  technology.  To date, we have  incorporated  three human genes
into the  proprietary  technology and we have tested two of these in preliminary
clinical  trials,  with the emphasis on the treatment of patients with end-stage
liver disease.  Management  believes the technology may also have application in
patients  undergoing  chemotherapy for cancer.  We maintain our exclusive rights
until the last to expire of the patents which we expect to occur in 2017.


                                       2
<PAGE>


Non-Cancer Product Portfolio
----------------------------

Our non-cancer product portfolio is as follows:

Oligon(R) and Methylene Blue

         We have the exclusive  world-wide  right to  manufacture  and market an
anti-infective  technology  for the use of thiazine  dyes,  including  Methylene
Blue, and for other  anti-infective  uses.  With the  acquisition of Pathagon in
February 2002, we acquired the exclusive  worldwide  license to this  technology
and license this  technology  from  Oklahoma  Medical  Research  Foundation.  We
maintain  our  exclusive  license  until the last to  expire  of the  underlying
patents.  Currently,  there are six patents  issued in the U.S.  and  additional
patents have been filed in the U.S., Europe, Canada and Japan.


         We have  sub-licensed the right to market the technology in the U.S. to
Edwards  Lifesciences which is currently marketing the technology in its line of
short-term  vascular access  catheters.  Bioenvision  earns a nominal royalty on
annual net sales from Edwards Lifesciences.


Products and Technologies

         The  following is a  description  of our current  portfolio of platform
technologies.

      Purine Nucleoside Technology

         We  have  a  license  from  Southern  Research  Institute,  Birmingham,
Alabama,  to develop  and  market  purine  nucleoside  analogs  which,  based on
third-party  studies  conducted to date,  may be  effective in the  treatment of
leukemia and lymphoma. These studies were conducted by MD Anderson Cancer Center
on behalf of the Company, ILEX and several United States hospitals involved with
ILEX clinical studies.  The lead compound of these  purine-based  nucleosides is
known  as  Clofarabine.  To  facilitate  its  development,  we  entered  into  a
co-development  agreement  with Ilex  Oncology,  Inc.  ("Ilex")  in March  2001,
pursuant to which we granted Ilex an option on a sub-license  to make,  sell and
distribute  Clofarabine  in the United States and Canada,  subject to successful
completion of certain milestones.  Clofarabine has successfully  completed Phase
I/II clinical trials at M.D. Anderson Cancer Center, Houston, Texas. Three Phase
II  clinical  trials  have begun at MD  Anderson  and will be  extended to other
leading centers in the United States and Europe.  In addition,  a clinical trial
exemption certificate has been granted for Clofarabine in the United Kingdom and
approval for a Phase I/II trial of  Clofarabine in lymphoma has been obtained in
Switzerland.  In January 2002, the European  orphan drug  application for use of
Clofarabine  to treat acute  leukemia in adults was approved.  The drug also has
been granted  orphan drug status in the United  States.  The  combination of the
Phase II trials in acute  leukemia  at M.D.  Anderson  Cancer  Center  and other
leading cancer centers in the U.S. and Europe and the  encouraging  results from
the Phase I, early Phase II studies and current  Phase II studies  lead us to be
enthusiastic for the prospects of Clofarabine  reaching the market,  possibly as
soon as the third quarter of calendar year 2004. The United States Food and Drug
Administration  recently  indicated  that it would  review  clofarabine  for the
treatment of  refractory  or relapsed  ALL in children  more quickly than normal
after having  granted  "fast track" status to  clofarabine.  "Fast track" status
means  that the FDA will start  reviewing  clinical  trial data even  before the
entire New Drug  Application  ("NDA") is  complete.  The FDA could  complete its
review  within six months  rather  than the normal 12 month  review  period.  We
believe the set of clinical data from the current Phase II clinical trials could
serve as the basis for a marking application, which we believe could be filed as
early as April 2004.  Management  believes that the "fast track" designation may
also result in our more expeditiously gaining marketing approval for clofarabine
for the treatment of refractory or relapsed ALL.

         ILEX is obligated  to pay us  royalties  on US and Canadian  annual net
sales of  Clofarabine  on a sliding  scale  from 5.25% to  11.25%.  The  minimum
royalty of 5.25%  applies to annual net sales of up to $30  million per year and
the maximum  11.25%  royalty  rate  applies to annual net sales at or above $500
million per year.  SRI  receives  royalties on the same scale of US and Canadian
annual net sales  from 3.5% to 7.5% from each of  Bioenvision  and ILEX.  We pay
royalties  to each of SRI and  ILEX in the  amount  of 3.5% to 7.5% on the  same
scale as applies to the ILEX royalty payment  obligations noted above. ILEX also
is responsible  for 50% of our research and  development  costs  associated with
Clofarabine  development  in the  Territory  (worldwide  outside  of  Japan  and
Southeast Asia) other than the US and Canada.


                                       3
<PAGE>


         Under the terms of the agreement with Southern Research  Institute,  we
were granted the  exclusive  worldwide  license,  excluding  Japan and Southeast
Asia, to make,  use and sell  products  derived from the  technology  for a term
expiring on the date of  expiration  of the last  patent  covered by the license
(subject to earlier  termination  under certain  circumstances),  and to utilize
technical  information  related  to the  technology  to obtain  patent and other
proprietary  rights  to  products  developed  by us  and  by  Southern  Research
Institute from the  technology.  The current  projected  expiration  date of the
license is March 2021. We currently are developing Clofarabine for the treatment
of leukemia and lymphoma and we plan to study its potential role in treatment of
solid tumors. In August 2003, SRI granted us an irrevocable, exclusive option to
make,  use and sell products  derived from the technology in Japan and Southeast
Asia. We intend to convert the option to a license upon sourcing an  appropriate
co-marketing partner to develop these rights in such territory.

         Pre-clinical and clinical testing of Clofarabine  demonstrated that the
drug has  anti-tumor  activity  against  a range of human  and  animal  cancers,
including hematological malignancies and several solid tumors. Approximately 360
people participated in this clinical testing. In addition,  Clofarabine has been
shown to have good oral  bioavailability,  and in conjunction with ILEX, we have
developed and expect to complete an oral  formulation for  clofarabine  prior to
December 2003.  Results from ongoing  clinical studies indicate that Clofarabine
may be an  effective  treatment  for  relapsed  acute  leukemias  in  adult  and
pediatric  patients,  as well as acute leukemias in adult and pediatric patients
that have become resistant,  or refractory,  to prior  treatments.  According to
researchers  at M.D.  Anderson  Cancer  Center,  interim  Phase II study results
showed  that 45% of adults  with acute  myelogenous  leukemia  (AML)  achieved a
complete  remission  (CR) rate,  and acute  lymphocytic  leukemia (ALL) patients
achieved a 20% CR rate when treated with  Clofarabine  as a single  agent.  Data
from a separate Phase I dose-escalation study demonstrated a 25% CR rate, and an
overall  response  rate of 40%,  in  children  with  acute  leukemias  who  were
refractory  to  previous  therapy.  Trials  in  pediatric  acute  leukemias  are
currently  ongoing in the U.S.  and are planned to commence in Europe later this
calendar year. Complete remission,  in this context, means complete clearance of
all  leukemic  cells  from the  blood  and  normalization  of the  blood  count,
sustained for a period of more than four weeks. In this context, a response,  or
partial response, has largely the same meaning,  except that the bone marrow may
still  contain  more than five  percent but less than 25% blast cells  (leukemic
cells).

         Clofarabine appears to attack cancer cells in at least four ways:

         (1)  damaging DNA in cancer cells;

         (2)  preventing DNA repair by damaged cancer cells;

         (3)  damaging  the  cancer  cell's  important  control  structures--the
              mitochondria; and

         (4)  initiating  the process of programmed  cell death  (apoptosis)  in
              cancer cells.

         Clofarabine  combines many of the favorable  properties of the two most
commonly used nucleoside analog drugs, fludarabine(R) and cladribine(R), but has
several-fold greater potency,  when compared to fludarabine(R),  at damaging the
DNA of leukemia cells.  Clofarabine appears to achieve this greater potency by a
process  of  breaking   DNA  chains  and   inhibiting   an   important   enzyme,
ribonucleotide  reductase.  Clofarabine distinguishes itself from other drugs by
its broader  activity;  in particular,  the manner in which it damages the cells
mitochondria  and initiates the process of  programmed  cell death  (apoptosis).
(See Blood 2000; volume 96, page 3537).

         Because Clofarabine is a potent inhibitor of DNA repair, we, along with
our co-development  partners in North America, ILEX, are exploring the potential
use of Clofarabine in combination  with DNA damaging  agents.  This strategy has
already  been  validated   through  the  combination  of   Fludarabine(R)   with
cyclophosphamide in the treatment of chronic lymphocytic  leukemia (CLL) because
Fludarabine,  like  clofarabine,  is in the same  class of  compounds,  known as
purine nucleoside  analogs,  with similar  mechanisms of action in that the both
work by damaging DNA in a cancer cell. Public reports indicate that Fludarabine,
used in combination with a cyclophosphamide  agent, blocks enzymes which promote
cancer cell growth. Because Clofarabine and Fludarabine are in the same class of
cancer agents with similar  modes of action,  we believe use of  Clofarabine  in
combination  with  DNA  damaging  agents  may  have  the  same  effect  as  with
Fludarabine.

         Purine  Nucleoside--Solid Tumor. In pre-clinical tests, Clofarabine has
shown anti-tumor  activity against several human cancers,  including  cancers of
the colon,  kidney and prostate,  as well as its action against  leukemic cells.
This activity against solid tumors distinguishes Clofarabine from other drugs in
its class which have shown relatively  little activity against solid tumors.  We
intend to develop  Clofarabine  as a potential drug for the treatment


                                       4
<PAGE>


of certain  solid tumors,  such as colon and prostate  cancer.  The  development
strategy for Clofarabine as a solid tumor agent will run in conjunction with the
program for  hematological  cancers,  but is expected to take longer to complete
clinical trials and will require a different marketing approach.

         Cancer of the colon is one of the most  common  cancers in the  Western
world  with  approximately  200,000  new cases in the United  States  each year.
Surgery is the most successful  treatment for the primary tumor. Once the cancer
has spread the results of chemotherapy are disappointing and long-term  survival
figures have changed very little in the past 50 years. There is a great need for
an effective  chemotherapeutic  agent to treat this  disease,  and a huge market
potential  exists for any drug that can induce tumor regression in patients with
metastatic  colon cancer.  Prostate  cancer affects  181,000 new patients in the
United States each year.  Initial  treatment is directed at hormonal  control of
the disease,  but in the event control is not achieved,  chemotherapy usually is
required. We intend to develop Clofarabine, or a derivative of Clofarabine, as a
potential drug for the treatment of advanced colon and prostate cancer.

      Selective Steroid Receptor Modulation Technology

         Selective steroid receptor modulation technology,  the lead compound of
which is currently approved by regulatory  authorities in the United Kingdom for
the treatment of advanced breast cancer in post-menopausal  women, has also been
approved by  regulatory  authorities  in Germany,  for the  treatment of certain
adrenal  disorders,  such as Cushing's  Disease.  The product had also  received
marketing  approval  for the  treatment of  Cushing's  disease in certain  other
European  countries  and the United  States.  The lead product,  trilostane,  is
currently  approved for marketing under the names Modrenal(R) and Modrastane(R).
We receive royalty payments from Dechra on sales of trilostane in the veterinary
market in Europe.

         Breast  cancer  is,  in  general,  a  hormone-dependent  disease,  with
estrogen being the principal hormone driving cell growth.  Consequently, a major
part of modern treatment is directed at blocking the action of estrogen,  either
at the site of production in the body or at the cell's  estrogen  receptor.  The
most widely used drug in this area,  Tamoxifen(R),  has been very  successful in
improving  response  rates and  survival  in women  with  breast  cancer.  Until
recently,  it was  believed  that  estrogen  acted via a single  receptor on the
cancer  cell.  However,  it is now known  that more than one  estrogen  receptor
exists. Recent scientific data from Professor Gavin Vinson's laboratory at Queen
Mary & Westfield  College,  London,  England (part of the  University of London)
have shown that  trilostane  has a unique and  previously  unrecognized  mode of
action.  The drug inhibits  estrogen binding to the classical  estrogen receptor
(ER(alpha))  in an indirect  (allosteric)  fashion and also  modulates  estrogen
binding to the  newly-described  second  receptor,  ER(beta).  This action makes
trilostane  the first drug in a new class of agents that  specifically  modulate
ligand  binding to  ER(beta).  This novel  action may explain the high  clinical
response  rates  seen  when the drug was given to breast  cancer  patients  with
Tamoxifen(R) resistance. Furthermore, trilostane's action is different from that
of other known "hormonal  agents"  although its actions may be  complementary to
those of other drugs. Extensive clinical trials with the drug have shown that it
is effective in a significant proportion of breast cancer patients, particularly
those with  hormone-sensitive  tumors.  Trilostane  has no  aromatase  inhibitor
activity,  which  distinguishes it from some of the competitor hormonal products
currently  marketed for the treatment of breast cancer.  We believe that the new
data presents the drug with considerable market potential, although there can be
no assurance that the medical profession or the FDA will accept this new data or
that the drug will be successful in the marketplace.

         Trilostane  has been  extensively  studied in controlled  trials in the
United States, Europe and Australia,  and almost 800 patients with breast cancer
have been treated with trilostane.  Of these 800 patients, 87 of them were given
the drug in the United States as part of an FDA-approved  trial.  Its anti-tumor
activity has been well  documented  and the drug has been shown to produce tumor
response rates (i.e.  arrest the growth of the tumor) of up to 55% in women with
hormone-sensitive  breast  cancer.  In a sub-set  analysis of the clinical trial
data, patients with hormone-sensitive  breast cancer who had responded to one or
more hormonal  therapies were given  trilostane upon relapse of the cancer.  The
response  rate was above  40% in this  group of  patients.  This  compares  to a
response rate of about 30-35% with currently marketed  aromatase  inhibitors and
approximately  25% with  herceptin  given as second  line  therapy.  Most of the
patients in the sub-set had received  Tamoxifen(R) as first-line therapy.  Thus,
trilostane given as follow-on, or salvage, therapy has a response rate in excess
of those reported for the drugs  currently in use for  second-line  treatment in
this disease. Furthermore,  trilostane has an acceptable side-effect profile. On
the basis of these data,  trilostane was granted a product license in the United
Kingdom for the treatment of post-menopausal breast cancer.

         We hold an exclusive license,  until the expiration of existing and new
patents  related to  trilostane,  to market  trilostane  in major  international
territories,  and an  agreement  with a United  Kingdom  company  to  co-


                                       5
<PAGE>


develop  trilostane for other therapeutic  indications.  Trilostane is currently
manufactured by third-party  contractors in accordance  with good  manufacturing
practices.  We have no plans to  establish  our own  manufacturing  facility for
trilostane, but will continue to use third-party contractors.

         We launched  Modrenal(R)  in May 2003 in the United  Kingdom for use in
the  treatment  of  post-menopausal  breast  cancer.  We  also  intend  to  seek
regulatory  approval for Modrenal(R) in the United States as salvage therapy for
hormone-sensitive  breast cancers and hormone independent prostate cancers. This
would  target  patients  that have  hormone-sensitive  cancers  and have  become
refractory  to prior  hormone  treatments,  such as  Tamoxifen(R)  or  aromatase
inhibitors. We believe that the potential market for Modrenal(R), based upon the
sales of currently  available drugs for hormonal therapy for breast cancers,  is
in  excess of $1.8  billion  of sales per annum  worldwide.  The  results  of 11
clinical  trails to date,  with a total of 783  patients  tested,  in the United
States,  Europe  and  Australia  with  Modrenal(R)  show  that it is at least as
effective in second line or third line  treatment of advanced  breast  cancer as
the currently  available  hormonal  treatments,  such as the selective  estrogen
receptor modulators,  or SERMs, and aromatase inhibitors. In the view of several
clinicians  and   investigators   familiar  with   Modrenal's  mode  of  action,
Modrenal(R) is most effective in certain specific  patient types,  such as those
who have become  Tamoxifen(R)-refractory.  Furthermore, our management currently
intends  to  price  Modrenal(R)  in  such a  manner  as to make  treatment  with
Modrenal(R) compare very favorably, on a price basis, with the cost of treatment
with the existing  drugs used for second line or third line therapy.  We believe
that this  pricing  strategy  should  result in cost  benefits  for  physicians,
patients and health-care systems.

         Anti-Estrogen  Prostate.  We have received  Institutional  Review Board
approval  from  the  Massachusetts  General  Hospital  for a Phase  II  study of
trilostane for the treatment of androgen  independent prostate cancer. The study
will be conducted by The Dana Faber Cancer  Institute  and currently is intended
to commence in October 2003.

         The human  prostate  gland is under the  control of  several  hormones,
including androgens and estrogen. Receptors for estrogen have been identified in
the prostate gland, and the newly discovered  "second receptor,"  ER(beta),  has
been isolated from the human prostate gland.  ER(beta) is also highly  expressed
in uterine and ovarian  tissue.  Prostate  cancer,  in most cases,  is initially
hormone-dependent  and  treatment  of the  disease  is usually  directed  toward
blocking  the action of the  relevant  hormones.  Unfortunately,  it is a common
occurrence  for the cancer cells to become  resistant  to the standard  hormonal
agents.  We believe  that this is probably  due to the  inability  of  currently
available  treatments to block all the  receptors on the prostate  cancer cells.
The ability of  trilostane to control  prostate cell growth by altering  hormone
binding on important  receptors could expand the treatment  options for patients
with prostate cancer.

         Since adrenal disorders are relatively uncommon in humans, our strategy
is not to aggressively market trilostane for these indications,  but, rather, to
focus our  marketing  efforts  on  trilostane  for the  treatment  of breast and
prostate cancer, which have considerably greater market potential.  We intend to
file for  applicable  regulatory  approval of trilostane for treatment of breast
cancer in the United  States  within  months after  discussing  the  appropriate
course of regulatory consideration with applicable regulators. We will, however,
pursue   opportunities  for  adrenal  disorder  products  on  a  smaller  scale,
principally  in the  veterinary  market,  which we believe will generate  modest
revenues  over the near term.  Marketing  approval for  trilostane's  use in the
veterinary  market has been granted in the United  Kingdom and the drug is being
distributed by a third party. Under the terms of a co-development  agreement, we
were granted the exclusive worldwide license,  excluding Japan and South Africa,
to make, use and sell products  derived from this technology for a term expiring
on the date of expiration of the last patent covered by the license,  subject to
earlier  termination under certain  circumstances,  in exchange for, among other
things,  certain royalty  payments based on gross sales of products derived from
the technology.

         We  also  plan  to  devote  our   research   efforts  to  discover  new
applications  for trilostane and related  products.  The latest work has allowed
new patents to be filed which,  if granted,  will extend  broadly the commercial
potential for  trilostane  and related  products.  In addition,  a new analog of
trilostane,  which shows increased  activity compared with trilostane,  is being
developed and is the subject of new patent filings.

      OLIGON(R) Technology

         With the acquisition of Pathagon in February 2002, we acquired patents,
technology  and  technology   patents   relating  to  OLIGON(R)   anti-infective
technology,  and have licensed rights from Oklahoma Medical Research  Foundation
to the use of thiazine dyes,  including methylene blue, for other anti-infective
uses.


                                       6
<PAGE>


         The OLIGON(R)  technology is based on the  antimicrobial  properties of
silver  ions.  The broad  spectrum  activity  of silver ions  against  bacteria,
including  antibiotic-resistant  strains, has been known for decades.  OLIGON(R)
materials have  application  in a wide range of devices and products,  including
vascular access  devices,  urology  catheters,  pulmonary  artery  catheters and
thoracic devices, renal dialysis catheters, orthopedic devices and several other
medical and consumer  product  applications.  One  application  of the OLIGON(R)
technology has been licensed to a third party, which is currently  marketing the
technology in its line of short-term vascular access catheters.

         Six U.S.  patents for the  OLIGON(R)  technology  have been granted and
additional  patents  have been filed.  In  addition,  patents have been filed in
Europe, Canada and Japan.

         The  OLIGON(R)  technology   specifically   targets   hospital-acquired
infections,  the rate of which tripled  between 1980 and 1990 and which accounts
for  approximately  $11 billion of extra expense to the U.S.  healthcare  system
each year.  According to the U.S. Centers for Disease  Control,  $6.5 billion of
this expense is related to infections associated with medical devices, including
vascular  access and urology  catheters,  and is  unreimbursable  to  hospitals.
OLIGON(R)  devices  will be  marketed  as next  generation  products  into large
existing   markets.   Manufacturers  of  existing  products  are  aware  of  the
seriousness  of device  related  infections,  but none has been able to  develop
technology that imparts antimicrobial  efficacy to surfaces of implanted devices
over long periods of time. OLIGON(R) effectively addresses these requirements.

      Methylene Blue Technology

         We have licensed from Oklahoma Medical  Research  Foundation the rights
to use a range of thiazine dyes, the most well known of which is methylene blue,
for the in vitro and in vivo  inactivation  of pathogens in  biological  fluids.
Methylene  blue,  especially  when  irradiated  by  light,  acts  by  preventing
replication  of nucleic acid (DNA and RNA) in  pathogens.  Currently,  we do not
derive any revenues from its commercial use.

         Blood   transfusions  are  required  to  treat  a  variety  of  medical
conditions  and, to meet that need,  over 90 million blood  donations occur each
year.  Of these,  approximately  39 million  donations  occur in North  America,
Western Europe and Japan.  Methylene blue is currently used in several  European
countries to inactivate  pathogens in fresh frozen  plasma  (FFP).  We intend to
work closely with international  blood collection agencies to maximize the value
of our intellectual property position.

      Gene Therapy Technology

         Our product  portfolio also includes a variety of gene therapy products
which, we believe,  may offer  advancements in the field of cancer treatment and
may  have  additional  applications  in  certain  non-cancer  diseases  such  as
diabetes,  cystic  fibrosis  and  other  auto-immune  disorders.  Pursuant  to a
co-development  agreement  with the Royal Free and  University  College  Medical
School  and a  Canadian  biotechnology  company,  we are  developing  DNA vector
technologies  which,  based on pre-clinical  research and early Phase I clinical
trials,  we  believe  are  capable  of  elevating  albumin  levels in cancer and
cirrhosis patients with hypo-albuminemia,  a serious physiological  disorder. We
believe this has  considerable  market  potential  since low albumin  levels are
considered  to be  very  dangerous  consequences  of  many  diseases,  including
cirrhosis and liver cancer.

      Cytostatic Technology

         We have  acquired a license to  develop a distinct  group of  compounds
that we believe could play an important role in  controlling  the rate of growth
of cancer cells. In some cancers,  such as cancer of the bladder and skin, drugs
that stop cell growth  (cytostatics)  can be as effective as drugs that kill the
cell by direct toxicity (cytotoxics). The cytostatic drugs we are developing are
believed to work by blocking cell  division and reversing the malignant  process
in the cancer cell. The first  compound is a synthetic  analog of a drug derived
from a naturally  grown  plant,  which has been  widely  tested for a variety of
clinical  indications.  The results of this testing  have been  published in the
medical literature.  In particular,  the drug has shown efficacy against certain
cancers  by,  it is  believed,  preventing  cell  division  and  promoting  cell
differentiation.

         We plan to develop  more potent  analogs and to study their role in the
process  of cell  differentiation  and the  prevention  of the  spread of cancer
cells. The first compound derived from this technology is currently approved for
a Phase I clinical trial at a leading United Kingdom cancer center.


                                       7
<PAGE>


      Animal Health Products

         We also have one animal health  product,  Veteryl(R),  at market in the
United Kingdom for the treatment of Cushing's disease in dogs. In November 2001,
we granted to Arnolds Ltd., a major distributor of animal products in the United
Kingdom,  the right to market the drug for a six-month trial period, after which
time,  if the  results  were  satisfactory  to  Arnolds,  we would  enter into a
licensing  arrangement  whereby  Arnolds would pay royalties to us on sales from
April 2002 onward. During the trial period, Arnolds posted more than $400,000 of
sales of the drug.  Arnolds has licensed the drug from us for sale in the United
Kingdom  market  in  consideration  of  a  payment  of a 5%  royalty  on  sales.
Separately, in May 2003, we granted to Dechra Pharmaceuticals, PLC, an affiliate
of Arnolds Ltd., the exclusive right to market the drug in the United States for
$5.5 million of total consideration (including milestone payments) and a royalty
of 2%-4% of annual net sales.

Patents and Proprietary Rights

         Our  success  will  depend,  in part,  upon our  ability  to obtain and
enforce  protection for our products under United States and foreign patent laws
and other intellectual  property laws, preserve the confidentiality of our trade
secrets and operate without  infringing the proprietary rights of third parties.
Our policy is to file patent  applications  in the United States and/or  foreign
jurisdictions  to  protect  technology,   inventions  and  improvements  to  our
inventions  that are  considered  important to the  development of our business.
Also,  we will rely  upon  trade  secrets,  know-how,  continuing  technological
innovations and licensing opportunities to develop a competitive position.

         Through our current license  agreements,  we have acquired the right to
utilize  the   technology   covered  by  five  issued  patents  and  six  patent
applications,  as well as  additional  intellectual  property and know-how  that
could be the subject of further patent  applications in the future.  We evaluate
the desirability of seeking patent or other forms of protection for our products
in  foreign  markets  based on the  expected  costs  and  relative  benefits  of
attaining  this  protection.  There can be no assurance that any patents will be
issued from any  applications  or that any issued  patents will afford  adequate
protection to us.  Further,  there can be no assurance  that any issued  patents
will not be  challenged,  invalidated,  infringed  or  circumvented  or that any
rights granted thereunder will provide competitive advantages to us. Parties not
affiliated  with us have obtained or may obtain United States or foreign patents
or possess or may possess proprietary rights relating to our products. There can
be no assurance that patents now in existence or hereafter issued to others will
not adversely  affect the  development or  commercialization  of our products or
that our planned activities will not infringe patents owned by others.

         As a result  of the  licenses  described  above,  we are the  exclusive
licensee or sublicensee of three United States  patents  expiring in 2005,  2008
and 2014 relating to compounds,  pharmaceutical  compositions and methods of use
encompassing   clofarbine.   We  have  also  filed  two  United   States  patent
applications relating to the use of clofarbine in autoimmune diseases.  Although
the basic patents to trilostane have expired,  we are the exclusive  licensee of
several  United States and foreign  patent  applications  relating to the use of
trilostane alone or in combination with anticancer agents.

         We could incur substantial costs in defending ourselves in infringement
suits  brought  against  us  or  any  of  our  licensors  or  in  asserting  any
infringement  claims  that we may  have  against  others.  We could  also  incur
substantial  costs in connection with any suits relating to matters for which we
have agreed to indemnify our licensors or  distributors.  An adverse  outcome in
any  litigation  could  have a  material  adverse  effect  on our  business  and
prospects. In addition, we could be required to obtain licenses under patents or
other proprietary rights of third parties. No assurance can be given that any of
these licenses would be made available on terms  acceptable to us, or at all. If
we are  required  to,  and do not  obtain  any  required  licenses,  we could be
prevented from, or encounter delays in,  developing,  manufacturing or marketing
one or more of our products.

         We also rely upon trade  secret  protection  for our  confidential  and
proprietary  information.  There  can  be no  assurance  that  others  will  not
independently  develop  substantially  equivalent  proprietary  information  and
techniques  or  otherwise  gain  access to our trade  secrets or  disclose  this
technology or that we can meaningfully protect our trade secrets.

         It is our policy to require our employees,  consultants, members of the
Scientific  Advisory  Board and parties to  collaborative  agreements to execute
confidentiality  agreements  upon the  commencement  of employment or consulting
relationships  or a  collaboration  with us. These  agreements  provide that all
confidential  information  developed  or made  known  during  the  course of the
relationship  with us is to be kept  confidential  and not  disclosed  to  third
parties  except  in  specific  circumstances.  In the  case  of  employees,  the
agreements  provide that all  inventions  resulting  from work performed for us,
utilizing our property or relating to our business and conceived or


                                       8
<PAGE>


completed by the individual during employment shall be our exclusive property to
the extent permitted by applicable law.

Sales and Marketing

         We intend to establish strategic partnerships for the marketing,  sales
and  distribution  of our  products in North  America and certain  countries  in
Europe.  As of the date of this annual  report on From 10-KSB,  we have one such
arrangement  in place with Ilex for the  co-development  and marketing of one of
our initial lead products,  clofarabine,  and another  arrangement  with Edwards
Lifesciences for the marketing of short-term vascular access catheters using the
OLIGON(R)  technology.  We have  also  engaged  in our own  marketing  and sales
efforts in connection  with the marketing and sale of  Modrenal(R) in the United
Kingdom and upon regulatory  authorities' granting mutual recognition with which
we intend to apply during calendar 2004, throughout Europe. However, in order to
market any of our products  effectively,  we would need to establish a much more
integrated  marketing and sales force with technical  expertise and distribution
capability or contract with other  pharmaceutical  and/or health care  companies
with distribution systems and direct sales forces.

         Our marketing policy will be to generate  awareness of our products and
target the two key audiences  for our products - doctors and  patients.  Medical
education will be a priority,  with the use of  peer-opinion  leaders,  clinical
trials at major centers, satellite symposia and conferences, product advertising
in specific scientific  journals and trained sales personnel.  Patient education
is carefully  controlled  and is important to our  marketing  approach.  Patient
education is particularly  important because Modrenal(R),  our first product for
which we have obtained regulatory approval (in the United Kingdom) for marketing
for  use  in a  type  of  cancer  treatment,  is  effective  for  patients  with
post-menopausal  breast  cancer,  one of the most  common  cancers in women.  In
particular,  the drug is approved as follow-on  treatment  for patients who have
previously responded to hormonal therapy.

          If the trials of trilostane in prostate  cancer prove  successful,  we
will have a drug for treating a cancer found in  approximately  180,000 men each
year in the United States. We will work with patient help organizations,  inform
the lay public through consumer journals and television.

Manufacturing

         We do not have and do not  intend to  establish  any  internal  product
testing,  manufacturing or distribution  capabilities.  Our strategy is to enter
into  collaborative  arrangements with other companies for the clinical testing,
manufacture and distribution of its products.  These collaborators are generally
expected to be responsible  for funding or  reimbursing  all or a portion of the
development  costs,  including the costs of clinical testing necessary to obtain
regulatory  clearances and for commercial-scale  manufacturing,  in exchange for
exclusive or  semi-exclusive  rights to market  specific  products in particular
geographic  territories.  Manufacturers  of our products will be subject to Good
Manufacturing  Practices  prescribed  by the FDA or other rules and  regulations
prescribed by foreign regulatory authorities.

Raw Materials

         Our raw materials (such as laboratory chemicals) and other supply items
to be used in our research and  development  processes are  available  from many
different  suppliers  and are generally  available in  sufficient  quantities in
timely  fashion.   We  do  not  anticipate  any  significant   problems  in  the
availability of, or significant  price increases for,  required raw materials or
other production items in the foreseeable future.

Research and Development

         In developing new products, we consider a variety of factors including:
(i) existing or potential marketing  opportunities for these products;  (ii) our
capability  to arrange for these  products to be  manufactured  on a  commercial
scale;  (iii) whether or not these products  complement  our existing  products;
(iv) the  opportunities  to leverage  these  products  with the  development  of
additional products;  and (v) the ability to develop co-marketing  relationships
with  pharmaceutical  and/or other  companies  with respect to the products.  We
intend to fund future research and development activities at a number of medical
and scientific  centers in Europe and the United States.  Costs related to these
activities are expected to include:  clinical trial  expenses;  drug  production
costs; salaries and benefits of scientific, clinical and other personnel; patent
protection  costs;  analytical and other testing costs;  professional  fees; and
insurance and other administrative  expenses. We currently have three scientists
currently  working  on a  full-time  basis  who are  involved  in  research  and
development activities. We have spent approximately $1,900,000 and $1,700,000 on
research and development activities in 2002 and 2003, respectively.


                                       9
<PAGE>


Industry Overview

         We believe the  biopharmaceutical  industry  has evolved  significantly
since its  commercial  inception  in the 1970s and is  currently  approaching  a
period of  sustained  growth.  To be  successful,  we believe  biopharmaceutical
companies must have the ability to harness rapidly advancing technology, provide
solutions for previously unmet therapeutic  needs,  ensure faster development of
new drugs and allow flexibility to exploit changing market  conditions.  We seek
to engage in this new  generation of  biopharmaceutical  companies,  linking the
technological  skills of doctors and scientists in Europe and North America with
the U.S. and European capital markets.

         The National Cancer  Institute  estimated in 2000 the overall costs for
cancer to be $107 billion in the United  States;  $37 billion for direct  costs,
$11 billion for morbidity costs and $59 billion for mortality  costs.  Treatment
of breast,  lung and prostate  cancer  account for over half the direct  medical
costs.

         The table below shows the forecast global cancer  treatment  market for
the period 2001-2007.  The overall market is forecast to grow from $29.4 billion
in 2001 to $42.8bn in 2007, representing an average annual growth rate of 6.5%.

Forecast Global Cancer Treatment Market 2001 - 2007 (amounts in $ billions)
---------------------------------------------------------------------------

<TABLE>
<CAPTION>


Drug Class                   2001         2002         2003          2004         2005         2006         2007
----------------------  --------------- ----------- ------------- ------------ ------------ ------------ ------------
<S>                           <C>          <C>          <C>          <C>           <C>          <C>          <C>
Adjunct therapies             $11,321      $11,834      $12,347      $12,860       $13,373      $13,752      $14,132
Cytotoxics                      8,651        9,136        9,501        9,881        10,277       10,585       10,902
Hormonals                       5,720        5,841        5,950        5,952         5,856        5,688        5,464
Innovative agents               3,679        4,665        5,650        7,126         8,602       10,432       12,261
                        --------------- ----------- ------------- ------------ ------------ ------------ ------------
         TOTALS               $29,372      $31,476      $33,448      $35,820       $38,108      $40,457      $42,760
                        =============== =========== ============= ============ ============ ============ =============
Source:  Reuters, 2002
</TABLE>


         We believe that new cancer therapies  increasingly  will be required to
be more  cost-effective and allow for alternate site or in-home treatment and to
improve patient quality of life during treatment.

         With respect to our products and technologies within the overall cancer
market,  Clofarabine  and  Gossypol  constitute  cytotoxic  agents and  Modrenal
constitutes  a  hormonal  agent,  in  each  case,  which  we  believe  may  have
significant  market  potential  both in the U.S.  and other  parts of the world.
Although we have  received  orphan drug status for  Clofarabine  in the U.S. and
Europe in pediatric and adult acute leukemias,  we continue to develop the drug,
in conjunction with our U.S.  co-development  partner,  ILEX Oncology,  Inc., in
other  indications  with broader markets  including solid tumors and combination
studies. If Clofarabine  demonstrates  efficacy in all of these indications,  we
believe  it has  potential  to be a  leading  drug in the  U.S.  and  Europe  in
hematological  cancers with widespread use in solid tumors.  We believe efficacy
data on the use of Gossypol in bladder  cancers will be available as early as Q1
2005 upon  completion  of our initial  clinical  trial.  Modrenal is an approved
agent which we market for the treatment of  post-menopausal  women with advanced
breast  cancer  in  the  United  Kingdom  and  we  anticipate  receiving  mutual
recognition  from other European Union member states in Q1 2005. Taken together,
we believe this portion of our cancer drug portfolio  could create a significant
commercial advantage for our company and our stockholders.

Government Regulation

         The  FDA  and  comparable   regulatory  agencies  in  state  and  local
jurisdictions and in foreign countries impose substantial  requirements upon the
clinical  development,  manufacture  and marketing of  pharmaceutical  products.
These agencies and other federal, state and local entities regulate research and
development activities and the testing,  manufacture,  quality control,  safety,
effectiveness,  labeling,  storage,  record keeping,  approval,  advertising and
promotion of our drug delivery products.

         The process  required by the FDA under the new drug  provisions  of the
Federal Food,  Drug and Cosmetics Act before our products may be marketed in the
United States generally  involves the following:

         o   pre-clinical laboratory and animal tests;


                                       10
<PAGE>


         o   submission to the FDA of an  investigational  new drug application,
             or IND,  which must become  effective  before  clinical  trials may
             begin;

         o   adequate and well-controlled human clinical trials to establish the
             safety and efficacy of the proposed  pharmaceutical in our intended
             use;

         o   submission to the FDA of a new drug application; and

         o   FDA review and approval of the new drug application.

The  testing  and  approval  process  requires  substantial  time,  effort,  and
financial  resources  and we cannot be certain that any approval will be granted
on a timely basis, if at all.

         Pre-clinical  tests include laboratory  evaluation of the product,  its
chemistry,  formulation  and stability,  as well as animal studies to assess the
potential  safety and efficacy of the product.  The results of the  pre-clinical
tests,  together  with  manufacturing   information  and  analytical  data,  are
submitted to the FDA as part of an IND,  which must become  effective  before we
may begin human clinical trials. The IND automatically becomes effective 30 days
after receipt by the FDA, unless the FDA, within the 30-day time period,  raises
concerns or questions about the conduct of the trials as outlined in the IND and
imposes  a  clinical  hold.  In such a case,  the IND  sponsor  and the FDA must
resolve any outstanding  concerns before clinical trials can begin.  There is no
certainty  that  pre-clinical  trials will result in the submission of an IND or
that submission of an IND will result in FDA  authorization to commence clinical
trials.

         Clinical  trials  involve  the  administration  of the  investigational
product  to human  subjects  under  the  supervision  of a  qualified  principal
investigator.  Clinical  trials are conducted in accordance  with protocols that
detail the objectives of the study,  the parameters to be used to monitor safety
and the efficacy  criteria to be  evaluated.  Each protocol must be submitted to
the FDA as part of the IND. Further, each clinical study must be conducted under
the auspices of an  independent  institutional  review board at the  institution
where the study will be conducted. The institutional review board will consider,
among  other  things,  ethical  factors,  the safety of human  subjects  and the
possible liability of the institution.

         Human  clinical  trials are  typically  conducted  in three  sequential
phases which may overlap:

         o   PHASE  I: The  drug is  initially  introduced  into  healthy  human
             subjects  or  patients  and tested for  safety,  dosage  tolerance,
             absorption, metabolism, distribution and excretion;

         o   PHASE II: Studies are conducted in a limited patient  population to
             identify  possible short term adverse  effects and safety risks, to
             determine  the  efficacy  of  the  product  for  specific  targeted
             diseases and to determine dosage tolerance and optimal dosage;

         o   PHASE  III:  Phase III trials are  undertaken  to further  evaluate
             clinical  efficacy  and to further  test for safety in an  expanded
             patient  population,  often at  geographically  dispersed  clinical
             study sites.  Phase III or IIb/III  trials are often referred to as
             pivotal  trials,  as they  are  used for the  final  approval  of a
             product.

         In the case of products for  life-threatening  diseases such as cancer,
the initial  human testing is often  conducted in patients  with disease  rather
than in healthy  volunteers.  Since these  patients  already  have the  targeted
disease or  condition,  these studies may provide  initial  evidence of efficacy
traditionally  obtained  in Phase II trials and so these  trials are  frequently
referred to as Phase I/II trials. We cannot be certain that we will successfully
complete Phase I, Phase II or Phase III testing of our product candidates within
any specific time period, if at all. Furthermore, we, the FDA, the institutional
review board or the sponsor may suspend  clinical  trials at any time on various
grounds,  including a finding that the subjects or patients are being exposed to
an unacceptable health risk.

         The results of product  development,  pre-clinical studies and clinical
studies are submitted to the FDA as part of a new drug  application for approval
of the marketing and commercial shipment of the product.  The FDA may deny a new
drug application if the applicable  regulatory criteria are not satisfied or may
require additional clinical data. Even if the additional data is submitted,  the
FDA may  ultimately  decide that the new drug  application  does not satisfy the
criteria for approval.  Once issued,  the FDA may withdraw  product  approval if
compliance  with  regulatory  standards for production and  distribution  is not
maintained or if safety problems occur after the product reaches the market.  In
addition,  the FDA requires  surveillance  programs to monitor approved products
which have


                                       11
<PAGE>


been commercialized, and the agency has the power to require changes in labeling
or to  prevent  further  marketing  of a product  based on the  results of these
post-marketing programs.

         The FDA has a Fast Track program intended to facilitate the development
and expedite the review of drugs that demonstrate the potential to address unmet
medical needs for  treatment of serious or  life-threatening  conditions.  Under
this program,  if the FDA determines  from a preliminary  evaluation of clinical
data that a fast track product may be effective,  the FDA can review portions of
a new drug application for a Fast Track product before the entire application is
complete, and undertakes to complete its review process within six months of the
filing of the new drug application. The FDA approval of a Fast Track product can
include restrictions on the product's use or distribution such as permitting use
only for specified medical procedures or limiting  distribution to physicians or
facilities  with special  training or expertise.  The FDA may grant  conditional
approval of a product  with Fast Track  status and require  additional  clinical
studies following approval.

         Satisfaction  of FDA  requirements  or similar  requirements  of state,
local and foreign  regulatory  agencies  typically  takes  several years and the
actual time required may vary substantially, based upon the type, complexity and
novelty  of the  pharmaceutical  product.  Government  regulation  may  delay or
prevent  marketing of potential  products for a considerable  period of time and
impose costly  procedures upon our activities.  Success in pre-clinical or early
stage clinical  trials does not assure  success in later stage clinical  trials.
Data from pre-clinical and clinical  activities is not always conclusive and may
be susceptible to varying  interpretations  which could delay,  limit or prevent
regulatory  approval.  Even  if a  product  receives  regulatory  approval,  the
approval may be significantly  limited to specific  indications.  Further,  even
after the FDA approves a product, later discovery of previously unknown problems
with a product  may  result in  restrictions  on the  product  or even  complete
withdrawal of the product from the market.

         Any  products  manufactured  or  distributed  under FDA  clearances  or
approvals  are  subject  to  pervasive  and  continuing  regulation  by the FDA,
including record-keeping  requirements and reporting of adverse experiences with
the  products.  Drug  manufacturers  and their  subcontractors  are  required to
register  with  the  FDA  and  state  agencies,  and  are  subject  to  periodic
unannounced  inspections by the FDA and state agencies for compliance  with good
manufacturing practices,  which impose procedural and documentation requirements
upon manufacturers and their third party manufacturers

         We are subject to numerous other federal, state and local laws relating
to  such  matters  as  safe   working   conditions,   manufacturing   practices,
environmental  protection,  fire hazard  control,  and  disposal of hazardous or
potentially hazardous substances.  We may incur significant costs to comply with
such laws and regulations now or in the future.  In addition,  we cannot predict
what adverse  governmental  regulations  may arise from future  United States or
foreign governmental action.

         We also are subject to foreign regulatory  requirements governing human
clinical trials and marketing approval for pharmaceutical products which we sell
outside the United States.  The  requirements  governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary widely from country to
country.  Whether or not we obtain FDA  approval,  we must obtain  approval of a
product by the comparable  regulatory  authorities of foreign  countries  before
manufacturing or marketing the product in those countries.  The approval process
varies from  country to country and the time  required for these  approvals  may
differ  substantially from that required for FDA approval.  We cannot assure you
that  clinical  trials  conducted  in one  country  will be  accepted  by  other
countries  or that  approval in one country will result in approval in any other
country.  For clinical trials conducted outside the United States,  the clinical
stages   generally  are  comparable  to  the  phases  of  clinical   development
established by the FDA.

Competition

         Competition  in  the  pharmaceutical  industry  is  intense.  Potential
competitors   in  the  United   States  and  Europe  are  numerous  and  include
pharmaceutical,  chemical  and  biotechnology  companies,  most  of  which  have
substantially  greater capital  resources,  marketing  experience,  research and
development  staffs and facilities  than us. Although we seek to limit potential
sources of competition by developing  products that are eligible for orphan drug
designation  or other forms of  protection,  there can be no assurance  that our
competitors  will not succeed in developing  similar  technologies  and products
more rapidly than are being or will be developed by us.

         One of Bioenvision's lead drugs,  Clofarabine,  has been granted Orphan
Drug Status in the U.S.  and Europe,  and is currently  undergoing  multi-center
Phase II trials. Listed below are other Cytotoxic Agents currently at market.


                                       12
<PAGE>


<TABLE>
<CAPTION>


                                                                                 1999      2000      2001       Growth
Company             Brand            Generic           Class                     ($m)      ($m)      ($m)    2000-01 (%)
---------------     ---------------  -----------       ------------------------ --------  --------  ------  -------------
<S>                 <C>              <C>               <C>                        <C>       <C>      <C>            <C>
BMS                 Taxol            Paclitaxel        Other Cytotoxics           1,481     1,592    1,197         -24.8
Aventis             Taxotere         Docctaxel         Other Cytotoxics             461       686      925          34.8
Lilly               Gemzar           Gemcitabine       Antimetabolite               453       559      723          29.3
BMS                 Paraplatin       Carboplatin       Other Cytotoxics             600       690      702           1.7
Pharmacia           Camptosar        irinorccan        Other Cytotoxics             293       441      613          39.0
Taiho               UFT              tegafur uracil    Antimetabolite               460       440      420e         -4.5
Pharmacia           Pharmorubicin    cpirubein         Cytotoxic Antibiotics        206       199      261          31.2
                    /Ellence
Ivax                Paxene           paclitaxel        Other Cytotoxics             n/a        35      215         514.3
Roche               Furtulon         doxifluridine     Antimetabolite               166       201      201           0.0
Aventis             Campro           irinotecan        Other Cytotoxics              83       139      186          33.8
Sanofi              Eloxatine        oxilaplatin       Other Cytotoxics              72       130      181          39.2
SP                  Temodar          temozolomide      Alkylating agents             36       121      180          48.8
Roche               Xeloda           capecitabine      Antimetabolite                53        89      155          74.0
GSK                 Hycarntin        topotecan         Other Cytotoxics             141       144      131          -9.0
Schering AG         Fludara          fludarabine       Antimetabolite                79       102      120          17.6
BMS                 Ifex             ifosfamide        Alkylating agents             88       108      120e         11.1
Alza US             Doxil/Caelyx     liposomal/        Cytotoxic Antibiotics         66        82      100          22.0
                                     doxorubicin
Pierre Fabre        Navelbine        vinorelbine       Vae                           76        82       90e          9.8
Wyeth               Novantrone       mitoxantrone      Cytotoxic Antibiotics         45        60       71          18.7
BMS                 VcPesid          ctoposide         Vae                           77        70       65e         -7.1
GSK                 Navelbine        vinorelbine       Vae                           67        65       63e         -3.1
Pharmacia           Adriamycin       doxorubicin       Cytotoxic Antibiotics         65        62       55e        -11.3
BMS                 Hydrea           hydroxyurea       Alkylating agents             56        52       48e         -7.7

Others                                                                            1,824     1,776    1,829           3.0
                                                                                --------  --------  ------  -------------
             TOTAL                                                                6,948     7,925    8,651           9.2
                                                                                ========  ========  ======  ==============
Source:  Reuters, 2002
</TABLE>


         Another of Bioenvision's lead drugs,  Modrenal(R) is approved in the UK
for the treatment of  post-menopausal  patients with advanced breast cancer.  In
particular,  the drug is  approved  as  follow-on  treatment  for  patients  who
previously have responded to hormonal therapy.

         Listed below are other hormonal therapies currently at market.

<TABLE>
<CAPTION>


                                                                                 1999      2000      2001       Growth
Company             Brand            Generic           Class                     ($m)      ($m)      ($m)    2000-01 (%)
---------------     ---------------  -----------       ------------------------ --------  --------  ------  -------------
<S>                 <C>              <C>               <C>                        <C>       <C>      <C>            <C>
TAP                 Lupron           Leuprorelin       LHRH agonsists               775       798       833           4.4
AstraZeneca         Zoladex          Goserelin         LHRH agonsists               686       734       728          -0.8
AstraZeneca         Nolvadex         Tamoxifen         Anti-estrogens               573       576       630           9.4
AstraZeneca         Casodex          Bicalulamide      Anti-estrogens               340       433       569          31.4
Takeda              Leuplin          leuprorelin       LHRH agonsists               485       515       530e          2.9
Barr                Tamoxifen        Tamoxifen         Anti-estrogens               297       322       501          55.6
Pharmacia           Depo-Provera     Medroxy           Progestagens                 252       272       283           4.0
AstraZeneca         Arimidex         Anastrozole       Aromatase Inhibitors         140       156       191          22.4
Abbott              Lupron           leuprorelin       LHRH agonsists               140       153       163           6.5
BMS                 Megace           megestrol         Progestagens                 114       180       150e        -16.7
Novartis            Femara           letrozole         Aromatase Inhibitors          57        74       125          68.9
Ipsen               Deccapepryl      triptorelin       LHRH agonsists               100       105       110e          4.8
Aventis             Nilandron        nilutamide        Anti-androgens                72        87        93e          6.9
Schering AG         Androcur         cyproterone       Anti-androgens                91        95        92          -3.0
Aventis             Suprecur/        buserelin         LHRH agonsists                83        84        85e          1.7
                    Suprefact
</TABLE>


                                       13
<PAGE>


<TABLE>
<CAPTION>


                                                                                 1999      2000      2001       Growth
Company             Brand            Generic           Class                     ($m)      ($m)      ($m)    2000-01 (%)
---------------     ---------------  -----------       ------------------------ --------  --------  ------  -------------
<S>                 <C>              <C>               <C>                        <C>       <C>      <C>            <C>

SP                  Eulexin          flutamide         Anti-androgens               155       128        83         -35.2
Pharmacia           Aromasin         exemestane        Aromatase Inhibitors         n/a        36        65e         80.6
Nihun Kayaku        Odyne            flutamide         Anti-androgens                71        65        62e         -4.5
Teikoku             Prostal          chlormadinone     Progestagens                  63        63        62e         -1.6
Hormone
Novartis            Lentaron         formestane        Aromatase Inhibitors          47        45        43e         -4.4
Nihun Kayaku        Fareston         toremifene        Anti-estrogens                44        43        40e         -6.1
Novartis            Afema            tadrozole         Aromatase Inhibitors          22        25        23e         -8.0
Mitsui              Tasuomin         Tamoxifen         Anti-estrogens                10         9         9e         -3.2

Others                                                                              237       240       250           4.3
                                                                                --------  --------  ------  -------------
             TOTAL                                                                4,855     5,237     5,720           9.2
                                                                                ========  ========  ======  ==============
Source:  Reuters, 2002
</TABLE>


         The generic drug industry is intensely  competitive  and includes large
brand name and multi-source  pharmaceutical companies.  Because generic drugs do
not have patent protection or any other market exclusivity,  our competitors may
introduce competing generic products,  which may be sold at lower prices or with
more aggressive  marketing.  Conversely,  as we introduce branded drugs into our
product portfolio,  we will face competition from manufacturers of generic drugs
which may claim to offer equivalent therapeutic benefits at a lower price.

         We expect  that our  proposed  products  will  compete on the basis of,
among  other  things,  safety,  efficacy,  reliability,  price,  quality of life
factors (including the frequency and method of drug administration),  marketing,
distribution,  reimbursement and effectiveness of intellectual  property rights.
We believe that our  competitive  success will be based partly on our ability to
attract and retain  scientific  personnel,  establish  specialized  research and
development   capabilities,   gain  access  to   manufacturing,   marketing  and
distribution  resources,  secure licenses to external technologies and products,
and obtain  sufficient  development  capital.  We intend to obtain many of these
capabilities   from   pharmaceutical   or   biotechnology    companies   through
collaborative or license  arrangements.  However,  there is intense  competition
among early stage  biotechnology  firms to  establish  these  arrangements.  Our
development  products may not be of suitable  potential market size or provide a
compelling  return on investment to attract other firms to commit resources to a
collaboration.  Even  if  collaborations  can be  established,  there  can be no
assurance  that  we  will  secure  financial  terms  that  meet  our  commercial
objectives.

Employees

         As of June  30,  2003,  we had  seven  full-time  and  three  part-time
employees. Of these, three are in management, three are in sales/marketing,  one
is in administration  and three are in research and development.  We believe our
relationships with our employees are satisfactory.

Corporate History

         We were incorporated as Express Finance, Inc. under the laws of the
State of Delaware on August 16, 1996, and changed our name to Ascott Group, Inc.
in August 1998 and further to Bioenvision, Inc. in December 1998, at which time
the Company merged with Bioenvision, Inc, (`Old Bioenvision') a development
stage Company primarily engaged in the research and development of products and
technologies for the treatment of cancer.

         On February 1, 2002, we completed the acquisition of Pathagon Inc., the
successor in interest to Bridge Blood Technologies L.L.C., d/b/a Pathagon, a
non-public company focused on the development of novel anti-infective products
and technologies. Pathagon's principal products, OLIGON(R) and methylene blue,
are ready for market. Affiliates of SCO Capital Partners LLC, our financial
advisor and consultant, owned 82% of Pathagon prior to the acquisition. We
acquired 100% of the outstanding shares of Pathagon in exchange for 7,000,000
shares of our common stock. The acquisition has been accounted for as a purchase
business combination in accordance with SFAS 141. With the acquisition, we added
rights to OLIGON(R) and methylene blue to our product portfolio.


                                       14
<PAGE>


Factors that May Affect Our Business


         You should carefully  consider the following risks before you decide to
buy our common stock. Our business, financial condition or operating results may
suffer if any of the events  described in the  following  risk factors  actually
occur.  All known  risks  are  presented  in this  prospectus.  These  risks may
adversely affect our business,  financial condition or operating results. If any
of the events we have  identified  occur,  the trading price of our common stock
could  decline,  and you may lose all or part of the  money  you paid to buy our
common stock.


The price of our  common  stock is likely to be  volatile  and  subject  to wide
fluctuations.


         The market price of the securities of biotechnology  companies has been
especially volatile.  Thus, the market price of our common stock is likely to be
subject to wide  fluctuations.  For the twelve  month period ended May 18, 2004,
our closing  stock price has ranged from a high of $11.75 to a low of $0.69.  If
our  revenues  do not  grow or grow  more  slowly  than we  anticipate,  or,  if
operating or capital expenditures exceed our expectations and cannot be adjusted
accordingly,  or if some other event  adversely  affects us, the market price of
our common stock could decline.  In addition,  if the market for  pharmaceutical
and  biotechnology  stocks or the stock market in general  experiences a loss in
investor  confidence  or otherwise  fails,  the market price of our common stock
could fall for reasons  unrelated to our  business,  results of  operations  and
financial  condition.  The  market  price of our stock  also  might  decline  in
reaction to events that affect other  companies  in our  industry  even if these
events do not directly affect us. In the past,  companies that have  experienced
volatility  in the  market  price of  their  stock  have  been  the  subject  of
securities  class  action  litigation.  If we  were to  become  the  subject  of
securities class action  litigation,  it could result in substantial costs and a
diversion of management's attention and resources.


Certain events could result in a dilution of your ownership of our common stock.


         As of  June  30,  2003,  we  had  17,122,739  shares  of  common  stock
outstanding,  5,916,666 shares of Series A preferred stock outstanding which are
currently  convertible  into  11,833,332  shares of common stock and  15,749,543
common stock equivalents  including  warrants and stock options,  other than the
options granted under the  co-development  agreement with ILEX. The exercise and
conversion prices of the common stock equivalents range from $0.735 to $2.00 per
share.  We have also  reserved for issuance an aggregate of 3,000,000  shares of
common stock for a stock option plan for our employees.  Historically, from time
to time, we have awarded our common stock to officers of the Company, in lieu of
cash compensation,  although we do not expect to do so in the future. As of June
30, 2003,  (i) no shares are currently  registered  under the Securities Act and
(iii)  the sale of  shares  underlying  options  are not  registered  under  the
Securities Act, on Form S-8 or otherwise.  The future resale of these shares and
shares  underlying  stock options and warrants will result in a dilution to your
percentage  ownership of our common stock and could adversely  affect the market
price of our common stock.


         The  terms  of  our  Series  A  Convertible   Preferred  Stock  include
antidilution  protection  upon the occurrence of sales of our common stock below
certain   prices,   stock  splits,   redemptions,   mergers  and  other  similar
transactions.  If one or more of these events occurs the number of shares of our
common stock that may be acquired upon conversion or exercise would increase. If
converted  or  exercised,  these  securities  will  result in a dilution to your
percentage  ownership of our common  stock.  The resale of many of the shares of
common stock which underlie these options and warrants are registered under this
prospectus and the sale of such shares may adversely  affect the market price of
our common stock.

The provisions of our charter and Delaware law may inhibit potential acquisition
bids that  stockholders  may believe are desirable,  and the market price of our
common stock may be lower as a result.

Section 203 of the Delaware corporate statute

         We are subject to the  anti-takeover  provisions  of Section 203 of the
Delaware corporate statute, which regulates corporate acquisitions.  Section 203
may  affect  the  ability of an  "interested  stockholder"  to engage in certain
business  combinations,  including  mergers,  consolidation  or  acquisitions of
additional  shares,  for a period  of three  years  following  the time that the
stockholder becomes an "interested stockholder".  An "interested stockholder" is
defined to include  persons  owning  directly or  indirectly  15% or more of the
outstanding  voting stock of a corporation.  These  provisions  could discourage
potential  acquisition  proposals and could delay or prevent a change in control
transaction.  They could also have the effect of discouraging others from making
tender offers for our common stock.  As a result,  these  provisions may prevent
our stock price from increasing  substantially  in response to actual or rumored
takeover attempts. These provisions may also prevent changes in our management.


                                       15
<PAGE>


Issuance of Preferred Stock Without Shareholder Approval.

          Our charter authorizes our board of director to increase the number of
shares of preferred stock we may issue without shareholder  approval.  Preferred
stock may be issued in one or more series,  the terms of which may be determined
without  further action by  shareholders.  These terms may include  preferences,
conversion or other  rights,  voting  powers,  restrictions,  limitations  as to
dividends,  qualifications or terms or conditions of redemption. The issuance of
any preferred stock could  materially  adversely affect the rights of holders of
our common stock,  and therefore could reduce its value.  In addition,  specific
rights  granted to future  holders of preferred  stock could be used to restrict
our ability to merge with,  or sell assets to, a third  party.  The power of the
board of directors to issue preferred stock could make it more difficult, delay,
discourage,  prevent  or make it more  costly to  acquire  or effect a change in
control, thereby preserving the current shareholders' control.

We have a limited  operating  history,  which makes it difficult to evaluate our
business and to predict our future operating results.

         Since our inception,  August of 1996, we have been primarily engaged in
organizational  activities,  including  developing a strategic  operating  plan,
entering into various  collaborative  agreements for the development of products
and technologies,  hiring personnel and developing and testing our products.  We
have not  generated  any  material  revenues  to date.  Accordingly,  we have no
relevant  operating  history upon which an  evaluation  of our  performance  and
prospects can be made.

We have incurred net losses since commencing business and expect future losses.


         To date, we have incurred significant net losses,  including net losses
of $8,437,397 for the nine-month  period ended March 31, 2004 and $4,064,277 for
the three  month  period  ended March 31,  2004.  At March 31,  2004,  we had an
accumulated deficit of $37,676,811.  We anticipate that we may continue to incur
significant  operating losses for the foreseeable  future. We may never generate
material revenues or achieve profitability and, if we do achieve  profitability,
we may not be able to maintain profitability.


Clinical  trials for our products will be expensive  and may be time  consuming,
and their outcome is uncertain,  but we must incur substantial expenses that may
not result in any viable products.

         Before  obtaining  regulatory  approval  for the  commercial  sale of a
product,  we must demonstrate through  pre-clinical  testing and clinical trials
that a product  candidate is safe and  effective  for use in humans.  Conducting
clinical  trials is a lengthy,  time-consuming  and expensive  process.  We will
incur  substantial  expense  for,  and  devote a  significant  amount of time to
pre-clinical testing and clinical trials. Even with Modrenal,  which is approved
and  marketed by us in the U.K. for the  treatment  of advanced  post-menopausal
breast  cancer,  we are  conducting  a clinical  trial in the U.S.  in  prostate
cancer, which is a new potential indication for this approved drug.

         Historically,  the results from pre-clinical testing and early clinical
trials have often not been  predictive  of results  obtained  in later  clinical
trials.  A number of new drugs have shown promising  results in clinical trials,
but  subsequently  failed to establish  sufficient  safety and efficacy  data to
obtain  necessary  regulatory  approvals.  Data obtained from  pre-clinical  and
clinical activities are susceptible to varying interpretations, which may delay,
limit or prevent  regulatory  approval.  Regulatory  delays or rejections may be
encountered as a result of many factors,  including changes in regulatory policy
during the period of product  development.  Regulatory  authorities  may require
additional   clinical  trials,   which  could  result  in  increased  costs  and
significant  development delays.  Clofarabine currently is at a pivotal stage of
its development,  but many of our other products and technologies are at various
less mature  stages of  development  including  gossypol  for which we have just
commenced  a Phase I  clinical  trial in the  U.K.  and  gene  therapy  which is
currently in pre-clinical testing.

         Completion of clinical trials for any product may take several years or
more. The length of time generally varies  substantially  according to the type,
complexity,  novelty and intended use of the product candidate. Our commencement
and rate of  completion  of  clinical  trials may be  delayed  by many  factors,
including:

         o        inability of vendors to manufacture  sufficient  quantities of
                  materials for use in clinical trials;

         o        slower  than   expected   rate  of  patient   recruitment   or
                  variability in the number and types of patients in a study;

         o        inability to adequately follow patients after treatment;


                                       16
<PAGE>


         o        unforeseen safety issues or side effects;

         o        lack of efficacy during the clinical trials; or

         o        government or regulatory delays.

If our development  agreement with ILEX does not proceed as planned we may incur
delay in the commercialization of Clofarabine,  which would delay our ability to
generate sales and cash flow from the sale of Clofarabine.

         ILEX,  and any third party to which ILEX may grant a  sublicense  or in
any way transfer its  obligations,  has primary  responsibility  for  conducting
clinical trials and administering  regulatory compliance and approval matters in
the  United  States  and  Canada  pursuant  to the  terms of our  co-development
agreement with ILEX. While there are target dates for completion, that agreement
allows  ILEX  time  to  continue   working  beyond  those  dates  under  certain
circumstances.  For  example,  under  the  co-development  agreement,  ILEX  was
required to complete  Pivotal  Phase II Trials not later than December 31, 2002,
but  ILEX  failed  to do so.  In this  situation  the  co-development  agreement
provides that the milestone  shall be adjusted such that ILEX receives more time
to complete  the pivotal  trials if the trials are ongoing at December  31, 2002
and progressing to completion within a reasonable time thereafter. Further, ILEX
was  required  under  the  co-development  agreement  to have  filed a New  Drug
Application  by August 31, 2003,  subject to extension if ILEX  continues to use
its  reasonable  efforts to promptly  complete the filing after August 31, 2003.
ILEX continued to use its reasonable efforts to complete the filing after August
31, 2003 and in March 2004, ILEX completed the filing.

         If  ILEX  fails  to  meet  its  obligations  under  the  co-development
agreement,   we  could  lose  valuable  time  in  developing   Clofarabine   for
commercialization  both in the U.S. and in Europe. Because we intend to make use
of  clinical  data  from  the  clinical  trials  which  ILEX  conducted,  and is
conducting,  to prepare and support our  regulatory  applications  in Europe and
elsewhere,  ILEX's failure to  expeditiously  file the New Drug Application with
FDA could adversely affect the timing of European  approval.  We can not provide
assurance  that  ILEX  will  not  fail  to  meet  its   obligations   under  the
co-development  agreement.  Development  of  compounds  to the stage of approval
includes  inherent risk at each stage of development  that FDA in its discretion
will mandate a requirement not foreseeable by us or by ILEX. There would also be
testing  delays if, for  example,  our sources of drug supply  could not produce
enough  Clofarabine to support the then ongoing clinical trials being conducted.
If this were to occur, it could have a material adverse effect on our ability to
develop Clofarabine,  obtain necessary regulatory approvals,  and generate sales
and cash flow from the sale of Clofarabine.

         If  delays  in  completion  constitute  a breach  by ILEX or there  are
certain other  breaches of the  co-development  agreement by ILEX,  then, at our
discretion,  the primary  responsibility  for completion would revert to us, but
there is no assurance that we would have the financial,  managerial or technical
resources to complete such tasks in timely fashion or at all.



We have limited experience in developing products and may be unsuccessful in our
efforts to develop products.

         To  achieve  profitable  operations,  we,  alone or with  others,  must
successfully  develop,  clinically  test,  market and sell our products.  We are
developing Clofarabine with ILEX Oncology, our U.S.  co-development partner, but
on February  26,  2004,  Genzyme  announced a merger  pursuant to which  Genzyme
intends  to  acquire  ILEX  in a  merger  transaction.  If this  transaction  is
consummated,  no  assurance  can be given that the  operational  and  managerial
relations  with  Genzyme  will  proceed  favorably  or  that  the  timeline  for
development  of  Clofarabine  will  not be  elongated.  If the  U.S.  regulatory
timeline is elongated,  this could  materially and adversely affect the European
regulatory timeline for the approval of Clofarabine.

         With  respect to our  co-lead  drug,  Modrenal,  we  currently  have an
Investigational  New Drug  Application  filed  with FDA to conduct in the U.S. a
Phase II Clinical  Trial to  determine  efficacy of Modrenal in prostate  cancer
patients.  This Phase II Clinical  Trial will be  conducted on our behalf at the
Mass General Hospital in Boston, MA at the direction of Dr. Mathew Smith. To our
knowledge, Modrenal has not been tested in this indication in the past and there
can be no  assurance  that  Modrenal  will be an  effective  therapy in prostate
cancer.  Further, our long-term drug development objectives for Modrenal include
attempting  to test the drug and get  approval  in the  U.S.  for  treatment  of
advanced   post-menopausal  breast  cancer  patients.  These  trials  will  take
significant  time and resource and no assurance can be given that developing the
drug in this indication will result in a U.S.  approval for Modrenal in advanced
post-menopausal breast cancer patients.


                                       17
<PAGE>


         Generally,  most  products  resulting  from  our or  our  collaborative
partners' product  development efforts are not expected to be available for sale
for at least  several  years,  if at all.  Potential  products that appear to be
promising at early stages of  development  may not reach the market for a number
of reasons, including:

o        discovery  during  pre-clinical  testing or  clinical  trials  that the
     products are ineffective or cause harmful side effects;

o        failure to receive necessary regulatory approvals;

o        inability to manufacture on a large or economically feasible scale;

o        failure to achieve market acceptance; or

o        preclusion  from  commercialization  by  proprietary  rights  of  third
     parties.

         Most of the existing and future products and technologies  developed by
us will require extensive additional development, including pre-clinical testing
and   clinical   trials,   as   well   as   regulatory   approvals,   prior   to
commercialization. Our product development efforts may not be successful. We may
fail to receive required  regulatory  approvals from U.S. or foreign authorities
for any  indication.  Any products,  if introduced,  may not be capable of being
produced in  commercial  quantities at  reasonable  costs or being  successfully
marketed.  The failure of our research and  development  activities to result in
any  commercially  viable products or technologies  would  materially  adversely
affect our future prospects.

Our  industry is subject to  extensive  government  regulation  and our products
require other regulatory  approvals which makes it more expensive to operate our
business.

         Regulation  in  General.  Virtually  all  aspects of our  business  are
regulated by federal and state statutes and governmental  agencies in the United
States and other  countries.  Failure to comply  with  applicable  statutes  and
government  regulations  could have a material  adverse effect on our ability to
develop and sell products  which would have a negative  impact on our cash flow.
The development, testing, manufacturing,  processing, quality, safety, efficacy,
packaging, labeling,  record-keeping,  distribution,  storage and advertising of
pharmaceutical  products,  and  disposal of waste  products  arising  from these
activities,  are subject to  regulation by one or more federal  agencies.  These
activities are also regulated by similar state and local agencies and equivalent
foreign  authorities.  In our  material  contracts  with vendors  providing  any
portion of these types of services,  we seek  assurances that our vendors comply
and  will  continue  to  maintain  compliance  with  all  applicable  rules  and
regulations.  This is the case, for example,  with respect to our contracts with
Ferro  Pfanstiehl and Penn  Pharmaceuticals.  No assurance can be given that our
most  significant   vendors  will  continue  to  comply  with  these  rules  and
regulations.

         FDA Regulation.  All pharmaceutical  manufacturers in the United States
are subject to  regulation  by the FDA under the  authority of the Federal Food,
Drug,  and Cosmetic  Act.  Under the Act, the federal  government  has extensive
administrative   and  judicial   enforcement   powers  over  the  activities  of
pharmaceutical  manufacturers to ensure  compliance with FDA regulations.  Those
powers include, but are not limited to the authority to:

o        initiate court action to seize unapproved or non-complying products;

o        enjoin non-complying activities;

o        halt  manufacturing  operations that are not in compliance with current
         good manufacturing practices prescribed by the FDA;

o        recall products which present a health risk; and

o        seek civil monetary and criminal penalties.

         Other  enforcement   activities  include  refusal  to  approve  product
applications  or  the  withdrawal  of  previously  approved  applications.   Any
enforcement  activities,  including the  restriction  or prohibition on sales of
products marketed by us or the halting of manufacturing  operations of us or our
collaborators,  would have a material  adverse  effect on our ability to develop
and sell  products  which  would  have a negative  impact on our cash  flow.  In
addition, product recalls may be issued at our discretion or by the FDA or other
domestic  and  foreign  government  agencies  having  regulatory  authority  for
pharmaceutical product sales. Recalls may occur due to


                                       18
<PAGE>


disputed  labeling  claims,  manufacturing  issues,  quality  defects  or  other
reasons.  Recalls of  pharmaceutical  products  marketed  by us may occur in the
future.  Any product recall could have a material  adverse effect on our revenue
and cash flow.

         FDA Approval Process.  We have a variety of products under development,
including  line  extensions  of existing  products,  reformulations  of existing
products  and  new  products.  All  "new  drugs"  must  be  the  subject  of  an
FDA-approved  new drug  application  before  they may be  marketed in the United
States. All generic equivalents to previously approved drugs or new dosage forms
of existing drugs must be the subject of an  FDA-approved  abbreviated  new drug
application before they may by marketed in the United States. In both cases, the
FDA has the authority to determine what testing procedures are appropriate for a
particular  product  and, in some  instances,  has not  published  or  otherwise
identified  guidelines  as to  the  appropriate  procedures.  The  FDA  has  the
authority to withdraw existing new drug application and abbreviated  application
approvals and to review the  regulatory  status of products  marketed  under the
enforcement  policy.  The FDA may require an approved  new drug  application  or
abbreviated  application  for any drug product  marketed  under the  enforcement
policy  if  new  information  reveals  questions  about  the  drug's  safety  or
effectiveness.  All drugs must be  manufactured  in conformity with current good
manufacturing practices and drugs subject to an approved new drug application or
abbreviated  application must be  manufactured,  processed,  packaged,  held and
labeled in accordance with information  contained in the new drug application or
abbreviated application.

         The required  product testing and approval process can take a number of
years and require  the  expenditure  of  substantial  resources.  Testing of any
product  under  development  may not  result in a  commercially-viable  product.
Further,  we may decide to modify a product in testing,  which could  materially
extend the test  period and  increase  the  development  costs of the product in
question.  Even after time and expenses,  regulatory approval by the FDA may not
be obtained for any products we develop.  In addition,  delays or rejections may
be  encountered  based upon  changes in FDA policy  during the period of product
development and FDA review.  Any regulatory  approval may impose  limitations in
the indicated use for the product.  Even if regulatory  approval is obtained,  a
marketed product, its manufacturer and its manufacturing  facilities are subject
to continual review and periodic inspections. Subsequent discovery of previously
unknown  problems  with a  product,  manufacturer  or  facility  may  result  in
restrictions on the product or manufacturer, including withdrawal of the product
from the market.

         Foreign  Regulatory  Approval.  Even if required  FDA approval has been
obtained  with respect to a product,  foreign  regulatory  approval of a product
must also be obtained  prior to marketing the product  internationally.  Foreign
approval  procedures  vary from  country to country  and the time  required  for
approval  may  delay or  prevent  marketing.  In  certain  instances,  we or our
collaborative partners may seek approval to market and sell some of our products
outside of the United States before  submitting an  application  for approval to
the FDA.  The  clinical  testing  requirements  and the time  required to obtain
foreign  regulatory  approvals  may differ from that  required for FDA approval.
Although there is now a centralized  European  Union approval  mechanism for new
pharmaceutical  products in place,  each European Union country may  nonetheless
impose its own procedures and requirements, many of which are time consuming and
expensive,  and some European Union countries  require price approval as part of
the  regulatory  process.  Thus,  there can be  substantial  delays in obtaining
required approval from both the FDA and foreign regulatory authorities after the
relevant applications are filed.

         Changes in Requirements.  The regulatory requirements applicable to any
product may be modified in the future.  We cannot  determine what effect changes
in regulations or statutes or legal  interpretations may have on our business in
the future. Changes could require changes to manufacturing methods,  expanded or
different  labeling,  the  recall,  replacement  or  discontinuation  of certain
products, additional record keeping and expanded documentation of the properties
of  certain  products  and  scientific   substantiation.   Any  changes  or  new
legislation  could have a material  adverse effect on our ability to develop and
sell products and, therefore, generate revenue and cash flow.

         The products under development by us may not meet all of the applicable
regulatory  requirements needed to receive regulatory  marketing approval.  Even
after we expend substantial resources on research,  clinical development and the
preparation  and  processing of regulatory  applications,  we may not be able to
obtain  regulatory  approval  for  any of  our  products.  Moreover,  regulatory
approval for marketing a proposed pharmaceutical product in any jurisdiction may
not result in similar approval in other jurisdictions. Our failure to obtain and
maintain  regulatory  approvals  for  products  under  development  would have a
material  adverse  effect on our  ability  to  develop  and sell  products  and,
therefore, generate revenue and cash flow.


                                       19
<PAGE>


We may not be  successful  in  receiving  orphan  drug status for certain of our
products or, if that status is obtained,  fully  enjoying the benefits of orphan
drug status.

         Under the Orphan Drug Act, the FDA may grant orphan drug designation to
drugs intended to treat a rare disease or condition. A disease or condition that
affects  populations of fewer than 200,000 people in the United States generally
constitutes a rare disease or  condition.  We may not be successful in receiving
orphan drug status for certain of our products.  Orphan drug designation must be
requested before submitting a new drug application.  After the FDA grants orphan
drug  designation,  the  generic  identity  of the  therapeutic  agent  and  its
potential  orphan use are publicized by the FDA. Under current law,  orphan drug
status is conferred upon the first company to receive FDA approval to market the
designated  drug for the designated  indication.  Orphan drug status also grants
marketing exclusivity in the United States for a period of seven years following
approval  of the new drug  application,  subject  to  limitations.  Orphan  drug
designation  does not provide any  advantage in, or shorten the duration of, the
FDA regulatory  approval  process.  Although  obtaining FDA approval to market a
product with orphan drug status can be advantageous,  the scope of protection or
the level of marketing  exclusivity  that is  currently  afforded by orphan drug
status and marketing approval may not remain in effect in the future.

         Our business  strategy  involves  obtaining orphan drug designation for
certain of the oncology products we have under development. Although Clofarabine
has  received  orphan  drug  designation  with the FDA and EMEA,  we do not know
whether  any of our other  products  will  receive an orphan  drug  designation.
Orphan drug designation does not prevent other  manufacturers from attempting to
develop  the same  drug for the  designated  indication  or from  obtaining  the
approval of a new drug  application  for their drug prior to the approval of our
new drug  application.  If another  sponsor's new drug  application for the same
drug and the same  indication  is approved  first,  that  sponsor is entitled to
exclusive  marketing rights if that sponsor has received orphan drug designation
for its drug. In that case,  the FDA would refrain from approving an application
by us to market our competing  product for seven years,  subject to limitations.
Competing  products may not receive orphan drug  designations  and FDA marketing
approval before the products under development by us.

         New drug application approval of a drug with an orphan drug designation
does  not  prevent  the  FDA  from  approving  the  same  drug  for a  different
indication,  or a molecular  variation of the same drug for the same indication.
Because doctors are not restricted by the FDA from  prescribing an approved drug
for uses not approved by the FDA, it is also  possible  that  another  company's
drug could be prescribed for indications for which products developed by us have
received orphan drug designation and new drug application approval.  Prescribing
of approved drugs for unapproved uses,  commonly referred to as "off label" use,
could adversely affect the marketing potential of products that have received an
orphan drug designation and new drug application approval. In addition, new drug
application  approval of a drug with an orphan drug designation does not provide
any marketing exclusivity in foreign markets.

         The  possible  amendment  of the Orphan  Drug Act by the United  States
Congress has been the subject of frequent  discussion.  Although no  significant
changes to the Orphan Drug Act have been made for a number of years,  members of
Congress  have from  time to time  proposed  legislation  that  would  limit the
application of the Orphan Drug Act. The precise scope of protection  that may be
afforded by orphan drug  designation  and  marketing  approval may be subject to
change in the future.

The use of our products may be limited or eliminated by professional  guidelines
which would decrease our sales of these products and, therefore, our revenue and
cash flows.

         In addition to government agencies,  private health/science foundations
and  organizations  involved in various diseases may also publish  guidelines or
recommendations  to  the  healthcare  and  patient  communities.  These  private
organizations may make recommendations that affect the usage of therapies, drugs
or procedures,  including  products developed by us. These  recommendations  may
relate to matters  such as usage,  dosage,  route of  administration  and use of
concomitant  therapies.  Recommendations  or  guidelines  that are  followed  by
patients  and  healthcare  providers  and that result in,  among  other  things,
decreased use or elimination  of products  developed by us could have a material
adverse  effect on our revenue and cash flows.  For example,  if  Clofarabine is
definitively  determined in clinical trials to be an active agent to treat solid
tumor cancer patients, but the required dose is high, private healthcare/science
foundations  could recommend  various other regimens of treatment which may from
time to time show activity at lower doses.

Generic  products  which  third  parties  may  develop  may render our  products
noncompetitive or obsolete.


                                       20
<PAGE>


         An increase in competition from generic  pharmaceutical  products could
have a material adverse effect on our ability to generate revenue and cash flow.
For example,  many of the  indications in which  Clofarabine  and Modrenal,  our
co-lead drugs, have demonstrated activity are areas of unmet clinical need, such
as  Clofarabine's  application to pediatric acute leukemia in which,  initially,
the drug will be used as a salvage  therapy  after other  regimens of  treatment
have failed.  Our lead  investigators  who have assisted with the development of
Modrenal  envision,  initially,  that Modrenal  would be used as second or third
line therapy,  only after patients with advanced  post-menopausal  breast cancer
receive  regimens of timoxifin  and faslodex (or similar  drug)  treatments.  If
generic drug  companies  develop a compound  which is more effective than either
Clofarabine or Modrenal,  in these areas of unmet clinical need, , or equally as
effective but at lower doses, it could adversely affect our market and/or render
our drugs obsolete.

Because many of our competitors  have  substantially  greater  capabilities  and
resources,  they may be able to  develop  products  before  us or  develop  more
effective products or market them more effectively which would limit our ability
to generate revenue and cash flow.

         Competition  in our industry is intense.  Potential  competitors in the
United States and Europe are numerous and include  pharmaceutical,  chemical and
biotechnology  companies,  most of  which  have  substantially  greater  capital
resources, marketing experience,  research and development staffs and facilities
than us.  Potential  competitors  for  certain  indications  of our  lead  drugs
include,  with respect to Clofarabine,  Schering AG, which markets  Fludarabine,
and certain generic drug companies in Europe which could market Fludarabine upon
expiry of the patent  protections held by Schering.  Potential  competitors with
respect to Modrenal include  Astra-zeneca  and Novartis,  which market timoxifen
and other aromitase  inhibitors,  which could be used by clinicians as first and
second   line   therapies   in  patients   with   hormone   sensitive   advanced
post-menopausal  breast  cancer  prior to a Modrenal  regimen of  treatment.  No
assurance can be given that the ongoing  business  activities of our competitors
will  not  have  a  material  adverse  effect  on  our  business  prospects  and
projections going forward.

         Although  we  seek  to  limit  potential   sources  of  competition  by
developing  products that are eligible for orphan drug  designation and new drug
application  approval or other forms of protection,  our competitors may develop
similar  technologies  and  products  more  rapidly  than us or market them more
effectively.  Competing technologies and products may be more effective than any
of those that are being or will be developed by us. The generic drug industry is
intensely   competitive   and  includes   large  brand  name  and   multi-source
pharmaceutical companies. Because generic drugs do not have patent protection or
any other market  exclusivity,  our competitors may introduce  competing generic
products,  which may be sold at lower prices or with more aggressive  marketing.
Conversely,  as we introduce branded drugs into our product  portfolio,  we will
face  competition  from  manufacturers of generic drugs which may claim to offer
equivalent  therapeutic  benefits  at a  lower  price.  The  aggressive  pricing
activities of our generic  competitors  could have a material  adverse effect on
our revenue and cash flow.

If we fail to keep up with rapid  technological  change and evolving  therapies,
our technologies and products could become less competitive or obsolete.

         The  pharmaceutical  industry is characterized by rapid and significant
technological change. We expect that pharmaceutical  technology will continue to
develop  rapidly,  and our future  success will depend on our ability to develop
and maintain a competitive  position.  Technological  development  by others may
result in products developed by us, branded or generic, becoming obsolete before
they are marketed or before we recover a significant  portion of the development
and  commercialization   expenses  incurred  with  respect  to  these  products.
Alternative  therapies or new medical  treatments could alter existing treatment
regimes,  and thereby reduce the need for one or more of the products  developed
by us,  which  would  adversely  affect  our  revenue  and cash  flow.  See also
"--Generic  products  which third  parties  may develop may render our  products
noncompetitive or obsolete."

We depend on others for clinical  testing of our products  which could delay our
ability to develop products.

         We do not currently have any internal product testing capabilities. Our
inability  to retain  third  parties  for the  clinical  testing of  products on
acceptable  terms would adversely  affect our ability to develop  products.  Any
failures by third parties to adequately perform their responsibilities may delay
the  submission  of  products  for  regulatory  approval,  impair our ability to
deliver products on a timely basis or otherwise impair our competitive position.
Our  dependence on third parties for the  development  of products may adversely
affect our  potential  profit  margins  and our  ability to develop  and deliver
products on a timely basis.

We depend on others to manufacture our products and have not  manufactured  them
in significant quantities.


                                       21
<PAGE>


         We have never manufactured any products in commercial  quantities,  and
the  products  being  developed  by  us  may  not  be  suitable  for  commercial
manufacturing in a cost-effective manner. Manufacturers of products developed by
us will be subject to current good manufacturing practices prescribed by the FDA
or other rules and regulations prescribed by foreign regulatory authorities.  We
may not be able to enter into or maintain  relationships  either domestically or
abroad  with  manufacturers  whose  facilities  and  procedures  comply  or will
continue to comply with  current  good  manufacturing  practices  or  applicable
foreign  requirements.  Failure by a manufacturer of our products to comply with
current good manufacturing  practices or applicable  foreign  requirements could
result in significant  time delays or our inability to commercialize or continue
to market a product  and could  have a material  adverse  effect on our sales of
products and, therefore,  our cash flow. In the United States, failure to comply
with current good manufacturing practices or other applicable legal requirements
can lead to federal seizure of violative products, injunctive actions brought by
the federal  government,  and potential criminal and civil liability on the part
of a company and our officers and employees.

We have limited  sales and  marketing  capability,  and may not be successful in
selling or marketing our products.

         The creation of infrastructure to commercialize  oncology products is a
difficult, expensive and time-consuming process. We may not be able to establish
direct or indirect  sales and  distribution  capabilities  or be  successful  in
gaining market  acceptance for proprietary  products or for other  products.  We
currently  have very  limited  sales and  marketing  capabilities.  We currently
employ one fulltime  sales  employee and two fulltime  marketing  employees.  To
market any products  directly,  we will need to develop a more fulsome marketing
and sales force with technical expertise and distribution capability or contract
with other pharmaceutical and/or health care companies with distribution systems
and direct sales forces.  To the extent that we enter into co-promotion or other
licensing  arrangements,  any revenues to be received by us will be dependent on
the  efforts  of  third  parties.  The  efforts  of  third  parties  may  not be
successful.  Our failure to establish marketing and distribution capabilities or
to enter into marketing and distribution  arrangements  with third parties could
have a material adverse effect on our revenue and cash flows.


If we lose key management our business will suffer.

         We are highly  dependent on our Chief Executive  Officer to develop our
lead drug. Dr. Wood has an employment  agreement with the Company dated December
31,  2002  for an  initial  term of one year  which  automatically  extends  for
additional one year periods until either party gives the other written notice of
termination  at least 90 days prior to the end of the current term.  Dr. Wood is
not near  retirement age and he does not, to our knowledge,  plan on leaving the
Company in the near  future.  Dr. Wood is one of the founders of the company and
he is  intimately  familiar  with the science that  underlies our lead drugs and
ancillary  technologies.  He  also  maintains  a  position  on  the  Clofarabine
management team that is responsible for all drug development activities relating
to that lead drug, and has been  instrumental in the development and maintenance
of our key relationships within the scientific research and medical communities,
and those with our vendors, inventors, co-development partners and licensors. If
Dr. Wood was no longer  employed by the company,  the  development  of our drugs
would be significantly delayed and otherwise would be adversely impacted, and we
may be unable to maintain and develop these important relationships.

Need for additional personnel.

         The Company will be required to hire  additional  qualified  scientific
and technical personnel, as well as personnel with expertise in clinical testing
and government  regulation to expand our research and  development  programs and
pursue our product development plans. There is intense competition for qualified
personnel  in the  areas  of  the  Company's  activities,  and  there  can be no
assurance  that the  Company  will be able to attract  and retain the  qualified
personnel  necessary  for the  development  of its  business.  The Company faces
competition  for  qualified   individuals  from  numerous   pharmaceutical   and
biotechnology companies,  universities and research institutions. The failure to
attract and retain key scientific and technical  personnel would have a material
adverse effect on the  development of the Company's  business and our ability to
develop, market and sell our products.

Our management and internal  systems might be inadequate to handle our potential
growth.

         Our success  will depend in  significant  part on the  expansion of our
operations  and the  effective  management  of growth.  This growth has and will
continue to place a significant strain on our management and information systems
and resources and  operational  and financial  systems and resources.  To manage
future  growth,  our  management  must continue to improve our  operational  and
financial  systems and expand,  train,  retain and manage our employee base. Our
management  may not be able to manage our growth  effectively.  If our  systems,
procedures, controls, and



                                       22
<PAGE>



resources are  inadequate  to support our  operations,  our  expansion  would be
halted or delayed and we could lose our opportunity to gain  significant  market
share or the timing with which we would otherwise gain significant market share.
Any inability to manage growth effectively may harm our ability to institute our
business plan. The strain on our systems, procedures,  controls and resources is
further  heightened  by the  fact  that our  executive  office  and  operational
development  facilities  are  located  in  separate  time  zones  (New  York and
Edinburgh, Scotland, respectively).


We  depend  on  patent  and  proprietary  rights  to  develop  and  protect  our
technologies and products, which rights may not offer us sufficient protection.

         The pharmaceutical industry places considerable importance on obtaining
patent and trade secret protection for new technologies, products and processes.
Our success  will depend on our  ability to obtain and  enforce  protection  for
products that we develop  under United States and foreign  patent laws and other
intellectual  property laws,  preserve the  confidentiality of our trade secrets
and operate without infringing the proprietary rights of third parties.  Through
our  current  license  agreements,  we have  acquired  the right to utilize  the
technology  covered  by  issued  patents  and  patent  applications,  as well as
additional  intellectual  property  and  know-how  that could be the  subject of
further patent  applications in the future.  Several of the original  patents to
trilostane have expired in the United States and foreign countries. Thus, we and
our licensors are pursuing  patent  applications  to specific uses,  combination
therapy and dosages or formulations of trilostane. We cannot guarantee that such
applications  will result in issued  patents or that such patents if issued will
provide adequate protection against competitors.  Patents may not be issued from
these  applications and issued patents may not give us adequate  protection or a
competitive advantage. Issued patents may be challenged,  invalidated, infringed
or  circumvented,  and any rights  granted  thereunder  may not  provide us with
competitive  advantages.  Parties not  affiliated  with us have  obtained or may
obtain  United States or foreign  patents or possess or may possess  proprietary
rights  relating to products  being  developed or to be developed by us. Patents
now in  existence  or  hereafter  issued  to others  may  adversely  affect  the
development or commercialization of products developed or to be developed by us.
Our planned  activities  may infringe  patents  owned by others.  Our patents to
Clofarabine are licensed from Southern Research Institute. The current projected
expiration date of the license is March 2021. These patents cover pharmaceutical
compositions  and methods of using  Clofarabine.  We cannot guarantee that these
patents  would  survive an attack on their  validity or that they will provide a
competitive  advantage over our competitors.  Moreover, we cannot guarantee that
Southern Research  Institute was the first to invent the subject matter of these
patents. In addition,  we are aware of a third party patent which is directed to
the treatment of chronic  myelogenous  leukemia  ("CML") using specific doses of
Clofarabine. We do not believe that we will infringe this patent. If this patent
is asserted  against us, even though we may be successful  in defending  against
such an assertion,  our defense would  require  substantial  financial and human
resources.  And, we may need a license to this patent to use the claimed dose in
the treatment of CML. However,  we do not know if such a license is available at
commercially reasonable terms, if at all.

         We could  incur  substantial  costs  in  defending  infringement  suits
brought  against us or any of our  licensors  or in asserting  any  infringement
claims that we may have against others. We could also incur substantial costs in
connection  with any suits  relating  to  matters  for  which we have  agreed to
indemnify our licensors or  distributors.  An adverse  outcome in any litigation
could have a material  adverse  effect on our  ability to sell  products  or use
patents in the future.  In  addition,  we could be  required to obtain  licenses
under patents or other proprietary  rights of third parties.  These licenses may
not be made  available on terms  acceptable to us, or at all. If we are required
to, and do not obtain any  required  licenses,  we could be prevented  from,  or
encounter  delays  in,  developing,  manufacturing  or  marketing  one  or  more
products.

         We also rely upon trade  secret  protection  for our  confidential  and
proprietary   information.   Others  may  independently   develop  substantially
equivalent  proprietary  information  and techniques or gain access to our trade
secrets or disclose our technology.  We may not be able to meaningfully  protect
our trade secrets which could limit our ability to exclusively produce products.

         We  require  our  employees,  consultants,  members  of the  scientific
advisory   board  and   parties   to   collaborative   agreements   to   execute
confidentiality  agreements  upon the  commencement  of employment or consulting
relationships  or a  collaboration  with us.  These  agreements  may not provide
meaningful  protection of our trade secrets or adequate remedies in the event of
unauthorized use or disclosure of confidential and proprietary information.




                                       23
<PAGE>


Because  we have  international  operations,  we will be  subject  to  risks  of
conducting business in foreign countries.

         We have the right to manufacture, market and distribute our lead drugs,
Clofarabine  and  Modrenal,   in  territories  outside  of  the  United  States.
Specifically,  we  currently  market  Modrenal  in the United  Kingdom  and upon
receiving  European  approval  for  Clofarabine,  we intend  to market  the drug
throughout  Europe.  Further,  half of our employees are employed by Bioenvision
Limited, our wholly-owned subsidiary with offices in Edinburgh, Scotland.

         Because  we  have  international  operations  in  the  conduct  of  our
business,  we are  subject  to the  risks  of  conducting  business  in  foreign
countries, including:

o        difficulty in establishing or managing distribution relationships;

o        different standards for the development,  use,  packaging,  pricing and
     marketing of our products and technologies;

o        our  inability  to  locate   qualified   local   employees,   partners,
     distributors and suppliers;

o        the potential burden of complying with a variety of foreign laws, trade
     standards  and  regulatory   requirements,   including  the  regulation  of
     pharmaceutical products and treatment; and

o        general geopolitical risks, such as political and economic instability,
     changes in diplomatic and trade relations, and foreign currency risks.

o        We do not engage in forward  currency  transactions  which means we are
     susceptible to fluctuations  in the U.S. dollar against foreign  currencies
     such as the pound sterling. Accordingly, as the value of the dollar becomes
     weaker  against the pound  sterling,  ongoing  services  provided by our UK
     employees, Cancer Research Organizations and other service providers become
     more  expensive to us. No assurance can be given that the U.S.  dollar will
     not  continue to weaken which could have a material  adverse  effect on the
     costs associated with our drug development activities.

We cannot  predict  our  future  capital  needs and we may not be able to secure
additional  financing  which  could  affect  our  ability  to operate as a going
concern.


         We  consummated  a private  placement  transaction  on March 22,  2004,
pursuant to which we raised  $12.8  million and issued  2,044,514  shares of our
common stock and warrants to purchase an additional 408,903 shares of our common
stock at a conversion  price of $7.50 per share. We consummated a second closing
for this  financing on May 13, 2004 in order to comply with certain  contractual
obligations of the Company to its holders of Series A Preferred Stock which hold
preemptive  rights for equity  offerings of the Company.  The Company  raised an
additional  $3.5 million in the second  trance  closing and issued an additional
558,384  shares of our common stock and warrants to purchase  111,677  shares of
our common stock at a conversion price of $7.50 per share.  However, we may need
additional  financing to continue to fund the research  and  development  of our
products and to generally  expand and grow our  business.  For example,  we will
need to  employ a  European  sales  force  within  the  next  twelve  months  to
capitalize on the commercial  potential for  Clofarabine  and Modrenal if and to
the extent our lead drugs are at market in Europe in the first half of 2005.  To
the extent that we will be  required to fund  operating  losses,  our  financial
position  would  deteriorate.  There can be no assurance that we will be able to
find  significant  additional  financing at all or on terms  favorable to us. If
equity  securities  are issued in connection  with a financing,  dilution to our
stockholders  may  result,  and if  additional  funds  are  raised  through  the
incurrence  of debt, we may be subject to  restrictions  on our  operations  and
finances.  Furthermore,  if we do incur  additional debt, we may be limiting our
ability  to  repurchase  capital  stock,  engage  in  mergers,   consolidations,
acquisitions  and asset  sales,  or alter our lines of  business  or  accounting
methods,  even though these actions would otherwise benefit our business.  As of
December 31, 2003, we had  stockholders'  equity of $15,404,099  and net working
capital of $3,115,285.


         If adequate  financing is not  available,  we may be required to delay,
scale back or  eliminate  some of our  research  and  development  programs,  to
relinquish  rights to certain  technologies  or  products,  or to license  third
parties to  commercialize  technologies or products that we would otherwise seek
to develop.  Any inability to obtain additional  financing,  if required,  would
have a material  adverse  effect on our ability to continue our  operations  and
implement our business plan.


                                       24
<PAGE>


The prices we charge for our products and the level of third-party reimbursement
may decrease and our revenues could decrease.

         Our ability to commercialize  products  successfully depends in part on
the price we may be able to charge for our  products  and on the extent to which
reimbursement  for the  cost  of our  products  and  related  treatment  will be
available from  government  health  administration  authorities,  private health
insurers and other third-party payors.  Government  officials and private health
insurers  are  increasingly  challenging  the  price  of  medical  products  and
services.   Significant   uncertainty  exists  as  to  the  pricing  flexibility
distributors will have with respect to, and the  reimbursement  status of, newly
approved health care products.

         Third-party  payors may attempt to control  costs  further by selecting
exclusive providers of their pharmaceutical products. If third-party payors were
to make this type of arrangement with one or more of our competitors, they would
not reimburse patients for purchasing our competing products.  For example, if a
third-party  payor in the U.K.  were to pay  patients  for regimens of aromitase
inhibitor  treatment but not  treatments of Modrenal,  this would cause sales of
Modrenal to decline.  This lack of  reimbursement  would diminish the market for
products developed by us and could have a material adverse effect on us.

Our products may be subject to recall.

         Product  recalls may be issued at our discretion or by the FDA, the FTC
or other  government  agencies  having  regulatory  authority for product sales.
Product recalls,  if any in the future,  may harm our reputation and cause us to
lose development  opportunities,  or customers or pay refunds. Products may need
to be recalled due to disputed labeling claims,  manufacturing  issues,  quality
defects,  or other  reasons.  We do not carry any insurance to cover the risk of
potential  product  recall.  Any product  recall  could have a material  adverse
effect on us, our prospects, our financial condition and results of operations.

We may face  exposure  from  product  liability  claims  and  product  liability
insurance  may not be  sufficient  to cover  the costs of our  liability  claims
related to technologies or products.

         We  face  exposure  to  product  liability  claims  if  the  use of our
technologies  or products or those we license  from third  parties is alleged to
have resulted in adverse effects to users thereof.  Product liability claims may
be brought by trial  participants,  although  to date,  no such claims have been
brought  against  us. If any such claims  were  brought  against us, the cost of
defending such claims may adversely affect our business. Regulatory approval for
commercial sale of our products does not mitigate  product  liability risks. Any
precautions we take may not be sufficient to avoid significant product liability
exposure.   Although  we  have  obtained  product  liability  insurance  on  our
technologies and products at levels with which management deems  reasonable,  no
assurance can be given that this insurance  will cover any  particular  claim or
that we have obtained an appropriate level of liability  insurance  coverage for
our development and marketing  activities.  We currently  maintain three million
dollars per year,  claims made product  liability  insurance  coverage  which we
believe is adequate. Existing coverage may not be adequate as we further develop
our products.  In the future,  adequate insurance coverage or indemnification by
collaborative  partners  may  not be  available  in  sufficient  amounts,  or at
acceptable costs, if at all. To the extent that product liability insurance,  if
available,  does not cover potential  claims, we will be required to self-insure
the  risks  associated  with  those  claims.  The  successful  assertion  of any
uninsured product liability or other claim against us could limit our ability to
sell our products or could cause monetary damages.  In addition,  future product
labeling may include disclosure of additional  adverse effects,  precautions and
contra indications, which may adversely impact product sales. The pharmaceutical
industry has experienced  increasing difficulty in maintaining product liability
insurance coverage at reasonable levels, and substantial  increases in insurance
premium costs in many cases have rendered coverage economically impractical.

Where You Can Find More Information

         We file annual,  quarterly and special  reports,  proxy  statements and
other  information  with the SEC.  This  information  is  available at the SEC's
Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may
obtain  information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports,
proxy and information  statements,  and other  information about Bioenvision and
other issuers that file electronically with the SEC at http://wwww.sec.gov.

Item 2.  Description of Property.


                                       25
<PAGE>


Facilities

         As of the  date of this  report  we do not  own  any  interest  in real
property.  We currently lease 3,229 square feet of office space at our principal
executive offices at 509 Madison Avenue, Suite 404, New York, New York 10022 for
approximately  $13,000 per month. These facilities are the center for all of our
administrative  functions in the United States.  We also rent 250 square feet of
office  space at 32  Haymarket,  London  SW1Y 4TP for  approximately  $1,000 per
month.  This  office  space  is  used to  perform  certain  marketing  functions
throughout  Europe.  Also, we rent on a month-to-month  basis  approximately 500
square feet of office space in Edinburgh,  Scotland for approximately $3,000 per
month.  To date,  most of our drug  development  programs have been conducted at
scientific  institutions  around  the  world.  It  is  our  policy  to  continue
development at leading scientific  institutions in the United States and Europe.
We do not plan to conduct  laboratory  research in any of our  facilities in the
near future, rather, we will conduct research through collaborative arrangements
with Southern Research Institute, M.D. Anderson and others.

Investment Policies

         We do not currently have any investments in real estate or interests in
real  estate;  investments  or  interests  in real  estate  mortgages  or in the
securities  of or interests  in persons  primarily  engaged in real  estate.  We
generally  acquire  our assets for the  purpose of  ultimately  producing  sales
revenues  from  the  exploitation  of  such  assets  in the  development  of our
biopharmaceutical   business.   We   currently   invest  our  surplus   cash  in
interest-bearing deposit accounts and short-term certificates of deposit.

Item 3.  Legal Proceedings.

         On April 1, 2003,  RLB  Capital,  Inc.  filed a  complaint  against the
Company in the Supreme Court of the State of New York (Index No. 601058/03). The
Complaint  alleges a breach of contract  by the  Company  and  demands  judgment
against the Company for $112,500 and  warrants to acquire  75,000  shares of the
Company's  common stock.  The Company  submitted its Verified Answer on June 25,
2003 and, in pertinent part, denied RLB's allegations and asserted counterclaims
based on negligence. The Company believes that the grounds for the complaint are
meritless  and intends to defend this matter  vigorously.  If the Company is not
able to successfully defend this complaint, management does not believe that any
resulting  judgment or settlement  would have a material  adverse  effect on the
Company, its financial position or results of operations.


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

         None.

                                     PART II


Item 5.  Market for Common Equity and Related Stockholder Matters.

         The  following  represents  the  range  of  reported  high  and low bid
quotations  for our  common  stock on a  quarterly  basis  since July 1, 2000 as
reported on the OTC Bulletin  Board.  Throughout this period and up to September
5, 2003,  our trading  symbol was "BIOV" Our trading symbol was changed to "BIV"
on September 8, 2003 upon  commencement of listing our shares of common stock on
the American Stock Exchange.  The quotations also reflect  inter-dealer  prices,
without retail mark-up,  mark-down or commission,  and may not represent  actual
transactions.

                                               High                     Low
                                               ----                     ---
Fiscal Year Ended June 30, 2001
First Quarter                                  $4.25                    $2.50
Second Quarter                                 $4.00                    $1.50
Third Quarter                                  $2.625                   $0.875
Fourth Quarter                                 $2.45                    $0.82

Fiscal Year Ended June 30, 2002
First Quarter                                  $2.50                    $1.60
Second Quarter                                 $2.50                    $1.15


                                       26
<PAGE>


Third Quarter                                  $3.00                    $2.25
Fourth Quarter                                 $3.60                    $1.75

Fiscal Year Ended June 30, 2003
First Quarter                                  $2.55                    $1.35
Second Quarter                                 $2.25                    $1.10
Third Quarter                                  $1.55                    $0.39
Fourth Quarter                                 $2.89                    $0.77


         On May 12, 2002, we had 189 stockholders of record.


         We have never declared or paid cash dividends on our capital stock, and
our board of  directors  does not intend to declare or pay any  dividends on the
common  stock in the  foreseeable  future.  However,  the Company is required to
accrue for and pay a dividend  of 5%,  subject  to certain  adjustments,  on its
cumulative Series A Convertible  Participating Preferred Stock. We have not paid
dividends on our cumulative Series A Convertible  Participating  Preferred Stock
since May 8, 2002 but have accrued the dividends  since that time. Our earnings,
if any,  are  expected to be retained for use in  expanding  our  business.  The
declaration  and  payment  in the future of any cash or stock  dividends  on the
common stock will be at the discretion of the board of directors and will depend
upon a variety of factors,  including  our  ability to service  our  outstanding
indebtedness and to pay our dividend obligations on securities ranking senior to
the common stock, our future earnings, if any, capital  requirements,  financial
condition  and such other  factors as our board of directors  may consider to be
relevant from time to time.

Recent Sales of Unregistered Securities

         In June 2003, in  connection  with that certain  employment  agreement,
dated  January 1, 2000,  by and between the  Company and Mr.  Stuart  Smith (the
"Smith  Employment  Agreement"),  we issued 19,728 shares of our common stock at
fair market value to Mr. Smith in settlement of any and all obligations owing to
Mr. Smith under the Smith Employment Agreement. The issuance of these shares was
exempt from registration  under Regulation D under the Securities Act or Section
4(2) of the Securities Act.

         In May 2003,  in  connection  with that certain  consulting  agreement,
dated November 19, 2001 (the "Sterling Consulting Agreement"),  we issued 15,225
shares of our common stock at fair market value to Mr. Sterling in settlement of
all  outstanding  obligations  under  the  Sterling  Consulting  Agreement.  The
issuance of these shares was exempt from  registration  under Regulation D under
the Securities Act or Section 4(2) of the Securities Act.

         In February 2003, in connection with that certain consulting agreement,
dated March 1, 2002,  by and  between  the Company and Mr.  Edward W. Kelly (the
"Kelly Consulting  Agreement"),  we issued 200,000 shares of our common stock at
fair  market  value  to Mr.  Kelly  in  settlement  of  all  of our  outstanding
obligations under the Kelly Consulting  Agreement.  The issuance of these shares
was exempt from  registration  under  Regulation D under the  Securities  Act or
Section 4(2) of the Securities Act.

         In  January  2003,  in  connection  with our  employment  of our office
manager at the principal  executive office, we issued options to purchase 20,000
shares  of our  common  stock at an  exercise  price of $1.42  per  share  which
approximated the fair market value of the common stock on the date of the grant.
Of such options,  subject to certain terms and  conditions,  options to purchase
10,000  shares of our common  stock vested  immediately  and options to purchase
10,000 shares of our common stock vest on the one-year anniversary of January 9,
2003, the grant date.

         On December  31, 2002 the Company  issued  options to purchase  500,000
shares of common  stock at an  exercise  price  equal to $1.45 per share,  which
approximated the fair market value of the common stock on the date of the grant,
to its Chairman and Chief Executive  Officer,  Dr. Christopher B. Wood. Of these
options, subject to certain circumstances, options to purchase 166,666 shares of
common  stock vest on each of the first,  second  and third  anniversary  of the
grant date.

         On December  31, 2002 the Company  issued  options to purchase  200,000
shares  of  common  stock  at an  exercise  price  of  $2.00  per  share,  which
approximated the fair market value of the common stock on the date of the grant,
to a consultant to the Company who performs European regulatory services for the
Company.  Of these  options,  options to purchase  66,666 shares of common stock
vest on each of the first, second and third anniversary


                                       27
<PAGE>


of the grant date.  Compensation  expense of $24,333 was recorded as  consulting
fees for the year ended June 30, 2003.

         In October 2002, in connection  with our employment of Ian  Abercrombie
as our Sales Manager  (Europe),  we issued options to purchase  50,000 shares of
our common stock at an exercise price of $1.45 per share, which approximated the
fair  market  value  of the  common  stock on the  date of the  grant.  Of these
options,  subject to certain terms and  conditions,  options to purchase  25,000
shares of common  stock  vest on each of the first and second  anniversaries  of
October 23, 2002, the grant date.

         In October 2002, in connection  with our employment of Hugh Griffith as
our Commercial  Director (Europe),  we issued options to purchase 300,000 shares
of our common stock at an exercise price of $1.45 per share,  which approximated
the fair  market  value of the common  stock on the date of the grant.  Of these
options,  subject to certain terms and conditions,  options to purchase  100,000
shares of common stock vest on each of the first, second and third anniversaries
of October 23, 2002, the grant date.

         In July 2002, in connection with our employment of David P. Luci as our
Director of Finance and General  Counsel,  we issued options to purchase 380,000
shares  of our  common  stock at an  exercise  price of $1.95 per  share,  which
approximated the fair market value of the common stock on the date of the grant.
In  connection  with our entering into an  employment  agreement  with Mr. Luci,
dated March 31, 2003, we cancelled  these options and issued options to purchase
500,000 shares of common stock, which are exercisable at $0.735 per share, which
approximated the fair market value of the common stock on the date of the grant.
Of these options,  subject to certain terms and conditions,  options to purchase
170,000  shares of common stock  vested on March 31, 2003 (the grant date),  and
options to purchase  110,000  shares of common  stock vest on each of the first,
second and third anniversaries of March 31, 2003.

         In May 2002,  Bioenvision  issued an aggregate  of 5,916,666  shares of
Series A  convertible  participating  preferred  stock  for  $3.00 per share and
warrants  to  purchase  an  aggregate  of  5,916,666  shares of common  stock to
seventeen accredited investors,  as defined under Regulation D of the Securities
Act. The  issuance of these  shares and  warrants  was exempt from  registration
under  Regulation D under the  Securities  Act or Section 4(2) of the Securities
Act.

         On  February 1, 2002,  Bioenvision  issued  7,000,000  shares of common
stock to the former stockholders of Pathagon in connection with the consummation
of the  Pathagon  transaction.  The  issuance  of these  shares was exempt  from
registration  under Regulation D under the Securities Act or Section 4(2) of the
Securities Act.


         On November 16, 2001,  we entered  into an  engagement  letter with SCO
Financial  Group,  pursuant  to  which  SCO  Financial  Group  would  act as our
financial advisor. In connection with the engagement letter, we issued a warrant
to purchase  100,000  shares of common  stock at an exercise  price of $1.25 per
share, subject to certain anti-dilution adjustments. In connection with securing
a credit  facility with SCO Capital,  we issued  warrants to purchase  1,500,000
shares of our  common  stock at a strike  price of $1.25 per  share,  subject to
certain anti-dilution adjustments.  The warrants expire five years from the date
of  issuance.  The  issuance  of these  shares and  warrants  were  exempt  from
registration  under Regulation D under the Securities Act or Section 4(2) of the
Securities Act.


         In October  2001,  we issued  134,035  shares of common  stock to three
officers as payment for salaries  accrued to September  30, 2001,  each of which
were  accredited  investors,  as defined under the  Securities  Act of 1933. The
issuance of these shares was exempt from  registration  under Regulation D under
the Securities Act or Section 4(2) of the Securities Act.

         In August 2001 in connection with  outstanding  deferred  salaries,  we
issued 208,333 shares of common stock at the rate of $1.25 per share as follows:
Christopher Wood 98,684 shares;  Thomas Nelson, 27,412 shares; and Stuart Smith,
82,237 shares.  The issuance of these shares was exempt from registration  under
Regulation D under the Securities Act or Section 4(2) of the Securities Act.

         In addition,  in August 2001,  we granted  150,000  options to purchase
shares of our common stock at an exercise price of $1.25 per share.  The options
were issued to two consultants in exchange for certain  services  rendered.  The
options expire in August 2004 and are  immediately  vested.  Those  issuances of
options were exempt from  registration  under Regulation S promulgated under the
Securities  Act or  Section  4(2) of the  Securities  Act.  In August  2001,  we
cancelled these options and replaced them with 150,000 shares.

Item 6.  Management's Discussion and Analysis or Plan of Operation


                                       28
<PAGE>


         The  following  discussion  and  analysis  provides  information  which
management  believes is  relevant  to an  assessment  and  understanding  of our
results of operations and financial  condition.  The  discussion  should be read
together with our audited  consolidated  financial statements and notes included
under Item 7 in this annual report on Form 10-KSB, which consolidated  financial
statements are presented beginning at page F-1, for further details.

         Summary of Significant Accounting Policies

         Financial  Reporting Release No. 60, which was recently released by the
SEC,  requires  all  companies to include a  discussion  of critical  accounting
policies  or  methods  used in the  preparation  of the  consolidated  financial
statements.  In  addition,  Financial  Reporting  Release  No.  61 was  recently
released by the SEC,  which  requires all  companies to include a discussion  to
address,  among  other  things,   liquidity,   off-balance  sheet  arrangements,
contractual obligations and commercial commitments.  The following discussion is
intended  to  supplement  the  summary of  significant  accounting  policies  as
described in Note 1 of the Notes To  Consolidated  Financial  Statements for the
year ended June 30, 2002  included  under Item 7 in this  annual  report on Form
10-KSB, which are presented beginning at page F-1.

         These   policies  were  selected   because  they   represent  the  more
significant  accounting  policies  and methods  that are broadly  applied in the
preparation of the consolidated financial statements.

         Revenue  Recognition - Revenue under research  contracts is recorded as
earned under the  contracts,  as services are provided.  In accordance  with SEC
Staff Accounting  Bulletin No. 101, upfront  nonrefundable  fees associated with
license and development  agreements where the Company has continuing involvement
in the  agreement,  are  recorded as deferred  revenue and  recognized  over the
period of involvement. If the estimated service period is subsequently modified,
the  period  over  which  the  up-front  fee is  recognized  would  be  modified
accordingly on a prospective  basis.  Revenues from the  achievement of research
and  development  milestones,  which  represent the achievement of a significant
step in the research and  development  process,  are recognized  when and if the
milestones are achieved.

         Stock  Based  Compensation  - In  accordance  with  the  provisions  of
Statement of Financial  Accounting  Standards  ("SFAS") No. 123,  Accounting for
Stock-Based  Compensation,  we apply Accounting  Principles Board Opinion 25 and
related   interpretations   in  accounting   for  our  stock  option  plan  and,
accordingly, we do not recognize compensation expense for employee stock options
granted  with  exercise  prices  equal to or  greater  than fair  market  value.
Non-employee  stock-based   compensation   arrangements  are  accounted  for  in
accordance  with the  provisions of SFAS No. 123 and Emerging  Issues Task Force
No.  96-18,  Accounting  for  Equity  Instruments  That Are Issued to Other Than
Employees for  Acquiring,  or in  Conjunction  with Selling,  Goods or Services.
Under EITF No. 96-18, as amended,  where the fair value of the equity instrument
is more  reliably  measurable  than the fair value of  services  received,  such
services will be valued based on the fair value of the equity instrument.

         Use  of  Estimates  -  The  preparation  of  financial   statements  in
conformity with generally  accepted  accounting  principles of the United States
requires  management to make estimates and assumptions  that affect the reported
amounts of assets and  liabilities  and the disclosure of contingent  assets and
liabilities  at the date of the  financial  statements  as well as the  reported
amounts of revenues and expenses  during the reporting  period.  Actual  results
could differ from those  estimates,  and such differences may be material to the
financial statements.

Overview


         We are an emerging  biopharmaceutical company that develops and markets
drugs to treat  cancer.  Our two lead  drugs are  Clofarabine  and  Modrenal(R),
although we have several other products and technologies under  development.  As
of May 1, 2004,  our internal  staff  consisted of nine  employees  based in New
York, New York and Edinborough, Scotland.


         Clofarabine  is a  purine  nucleoside  analogue,  or a small  molecule,
which,  based on our own clinical studies and studies conducted by others on our
behalf,  we believe is effective in the treatment of leukemia.  Clofarabine  may
also be an effective agent to treat patients with solid tumor cancers,  based on
preclinical  studies and Phase I/II  clinical  trials  performed to date. In the
United Kingdom, we are currently conducting clinical trials with Clofarabine for
the treatment of pediatric and adult acute leukemias.  In the U.S.,  Clofarabine
is currently in Pivotal Phase II clinical trials for pediatric acute  leukemias.
In January, 2002, the European orphan drug application for use of Clofarabine to
treat acute leukemia in adults was approved.  Orphan Drug  Designation  provides
the Company with ten years of market exclusivity in Europe for Clofarabine.  The
drug has also been granted orphan drug status and "fast track"  treatment by the
United States Food and Drug Administration (the "FDA"). Further, in August


                                       29
<PAGE>


2003,  we  obtained  the  exclusive,  irrevocable  option  to sell,  market  and
distribute  Clofarabine  in  Japan  and  Southeast  Asia  from the  inventor  of
Clofarabine.  These  rights were not  previously  granted by  Southern  Research
Institute and fall outside the scope of the Company's then current licensing and
development  contracts with respect to  Clofarabine.  We originally  obtained an
exclusive  license  from  Southern  Research   Institute  to  sell,  market  and
distribute  Clofarabine  throughout  the world,  except for Japan and  Southeast
Asia, for all human applications,  pursuant to a co-development agreement, dated
August 31, 1998, between the Company and Southern Research  Institute.  On March
12,  2001,  we  granted  an  exclusive  option to sell,  market  and  distribute
Clofarabine  in the U.S. and Canada to ILEX Oncology,  Inc. We converted  ILEX's
option to an exclusive sublicense on December 30, 2003.  Accordingly,  we do not
possess the rights to sell, market and distribute Clofarabine in the U.S.

         Modrenal(R) is a hormonal agent with a novel mode of action, that makes
it an effective  agent in patients with advanced breast cancer who have acquired
resistance to other hormonal agents. We launched  Modrenal(R) in May 2003 in the
United Kingdom,  where we have received  regulatory  approval for its use in the
treatment of post-menopausal breast cancer. In the first half of 2004, we intend
to apply for mutual recognition in another four large European territories in an
effort to gain approval for  Modrenal(R) in each such  territory.  We anticipate
receiving  approval in each such  territory  in the first half of calendar  year
2005.  Further, we filed an IND for prostate cancer clinical trials in the US in
February  2004 and intend to commence our first US clinical  trial in the second
quarter of calendar year 2004.  Further,  we intend to seek regulatory  approval
for  Modrenal(R) in the United States as salvage  therapy for  hormone-sensitive
breast  cancer upon  completion of additional  clinical  studies.  We originally
obtained an exclusive license from Stegram  Pharmaceuticals Ltd. to sell, market
and distribute  Modrenal(R)  throughout the world,  except for South Africa, for
all human and animal health applications, pursuant to a co-development agreement
dated July 15, 1998.

         Our  primary   business   strategy  relates  to  our  two  lead  drugs,
Clofarabine and Modrenal(R).  With Clofarabine, our strategy is to complete drug
development  in Europe  and obtain  marketing  authorization  from the  European
regulatory authorities to market and distribute Clofarabine for the treatment of
pediatric and adult acute leukemias.  We anticipate  receiving approval early in
2005, subject to our obtaining approval of the regulatory  authorities.  We will
continue  clinical  trials in other  indications  with the  intention of seeking
label extensions after Clofarabine's first approval. With Modrenal, our strategy
is to expand  sales in the United  Kingdom and apply for mutual  recognition  to
obtain the right to sell Modrenal(R)  throughout Europe. We anticipate receiving
mutual recognition from major European Community member states by mid-2005.  Our
secondary business strategy is to continue to develop our portfolio of ancillary
products and technologies.  We anticipate that revenues derived from Clofarabine
and  Modrenal(R)  will permit us to further  develop our  portfolio of ancillary
products and technologies.

         Company Status

         We have made significant  progress in developing our product  portfolio
over the past twelve months,  and have multiple  products in clinical trials. We
have incurred losses during this emerging stage. Our management believes that we
have the opportunity to become a leading oncology-focused pharmaceutical company
in the next five years if we successfully bring our two lead drugs to market. We
anticipate  that  revenues  derived  from the two lead drugs  will  permit us to
further  develop the twelve other products and potential  products  currently in
our development portfolio.  We currently plan to have as many as twelve products
at  market  by the end of  2006.  We have  commenced  marketing  one of our lead
products,  Modrenal(R),  and we  intend  to  continue  developing  our  existing
platform  technologies  with a primary  business focus on drugs to treat cancer,
and  commercializing  products derived from such technologies.  A key element of
our  business  strategy  is to continue to acquire,  obtain  licenses  for,  and
develop new  technologies  and  products  that we believe  offer  unique  market
opportunities  and/or  complement our existing product lines. As a result of the
acquisition  of Pathagon Inc. in February  2002, we have several  anti-infective
technologies.  These include the OLIGON(R)  technology,  an advanced biomaterial
that has been approved for certain  indications  by the FDA in the U.S.,  and is
being sold by a product  co-development  partner,  and the use of thiazine dyes,
such as methylene blue, which are used for in vitro and in vivos inactivation of
pathogens  (viruses,  bacteria and fungus) in biological  fluids.  It is not the
Company's strategy to sell devices or to expand into the  anit-infective  market
per se, but the  technology  obtained in the Pathagon  acquisition  has specific
application  for support of the cancer patient and oncology  treatment.  We have
had  discussions  with potential  product  co-development  partners from time to
time, and plan to continue to explore the possibilities for  co-development  and
sub-licensing  in order to implement  our  development  plans.  In addition,  we
believe that some of our products may have  applications in treating  non-cancer
conditions  in humans and in  animals.  Those  conditions  are  outside our core
business focus and we do not presently intend to devote a substantial portion of
our resources to  addressing  those  conditions.  In May 2003, we entered into a
Sub-License Agreement with Dechra Pharmaceuticals,  plc ("Dechra"),  pursuant to
which  Bioenvision   sub-licensed  the  marketing  and  development   rights  to
modrestane,  solely with respect to animal  health  applications,  in the United
States and Canada, to Dechra.  We


                                       30
<PAGE>


received  $1.25  million in cash,  together  with future  milestone  and royalty
payments which are contingent upon the occurrence of certain events We intend to
continue to try and exploit these types of opportunities as they arise.

         You should  consider the  likelihood of our future success to be highly
speculative in light of our limited  operating  history,  as well as the limited
resources, problems, expenses, risks and complications frequently encountered by
similarly  situated  companies.  To address  these risks,  we must,  among other
things:

o    satisfy  our future  capital  requirements  for the  implementation  of our
     business plan;

o    commercialize our existing products;

o    complete  development  of products  presently  in our  pipeline  and obtain
     necessary regulatory approvals for use;

o    implement and successfully  execute our business and marketing  strategy to
     commercialize products;

o    establish and maintain our client base;

o    continue to develop new products and upgrade our existing products;

o    respond to industry and competitive developments; and

o    attract, retain, and motivate qualified personnel.

         We may not be successful in addressing  these risks.  If we were unable
to do so, our business prospects,  financial condition and results of operations
would be materially  adversely  affected.  The likelihood of our success must be
considered in light of the development cycles of new pharmaceutical products and
technologies and the competitive and regulatory environment in which we operate.

Results of Operations

Year Ended June 30, 2003 Compared to Year Ended June 30, 2002

         We reported  revenues of $505,000 and $803,000 for the years ended June
30, 2003 and 2002,  respectively.  Revenues reflect recognition of consideration
received  pursuant  to our  agreements  with  co-development  and  sub-licensing
partners  in  connection  with our  platform of drugs and  technologies.  Of the
revenues recorded for the year ended June 30, 2003,  $12,000 was recognized from
Dechra, pursuant to the Sub-License Agreement, dated May 13, 2003.

         Research  and  development  costs for the years ended June 30, 2003 and
2002 were  $1,689,000 and $1,912,000,  respectively,  representing a decrease of
$223,000.


         Our research and  development  costs include costs  associated with six
projects of which the Company devotes significant time and resource. Clofarabine
research  and  development  costs for the year ended June 30, 2003 and 2002 were
$871,000 and $596,000,  respectively,  representing an increase of $275,000. The
increase  primarily  reflects  the costs  associated  with our having  commenced
clinical  trials  in  Europe  to  develop  Clofarabine.  Modrenal  research  and
development  costs for the year ended June 30, 2003 and 2002 were  $913,000  and
$923,000,  respectively,  representing a decrease of $10,000.  Gossypol research
and  development  costs were $30,000 and $90,000,  respectively,  representing a
decrease of $60,000. The decrease primarily reflects a decrease in the amount of
resource  devoted by the Company to this compound  while the Company  focused on
developing its lead drugs.  Gene Therapy research and development  costs for the
year  ended  June  30,  2003  were   $(130,000)   and  $303,000,   respectively,
representing a decrease of $433,000.  The decrease primarily reflects an accrued
expense in the year ended 2002 of $200,000  which was determined to be less than
originally  estimated  by the  Company  in the year  ended  June 30,  2003.  The
clinical  trials and  development  strategy  for the  Clofarabine  and  Modrenal
projects,  in each case, is anticipated to cost several million dollars and will
continue for several  years based on the number of clinical  indications  within
which we plan to develop these drugs. Currently,  management cannot estimate the
timing or costs  associated  with these projects  because many of the variables,
such as interaction  with  regulatory  authorities and response rates in various
clinical trials, are not predictable.  Estimated total costs to date for each of
these four projects is as follows:  (i)  Clorfarabine  research and  development
costs have been approximately $3.0



                                       31
<PAGE>



million;  (ii) Modrenal research and development  costs have been  approximately
$2.35  million;   (iii)  Gossypol  research  and  development  costs  have  been
approximately  $150,000;  and (iv) Gene Therapy  research and development  costs
have  been  approximately  $450,000.  Our  other two  research  and  development
projects involve our two ancillary  technologies;  OLIGON and Methylene Blue. We
do not currently  devote any significant time or resources to these research and
development  projects,  but  we  intend  to  do so  if  and  to  the  extent  we
successfully  commercialize our lead drugs, Clorfarabine and Modrenal , over the
next two years.


         Administrative  expenses for the year ended June 30, 2003 and 2002 were
$4,567,000 and $2,128,000, respectively, representing an increase of $2,439,000.
Of this amount,  $1,600,000  of this  increase  was due to the  expansion of the
internal  management  team  from one full  time  employee  to  eight  full  time
employees; approximately $150,000 of this increase was due to lease expenses and
office supplies /equipment for the newly opened New York and Edinburgh, Scotland
offices, both of which we opened during the year;  approximately $300,000 of the
increase  was due to an  increase  in  investor  and public  relations  expenses
related  to  pre-marketing  activities  with  Clofarabine  and  marketing  costs
associated with Modrenal;  approximately $200,000 of the increase was related to
increases in related travel expense to successfully  manage our drug development
activities;  and approximately  $150,000 of the increase was due to increases in
our consulting and legal expenses as the result of our recent growth.

         We reported interest and finance charges of $325,000 for the year ended
June 30, 2003,  representing  a decrease of $1,848,000  from the year ended June
30, 2002.  This decrease  reflects the retirement of our credit  facility in May
2002 and the fact that we carried  no long term debt  during the year ended June
30, 2003.

         Depreciation and amortization  expense totaled  $1,345,000 for the year
ended June 30, 2003,  representing  an increase of $766,000  from the year ended
June 30,  2002.  The increase is primarily  due to the  amortization  of certain
intangible  assets we acquired in the Pathagon  transaction which we consummated
in February 2002.

Year Ended June 30, 2002 Compared to Year Ended June 30, 2001

         We reported  revenues of $803,000 and $245,000 for the years ended June
30,  2002 and 2001,  respectively.  Revenues  reflect  our  agreements  with our
co-development  partners  and/or  licensees in  connection  with our platform of
drugs and technologies.

         Research  and  development  costs for the years ended June 30, 2002 and
2001 were $1,912,000 and $1,566,000,  respectively,  representing an increase of
approximately  $346,000.  This increase primarily is attributable to a full year
amortization of deferred  royalties,  which represent  advance royalties paid to
SRI that are being  amortized over the same period that related revenue is being
recognized.

         Administrative  expenses for the year ended June 30, 2002 and 2001 were
$2,128,000 and $550,000,  respectively,  representing an increase of $1,578,000.
Of this amount,  (i) approximately  $650,000 related to an increase in legal and
other  professional  fees paid  during  the year,  (ii)  approximately  $750,000
related to an increase in  printing,  investor  and public  relations  costs and
(iii) approximately $85,000 was due to an increase in travel expenses related to
the Company's expansion of the internal management team.

         We reported interest and finance charges of $2,173,000 and $229,000 for
the years ended June 30, 2002 and 2001,  respectively,  representing an increase
of  $1,944,000.  This  increase  reflects  charges  related to the  issuance  of
warrants in connection with the Company's various financings.

         Depreciation and amortization  expense totaled $579,000 and $23,000 for
the years ended June 30, 2002 and 2001, respectively. This increase primarily is
due to the amortization of certain intangible assets we acquired in the Pathagon
transaction, which we consummated in February 2002.

Liquidity and Capital Resources

         We  anticipate  that we may  continue  to incur  significant  operating
losses for the  foreseeable  future.  There can be no assurance as to whether or
when we will generate material revenues or achieve profitable operations.


                                       32
<PAGE>


         We are  actively  seeking  strategic  alliances in order to develop and
market our range of products. In August 2001, we obtained a $1 million unsecured
line of credit facility from Jano Holdings  Limited,  bearing interest at 8% per
annum. In November 2001, we entered into a senior,  Secured Credit Facility with
SCO  Capital  Partners  LLC.  The  credit  facility  was  established  for up to
$1,000,000  in short term  financing,  in four trances of  $250,000,  subject to
satisfaction  of  certain  conditions,  secured  by the pledge of certain of our
assets,  and was  established  to bear  interest on drawings at a rate of 6% per
annum.  In  addition,  our  officers  agreed to defer  salaries,  and our former
outside  counsel  agreed to defer  certain  fees,  until we obtained  sufficient
long-term funding.  Deferred salaries and fees amounted to approximately $52,000
through June 30, 2002. In May 2001, our officers agreed to accept 705,954 shares
of our  common  stock in  settlement  of  $910,681  of the  outstanding  accrued
salaries  through June 30, 2001. The shares were issued during the quarter ended
March 31, 2002.  On October 17,  2001,  our  officers  agreed to accept  134,035
shares in settlement of $154,140 of additional  outstanding  accrued salaries to
September 30, 2001. On October 17, 2001, the board of directors  approved a plan
to repay  certain  trade debt with  shares of our common  stock,  and a total of
146,499 shares of common stock were issued for the repayment of $168,473.

         We received an initial  payment  from ILEX of  $1,350,000  which became
non-refundable  in March  2001  upon  execution  of the  agreement  with ILEX to
co-develop  Clofarabine.  That sum will be recognized  as income for  accounting
purposes  on a straight  line basis over the period  from March  2001,  when the
payment  was  received,  through  December  31,  2002,  at which  time  ILEX was
originally scheduled to complete Phase II trials of Clofarabine and make another
payment to us.

         We received an initial  payment  from Dechra of  $1,250,000  on May 13,
2003 upon execution of our  sub-license  agreement  with Dechra.  This agreement
expires upon expiration of the last patent related to modrenal or the completion
of the last royalty obligation as set forth therein.

         On May 7, 2002 we  authorized  the issuance and sale of up to 5,920,000
shares  of  Series A  Preferred  Stock.  The  Series A  preferred  stock  may be
converted  into shares of common stock at an initial  conversion  price of $1.50
per share of common  stock,  subject  to  adjustment  for  stock  splits,  stock
dividends,  mergers,  issuances of cheap stock and other  similar  transactions.
Holders of Series A preferred  stock also received,  in respect of each share of
Series A preferred  stock  purchased in a private  placement which took place in
May 2002,  one warrant to purchase  one share of our common  stock at an initial
exercise price of $2.00 subject to adjustment.

         Through May 16, 2002 we have sold an aggregate  of 5,916,666  shares of
Series A  convertible  participating  preferred  stock  in the May 2002  private
placement for $3.00 per share and warrants to purchase an aggregate of 5,916,666
shares of common stock,  resulting in aggregate gross proceeds of  approximately
$17,750,000.  A  portion  of the  proceeds  were  used to repay in full the Jano
Holdings and SCO Capital  obligations upon which such facilities were terminated
as well as to repay fees amounting to $1,610,000 related to the transaction.

         On June 30, 2003, we have cash and cash  equivalents  of $8,200,000 and
working capital of $6,108,000  which  management  believes will be sufficient to
continue  currently planned  operations over the next 12 months.  Although we do
not currently  intend to raise any additional  funds for the next 12 months,  we
can not ensure additional funds will not be raised during such period because of
the  significant  scale up of our operating  activities,  including  clofarabine
development and the launch of modrenal.  Further,  a key element of our business
strategy  is to  continue  to  acquire,  obtain  licenses  for,  and develop new
technologies  and products  that we believe  offer unique  market  opportunities
and/or  complement our existing product lines. We are not presently  considering
any such transactions, and we do not presently expect to acquire any significant
assets over the coming 12 month period,  but if any such opportunity  arises and
we deem it to be in our interests to pursue such an opportunity,  it is possible
that additional financing would be required for such a purpose.

         We  anticipate  that we may  continue  to incur  significant  operating
losses for the  foreseeable  future.  There can be no assurance as to whether or
where we will generate material revenues or achieve profitable operations.

         The Company has the following commitments as of June 30, 2003:

                                 Payments Due in
--------------------------------------------------------------------------------
                        Total          2004           2005          2006
--------------------------------------------------------------------------------

Employee Contracts         266,400         266,400            -              -
--------------------------------------------------------------------------------

Occupancy Lease            369,500         161,600      166,100         41,000
--------------------------------------------------------------------------------

Total                      635,900         418,500      156,000         39,000
--------------------------------------------------------------------------------


                                       33
<PAGE>


         In  management's  opinion,  cash flows from  operations  and  borrowing
capacity  combined  with  cash on hand will  provide  adequate  flexibility  for
funding the Company's  working  capital  obligations for the next twelve months.
However,  there can be no assurance that suitable debt or equity  financing will
be available for the Company.  The Company has a commitment  under its operating
lease with the New York  office.  The Company  leases  3,299 square feet under a
lease  that  expires  on  September  30,  2005.  The  Company  is a party  to an
additional month-to-month lease agreement for its subsidiary, Bioenvision, Ltd.

Plan of Operation

         We are an emerging  biopharmaceutical  company with a primary  business
focus on the acquisition, development and distribution of drugs to treat cancer.
We have acquired development and marketing rights to a portfolio of six platform
technologies  developed  over the past 15 years from  which a range of  products
have been  derived  and  additional  products  may be  developed  in the future.
Although we have commenced marketing one of our lead products,  Modrenal(R), and
intend  to  continue  to  develop   Clofarabine,   and  our  existing   platform
technologies and commercializing products derived from such technologies,  a key
element of our business strategy is to continue to acquire, obtain licenses for,
and develop new  technologies  and products  that we believe offer unique market
opportunities  and/or  complement our existing product lines.  Once a product or
technology  has  been  launched  into  the  market  for  a  particular   disease
indication, we plan to work with numerous collaborators, both pharmaceutical and
clinical,  in the oncology community to extend the permitted uses of the product
to other indications.  In order to market our products effectively, we intend to
develop  marketing  alliances with strategic  partners and may co-promote and/or
co-market in certain territories.

         We plan to continue to use a major  portion of the  proceeds of the May
2002 private placement to initiate clinical trials of Clofarabine in Europe. The
emphasis will be on the use of Clofarabine in the treatment of refractory  acute
leukemia in children and adults.  The drug has received orphan drug  designation
in Europe.

         We plan to identify  licensing  partners for  OLIGON(R) and to continue
developing new aspects of the technology.  We also plan to continue  development
of methlylene blue and other products in our pipeline.

         With  respect  to  our  gene  therapy  technology,  we  have  completed
laboratory  research  which  confirms  proof of  principal  of our gene  therapy
technology  and has added to the  pre-clinical  data which will be important for
any subsequent regulatory  submission.  This laboratory research was required to
allow the Company and the  research  departments  of the  relevant  universities
assisting  with this  technology  to file  patents  for which  the  Company  has
licensing rights. We now plan to perform additional clinical trials with the two
lead products related to this technology.

         Key Personnel, Consultants and Infrastructure

         On July 22, 2002,  David P. Luci commenced  employment with the Company
and serves as Director of Finance,  General  Counsel and Corporate  Secretary of
the  Company,  pursuant  to  terms  which  are  memorialized  in  an  Employment
Agreement,  dated March 31, 2003.  See Part III,  Item 9  "Directors,  Executive
Officers,  Promoters and Control  Persons;  Compliance with Section 16(a) of the
Exchange Act - Employment Agreements" below.

         On September 3, 2002, the Company and ILEX  constituted  the management
team (the  "Management  Team") for the  development  of Clofarabine in the U.S.,
Canada and Europe.  The Management  Team meets  regularly to plan and coordinate
clofarabine  drug development on an ongoing basis. The Management Team currently
consists  of Dr.  Wood and Mr.  Luci from the  Company  and  Jeffrey  Buchalter,
President and Chief Executive Officer of Ilex.

         On September  17, 2002,  the Company  announced  its  establishment  of
principal executive offices at 509 Madison Avenue, Suite 404, New York, New York
10022.

         On September 24, 2002, Mr. Thomas Scott Nelson resigned his position as
Chief Financial Officer of the Company. Mr. Luci has taken responsibility as the
Company's  principal  accounting  officer.  Mr.  Nelson  continues  his  role as
director of the Company.

         On September  30,  2002,  Stuart  Smith  resigned  from his position as
Senior Vice President of the Company;  his employment  agreement was terminated.
The Company  issued  shares of its common stock to Mr. Smith at the


                                       34
<PAGE>


then current fair market value in satisfaction of all outstanding obligations of
the Company to Mr. Smith pursuant to the employment agreement.

         On  October  6, 2002,  Mr.  Hugh  Griffith  commenced  employment  with
Bioenvision Ltd., a wholly owned subsidiary of the Company.  Mr. Griffith serves
as Commercial  Director (Europe) and is responsible for Bioenvision's  marketing
campaign for modrenal, which is approved in the United Kingdom for the treatment
of advanced  post-menopausal  breast  cancer,  and for  Bioenvision's  sales and
marketing  initiatives for all other approved products  throughout Europe which,
initially, includes methylene blue and OLIGON.

         On November 1, 2002,  the Company  entered into an agreement with Queen
Mary Westfield College,  University of London ("Queen Mary"), pursuant to which,
in  pertinent  part,  Queen  Mary has  agreed to perform  certain  research  and
development  activities in connection with the development of modrenal(TM).  The
term of the agreement is five years, subject to certain rights of the parties to
terminate prior thereto.

         On December 1, 2002, the Company appointed Mr. Ian Abercrombie to serve
as Sales Manager  (Europe).  Messrs.  Abercrombie  and Griffith,  together,  are
creating a worldwide marketing strategy for the Company's products and marketing
Modrenal (TM) in the United Kingdom.  Further, Messrs.  Abercrombie and Griffith
are designing plans to expand the Company's  marketing  strategy  throughout the
European Community and to commence  pre-registration  marketing  activities with
Clofarabine worldwide, except for North America.

         On December 31, 2002,  the Company  entered into a one-year  employment
agreement  with Dr.  Christopher  B.  Wood who  serves  as  Chairman  and  Chief
Executive  Officer of the Company.  See Part III, Item 9  "Directors,  Executive
Officers,  Promoters and Control  Persons;  Compliance with Section 16(a) of the
Exchange Act - Employment Agreements" below.

         On December 31, 2002, the Company  entered into a consulting  agreement
with Dr.  Deidre  Tessman to serve as a regulatory  consultant to the Company in
connection with the European development of Clofarabine.

         In January  2003, we entered into an agreement  with RRD  International
LLC  ("RRD"),  pursuant  to which RRD serves as the global  product  development
consultant to the Company in connection  with the  development  of  Clofarabine,
Modrenal  (TM) and OLIGON and assists with  designing  and managing our clinical
development  program  for our  products.  On April 2, 2003,  the Company and RRD
further  memorialized  their  agreement  pursuant  to a formal  Master  Services
Agreement and Registration  Rights Agreement and, in connection  therewith,  the
Company  issued a Warrant to RRD  pursuant to which RRD has the right to acquire
175,000  shares of our  common  stock at an  exercise  price of $2.00 per share,
which warrant includes registration rights under certain circumstances.

         In April 2003, we entered into an exclusive  license agreement with CLL
Pharma ("CLL"), pursuant to which CLL has agreed to develop a new formulation of
modrenal using proprietary patented technology of CLL. The term of the agreement
is for a period of 24 months  following the first delivery of reformulated  drug
product.

         In May 2003,  we  entered  into a  Sub-License  Agreement  with  Dechra
Pharmaceuticals,  plc ("Dechra"), pursuant to which Bioenvision sub-licensed the
marketing and  development  rights to modrestane,  solely with respect to animal
health  applications,  in the United States and Canada,  to Dechra.  We received
$1.25 million in cash, together with future milestone and royalty payments which
are contingent upon the occurrence of certain events.

         In May 2003,  we entered  into a Master  Services  Agreement  with Penn
Pharmaceutical Services Limited ("Penn"), pursuant to which Penn will assist the
Company with labeling,  packaging and  distribution  of Clofarabine  and certain
other  services  including  regulatory  and quality  control,  in each case,  as
requested by the Company on an ongoing  basis.  The term of the  agreement is 12
months subject to automatic 12 month  extensions  unless  earlier  terminated by
either party.

         In June 2003,  we entered  into a supply  agreement  and a  development
agreement, in each case, with Ferro Phanstiehl Laboratories, ("Ferro"), pursuant
to which Ferro will  manufacture and exclusively  supply to us our global supply
of Clofarabine  and perform a scale-up of this compound for commercial  use. The
term of the supply  agreement is five-years  from the first  product  regulatory
approval for Clofarabine, subject to certain early termination rights.

         Scientific Advisory Board / Modrenal Launch


                                       35
<PAGE>


         In December 2002, the Company's  scientific  advisory board convened at
the Meeting of the American Society of  Hematologists  in  Philadelphia,  PA and
reviewed the clinical trial results to date and planned future  clinical  trials
for clofarabine.

         In May 2003, the Company's  scientific advisory board met to review and
discuss  the  design  and  strategy  for the  forthcoming  clinical  trials  for
modrenal, globally, for patients with breast cancer.

         In May 2003,  the Company  launched  the  marketing  of modrenal in the
United  Kingdom  for breast  cancer at the Royal  College of Surgeons in London,
England.

Recent Accounting Pronouncements

         In July 2002,  the FASB Issued  Statement  146,  "Accounting  for Costs
Associated  with Exit or  Disposal  Activities"  ("SFAS  146").  This  Statement
addresses  financial  accounting and reporting for costs associated with exit or
disposal  activities and nullifies  Emerging  Issues Task Force (EITF) Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Cost to Exit an Activity (including Certain Costs Incurred in a Restructuring)."
The principal  difference  between this  Statement and Issue 94-3 relates to its
requirements  for  recognition of a liability for a cost associated with an exit
or disposal  activity.  This  Statement  requires  that a  liability  for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred.  Under  Issue 94-3,  a liability  for an exit cost as defined in Issue
94-3 was  recognized at the date of an entity's  commitment to an exit plan. The
provisions of this Statement are effective for exit or disposal  activities that
are initiated  after December 31, 2002.  Effective  January 1, 2003, the Company
adopted the  provisions  of SFAS 146 which did not have an impact on the results
of operations or financial position.

         In November 2002, the FASB issued  Interpretation  No. 45,  "Guarantors
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees of  Indebtedness  of Others" ("FIN 45"). FIN 45 requires that certain
guarantees  be initially  recorded at fair value,  which is  different  from the
general  current  practice of recording a liability only when a loss is probable
and reasonably  estimable.  FIN 45 also requires a guarantor to make significant
new  disclosures for virtually all  guarantees.  Effective  January 1, 2003, the
Company  adopted the disclosure  requirements  under FIN 45 which did not have a
material  impact on the  results of  operations  or  financial  position  of the
Company.

         On December 31,  2002,  the FASB issued SFAS No. 148,  "Accounting  for
Stock Based  Compensation  Transition  and  Disclosure"  ("SFAS 148").  SFAS 148
amends FASB Statement No. 123,  "Accounting  for Stock Based  Compensation,"  to
provide  alternative  methods of  transition  to SFAS 123's fair value method of
accounting  for  stock-based  employee  compensation.  SFAS 148 also  amends the
disclosure  provisions  of SFAS 123 and APB Opinion No. 28,  "Interim  Financial
Reporting,"  to require  disclosure  on the  summary of  significant  accounting
policies  of the  effects  of an  entity's  accounting  policy  with  respect to
stock-based employee  compensation on reported net income and earnings per share
in annual and interim financial  statements.  While SFAS 148 does not amend SFAS
123 to require  companies to account for employee  stock  options using the fair
value  method,  the  disclosure  provisions  of SFAS 148 are  applicable  to all
companies with  stock-based  employee  compensation,  regardless of whether they
account  for the  compensation  using the fair  value  method of SFAS 123 or the
intrinsic  value  method of APB  Opinion 25. The  Company  adopted the  required
disclosure provisions of SFAS 148 as described under accounting policy footnote,
"Stock Based Compensation."

         In January 2003, the FASB issued  interpretation No. 46, "Consolidation
of  Variable  Interest  Entities--An  Interpretation  of ARB No. 51" ("FIN 46"),
which addresses  consolidation of variable interest entities. FIN 46 expands the
criteria for  consideration  in determining  whether a variable  interest entity
should  be   consolidated   by  a  business   entity,   and  requires   existing
unconsolidated  variable interest  entities (which include,  but are not limited
to, Special  Purpose  Entities,  or SPE's) to be  consolidated  by their primary
beneficiaries  if the entities do not  effectively  disburse risks among parties
involved.  This interpretation applies immediately to variable interest entities
created  after  January  31,  2003 and  variable  interest  entities in which an
enterprise  obtains and interest after that date. It applies in the first fiscal
year or interim  period  beginning  after  June 15,  2003 to  variable  interest
entities  in which an  enterprise  holds a variable  interest  that it  acquired
before  February  1, 2003.  The  adoption  of FIN 46 is not  expected  to have a
material  impact on the  results  of  operation  or  financial  position  of the
Company.

         In May 2003,  the FASB  issued SFAS No.  150,  "Accounting  for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS
150"). The objective of SFAS No. 150 is to establish standards for how an issuer
classifies and measures certain financial  instruments with  characteristics  of
both  liabilities  and equity.  SFAS 150 is effective for  financial  statements
entered into or modified after May 31, 2003


                                       36
<PAGE>


and for existing financial  instruments after July 1, 2003. The adoption of SFAS
150 is not expected to have a material  impact on the results of  operations  or
financial position of the Company.

         In May  2003,  the  Emerging  Issues  Task  Force  ("EITF")  reached  a
consensus  on  EITF  Issue  No.  00-21,   "Revenue  Arrangements  with  Multiple
Deliverables"  ("EITF 00-21").  EITF 00-21 provides guidance on how to determine
when an  arrangement  that involves  multiple  revenue-generating  activities or
deliverables  should be divided into separate  units of  accounting  for revenue
recognition  purposes,  and if this  division is required,  how the  arrangement
consideration  should be allocated  among the separate units of accounting.  The
guidance in the consensus is effective for revenue  arrangements entered into in
quarters  beginning  after June 15,  2003.  The  adoption  of EITF 00-21 did not
impact the Company's  consolidated  financial position or results of operations,
but could  affect  the  timing or  pattern  of  revenue  recognition  for future
collaborative research and/or license agreements.

Subsequent Events

         In August 2003,  we entered  into an  amendment  to the  co-development
agreement with Stegram  Pharmaceuticals  plc ("Stegram"),  pursuant to which, in
pertinent part, we succeeded to the U.K. marketing rights to modrenal.

         In August 2003,  we received  notice that our  application  to list our
shares of common stock had been approved by the American  Stock  Exchange  under
the symbol "BIV".  Our shares of common stock commenced  trading on the American
Stock Exchange on September 8, 2003.

         In August  2003,  SRI granted us an  irrevocable,  exclusive  option to
make,  use and sell products  derived from the technology in Japan and Southeast
Asia. We intend to convert the option to a license upon sourcing an  appropriate
co-marketing partner to develop these rights in such territory.

         In  September  2003,  we  entered  into a letter  agreement  with  ILEX
Oncology,  Inc. pursuant to which we are working with ILEX to co-develop an oral
formulation for clofarabine;  the rights and related costs to which we agreed to
split equally with ILEX.


Item 7.  Financial Statements.

         The  consolidated  financial  statements of  Bioenvision,  Inc. and its
subsidiaries  including the notes thereto and the report  thereon,  is presented
beginning at page F-1.


Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure.

         None.


                                       37
<PAGE>


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act.

         Our executive officers,  directors and other significant  employees and
their ages and positions are as follows:


<TABLE>
<CAPTION>


Name of Individual                             Age        Position with Bioenvision and Subsidiaries
------------------                             ---        ------------------------------------------
<S>                                            <C>        <C>

Christopher B. Wood, M.D.                      57         Chairman of the Board and Chief Executive Officer
David P. Luci, C.P.A., J.D.                    36         Director of Finance, General Counsel and Corporate Secretary
                                                          (1)
Hugh Griffith                                  35         Commercial Director (Europe) (2)
Jeffrey B. Davis                               40         Director (3)
Thomas Scott Nelson, C.A.                      64         Director (4)
Steven A. Elms                                 39         Director (4)
Andrew Schiff, M.D.                            38         Director (3) (4)
</TABLE>

-----------------------------
(1) Mr. Luci has been employed with the Company since July 22, 2002.
(2) Mr.  Griffith  has been  employed  with  Bioenvision,  Ltd,  a  wholly-owned
subsidiary of the Company, since October 6, 2002.
(3) Member of the Compensation Committee since September 5, 2002.
(4) Member of the Audit Committee since September 5, 2002.

         Christopher  B. Wood,  M.D. has served as our Chairman of the Board and
Chief Executive  Officer since January 1999. From January 1997 to December 1998,
Dr. Wood was Chairman of Eurobiotech,  Inc. From March 1994 to January 1997, Dr.
Wood was a specialist  surgeon in the National Health  Service,  United Kingdom.
From April 1979 to March 1991,  Dr. Wood was a  specialist  surgeon at The Royal
Postgraduate  Medical  School,  London,  England.  He has  more  than  15  years
experience in the European  biotechnology sector. He has taken two biotechnology
companies from start-up through  commercialization,  one of which,  Medeva Plc.,
traded on the London Stock Exchange and the New York Stock Exchange,  and is now
wholly owned by Celltech Group PLC, the other being Genethics Ltd which was sold
to Proteus  International  plc. Dr. Wood holds an M.D.  from the  University  of
Wales School of Medicine and the  Fellowship of the Royal College of Surgeons of
Edinburgh.

         David P. Luci, C.P.A., Esq. has served as Director of Finance,  General
Counsel and Corporate  Secretary  since July 2002.  From  September 1994 to July
2002,  Mr. Luci served as a corporate  associate at Paul,  Hastings,  Janofsky &
Walker LLP (New York office). Prior to that, Mr. Luci served as a senior auditor
at  Ernst & Young  LLP  (New  York  office).  Mr.  Luci  is a  certified  public
accountant.  He holds a Bachelor  of Science in Business  Administration  with a
concentration in accounting from Bucknell  University and a J.D. from Albany Law
School of Union University.

         Hugh  S.  Griffith  has  served  as  Commercial  Director  (Europe)  of
Bioenvision,  Ltd., a wholly-owned sales and marketing subsidiary of the Company
since October 2002.  From January 2002 to October 2002, Mr.  Griffith  served as
Executive  Commercial  Director of QuantaNova Ltd. From January 2000 to December
2001,  Mr.   Griffith   served  as  Senior   Business  Unit  Manager  at  Abbott
Laboratories,   Ltd.  where  he  was  responsible  for  strategic   development,
implementation and  commercialization  of a new neonatology  business unit. This
role  encompassed the management of the sales force,  marketing,  PR, policy and
healthcare  liaison  teams  whilst  also  directing  the  clinical   development
programme for the  neonatology  portfolio.  From April 1998 to January 2000, Mr.
Griffith was the HIV Business Unit Manager at Abbott  Laboratories  Ltd where he
was responsible for the profitability of the HIV franchise.  Mr Griffith managed
the Norvir  capsule  crisis  including  the fully  comprehensive  named  patient
programme.  At Abbott  Laboratories  Ltd., Mr.  Griffith also served as Business
Development Manager (July 1997 to April 1998) and as Area Sales Manager (October
1995 to July 1997). Mr. Griffith holds a Masters of Business Administration from
Cardiff  Business  School,  a Diploma of Marketing  and a Bachelor of Science in
Honours Biology from University of Stirling.

         Thomas Scott Nelson,  C.A. was named a director in May 1998. Mr. Nelson
served as our Chief Financial Officer from May 1998 to September 2002. From 1996
to 1999, Mr. Nelson served as the Director of Finance of the Management Board of
the Royal & Sun Alliance  Insurance Group.  From 1991 to 1996, Mr. Nelson served
as


                                       38
<PAGE>


Group Finance Director of the Main Board of Sun Alliance Insurance Group. He has
served as  Chairman  of the  United  Kingdom  insurance  industry  committee  on
European  regulatory,  fiscal and  accounting  issues.  He has also  worked with
Deloitte in Paris and as a consultant with PA Consultants Management. Mr. Nelson
is a Member of Institute of  Chartered  Accountants  of Scotland and a Fellow of
the Institute of Cost and Management Accountants. Mr. Nelson holds a B.A. degree
from Cambridge University.

         Jeffrey B. Davis was named a director in February  2002.  Mr. Davis has
extensive  experience  in investment  banking,  and  corporate  development  and
financing for development stage companies.  Mr. Davis serves as President of SCO
Financial  Group LLC and SCO Securities  LLC. He served as Senior Vice President
and Chief Financial  Officer of a publicly traded  development  stage healthcare
technology  company from November 1995 to April 1997.  Prior to that,  from June
1990 to November  1995,  Mr. Davis was Vice  President,  Corporate  Finance,  at
Deutsche Morgan Grenfell,  both in the U.S. and Europe. Mr. Davis also served in
senior marketing and product management  positions at AT&T Bell Laboratories and
Philips  Medical  Systems  North  America,  where he was  also a  member  of the
technical staff.

         Steven A. Elms was named a director  in May 2002.  Mr. Elms serves as a
Managing  Director of the Perseus-Soros  BioPharmaceutical  Fund. For five years
prior to joining  Perseus-Soros,  Mr. Elms was a Principal  in the Life  Science
Investment  Banking group of Hambrecht & Quist (now J.P. Morgan H&Q). During his
five  years  at  H&Q,  Mr.  Elms  was  involved  in over  60  financing  and M&A
transactions,  helping  clients raise in excess of $3.3 billion of capital.  Mr.
Elms'  primary  areas of focus were the genomics and drug  discovery  technology
sectors.

         Andrew  Schiff,  M.D.  was named a  director  in May 2002.  Dr.  Schiff
currently serves as a Managing Director of Perseus-Soros Biopharmaceutical Fund.
Over the last 10 years,  Schiff has practiced  internal medicine at The New York
Presbyterian  Hospital  where he maintains his position as a Clinical  Assistant
Professor of Medicine. In addition, he has also been a partner of a small family
run investment fund, Kuhn, Loeb & Co.

         Under the terms of its investment agreement,  as amended in April 2001,
Bioaccelerate  Ltd.  has the  right  to  nominate  one  member  to our  board of
directors. Bioaccelerate Ltd. has not made any such nomination at this time.

         Under the terms of the merger  agreement with certain former  directors
of Pathagon, such former directors have the right to nominate another individual
to our board of directors.  These former directors of Pathagon have not made any
such nomination at this time.

         The directors serve until the next annual meeting of  stockholders  and
until their respective  successors are elected and qualified.  Officers serve at
the discretion of the board of directors.

Committees of the Board of Directors

         The  Board  of  Directors  currently  has  two  committees;  the  Audit
Committee and the Compensation Committee.  The Board of Directors re-constituted
membership  of  the  Audit  Committee  and  Compensation  Committee  to  include
non-management directors on such committees.

         The Audit  Committee is comprised of Messrs.  Elms,  Schiff and Nelson;
with Mr. Elms serving as Chairman of the Audit  Committee.  The Audit  Committee
recommends the  independent  accountants  appointed by the Board of Directors to
audit our the financial  statements,  which  includes an inspection of our books
and  accounts,  and reviews with such  accountants  the scope of their audit and
their report thereon, including any questions and recommendations that may arise
relating to such audit and report or our internal accounting and auditing system
procedures. The Audit Committee reports to the Board of Directors.

         The  Compensation  Committee is comprised of Messrs.  Davis and Schiff;
with Mr. Davis serving as Chairman of the Compensation  Committee.  The function
of the  Compensation  Committee  is to review and  approve the  compensation  of
executive  officers  and  establish  targets  and  incentive  awards  under  our
incentive compensation plans. The Compensation Committee reports to the Board of
Directors.

Scientific Advisory Committee

         In addition to the foregoing committees of the board of directors,  the
Company has a Scientific Advisory  Committee.  The Scientific Advisory Committee
is comprised of Professor Emillio Montserrat,  Nagy Habib, M.D., Ph.D.,  Michael
Keating, M.D., Professor Cecilia Saccone, B.Sr., Professor Wafik El-Deiry, M.D.,
Ph.D.,  Professor Anthony Davies,  Ph.D., D.Sr. and Professor Daniel Jaeck, M.D.
The members of the Scientific Advisory


                                       39
<PAGE>


Committee  are each leaders in various  disciplines  relating to our  scientific
interests.  These  individuals  were  appointed  by and  report  to the Board of
Directors  and  provide  critical  review and advice  pertaining  to our product
research and development,  and business development activities and strategies at
the request of management or the Board of Directors.  Members of the  Scientific
Advisory  Committee  are  compensated  on a  case-by-case  basis  based on their
commitment  of time and  other  factors  and are  reimbursed  for  out-of-pocket
expenses incurred in serving on the Scientific Advisory Committee.  Compensation
through stock options or stock purchases may be provided. To our knowledge, none
of our  Scientific  Advisory  Committee  members  have any  conflict of interest
between his or her obligations to us and his or her obligations to others.

Chief Medical Consultant

         George Margetts,  M.D. has served as our Chief Medical Consultant since
December   1998.   Since  1990,  he  has  been  Managing   Director  of  Stegram
Pharmaceutical  Ltd. From 1984 to 1990,  Dr.  Margetts  served as Executive Vice
President  Research/Managing  Director  of  Sterling  Winthrop  Group and as its
Medical  Director  between 1971 and 1989. Dr. Margetts holds B. Pharm. and M.Sc.
degrees from the  University  of London and  M.R.C.S.,  L.R.C.P.,  M.D. and B.S.
degrees from University College Hospital Medical School, London.

Compliance with Section 16(a) of the Exchange Act

          Section 16(a) of the Exchange Act requires Bioenvision's directors and
executive officers,  and persons who own more than 10% of the outstanding equity
securities of Bioenvision,  to file initial reports of beneficial  ownership and
reports of changes in beneficial ownership of equity securities with the SEC and
any national  securities  exchange on which equity securities are listed.  These
persons are required by SEC  regulations to furnish  Bioenvision  with copies of
all Section 16(a) forms they file.

         Based  upon  filings  made  with  the  SEC and  Bioenvision's  records,
Bioenvision  believes  that  certain of its  directors,  executive  officers  or
holders  of more than 10% of the  outstanding  shares of common  stock  have not
filed on a timely  basis the reports  required by Section  16(a) of the Exchange
Act during, or with respect to, the year ended June 30, 2003.

Item 10.  Executive Compensation.

         The following table sets forth information for each of the fiscal years
ended June 30, 2003, 2002 and 2001 concerning the compensation  paid and awarded
to all individuals  serving as (a) our chief executive officer,  (b) each of our
four other most  highly  compensated  executive  officers  (other than our chief
executive officer) at the end of our fiscal year ended June 30, 2003 whose total
annual salary and bonus exceeded  $100,000 for these periods,  and (c) up to two
additional  individuals,  if any, for whom  disclosure  would have been provided
pursuant to (b) except that the individual(s)  were not serving as our executive
officers at the end of our fiscal year ended June 30, 2003:


                                       40
<PAGE>


<TABLE>
<CAPTION>


                                                Summary Compensation Table
                                     Annual compensation                           Long term compensation
                              --------------------------------  -----------------------------------------------------------
                                                                             Awards                      Payouts

                                                       Other
                                                      Annual        Restricted     Securities
                                                       Comp-          Stock        underlying       LTIP        All other
Name &                         Salary                ensation         Awards      options/SARs     payouts     compensation
Principal                      ------                --------         ------      ------------     -------     ------------
Position              Year       $         Bonus $      $               $                             $              $
--------              ----                 ----
<S>                   <C>    <C>         <C>            <C>             <C>       <C>                 <C>            <C>

Christopher B.
Wood (1)              2003    225,000         -
                      2002    225,000         -
                      2001    180,000         -

David P. Luci
(2)                   2003    205,200    57,000(3)
                      2002       -            -
                      2001       -            -

Hugh Griffith
(4)                   2003    180,000    20,000
                      2002       -            -
                      2001       -            -

Stuart Smith (5)      2002    150,000         -
                      2001    150,000         -
                      2000    150,000         -
</TABLE>

--------------------------

(1)    On April 30,  2001,  Dr. Wood was granted  options to purchase  1,500,000
       shares of our common stock.  The options are immediately  exercisable and
       originally  expired on April 30, 2004 but have been extended to April 30,
       2006.  On December  31,  2002,  Dr. Wood was granted  options to purchase
       500,000  shares of our common stock which vest and become  exercisable in
       equal  amounts  on the  first,  second  and  third  anniversaries  of the
       December 31, 2002 grant date.
(2)    On July 22, 2002, Mr. Luci was granted options to purchase 380,000 shares
       of our common stock.  On March 31, 2003, in connection with the execution
       of an  employment  agreement  between  the Company  and Mr.  Luci,  these
       options were cancelled and the Company issued options to purchase 500,000
       shares of common  stock at a  then-current  fair market  value.  Of these
       options,  options to  purchase  170,000  shares of our  common  stock are
       immediately exercisable and, subject to certain circumstances, options to
       purchase  110,000  shares of common stock vest and become  exercisable on
       each of the first,  second and third anniversaries of March 31, 2003, the
       grant date.
(3)    This annual  bonus was  prorated  for the  portion of calendar  year 2002
       within which Mr. Luci was employed by the Company.  The net amount of the
       bonus paid to Mr. Luci after such pro-ration was equal to $25,000.
(4)    On October 23, 2002, Mr. Griffith was granted options to purchase 300,000
       shares of our common stock at a then-current  fair market value. Of these
       options,  options to purchase 100,000 shares of our common stock vest and
       become  exercisable,  subject  to certain  circumstances,  on each of the
       first,  second and third  anniversaries  of October 22,  2002,  the grant
       date.
(5)    On April 30,  2001,  Mr.  Smith was granted  options to purchase  500,000
       shares of our common stock.  The options are immediately  exercisable and
       originally  expired on April 30, 2004 but have been extended to April 30,
       2006.

Stock Options

Our Board of Directors has adopted,  and our stockholders have approved our 2003
Stock Incentive Plan. The plan was adopted to recognize the  contributions  made
by our  employees,  officers,  consultants,  and  directors,  to  provide  those
individuals with additional incentive to devote themselves to our future success
and to improve our ability to attract, retain and motivate individuals upon whom
our growth and financial success depends.

   The key provisions of the plan are as follows:


                                       41
<PAGE>


Eligibility and Administration.

         The  plan  authorizes  the  Board  of  Directors  or  the  compensation
committee (the  "Administrator"),  to (i)select the  participants  who are to be
granted  options,  restricted  shares or performance  units,  (ii)determine  the
number  of  shares  of  Common   Stock  to  be  granted  to  each   participant,
(iii)designate  options,  to the  extent  the  award  consists  of  options,  as
incentive stock options or nonstatutory stock options, (iv)determine the vesting
schedule and performance criteria, if any, for restricted shares and performance
units and (v)determine to what extent the awards may be transferable.  As of the
date hereof,  there are approximately 7 employees who are currently  eligible to
participate  in the  plan  under  the  Company's  policies.  All  directors  and
consultants   are  currently   eligible  to   participate   in  the  plan.   The
Administrator's  interpretations  and  construction  of the plan are  final  and
binding on the Company.

Shares Available for Issuance Under the Plan

         The stock  subject to options  granted under the plan are shares of the
Company's authorized but unissued or reacquired shares of Common Stock. On March
23, 2004,  the closing price of the common stock on the American  Stock Exchange
of the Common Stock was $8.45 per share. There are 3,000,000 shares reserved for
grants of options under the plan. On the same date, there were 22,934,616 shares
of Common Stock outstanding.

Grant, Exercise and other Terms of Awards.

         Options issued under the plan are designated as either  incentive stock
options or  nonstatutory  stock  options.  Incentive  stock  options are options
meeting the  requirements of Section 422 of the Code, and  nonstatutory  options
are options not intended to so qualify.

         The exercise  price of options  granted  under the plan may not be less
than  100% of the fair  market  value of the  Common  Stock of the  Company  (as
defined by the plan) on the date of the grant.  With respect to any  participant
who  owns  stock  representing  more  than  10%  of  the  voting  rights  of the
outstanding  Common Stock of the Company,  the exercise  price of any  incentive
stock  option  granted  must equal at least 110% of the fair market value of the
Common Stock on the grant date, and the maximum term of any such incentive stock
option must not exceed five years.

         Options,  restricted  shares and  performance  units are  evidenced  by
written award  agreements in a form approved by the  Administrator  from time to
time and no award is effective  until the  applicable  award  agreement has been
executed by both  parties  thereto.  Options  granted  under the plan may become
exercisable  in  cumulative  increments  over a period of  months  or years,  or
otherwise,  as determined by the  Administrator.  The purchase  price of options
shall be paid in cash; provided, however, that if the applicable award agreement
so provides,  or the  Administrator,  in its sole discretion  otherwise approves
thereof,  the purchase price may be paid in shares of Common Stock having a fair
market  value  on the  exercise  date  equal  to the  exercise  price  or in any
combination  of cash and shares of Common Stock,  as long as the sum of the cash
so paid and the fair  market  value of the  shares  so  surrendered  equals  the
aggregate  purchase price. In addition,  the  Administrator  may permit deferred
compensation  elections by certain directors and executive  officers.  The award
agreement  evidencing the restricted  shares and/or  performance units shall set
forth the terms  upon  which  the  Common  Stock  subject  to any  awards or the
achievement of any cash bonus may be earned.

         No options granted under the plan are exercisable  after the expiration
of ten years (or less in the discretion of the  Administrator)  from the date of
the grant,  and no incentive  stock options granted under the Amended Award Plan
to a  participant  who owns more than ten percent of the total  combined  voting
power of all classes of  outstanding  stock of the Company shall be  exercisable
after  the  expiration  of  five  years  (or  less,  in  the  discretion  of the
Administrator)  from the date of the grant.  The aggregate fair market value (as
of the  respective  date or  dates of  grant)  of the  shares  of  Common  Stock
underlying the incentive  stock options that are  exercisable for the first time
by a  participant  during any calendar year under the plan and all other similar
plans maintained by the Company may not exceed $100,000. If a participant ceases
to be an employee  of the  Company  for any reason  other than his or her death,
Disability  or  Retirement  (as  such  terms  are  defined  in the  plan),  such
participant shall have the right, subject to certain  restrictions,  to exercise
that option at any time within  ninety days (or less,  in the  discretion of the
Administrator) after cessation of employment,  but, except as otherwise provided
in the  applicable  award  agreement,  only to the extent  that,  at the date of
cessation  of  employee,  the  participant's  right to exercise  such option had
vested and had not been previously  exercised.  The  Administrator,  in its sole
discretion,  may provide  that the option shall cease to be  exercisable  on the
date of such  cessation if such cessation  arises by reason of  termination  for


                                       42
<PAGE>


Cause (as such term is defined in the Amended Award Plan) or if the  participant
becomes an employee,  director or consultant of an entity that the Administrator
determines is in direct competition with the Company.

         In the event a  participant  dies  before  such  participant  has fully
exercised his or her option, then the option may be exercised at any time within
twelve months after the participant's  death by the executor or administrator of
his or her estate or by any person who has acquired the option directly from the
participant by bequest or inheritance,  but except as otherwise  provided on the
applicable award  agreement,  only to the extent that, at the date of death, the
participant's  right to exercise such option had vested pursuant to the terms of
the  applicable  award  agreement  and  had not  been  forfeited  or  previously
exercised.

         In the event a  participant  ceases to be an employee of the Company by
reason of Disability,  such participant shall have the right, subject to certain
restrictions,  to exercise the option at any time within  twelve months (or such
shorter  period as the  Administrator  may  determine)  after such  cessation of
employment, but only to the extent that, at the date of cessation of employment,
the  participant's  right to exercise such option had previously vested pursuant
to the terms of the  applicable  award  agreement  and had not  previously  been
exercised.

         In the event a  participant  ceases to be an employee of the Company by
reason of Retirement,  such participant shall have the right, subject to certain
restrictions,  to exercise  the option at any time  within  ninety days (or such
longer or shorter period as the  Administrator may determine) after cessation of
employment, but only to the extent that, at the date of cessation of employment,
the participant's right to exercise such option had vested pursuant to the terms
of the applicable award agreement and had not previously been exercised.

Adjustment of Awards Upon Certain Events.

         If the Company merges with another  corporation  and the Company is the
surviving  corporation  in such  merger  and under the terms of such  merger the
shares  of Common  Stock  outstanding  immediately  prior to the  merger  remain
outstanding and unchanged, each outstanding award shall continue to apply to the
shares  subject  thereto  and will  also  pertain  and  apply to any  additional
securities and other property, if any, to which a holder of the number of shares
subject to the option would have been entitled as a result of the merger.

         In the event all or substantially  all of the assets of the Company are
sold, the Company  engages in a merger where the Company does not survive or the
Company is consolidated with another corporation, each participant shall receive
immediately  before the  effective  date of such sale,  merger or  consolidation
restricted  shares  and  the  value  of  any  performance  units  to  which  the
participant  is then entitled  (regardless  of any vesting  condition)  and each
outstanding  option  will  become  exercisable  (without  regard to the  vesting
provisions  thereof)  for a period of at least 30 days ending five days prior to
the  effective  date of the  transaction.  Notwithstanding  the  foregoing,  the
surviving corporation may, in its sole discretion, (i) (a) grant to participants
with  options,  options to purchase  shares of the  surviving  corporation  upon
substantially  the same terms as the options  granted under the plan, (b) tender
to all participants with restricted shares, an award of restricted shares of the
surviving  or acquiring  corporation,  and (c) tender to all  participants  with
performance  units, an award of performance  units of the surviving or acquiring
corporation,  or (ii) (a) permit  participants with restricted shares to receive
unrestricted  shares immediately prior to the effective date of any transaction,
(b) permit  participants  with performance units to receive cash with respect to
the value of any performance units immediately  before the effective date of the
transaction and (c) provide  participants  with options the choice of exercising
the  option  prior  to  the  consummation  of the  transaction  or  receiving  a
replacement option.

         Notwithstanding  anything  to the  contrary  and  except  as  otherwise
expressly  provided in the applicable  award  agreement,  the vesting or similar
installment  provisions  relating to the exercisability of any award,  option or
replacement  option  tendered as  described in the  previous  sentence  shall be
accelerated,  and the participant  with restricted  shares or performance  units
shall become  fully  vested,  and the  participant  with options  shall have the
right, for a period of at least 30 days, to exercise such options; provided that
such accelerations of vesting and  exercisability  shall occur only in the event
that the  participant's  employment  with or  services  for the  Company  should
terminate  within two years  following  a Change of Control  (as  defined in the
plan),  unless such  employment  or services are  terminated  by the Company for
Cause (as defined in the plan) or by the  participant  voluntarily  without Good
Reason (as defined in the plan),  or such  employment or services are terminated
due  to  the  death  or  Disability  of  the  participant.  Notwithstanding  the
foregoing,  no incentive stock option shall become  exercisable  pursuant to the
foregoing  without the  participant's  consent,  if the result would be to cause
such option not to be treated as an incentive stock option.


                                       43
<PAGE>


         The number of shares of Common Stock covered by the plan, the number of
shares of Common Stock covered by each outstanding option,  restricted share and
performance unit and the exercise price of any options shall be  proportionately
adjusted for any  increase or decrease in the number of issued  shares of Common
Stock  resulting from a subdivision or  consolidation  of such shares or a stock
split or the payment of a stock dividend (but only of Common Stock) or any other
increase or decrease in the number of issued shares effected  without receipt of
consideration by the Company.

Transfer of Awards.

         Unless an award is designated  transferable by the  Administrator  upon
grant, during the lifetime of the participant who has been granted an award, the
award shall be shall not be  assignable  or  transferable.  No  incentive  stock
option may be  designated  as  transferable.  In the event of the  participant's
death, any nontransferable award shall be transferable by the participant's will
or the laws of descent and distribution.

Amendment and Termination.

         The plan will  continue  in  effect  until  terminated  by the Board of
Directors or until  expiration  of the plan on November 17, 2013.  The Board may
suspend or discontinue the plan or revise or amend it.

         The following table sets forth information concerning option/SAR grants
in our fiscal  year ended June 30,  2003 to all  individuals  serving as (a) our
chief  executive  officer,  (b) each of our four other most  highly  compensated
executive  officers (other than our chief  executive  officer) at the end of our
fiscal  year ended June 30, 2003 whose total  annual  salary and bonus  exceeded
$100,000 for these periods,  and (c) up to two additional  individuals,  if any,
for whom  disclosure  would have been  provided  pursuant to (b) except that the
individual(s)  were not  serving  as our  executive  officers  at the end of our
fiscal year ended June 30, 2003:

<TABLE>
<CAPTION>


----------------------------------------------------------------------------------------------------------------------------

                                           Option/SAR Grants in Last Fiscal Year
                                                     Individual Grants
----------------------------------------------------------------------------------------------------------------------------

Name                      Number of securities     Percent  of  total       Exercise or base price    Expiration  Date
                          underlying               options/SARs granted     ($/Share)
                          options/SARs granted     to employees in fiscal
                          (#)                      year
----------------------------------------------------------------------------------------------------------------------------
<S>                       <C>                      <C>                      <C>                       <C>

Christopher B. Wood       500,000                  35.84%                   $1.45                     12/31/12

----------------------------------------------------------------------------------------------------------------------------

David P. Luci             500,000                  35.84%                   $.74                      3/31/13

----------------------------------------------------------------------------------------------------------------------------

Hugh Griffith             300,000                  21.51%                   $1.45                     10/22/12

----------------------------------------------------------------------------------------------------------------------------

All Executive             1,300,000                93.19%                   n/a                       n/a
Officers
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Employment Agreements

         We  have  has  entered  into  employment  agreements  with  each of our
principal  executive  officers.  Pursuant  to these  agreements,  our  executive
officers  agree to devote all or a  substantial  portion of their  business  and
professional time efforts to our business as executive officers.  The employment
agreements provide for certain compensation packages,  which include bonuses and
other incentive compensation.  The agreements also contain covenants restricting
the employees from competing with us and our business and prohibiting  them from
disclosing confidential information about us and our business.


                                       44
<PAGE>


         On September  1, 1999,  we entered into an  employment  agreement  with
Christopher  B.  Wood,  M.D.  under  which he serves as our  Chairman  and Chief
Executive  Officer.  The initial term of Dr. Wood's employment  agreement is two
years with automatic  one-year  extensions  thereafter unless either party gives
written  notice to the  contrary.  On December 31,  2002,  we entered into a new
employment  agreement  with Dr.  Wood,  under which he continues to serve as our
Chairman and Chief Executive Officer. Under this contract, the term is one year,
with  automatic  one-year  extensions  thereafter  unless either party  provides
written notice to the contrary. Dr. Wood's new employment agreement provides for
an  initial  base  salary of  $225,000,  a bonus as  determined  by the Board of
Directors,  health  insurance  and other  benefits  currently  or in the  future
provided to key employees of the Company. If Dr. Wood's employment is terminated
other than for cause or if he resigns  for good reason or if a change of control
occurs,  he will  receive  a lump sum  payment  in an  amount  equal to his then
current  annual  base  salary  and any and all  unvested  options  will vest and
immediately become exercisable.

         On January 1, 2000, we entered into an employment agreement with Stuart
Smith under which he serves as our Senior Vice  President.  The initial  term of
Mr.  Smith's  employment   agreement  is  two  years,  with  automatic  one-year
extensions  thereafter unless either party gives written notice to the contrary.
Mr. Smith's agreement  provides for an initial base salary of $150,000,  a bonus
as determined by the board of directors,  life  insurance  benefits equal to his
annual salary,  health  insurance and other benefits  currently or in the future
provided to our key  employees.  On September 30, 2002,  Mr. Smith resigned from
his position as Senior Vice President of the Company;  his employment  agreement
was terminated and the Company agreed to issue shares of its common stock to Mr.
Smith at the then current fair market value in  satisfaction  of all outstanding
obligations of the Company to Mr. Smith pursuant to the employment agreement.

         On March 31, 2003, we entered into an employment  agreement  with David
P. Luci, pursuant to which he serves as our Director of Finance, General Counsel
and Corporate Secretary.  The initial term of Mr. Luci's employment agreement is
one-year,  with automatic  one-year  extensions  thereafter  unless either party
provides written notice to the contrary.  If Mr. Luci's employment is terminated
other than for cause or if he resigns  for good reason or if a change of control
occurs,  he will receive a lump sum payment in an amount equal to 1.5 multiplied
by the sum of (i) his then current annual base salary plus (ii) his then average
annual bonus for the preceding  two years and any and all unvested  options will
vest and immediately become exercisable.

Director Compensation

         Our policy is that  non-management  directors are entitled to receive a
director's  fee of $1,000 per meeting for attendance at meetings of the board of
directors,  and are reimbursed for actual  expenses  incurred in respect of such
attendance.  We do not separately compensate employees for serving as directors.
We do not provide additional compensation for committee participation or special
assignments of the board of directors.


Item 11.  Security  Ownership of Certain  Beneficial  Owners and  Management and
Related Stockholder Matters.

         The  following  table  sets forth  certain  information  regarding  the
beneficial  ownership of common  stock,  as of September  15, 2003,  by (i) each
person whom we know to  beneficially  own 5% or more of the common  stock,  (ii)
each of our  directors,  (iii) each person  listed on the  Summary  Compensation
Table set forth under "Executive Compensation" and (iv) all of our directors and
executive  officers.  The number of shares of common stock beneficially owned by
each  stockholder  is determined in accordance  with the rules of the Commission
and does not necessarily  indicate  beneficial  ownership for any other purpose.
Under these rules,  beneficial  ownership  includes those shares of common stock
over which the stockholder  exercises sole or shared voting or investment power.
The  percentage  ownership  of  the  common  stock,  however,  is  based  on the
assumption,  expressly  required by the rules of the  Commission,  that only the
person or entity whose  ownership is being  reported has  converted or exercised
common stock equivalents into shares of common stock; that is, shares underlying
common stock equivalents are not included in calculations in the table below for
any other purpose, including for the purpose of calculating the number of shares
outstanding  generally.  The table  below does not  reflect the right of ILEX to
purchase from us $1.0 million of our common stock at the then applicable  market
price within 30 days of the  completion  of the Phase II trial for  Clofarabine,
and an additional $2.0 million of our common stock at the then applicable market
price within 30 days of submittal to the FDA of the NDA for Clofarabine.


                                       45
<PAGE>


<TABLE>
<CAPTION>


                                                               BENEFICIAL          CURRENT
                                                              OWNERSHIP OF      PERCENTAGE OF
NAME                                                             STOCK            CLASS (1)
<S>                                                             <C>                   <C>

Perseus-Soros Biopharmaceutical
Fund, LP (2)
888 Seventh Avenue, 29th Floor
New York, New York 10106.............................           9,000,000             34.07%

OrbiMed Advisors Inc. (3)
767 Third Avenue, 30th Floor
New York, New York 10017.............................           3,000,000             14.69%

Merlin Biomed Private Equity Fund LP (4)
230 Park Avenue, Suite 928
New York, New York 10169.............................           1,000,002              5.43%

DWS Investment GmbH (5)
Gruneburgweg M3-M5
60323 Frankfurt
Germany..............................................           1,299,999              6.95%

SCO Capital Partners LLC (6)
1285 Avenue of the Americas, 35th Floor
New York, New York 10019.............................           7,409,946             37.60%

Kevin Leech (7)
The Old Chapel
Sacre Couer
Rouge Boullion
St Helier
Jersey, Channel Islands..............................           1,900,000             10.60%

Lifescience Ventures Limited (8)
Suite F8
International Commercial Centre
Gibraltar............................................             887,500              5.10%

Estate of David Chester (9)..........................             887,500              5.10%

Bioaccelerate, Inc. (10)
PO Box 3175
Road Town
Tortolla
British Virgin Islands...............................           2,181,816             11.56%

Christopher B. Wood, M.D. (11)
c/o Bioenvision, Inc.
509 Madison Avenue, Suite 404
New York, New York 10022.............................           4,457,342             22.96%

Stuart Smith (12)
c/o Bioenvision, Inc.
509 Madison Avenue, Suite 404
New York, New York 10022.............................             700,000              3.90%

David P. Luci (13)
c/o Bioenvision, Inc.
509 Madison Avenue, Suite 404                                     170,000                  *
New York, New York 10022...........................

Hugh Griffith
c/o Bioenvision, Inc.
509 Madison Avenue, Suite 404
</TABLE>


                                       46
<PAGE>


<TABLE>
<CAPTION>

                                                               BENEFICIAL          CURRENT
                                                              OWNERSHIP OF      PERCENTAGE OF
NAME                                                             STOCK            CLASS (1)
<S>                                                             <C>                   <C>

New York, New York 10022
                                                                        0                  *
Thomas Scott Nelson (14)
c/o Bioenvision, Inc.
509 Madison Avenue, Suite 404
New York, New York 10022.............................             287,523              1.63%

Jeffrey B. Davis (15)
1285 Avenue of the Americas, 35th Floor
New York, New York  10019............................             749,243              4.24%

Steven A. Elms
888 Seventh Avenue, 29th Floor
New York, New York 10106.............................                   0                  *

Andrew N. Schiff, M.D.
888 Seventh Avenue, 29th Floor
New York, New York 10106.............................                   0                  *

All Executive Officers and Directors as a group (six
persons) (16)........................................           6,364,108             30.99%
</TABLE>

----------------

* Represents holdings of less than one percent (1%).

(1)  Based on a total of 17,417,739 shares of common stock outstanding as of
     September 15, 2002.

(2)  Includes 3,000,000 shares of Series A Preferred Stock currently convertible
     into 6,000,000 shares of common stock at a conversion price of $1.50 and a
     warrant to purchase 3,000,000 shares of common stock exercisable at $2.00
     per share for five years from May 8, 2002. Based upon information contained
     in its report on Schedule 13D filed with the Commission on May 20, 2002,
     Perseus-Soros BioPharmaceutical Fund, L.P. reported that Perseus-Soros
     BioPharmaceutical Fund, L.P. and Perseus-Soros Partners may be deemed to
     have sole power to direct the voting and disposition of the 9,000,000
     shares of common stock. By virtue of the relationships between and among
     Perseus-Soros BioPharmaceutical Fund, L.P., Perseus-Soros Partners, LLC,
     Perseus BioTech Fund Partners, LLC, SFM Participation, L.P., SFM AH, Inc.,
     Frank H. Pearl, George Soros, Soros Fund Management LLC, Perseus EC, LLC,
     Perseuspur, LLC, each of such Perseus entities, other than Perseus-Soros
     BioPharmaceutical Fund, L.P. and Perseus-Soros Partners, may be deemed to
     share the power to direct the voting and disposition of the 9,000,000
     shares of common stock.

(3)  Includes 669,964 shares of Series A Preferred Stock currently convertible
     into 1,339,928 shares of common stock at a conversion price of $1.50 and a
     warrant to purchase 669,964 shares of common stock exercisable at $2.00 per
     share for five years from May 16, 2002, both of which are held by Caduceus
     Private Investments, LP; 13,945 shares of Series A Preferred Stock
     currently convertible into 27,980 shares of common stock at a conversion
     price of $1.50 and a warrant to purchase 13,945 shares of common stock
     exercisable at $2.00 per share for five years from May 16, 2002, both of
     which are held by OrbiMed Associates LLC; and 316,091 shares of Series A
     Preferred Stock currently convertible into 632,182 shares of common stock
     at a conversion price of $1.50 and a warrant to purchase 316,091 shares of
     common stock exercisable at $2.00 per share for five years from May 16,
     2002, both of which are held by PW Juniper Crossover Fund, L.L.C. Based
     upon information contained in its report on Schedule 13G filed with the
     Commission on June 21, 2002, OrbiMed Advisors Inc., OrbiMed Advisors LLC,
     OrbiMed Capital LLC and Samuel D. Isaly reported that they share the power
     to direct the voting and disposition of the 3,000,000 shares of common
     stock.

(4)  Includes 333,334 shares of Series A Preferred Stock currently convertible
     into 666,668 shares of common stock at a conversion price of $1.50 and a
     warrant to purchase 333,334 shares of common stock exercisable at $2.00 per
     share for five years from May 8, 2002. Based upon information contained in
     its report on Schedule 13G filed with the Commission on June 28, 2002,
     Merlin BioMed Private Equity Fund, L.P. reported that it shares the power
     to direct the voting and disposition of the 1,000,002 shares of common
     stock with Merlin


                                       47
<PAGE>


     BioMed Private Equity, LLC, its general partner and Dominique Semon, who is
     the sole managing member of the general partner.

(5)  Includes 433,333 shares of Series A Preferred Stock currently convertible
     into 866,666 shares of common stock at a conversion price of $1.50 and a
     warrant to purchase 433,333 shares of common stock exercisable at $2.00 per
     share for five years from May 14, 2002. Deutsche Bank AG has sole voting
     and investment power with respect to these shares.

(6)  Includes a warrant to purchase 1,200,000 shares of common stock exercisable
     at $1.25 per share for five years from November 16, 2001; a warrant to
     purchase 688,333 shares of common stock exercisable at $1.50 per share for
     five years from May 8, 2002; a warrant to purchase 100,000 shares of common
     stock exercisable at $1.25 per share Financial Group LLC for five years
     from November 16, 2001 held by SCO; a warrant to purchase 70,000 shares of
     common stock exercisable at $1.50 per share for five years from May 8, 2002
     held by SCO Financial Group LLC; a warrant to purchase 150,000 shares of
     common stock exercisable at $1.25 per share for five years from November
     16, 2001 held by the Sophie C. Rouhandeh Trust; and a warrant to purchase
     150,000 shares of common stock exercisable at $1.25 per share for five
     years from November 16, 2001 held by the Chloe H. Rouhandeh Trust. Steven
     H. Rouhandeh, in his capacity as President of SCO Capital Partners LLC, has
     investment power and voting power with respect to these shares, but
     disclaims any beneficial ownership thereof.

(7)  These shares are owned of record by Phoenix Ventures Limited, a Channel
     Islands (Jersey) corporation, which, to our knowledge, is wholly-owned by
     Kevin Leech. These shares include 500,000 options which are exercisable at
     $1.25 per share for the benefit of Phoenix.

(8)  Lifescience Ventures is a Gibraltar limited company owned of record by a
     Gibraltar trust. Lee J. Cole, in his capacity as the trustee of the trust,
     has investment power and voting power with respect to these shares, but
     disclaims any beneficial ownership thereof.

(9)  These shares are owned of record by General Capital Limited, a Bermuda
     corporation which, to our knowledge, is wholly-owned by the Estate of David
     Chester, a private investor.

(10) Bioaccelerate, Inc. is a BVI corporation, owned of record by several
     private investors and includes options to acquire 1,454,544 shares of the
     common stock which are exercisable at $1.25 per share for five years from
     April 30, 2001. Barbara Platts, in her capacity as Managing Director of
     Bioaccelerate, Inc., has investment power and voting power with respect to
     these shares, but disclaims any beneficial ownership thereof.

(11) Includes 318,750 shares of common stock owned by Julie Wood, Dr. Wood's
     spouse, as to which Dr. Wood disclaims any beneficial interest, and
     1,500,000 options which are exercisable at $1.25 for five years from April
     30, 2001. Also includes 500,000 options which are exercisable at $1.45 from
     December 31, 2002.

(12) Includes options to acquire 500,000 shares of the common stock which are
     exercisable at $1.25 per share for five years from April 30, 2001.

(13) Includes options to acquire 170,000 shares of common stock which are
     exercisable at $0.735 per share from March 31, 2003.

(14) Includes options to acquire 200,000 shares of the common stock which are
     exercisable at $1.25 per share for five years from April 30, 2001.

(15) Includes a warrant to purchase 250,000 shares of common stock exercisable
     at $1.50 per share for five years from May 8, 2002. Mr. Davis is the
     President of SCO Financial Group LLC, an affiliate of SCO Capital Partners
     LLC. Mr. Davis disclaims beneficial ownership of all shares of common stock
     deemed beneficially owned by SCO Capital Partners LLC.

(16) Includes shares of common stock owned by Christopher B. Wood, Stuart Smith,
     Thomas Nelson, Jeffrey Davis, Steven A. Elms and Andrew Schiff, M.D. Also
     includes (a) 318,750 shares of common stock owned by Julie Wood, Dr. Wood's
     spouse, as to which Dr. Wood disclaims any beneficial interest, (b)
     Christopher Wood's options to acquire 1,500,000 shares of common stock, (c)
     Stuart Smith's options to acquire 500,000 shares of common stock, (d) David
     Luci's options to acquire 50,000 shares of common stock, (e) Thomas


                                       48
<PAGE>


     Nelson's options to acquire 200,000 shares of common stock and (e) Jeffrey
     B. Davis' warrant to purchase 250,000 shares of common stock.

Item 12.  Certain Relationships and Related Transactions.

         In August 2001  Bioenvision  issued 208,333 shares at the rate of $1.25
per share as follows:  Christopher B. Wood, 98,684 shares; Thomas Nelson, 27,412
shares; and Stuart Smith, 82,237 shares.

         In August 2001, we obtained a $1 million line of credit facility, which
expires in September 2002, from Jano Holdings Limited,  one of our shareholders.
This credit facility was terminated in May 2002.

         In October 2001, we issued  134,035  shares of common stock to officers
as payment for salaries accrued to September 30, 2001.


         On November 16, 2001,  we entered  into an  engagement  letter with SCO
Financial Group,  pursuant to which SCO would act as our financial  advisor.  In
connection with the engagement  letter,  we issued a warrant to purchase 100,000
shares of common  stock at an  exercise  price of $1.25 per  share,  subject  to
certain anti-dilution adjustments.  The warrants expire five years from the date
of  issuance.  Pursuant  to this  engagement  letter,  among other  things,  SCO
performs investor  relations services for the Company and earns a monthly fee of
$9,000 per month in connection therewith.


         In  connection  with securing a credit  facility  with SCO Capital,  we
issued  warrants to purchase  1,500,000  shares of our common  stock at a strike
price of $1.25 per  share,  subject to certain  anti-dilution  adjustments.  The
warrants  expire five years from the date of issuance.  The credit facility with
SCO Capital was terminated in May 2002.

         On February 5, 2002, we completed the  acquisition  of Pathagon Inc. In
connection  therewith,  on February 1, 2002 we issued 7,000,000 shares of common
stock to the former stockholders of Pathagon Inc.

         In May 2002,  we  completed  a private  placement  pursuant to which we
issued an aggregate of 5,916,666  shares of Series A  convertible  participating
preferred  stock for $3.00 per share and  warrants to purchase an  aggregate  of
5,916,666  shares of common stock. An affiliate of SCO Capital Partners LLC, one
of our  stockholders,  served as financial  advisor to the Company in connection
with this  financing and earned a placement fee of  approximately  $1,200,000 in
connection  therewith.  This affiliate of SCO Capital  Partners LLC continues to
serve as a financial advisor to the Company.




Item 13.  Exhibits, List and Reports on Form 10-KSB.


Exhibit
Number                                               Description
-------                                                 -----------

2.1                      Acquisition Agreement between Registrant and
                         Bioenvision, Inc. dated December 21, 1998 for the
                         acquisition of 7,013,897 shares of Registrant's Common
                         Stock by the stockholders of Bioenvision, Inc. (1)

2.2                      Amended and Restated Agreement and Plan of Merger,
                         dated as of February 1, 2002, by and among Bioenvision,
                         Inc., Bioenvision Acquisition Corp. and Pathagon, Inc.
                         (5)

3.1                      Certificate of Incorporation of Registrant. (2)

3.1(a)                   Amendment to Certificate of Incorporation filed January
                         29, 1999. (3)

3.1(b)                   Certificate of Correction to the Certificate of
                         Incorporation,


                                       49
<PAGE>


                         filed March 15, 2002 (6)

3.1(c)                   Certificate of Amendment to the Certificate of
                         Incorporation, filed April 30, 2002 (6)

3.2                      Amended and Restated By-Laws of the Registrant. (13)

3.2(a)                   Amendment to Bylaws, effective April 30, 2002 (6)

4.1                      Certificate of Designation (6)

4.2                      Form of Warrant (6)

4.3                      Registration Rights Agreement, dated April 2, 2003, by
                         and between Bioenvision, Inc. and RRD International,
                         LLC (14)

4.4                      Warrant, dated April 2, 2003, made by Bioenvision, Inc.
                         in favor of RRD International, LLC (14)

10.1                     Pharmaceutical Development Agreement, dated as of June
                         10, 2003, by and between Bioenvision, Inc. and Ferro
                         Pfanstiehl Laboratories, Inc.

10.2                     Co-Development Agreement between Bioheal, Ltd. and
                         Christopher Wood dated May 19, 1998. (3)

10.3                     Master Services Agreement, dated May 14, 2003, by and
                         between PennDevelopment Pharmaceutical Services Limited
                         and Bioenvision, Inc.

10.4                     Co-Development Agreement between Stegram
                         Pharmaceuticals, Ltd. and Bioenvision, Inc. dated July
                         15, 1998. (3)

10.5                     Co-Development Agreement between Southern Research
                         Institute and Eurobiotech Group, Inc. dated August 31,
                         1998. (3)

10.5(a)                  Agreement to Grant License from Southern Research
                         Institute to Eurobiotech Group, Inc. dated September 1,
                         1998. (3)

10.6                     License and Sub-License Agreement, dated as of May 13,
                         2003, by and between Bioenvision, Inc. and Dechra
                         Pharmaceuticals, plc

10.7                     Employment Agreement between Bioenvision, Inc. and
                         Christopher B. Wood, M.D., dated December 31, 2002 (3)

10.8                     Employment Agreement between Bioenvision, Inc. and
                         David P. Luci, dated March 31, 2003 (14)

10.9                     Securities Purchase Agreement with Bioaccelerate Inc
                         dated March 24, 2000. (4)

10.10                    Engagement Letter Agreement, dated as of November 16,
                         2001, by and between Bioenvision, Inc. and SCO
                         Securities LLC. (7)

10.11                    Security Agreement, dated as of November 16, 2001, by
                         Bioenvision, Inc. in favor of SCO Capital Partners LLC.
                         (7)

10.12                    Commitment Letter, dated November 16, 2001, by and
                         between SCO Capital Partners LLC and Bioenvision, Inc.
                         (7)

10.13                    Senior Secured Grid Note, dated November 16, 2001, by
                         Bioenvision, Inc. in favor of SCO Capital Partners LLC.
                         (7)


                                       50
<PAGE>


10.14                    Registration Rights Agreement, dated as of February 1,
                         2002, by and among Bioenvision, Inc., the former
                         shareholders of Pathagon, Inc. party thereto,
                         Christopher Wood, Bioaccelerate Limited, Jano Holdings
                         Limited and Lifescience Ventures Limited. (8)

10.15                    Stockholders Lock-Up Agreement, dated as of February 1,
                         2002, by and among Bioenvision, Inc., the former
                         shareholders of Pathagon, Inc. party thereto,
                         Chirstopher Wood, Bioaccelerate Limited, Jano Holdings
                         Limited and Lifescience Ventures Limited. (8)

10.16                    Form of Securities Purchase Agreement by and among
                         Bioenvision, Inc. and certain purchasers, dated as of
                         May 7, 2002. (6)

10.17                    Form of Registration Rights Agreement by and among
                         Bioenvision, Inc. and certain purchasers, dated as of
                         May 7, 2002. (6)

10.18                    Exclusive License Agreement by and between Baxter
                         Healthcare Corporation, acting through its Edwards
                         Critical-Care division, and Implemed, dated as of May
                         6, 1997. (12)

10.19                    License Agreement by and between Oklahoma Medical
                         Research Foundation and bridge Therapeutic Products,
                         Inc., dated as of January 1, 1998. (12)

10.20                    Amendment No. 1 to License Agreement by and among
                         Oklahoma Medical Research Foundation, Bioenvision, Inc.
                         and Pathagon, Inc., dated May 7, 2002. (12)

10.21                    Inter-Institutional Agreement between Sloan-Kettering
                         Institute for Cancer Research and Southern Research
                         Institute, dated as of August 31, 1998. (12)

10.22                    License Agreement between University College London and
                         Bioenvision, Inc., dated March 1, 1999. (12)


10.23                    Research Agreement between Stegram Pharmaceuticals
                         Ltd., Queen Mary and Westfield College and Bioenvision,
                         Inc., dated June 8, 1999 (12)

10.24                    Research and License Agreement between Bioenvision,
                         Inc., Velindre NHS Trust and University College Cardiff
                         Consultants, dated as of January 9, 2001. (12)

10.25                    Co-Development Agreement, between Bioenvision, Inc. and
                         ILEX Oncology, Inc., dated March 9, 2001. (12)

10.26                    Amended and Restated Agreement and Plan of Merger,
                         dated as of February 1, 2002, among Bioenvision, Inc.,
                         Bioenvision Acquisition Corp. and Pathagon Inc. (5)

10.27                    Master Services Agreement, dated as of April 2, 2003,
                         by and between Bioenvision, Inc. and RRD International,
                         LLC(14)

16.1                     Letter from Graf Repetti & Co., LLP to the Securities
                         and Exchange Commission, dated September 30, 1999. (9)

16.2                     Letter from Ernst & Young LLP to the Securities and
                         Exchange Commission, dated July 6, 2001. (10)

16.3                     Letter from Ernst & Young LLP to the Securities and
                         Exchange Commission, dated August 16, 2001. (11)


                                       51
<PAGE>


21.1                     Subsidiaries of the registrant (4)

24.1                     Power of Attorney (appears on signature page)

31.1                     Certification of Christopher B. Wood, Chief Executive
                         Officer, as adopted pursuant to Section 302 of the
                         Sarbanes-Oxley Act of 2002.

31.2                     Certification of David P. Luci, Chief Accounting
                         Officer, as adopted pursuant to Section 302 of the
                         Sarbanes-Oxley Act of 2002.

32.1                     Certification of Chief Executive Officer pursuant to 18
                         U.S.C. Section 1350, as adopted pursuant to Section 906
                         of the Sarbanes-Oxley Act of 2002.

32.2                     Certification of Chief Accounting Officer pursuant to
                         18 U.S.C. Section 1350, as adopted pursuant to Section
                         906 of the Sarbanes-Oxley Act of 2002.


-----------------------

(1)   Incorporated by reference and filed as an Exhibit to Registrant's Current
      Report on Form 8-K filed with the SEC on January 12, 1999.

(2)   Incorporated  by  reference  and  filed  as  an  Exhibit  to  Registrant's
      Registration  Statement  on Form 10-12g filed with the SEC on September 3,
      1998.

(3)   Incorporated  by reference  and filed as an Exhibit to  Registrant's  Form
      10-KSB/A filed with the SEC on October 18, 1999.

(4)   Incorporated  by reference  and filed as an Exhibit to  Registrant's  Form
      10-KSB filed with the SEC on November 13, 2000.

(5)   Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K filed with the SEC on April 16, 2002.

(6)   Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on May 28, 2002.

(7)   Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on January 8, 2002.

(8)   Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on February 21, 2002.

(9)   Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on October 1, 1999.

(10)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K/A, filed with the SEC on July 26, 2001.

(11)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on December 6, 2001.

(12)  Incorporated by reference and filed as an Exhibit to Registrant's  Current
      Report on Form 8-K, filed with the SEC on June 24, 2002.

(13)  Incorporated  by  reference  and  filed  as  an  Exhibit  to  Registrant's
      Quarterly Report on Form 10-QSB for the three-month  period ended December
      31, 2002.

(14)  Incorporated  by  reference  and  filed  as  an  Exhibit  to  Registrant's
      Quarterly Report on Form 10-QSB for the three-


                                       52
<PAGE>


      month period ended March 31, 2003.


(b)   Reports  on Form 8-K.  No  Current  Reports  on Form 8-K were filed by the
registrant during the last quarter of the period covered by this report.


                                       53
<PAGE>


Item 14. Controls and Procedures.

(a) Certificate of Chief Executive Officer.

I, Christopher B. Wood, certify that:

1. I have reviewed this annual report on Form 10-KSB/A2 of Bioenvision, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14 for the registrant and have:

a. designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c. presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):

a. all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: May 24, 2004





                /s/ Christopher B. Wood
                -------------------------------
                Christopher B. Wood
                Chairman and Chief Executive Officer
                (Principal Executive Officer)


                                       54
<PAGE>


(b) Certificate of Director of Finance.

I, David P. Luci, certify that:

1. I have reviewed this annual report on Form 10-KSB/A2 of Bioenvision, Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14 for the registrant and have:

a. designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c. presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):

a. all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and

b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.


Date: May 24, 2004





                /s/ David P. Luci
                -------------------------------
                David P. Luci
                Director of Finance, General Counsel and
                Corporate Secretary
                (Principal Accounting Officer)


                                       55
<PAGE>


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>


<S>                                                                                                     <C>
Report of Independent Registered Public Accounting Firm                                                 F-1
Consolidated Balance Sheets as of June 30, 2003 and 2002                                                F-2
Consolidated Statements of Operations for years ended June 30, 2003 and 2002                            F-3
Consolidated  Statements of Stockholders' Equity (Deficit) for years ended June 30,                     F-4
2003 and 2002
Consolidated Statements of Cash Flows for years ended June 30, 2003 and 2002                            F-5
Notes to Consolidated Financial Statements                                                              F-6
</TABLE>


<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders of Bioenvision, Inc. and Subsidiaries

We have audited the  accompanying  consolidated  balance sheets of  Bioenvision,
Inc. and Subsidiaries as of June 30, 2003 and 2002 and the related  consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the consolidated financial position of Bioenvision,  Inc.
and Subsidiaries as of June 30, 2003 and 2002, and the  consolidated  results of
their  operations  and cash flows for the years then  ended in  conformity  with
accounting principles generally accepted in the United States of America.


/s/ Grant Thornton LLP

GRANT THORNTON LLP
New York, New York
September 22, 2003




                                      F-1
<PAGE>


                       Bioenvision, Inc. and Subsidiaries
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                    June 30,                      June 30,
                                                                                      2003                          2002
                                                                                  -------------                 ------------
<S>                                                                               <C>                           <C>

                                  ASSETS
Current assets
    Cash and cash equivalents                                                     $   7,929,686                 $ 12,882,521
    Restricted cash                                                                     290,000
    Deferred costs - current                                                             22,727                      184,091
    Accounts receivable                                                                  25,000                       50,000
    Other assets                                                                        105,976
                                                                                  -------------                 ------------
        Total current assets                                                          8,373,389                   13,116,612

  Property and equipment, net                                                            49,265                          587
  Deferred costs - long term                                                            224,937
  Intangible assets, net                                                             15,779,399                   16,921,792
  Goodwill                                                                            3,902,705                    4,704,100
  Security deposits                                                                      79,111
  Other Long term assets                                                                126,869
                                                                                  -------------                 ------------

        Total assets                                                              $  28,535,675                 $ 34,743,091
                                                                                   ============                 ============

                    LIABILITIES AND STOCKHOLDERS' EQUITY

  Current liabilities
    Accounts payable                                                              $     411,392                 $    434,316
    Accrued expenses                                                                    730,722                    1,513,859
    Accrued dividends payable                                                         1,009,146                      131,328
    Deferred revenue - current                                                          113,636                      368,182
                                                                                  -------------                 ------------

        Total current liabilities                                                     2,264,896                    2,447,685

  Deferred revenue - long term                                                        1,124,685
  Deferred tax liability - non-current                                                6,317,702                    7,656,000
                                                                                  -------------                 ------------

        Total liabilities                                                             9,707,283                   10,103,685
                                                                                  -------------                 ------------

  COMMITMENTS AND CONTINGENCIES
  Stockholders' equity
    Preferred stock - $0.001 par value; 5,920,000 shares authorized
      and 5,916,966 shares issued and outstanding at June 30, 2003 and
      June 30, 2002, respectively (liquidation preference $17,750,898)                    5,917                        5,917

    Common stock - $0.001 par value; 50,000,000 shares authorized
      and 17,122,739 and 16,887,786 shares issued and outstanding at June
      30, 2003 and June 30, 2002, respectively                                           17,123                       16,887
    Additional paid-in capital                                                       47,304,449                   45,491,555
    Accumulated deficit                                                             (28,651,443)                 (21,027,299)
    Accumulated other comprehensive income                                              152,346                      152,346
                                                                                  -------------                 ------------

         Stockholders' equity                                                        18,828,392                   24,639,406
                                                                                  -------------                 ------------

         Total liabilities and stockholders' equity                               $  28,535,675                 $ 34,743,091
                                                                                  =============                 ============
</TABLE>


The accompanying notes are an integral part of these statements.


                                      F-2
<PAGE>


                       Bioenvision, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>


                                                                                                  Year ended
                                                                                                   June 30,
                                                                                       ---------------------------------
                                                                                           2003               2002
                                                                                       ------------       --------------
<S>                                                                                      <C>              <C>

Revenue                                                                                  $  504,857       $    802,965
                                                                                          ---------        -----------

Costs and expenses
    Research and development                                                              1,689,278          1,912,258
    General and administrative                                                            4,567,413          2,127,664
    Depreciation and amortization                                                         1,344,969            579,342
                                                                                         ----------        -----------

         Total costs and expenses                                                         7,601,660          4,619,264
                                                                                         ----------        -----------

Loss from operations                                                                     (7,096,803)        (3,816,299)

Interest income (expense)
    Interest and finance charges                                                           (325,000)        (2,172,682)
    Interest income                                                                         138,574
                                                                                          ---------        -----------

                                                                                           (186,426)        (2,172,682)
                                                                                          ---------        -----------

         Net loss before income tax benefit                                              (7,283,229)        (5,988,981)

Income tax benefit                                                                          536,903            253,000
                                                                                          ---------        -----------

         NET LOSS                                                                        (6,746,326)        (5,735,981)

Cumulative preferred stock dividend                                                        (877,818)          (131,328)
Beneficial conversion preferred stock dividend                                                              (9,351,339)
                                                                                          ---------        -----------

         Net loss available to common stockholders                                      $(7,624,144)      $(15,218,648)
                                                                                         ==========        ===========

Basic and diluted net loss per share of common stock                                    $     (0.45)      $      (1.25)
                                                                                         ==========        ===========

Weighted-average shares used in
    computing basic and diluted
    net loss per share                                                                   16,920,939         12,184,152
                                                                                         ==========        ===========
</TABLE>


The accompanying notes are an integral part of these statements.


                                      F-3
<PAGE>


                       Bioenvision, Inc. and Subsidiaries

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)


<TABLE>
<CAPTION>


                                                                                                        Accumulated      Total
                                                                               Additional                  Other     Stockholders'

                                    Preferred Stock         Common Stock        Paid In     Acccumlated Comprehensive   Equity
                                   ------------------- -----------------------
                                    Shares       $     Shares          $        Capital      Deficit      Income       (Deficit)

<S>                                <C>         <C>      <C>           <C>        <C>           <C>          <C>          <C>
Balance at June 30, 2001                                8,248,919     8,249      3,165,540     (5,808,651)  152,346      (2,482,516)



Net loss for the year                                                                          (5,735,981)               (5,735,981)

Shares issued to employees for
accrued salaries                                        1,048,352     1,048      1,269,864                                1,270,912

Shares issued to consultants for
services                                                390,515         391        168,083                                  168,473

Shares issued in connection with
acquisition of Pathagon                                 7,000,000     7,000     12,484,926                               12,491,926

Shares issued in connection with
licensing agreement -  OMRF                             200,000         200        619,800                                  620,000

Warrants issued in connection
with licensing agreement -  OMRF                                                   425,600                                  425,600

Gross proceeds from issuance of
preferred stock                    5,916,966   5,917                            17,744,081                               17,749,998
Direct costs incurred to issue
preferred stock                                                                 (3,911,906)                              (3,911,906)
Cumulative preferred stock
dividend                                                                                         (131,328)                 (131,328)
Beneficial conversion preferred
stock dividend                                                                   9,351,339     (9,351,339)

Warrants issued in connection
with credit facility                                                             1,872,000                                1,872,000

Warrants issued for services
rendered                                                                         2,302,228                                2,302,228


                                   -------------------------------------------------------------------------------------------------
         Balance at June 30, 2002  5,916,966   5,917    16,887,786   16,888     45,491,554    (21,027,299)  152,346      24,639,405



Net loss for the year                                                                          (6,746,326)               (6,746,326)
Cumulative preferred stock
dividend                                                                                         (877,818)                 (877,818)
Shares issued to consultants for
services                                                234,953         235      1,258,080                                1,258,080
Warrants issued in connection
with services                                                                      182,350                                  182,350

Rrepricing of options                                                              372,465                                  372,465
                                   -------------------------------------------------------------------------------------------------

         Balance at June 30, 2003  5,916,966   $5,917   17,122,739  $17,123   $ 47,304,449   $(28,651,443) $152,346     $18,828,392
                                   =========   ======   ==========  =======   ============   ============  ========     ===========
</TABLE>


The accompanying notes are an integral part of this statement.


                                      F-4
<PAGE>


                       Bioenvision, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                                                               Year ended
                                                                                                June 30,
                                                                               ----------------------------------------
                                                                                     2003                     2002
                                                                               -------------             --------------
<S>                                                                             <C>                      <C>

 Cash flows from operating activities
     Net loss                                                                   $ (6,746,326)            $ (5,735,981)
                                                                                ------------             ------------
     Adjustments to reconcile net loss to net
        cash used in operating activities
          Depreciation and amortization                                            1,344,969                  579,342
          Financing charges - noncash                                                                       2,129,482

          Deferred tax benefit                                                      (536,903)
          Compensation costs - shares and warrants issued to nonemployees          1,440,429
          Compensation costs - re-pricing of options                                 372,465
          Changes in assets and liabilities
              Deferred costs                                                         (63,573)                 337,500
              Deferred revenue                                                       870,139                 (736,364)
              Accounts payable                                                       (22,924)                (350,817)
              Other current assets                                                  (105,976)
              Other long term assets                                                (126,869)
              Accounts receivable                                                     25,000                  (50,000)
              Security deposits                                                      (79,111)
              Officer's salary for equity conversion                                                           52,090
              Other accrued expenses and liabilities                                (782,901)               1,099,636
                                                                                ------------             ------------
                     Net cash used in operating activities                        (4,411,581)              (2,675,113)
                                                                                ------------             ------------

 Cash flows from investing activities
     Purchase of intangible assets                                                  (191,848)                (455,500)
     Capital expenditures                                                            (59,406)
     Restricted cash                                                                (290,000)
                                                                                ------------             ------------
                     Net cash used in investing activities                          (541,254)                (455,500)
                                                                                ------------             ------------

 Cash flows from financing activities
     Bank overdraft                                                                                          (127,241)
     Proceeds from loan financing                                                                             982,943
     Repayment of loan financing                                                                             (982,943)
     Proceeds from issuance of preferred stock                                                             17,749,998
     Costs incurred in connection with offering                                                            (1,609,623)
                                                                                ------------             ------------
                     Net cash provided by financing activities                                             16,013,134
                                                                                ------------             ------------

                     Net (decrease) increase in cash and cash equivalents         (4,952,835)              12,882,521

 Cash and cash equivalents, beginning of year                                     12,882,521                    -
                                                                                ------------             ------------

 Cash and cash equivalents, end of year                                         $  7,929,686              $12,882,521
                                                                                 ===========               ==========

 Supplemental disclosure of cash flow information:
     Cash paid during the year for
         Interest                                                               $    -                    $    43,200

 Supplemental disclosure of noncash investing and financing activities:
     Noncash conversion of officer's salary into common stock                   $    -                    $ 1,270,912
     Noncash conversion of trade payables into common stock                     $    -                    $   168,473
     Noncash issuance of warrants related to SCO financing agreement            $    -                    $ 1,872,000
     Noncash issuance of warrants in connection with preferred stock            $    -                    $ 2,302,283
     Noncash issuance of stock related to Pathagon acquisition                  $    -                    $12,491,926
     Noncash issuance of warrants and shares related to OMRFA                   $    -                    $ 1,145,600
</TABLE>


The accompanying notes are an integral part of these statements.


                                      F-5
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies

Description of business

Bioenvision, Inc. ("Bioenvision" or the "Company") is an emerging
biopharmaceutical company whose primary business focus is the acquisition,
development and distribution of drugs to treat cancer. The Company has a broad
range of products and technologies under development, but its two lead drugs are
Clofarabine and Modrenal(R). Modrenal(R)is approved for marketing in the U.K.
for advanced breast cancer. The Company's plan is to bring Modrenal(R)into the
U.S. to perform further clinical trials and to access the U.S. market. Most of
the Company's other drugs are now in clinical trials in various stages of
development.

The Company was incorporated as Express Finance, Inc. under the laws of the
State of Delaware on August 16,1996, and changed its name to Ascot Group, Inc.
in August 1998 and further to Bioenvision, Inc. in December 1998.

On February 1, 2002, the Company completed the acquisition of Pathagon Inc.
("Pathagon"), a privately held company focused on the development of novel
anti-infective products and technologies. Pathagon's principal products are
OLIGON(R) and methylene blue. Affiliates of SCO Capital Partners LLC, the
Company's financial advisor and consultant, owned 82% of Pathagon prior to the
acquisition. The Company acquired 100% of the outstanding shares of Pathagon in
exchange for 7,000,000 shares of the Company's common stock. The acquisition has
been accounted for as a purchase business combination in accordance with SFAS
141.

Basis of presentation

Prior to the acquisition of Pathagon and the May 2002 private placement in which
the Company raised gross proceeds of $17.7 million (see note 6), the Company
devoted most of its efforts to establishing a new business (raising capital,
research and development, etc.) and had been a development stage enterprise.
Management believes they now have the financial resources to market some of the
Company's late-stage products which can lead to significant revenues from
royalty payments and drug sales. Accordingly, effective June 30, 2002, the
financial statements do not reflect the required disclosure for a Development
Stage Enterprise.

Principles of consolidation

The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Inter-company accounts and
transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with generally accepted
accounting principles of the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates, and such differences may be material to the financial statements.


                                      F-6
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies - continued

Revenue Recognition


In accordance with SEC Staff Accounting Bulletin No. 101, upfront nonrefundable
fees associated with research and development collaboration agreements where the
Company has continuing involvement in the agreement, are recorded as deferred
revenue and recognized over the estimated research and development period using
the straight-line method. If the estimated period is subsequently modified, the
period over which the up-front fee is recognized is modified accordingly on a
prospective basis using the straight-line method. Revenues from the achievement
of research and development milestones, which represent the achievement of a
significant step in the research and development process, are recognized when
and if the milestones are achieved. Continuation of certain contracts and grants
are dependent upon the Company and/or its co-development partners' achieving
specific contractual milestones; however, none of the payments received to date
are refundable regardless of the outcome of the project.

Upfront nonrefundable fees associated with licensing arrangements are recorded
as deferred revenue and recognized over the licensing arrangement using the
straight line method, which approximates the life of the patent.


Research and development

Research and development costs are charged to expense as incurred.

Stock based compensation

At June 30, 2003, the Company has stock based compensation plans which are
described more fully in Note 9. As permitted by SFAS No. 123, "Accounting for
Stock Based Compensation", the Company accounts for stock based compensation
arrangements with employees in accordance with provisions of Accounting
Principles Board ("APB") Opinion No. 25 "Accounting for Stock Issued to
Employees". Compensation expense for stock options issued to employees is based
on the difference on the date of grant, between the fair value of the Company's
stock and the exercise price of the option. Under APB 25, no stock based
employee compensation cost is reflected in reported net loss, as all options
granted to employees have an exercise price equal to the market value of the
underlying common stock at the date of grant. For year ended June 30, 2003, the
Company recognized stock based employee compensation cost of $372,465 as a
result of the March 31, 2003 re-pricing of 380,000 options granted to an
employee pursuant to the terms of his Employment Agreement (see Note 7).

The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS 123 and Emerging Issues Task Force no.
96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling Goods or Services," as
amended by EITF 00-27. Under EITF No. 96-18, where the fair value of the equity
instrument is more reliably measurable than the fair value of services received,
such services will be valued based on the fair value of the equity instrument.
The Company expects to continue applying the provisions of APB 25 for equity
issuances to employees.



                                      F-7
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies - continued


The following table illustrates the effect on net loss and loss per share as if
the fair value based method had been applied to all outstanding and unvested
awards in each period.


<TABLE>
<CAPTION>


                                                                             Year Ended June 30,
                                                                         ---------------------------
                                                                            2003                    2002
                                                                         -----------               -----------
<S>                                                                      <C>                       <C>

Net loss available to common stockholders, as reported                   $(7,624,144)              $(15,218,648)
Add:  Stock based employee compensation expense
     included in reported net loss                                           372,465                    --
Deduct:  Total stock based employee compensation
     expense determined under fair value based method
     for all awards                                                       (1,214,723)                   --
Pro forma net loss available to common stockholders                      $(8,466,402)              $(15,218,648)

Loss per share
     Basic and diluted - as reported                                     $(0.45)                   $(1.25)
      Basic and diluted - pro forma                                      $(0.50)                   $(1.25)
</TABLE>

The fair value of options at the date of grant was established using the
Black-Scholes model with the following assumptions:

                                                       2003
                                                       ----

         Expected life (years)                         4.00

         Risk free interest rate                      3.00%

         Expected volatility                            80%

         Expected dividend yield                       0.00


Income taxes

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" (FAS 109). Under FAS 109,
deferred tax assets and liabilities are determined based on the differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates that will be in effect when the differences
are expected to reverse. The Company records a valuation allowance for certain
temporary differences for which it is more likely than not that it will not
receive future tax benefits.

Net loss per share

Basic net loss per share is computed using the weighted average number of common
shares outstanding during the periods. Diluted net loss per share is computed
using the weighted average number of common shares and potentially dilutive
common shares outstanding during the periods. Options and warrants to purchase
15,749,543 and 13,604,543 shares of common stock have not been included in the
calculation of net loss per share for the years ended June 30, 2003 and 2002,


                                      F-8
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies - continued

respectively, as their effect would have been anti-dilutive.

Foreign currency translation

Through June 30, 2001, the functional currency of the Company was the Pound
Sterling and its reporting currency was the United States dollar. Translation
adjustments arising from differences in exchange rates from these transactions
were reported as accumulated other comprehensive income in stockholders' equity
(deficit). Effective July 1, 2001, the functional and reporting currency is the
United States dollar.

Cash and cash equivalents

The Company considers all highly liquid financial instruments with a maturity of
three months or less when purchased to be cash equivalents. The Company invests
all its funds with a single financial institution which provides for FDIC
insurance of $100,000.

Advertising costs

Costs related to advertising and other promotional expenditures are expensed as
incurred. Advertising costs totaled $144,300 and $4,850, respectively, for the
years ended June 30, 2003 and 2002, respectively.

Deferred costs

Deferred costs represents royalty payments that became due and payable to SRI
upon the Company's execution of the co-development agreement with Ilex Oncology
advance royalties. These costs have been presented together with research and
development costs on the statement of operations for the years ended June 30,
2003 and 2002.

Property and equipment

Property and equipment are stated at cost, net of accumulated depreciation and
amortization. Property and equipment are depreciated on a straight-line basis
over an estimated three-year useful life.

Goodwill and Other Intangible Assets

Goodwill represents the excess of costs over the fair value of identifiable net
assets of Pathagon. Intangible assets include patents and licensing rights
acquired in connection with the acquisition of Pathagon. The Company accounts
for these assets in accordance with Statement of Financial Accounting Standards
("SFAS") No. 142, Goodwill and Other Intangible Assets. Goodwill and intangible
assets acquired in a purchase business combination and determined to have an
indefinite useful life are not amortized, but instead tested for impairment at
least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142
also requires that intangible assets with estimable useful lives be amortized
over their respective estimated useful lives to their estimated residual values,
and reviewed for impairment in accordance with SFAS No. 144, Accounting for
Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). The Company does
not have any intangible assets with an indefinite useful life.

Long-Lived Assets

The Company adopted the provisions of SFAS No. 144 on July 1, 2003. In
accordance with SFAS No. 144, long-lived assets, such as property and equipment
and intangible assets subject to amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. Recoverability of


                                      F-9
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies - continued

assets to be held and used is measured by a comparison of the carrying amount of
an asset to estimated undiscounted future cash flows expected to be generated by
the asset. If the carrying amount of an asset exceeds its estimated future cash
flows, an impairment charge is recognized by the amount by which the carrying
amount of the asset exceeds the fair value of the asset.

Prior to the adoption of SFAS No. 144, the Company accounted for long-lived
assets in accordance with SFAS No. 121, Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of.

Impact of recently issued accounting pronouncements

In July 2002, the FASB Issued Statement 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146"). This Statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Cost
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The
principal difference between this Statement and Issue 94-3 relates to its
requirements for recognition of a liability for a cost associated with an exit
or disposal activity. This Statement requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred. Under Issue 94-3, a liability for an exit cost as defined in Issue
94-3 was recognized at the date of an entity's commitment to an exit plan. The
provisions of this Statement are effective for exit or disposal activities that
are initiated after December 31, 2002. Effective January 1, 2003, the Company
adopted the provisions of SFAS 146 which did not have an impact on the results
of operations or financial position.

In November 2002, the FASB issued Interpretation No. 45, "Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 requires that certain guarantees be
initially recorded at fair value, which is different from the general current
practice of recording a liability only when a loss is probable and reasonably
estimable. FIN 45 also requires a guarantor to make significant new disclosures
for virtually all guarantees. Effective January 1, 2003, the Company adopted the
disclosure requirements under FIN 45 which did not have a material impact on the
results of operations or financial position of the Company.

On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for Stock Based
Compensation Transition and Disclosure" ("SFAS 148"). SFAS 148 amends FASB
Statement No. 123, "Accounting for Stock Based Compensation," to provide
alternative methods of transition to SFAS 123's fair value method of accounting
for stock-based employee compensation. SFAS 148 also amends the disclosure
provisions of SFAS 123 and APB Opinion No. 28, "Interim Financial Reporting," to
require disclosure on the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements. While SFAS 148 does not amend SFAS 123 to require
companies to account for employee stock options using the fair value method, the
disclosure provisions of SFAS 148 are applicable to all companies with
stock-based employee compensation, regardless of whether they account for the
compensation using the fair value method of SFAS 123 or the intrinsic value
method of APB Opinion 25. The Company adopted the required disclosure provisions
of SFAS 148 as described under accounting policy footnote "Stock based
compensation".

In January  2003,  the FASB  issued  interpretation  No. 46,  "Consolidation  of
Variable Interest  Entities--An  Interpretation of ARB No. 51" ("FIN 46"), which
addresses  consolidation  of  variable  interest  entities.  FIN 46 expands  the
criteria for


                                      F-10
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 1 - Organization and significant accounting policies - continued

consideration in determining whether a variable interest entity should be
consolidated by a business entity, and requires existing unconsolidated variable
interest entities (which include, but are not limited to, Special Purpose
Entities, or SPE's) to be consolidated by their primary beneficiaries if the
entities do not effectively disburse risks among parties involved. This
interpretation applies immediately to variable interest entities created after
January 31, 2003 and variable interest entities in which an enterprise obtains
and interest after that date. It applies in the first fiscal year or interim
period beginning after June 15, 2003 to variable interest entities in which an
enterprise holds a variable interest that it acquired before February 1, 2003.
The adoption of FIN 46 is not expected to have a material impact on the results
of operation or financial position of the Company.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity" (SFAS 150").
The objective of SFAS No. 150 is to establish standards for how an issuer
classifies and measures certain financial instruments with characteristics of
both liabilities and equity. SFAS 150 is effective for financial instruments
entered into or modified after May 31, 2003 and for existing financial
instruments after July 1, 2003. The adoption of SFAS 150 is not expected to have
a material impact on the results of operations or financial position of the
Company.

In May 2003, the Emerging Issues Task Force ("EITF") reached a consensus on EITF
Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF
00-21"). EITF 00-21 provides guidance on how to determine when an arrangement
that involves multiple revenue-generating activities or deliverables should be
divided into separate units of accounting for revenue recognition purposes, and
if this division is required, how the arrangement consideration should be
allocated among the separate units of accounting. The guidance in the consensus
is effective for revenue arrangements entered into in quarters beginning after
June 15, 2003. The adoption of EITF 00-21 did not impact the Company's
consolidated financial position or results of operations, but could affect the
timing or pattern of revenue recognition for future collaborative research
and/or license agreements.

NOTE 2 - Acquisition of Pathagon

On February 1, 2002, the Company completed the acquisition of Pathagon. The
acquisition was accounted for as a purchase business combination in accordance
with SFAS 141. The Company issued 7,000,000 shares of common stock to complete
the acquisition, which was valued at $12,600,000 based on the 5-day average
trading price of the stock ($1.80) surrounding November 22, 2001, the day of the
Company's announcement of the agreed upon acquisition. The acquired patents and
licensing rights of OLIGON(R) and methylene blue (collectively referred to as
"Purchased Technologies"), were recorded at their fair market value which was
approximately $17,576,000. The patent and licensing rights acquired are being
amortized over 13 years, which is the estimated remaining contractual life of
these assets. Since the estimated fair value of the Purchased Technologies was
at least equal to the amount paid, the purchase price, net of assumed
liabilities, was allocated to Purchased Technologies. The transaction qualified
as a tax-free merger which resulted in a difference between the tax basis value
of the assets acquired and the fair market value of the patents and licensing
rights. As a result, a deferred tax liability was recorded for approximately
$7,909,000. The purchase price exceeded the fair market value of the net assets
acquired resulting in the recording of Goodwill of $4,704,100. The Company
recorded a charge to goodwill of $801,395 for fiscal year ended June 30, 2003 as
a result of a change in tax rates used to compute the deferred tax liability
arising as a result of this acquisition. Pathagon had no operations other than
holding the patents and licenses acquired. As Pathagon had no operations, its
pro-forma financials would not be meaningful and thus are not presented.

The Company now has the worldwide rights to the use of thiazine dyes, including
methylene blue, for in vitro and in vivos inactivation of pathogens in
biological fluids. Methylene blue is one of only two compounds used commercially
to inactivate pathogens in blood products, and is currently used in many
European countries to inactivate pathogens in fresh frozen plasma. The Company
believes that, as a result of the mechanism of action of its proprietary
technology, its systems also have the potential to inactivate many new pathogens
before they are identified and before tests have been developed to detect their
presence in the blood supply. Because the Company's systems are being designed
to inactivate rather than merely test for pathogens, the Company's systems also
have the potential to reduce the risk of transmission of pathogens that would


                                      F-11
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

Note 2 - Acquisition of Pathagon - continued

remain undetected by testing.

The OLIGON(R) technology is a patented anti-microbial technology that can be
incorporated into the manufacturing process of many implantable devices. The
patented process, involving two dissimilar metals (silver and platinum) creates
an electrochemical reaction that releases silver ions that destroy bacteria,
fungi and other pathogens. The Company intends to commercialize the technology
in partnership with leading medical devices manufacturers.

On May 6, 1997, Baxter Healthcare Corporation acting through its Edwards
Clinical-Care Division ("Edwards") entered into an Exclusive License Agreement
with Implemed, Inc. ("Implemed"), a predecessor in interest to the Pathagon and,
by virtue of the acquisition of Pathagon, a predecessor in interest to the
Company. Pursuant to the terms of the License Agreement, among other things,
Edwards licensed certain intellectual property technology relating to the
manufacture of anti-microbial polymers from Implemed.

On May 7, 2002, the Company executed an amendment to the original license
agreement between Oklahoma Medical Research Foundation ("OMRF") and Bridge
Therapeutic Products, Inc. ("BTP"), a predecessor of Pathagon, relating to the
licensing of methylene blue. Under the terms of the amendment, OMRF agreed to
the assignment of the original license agreement by BTP to Pathagon. Pursuant to
the amendment, the Company paid OMRF $100,000 and issued 200,000 shares of the
Company's common stock and a five-year warrant to purchase an additional 200,000
shares of common stock. The exercise price of the warrant is $2.33 per share,
subject to adjustment. The Company capitalized the costs of approximately
$1,145,600 related to this amendment as an intangible asset and will amortize
this asset over the remaining life of the methylene blue license agreement.


NOTE 3  - Intangible Assets

Intangible assets consist of the following:       June 30, 2003    June 30, 2002

Patents and licensing rights                       $17,644,521      $17,487,548
Less: accumulated amortization                       1,865,122          565,756
                                                   -----------      -----------
                                                   $15,779,399      $16,921,792
                                                   ===========      ===========

Amortization of patents and licensing rights amounted to $1,334,241 and $561,832
for the years ended June 30, 2003 and June 30, 2002, respectively. Amortization
for each of the next five fiscal years will amount to approximately $1,342,000
annually.


NOTE 4 - License and Co-Development Agreements

                                   Clofarabine

We have a license from Southern Research Institute ("SRI"), Birmingham, Alabama,
to develop and market purine nucleoside analogs which, based on third-party
studies conducted to date, may be effective in the treatment of leukemia and
lymphoma. The lead compound of these purine-based nucleosides is known as
Clofarabine. Under the terms of the agreement with SRI, we were granted the
exclusive worldwide license, excluding Japan and Southeast Asia, to make, use
and sell products derived from the technology for a term expiring on the date of
expiration of the last patent covered by the license (subject to earlier
termination under certain circumstances), and to utilize technical information
related to the technology to obtain patent and other proprietary rights to
products developed by us and by SRI from the technology. We plan to develop
Clofarabine initially for the treatment of leukemia and lymphoma and to study
its potential role in treatment of solid tumors.


                                      F-12
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


Note 4 - License and Co-Development Agreements - continued

In August 2003, SRI granted us an irrevocable, exclusive option to make, use and
sell products derived from the technology in Japan and Southeast Asia. We intend
to convert the option to a license upon sourcing an appropriate co-marketing
partner to develop these rights in such territory.

To facilitate the development of Clofarabine, we entered into a co-development
agreement with ILEX Oncology, Inc. ("ILEX") in March 2001. Under the terms of
the co-development agreement, ILEX is required to pay all development costs in
the United States and Canada, and 50% of approved development costs worldwide
outside the U.S. and Canada (excluding Japan and Southeast Asia). ILEX is
responsible for conducting all clinical trials and the filing and prosecution of
applications with applicable regulatory authorities in the United States and
Canada. The Company retains the right to handle those matters in all territories
outside the United States and Canada (excluding Japan and Southeast Asia). The
Company retained the exclusive manufacturing and distribution rights in Europe
and elsewhere worldwide, except for the United States, Canada, Japan and
Southeast Asia. Under the co-development agreement, ILEX will have certain
rights if it performs its development obligations in accordance with that
agreement. The Company would be required to pay ILEX a royalty on sales outside
the U.S., Canada, Japan and Southeast Asia. In turn, ILEX, which would have U.S.
and Canadian distribution rights, would pay the Company a royalty on sales in
the U.S. and Canada. In addition, the Company is entitled to certain milestone
payments. The Company also granted Ilex an option to purchase $1 million of
Common Stock after completion of the pivotal Phase II clinical trial, and ILEX
has an additional option to purchase $2 million of Common Stock after the filing
of a new drug application in the United States for the use of Clofarabine in the
treatment of lymphocytic leukemia. The exercise price per share for each option
is determined by a formula based around the date of exercise. Under the
co-development agreement, ILEX also pays royalties to Southern Research
Institute based on certain milestones. The Company is obligated to milestones
and royalties to Southern Research Institute in respect to Clofarabine.


The Company received a nonrefundable, upfront payment of $1.35 million when they
entered into the agreement with ILEX and is entitled to receive milestone
payments of $2.5 million upon completion of management designed pivotal Phase II
clinical trials of Clofarabine and $5.0 million after submission of a new drug
application with the FDA. The upfront payment was deferred and recognized as
revenues ratably, on a straight-line basis over the related service period,
through December 2002. The Company recognized revenues of approximately $490,000
and $800,000 in connection with the up-front payment of ILEX agreement for the
years ended June 30, 2003 and 2002, respectively.


Deferred costs represents royalty payments that became due and payable to SRI
upon the Company's execution of the co-development agreement with Ilex Oncology.
The Company also defers all royalty payments made to SRI and recognizes these
costs ratably, on a straight-line basis concurrent with revenue that is
recognized in connection with Ilex agreement. Research and Development includes
approximately $207,000 and $368,000 for the years ended June 30, 2003 and 2002,
respectively, related to such charges.


                                      F-13
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


Note 4 - License and Co-Development Agreements - continued

                                   Modrenal(R)

The Company holds an exclusive license, until the expiration of existing and new
patents related to Modrenal(R), to market Modrenal(R) in major international
territories, and an agreement with a United Kingdom company to co-develop
Modrenal(R) for other therapeutic indications. Management believes that
Modrenal(R) currently is manufactured by third-party contractors in accordance
with good manufacturing practices. The Company has no plans to establish its own
manufacturing facility for Modrenal(R), but will continue to use third-party
contractors.

Anti-Estrogen Prostate. We have received Institutional Review Board approval
from the Massachusetts General Hospital for a Phase II study of trilostane for
the treatment of androgen independent prostate cancer. The study will be
conducted by The Dana Faber Cancer Institute and currently is intended to
commence in May 2004.

                            Operational Developments


In June 2003, we entered into a supply agreement with Ferro-Pfanstiehl
Laboratories ("Ferro"), pursuant to which Ferro has agreed to manufacture and
supply 100% of Bioenvisions global requirements for Clofarabine-API. Subject to
certain circumstances, this agreement will expire on the fifth anniversary date
of the first regulatory approval of Clofarabine drug product.

In June 2003, the Company entered into a development agreement with Ferro,
pursuant to which Ferro agreed to perform certain development activities to
scale up, develop, finalize, and supply CTM and GMP supplier qualifications of
the API-Clofarabine. Subject to certain circumstances, this agreement expires
upon the completion of the development program. The development agreement is
milestone based and payments are to be paid upon completion of each milestone.
If Ferro has not completed the development agreement by December 2007, the
development agreement will automatically terminate without further action by
either party. Through June 30, 2003, the Company paid and capitalized $50,000
related to development costs.

In May 2003, we entered into a sub-license agreement with Dechra, pursuant to
which Dechra has been granted a sub-license for all of Bioenvision's rights and
entitlements to market and distribute modrenal in the United States and Canada
solely in connection with animal health applications. Subject to certain
circumstances, this agreement expires upon expiration of the last patent related
to modrenal or the completion of the last royalty set forth in the agreement.
Through June 30, 2003, we have recognized deferred revenue and deferred costs
related to this agreement as described below in this Note 4. The Company
received an upfront non-refundable payment of $1.25 million upon execution of
this agreement and may receive up to an additional $3.75 million upon the
achievement by Dechra of certain milestones set forth in the agreement.

In May 2003, we entered into a master services agreement with
Penn-Pharmaceutical Services Limited ("Penn"), pursuant to which Penn has agreed
to label, package and distribute clofarabine on behalf of and at our request.
The services to be performed by Penn also include regulatory support and the
manufacture , quality control, packaging and distribution of proprietary
medicinal products including clinical trials supplies and samples. Subject to
certain circumstances, the term of this agreement is twelve months and renews
for subsequent twelve month periods unless either party tenders notice of
termination upon no less than three month prior written notice


                                      F-14
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002

NOTE 4 - License and Co-Development Agreements - continued


In April 2003, we entered into an exclusive license agreement with CLL-Pharma
("CLL"), pursuant to which CLL has agreed to perform certain development works
and studies to create a new formulation of modrenal in the form of a soft gel
capsule. CLL intends to use its proprietary MIDDS.-patented technology to
perform this service on behalf of the Company. This new formulation, once in
hand, will allow the Company to apply for necessary authorization, as required
by applicable European health authorities, to sell modrenal throughout Europe.
Through June 30, 2003, the Company paid an advance of $175,000 related to
development services to be provided by CLL over an eighteen month period, which
advance was recorded as a prepaid development cost by the Company.



Note 5 - Income taxes

The components of the income tax benefit are as follows:


                                                June 30,
                                       ---------------------------
                                      2003                      2002
                                  -----------               -----------
Current:
   Federal                        $     --                  $     --
                                   ---------                 ---------
   State                                --                        --
                                   ---------                 ---------

Deferred:
   Federal                         (404,000)                 (160,000)
   State                           (133,000)                  (93,000)
                                   ---------                 ---------
                                   (537,000)                 (253,000)
                                   ---------                 ---------
Total benefit                      $(537,000)                $(253,000)
                                   ==============           ==============


                                      F-15
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


Note 5 - Income taxes - continued

Significant components of the company's deferred tax assets and liability at
June 30 are as follows:


                                                           June 30,
                                                 ---------------------------
                                                     2003            2002
                                                   ---------       ---------

Deferred tax liability
       Acquired intangibles                      $(6,318,000)    $(7,656,000)

Deferred tax assets
        Net operating loss                         5,512,000       3,256,000
        Depreciation                                  11,000          13,000
        Net deferred revenue                         401,000              --
        Other                                         66,000           1,000
                                                   ---------       ---------
Total deferred tax assets                          5,990,000       3,270,000
Valuation allowance for deferred tax assets       (5,990,000)     (3,270,000)
                                                   ---------       ---------
Net deferred tax asset                                    --              --
                                                   ---------       ---------
Net deferred tax liability                        (6,318,000)     (7,656,000)
                                                   =========      ==========

At June 30, 2003, the Company had approximately $13,609,000 of net operating
loss carryforwards for U.S. Federal and state income tax purposes that expire
fiscal year ending 2019, with a tax value of $5,512,000. A full valuation
allowance has been established for the deferred tax assets due to the
uncertainty of the utilization of such deferred tax asset.

The Tax Reform Act of 1986 enacted a complex set of rules (Internal Revenue Code
Section 382) limiting the utilization of NOLs to offset future taxable income
following a corporate "ownership change." Generally, this occurs when there is a
greater than 50 percentage point change in ownership. Accordingly, such change
could limit the amount of NOLs available in a given year, which could ultimately
cause NOLs to expire prior to utilization.

The income tax benefit as recognized differs from the benefit that would be
recognized at the Federal statutory rate on the pre-dividend net loss primarily
due to the valuation allowance established against the net operating loss
deferred tax assets.



                                      F-16
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


NOTE 6 - Stockholders' transactions

            Common Stock and Securities Convertible into Common Stock

In April 2001, in accordance with the terms of the Company's stock option plan,
the Company issued the following options at an exercise price of $1.25 per
share, which immediately vested:

o     a total of 2,200,000 options to employees (Christopher Wood - 1,500,000
      options; Stuart Smith - 500,000 options; and Thomas Scott Nelson - 200,000
      options);
o     a total of 2,654,544 options to certain consultants to the Company; and
o     a total of 500,000 options to Phoenix Ventures, which were issued in
      connection with a credit facility made available to the Company by Glen
      Investments Limited, a Jersey (Cnannel Islands) corporation wholly owned
      by Kevin R. Leech, a U.K. citizen and one of the Company's stockholders,
      which facility was terminated in August 2001.

Originally, the terms of the options were that each option could be exercised
after April 30, 2001 for a period of three years, whereby the options would no
longer be able to be exercised after April 30, 2004 unless otherwise agreed to
with the Company. In July 2002, the Company changed the three-year term to a
five-year term. The extension of the foregoing options to a five-year term
required the Company to record additional compensation, interest and finance
charges and consulting fees and expenses of $422,500 in the quarter ended
September 30, 2002.

In August 2001, the Board of Directors approved the issuance of 208,333 shares
of common stock to its officers and directors in exchange for accrued
compensation at a rate of $1.25 per share. In October 2001, the Board of
Directors approved the issuance of 134,055 shares of commons stock to its
officers and directors in exchange for accrued compensation of approximately
$206,000.

In connection with securing the Facility with SCO Capital in November 2001, the
Company issued warrants to purchase 1,500,000 shares of the Company's common
stock at a strike price of $1.25 per share, subject to certain anti-dilution
adjustments. The warrants expire five years from the date of issuance. The
Company measured the fair market value of the warrants and recorded financing
costs of $1,872,000, which were amortized over the term of the Facility. The
warrants expire five years from the date of issuance. The credit facility with
SCO Capital was terminated in May 2002 at which time the Company received a
payoff letter evidencing such termination.

In December 2001, the Company granted 200,000 shares of common stock to a
consultant to the Company, these shares vesting over an eighteen month period.
Compensation expense of $212,108 and $80,456 were recorded as consulting fees
for the years ended June 30, 2003 and 2002, respectively.

On February 1, 2002, in connection with the Company's acquisition of Pathagon,
the Company issued 7,000,000 shares of its common stock. In connection with the
closing of the acquisition of Pathagon, the Company also entered into
Registration Rights Agreements, with the persons or entities who were
shareholders of Pathagon, pursuant to which the Company is required to register
the offer and resale of the shares of common stock issued in the acquisition.
Affiliates of SCO Capital owned 82% of Pathagon prior to the acquisition.

On May 12, 2002, a majority of the Company's shareholders delivered a written
consent to authorize amendment of the Company's certificate of incorporation,
approved by the Company's Board of Directors, to increase the number of
authorized shares of common stock from 25,000,000 to 50,000,000 and to authorize
the issuance of 10,000,000 shares of the Company's Series A Convertible
Preferred Stock. The shareholder action became effective, and the amendment was
filed and became effective, on April 30, 2002.


                                      F-17
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


Note 6 - Stockholders' transactions - continued

In March 2002, the Company issued 705,984 shares of common stock to its officers
and directors as payment for salaries accrued through June 30, 2001 of $910,000


In June 2002, the Company granted options to an officer of the Company to
purchase 380,000 shares of common stock at an exercise price of $1.95 per share,
which equaled the stock price on the date of the grant. Of this amount, 50,000
options vested on June 28, 2002 and the remaining 330,000 options vest ratably
over a three-year period on each anniversary date. On March 31, 2003 the Company
entered into an Employment Agreement with such officer of the Company, pursuant
to which, among other things, the exercise price for all 380,000 options were
changed to $0.735 per share, which equaled the stock price on that date. In
addition, the Company issued an additional 120,000 options at an exercise price
of $0.735 per share which vested immediately. As a result of the re-pricing of
380,000 options, the Company will re-measure the intrinsic value of these
options at the end of each reporting period and will adjust compensation expense
based on changes in the stock price. Compensation expense recognized as a result
of this re-pricing amounted to $372,465 for the year ended June 30, 2003.


On October 23, 2002, the Company granted options to purchase 300,000 shares of
common stock at an exercise price of $1.45 per share to the Commercial Director
(Europe) of the Company. Of these options, options to purchase 100,000 shares of
common stock vest and become exercisable on each of the first, second and third
anniversary of October 23, 2002, the grant date.

On October 23, 2002, the Company granted options to purchase 50,000 shares of
common stock at an exercise price of $1.45 per share to another employee of the
Company. Of these options, options to purchase 50,000 shares of common stock
vest and become exercisable on each of the first and second anniversary of
October 23, 2002, the grant date.

On December 31, 2002 the Company issued options to purchase 500,000 shares of
common stock at an exercise price equal to $1.45 per share (average of the high
and low bid price on the grant date), to its Chairman and Chief Executive
Officer, Dr. Christopher B. Wood. Of these options, subject to certain
circumstances, options to purchase 166,666 shares of common stock vest on each
of the first, second and third anniversary of the grant date.

On December 31, 2002 the Company issues options to purchase 200,000 shares of
common stock at an exercise price of $2.00 per share to a consultant to the
Company who performs European regulatory services for the Company. Of these
options, options to purchase 66,666 shares of common stock vest on each of the
first, second and third anniversary of the grant date. Compensation expense of
$24,333 was recorded as consulting fees for the year ended June 30, 2003.

On January 9, 2003 the Company issued to an employee of the Company, options to
purchase 20,000 shares of common stock at an exercise price of $1.42 per share,
which equaled the stock price on the date of grant. Of these options, subject to
certain circumstances, options to purchase 10,000 shares of common stock vest
and become exercisable on the first anniversary of the grant date and the
remaining options to purchase 10,000 shares of common stock vest and become
exercisable on the second anniversary of the grant date.

In January 2003, we entered into an agreement with RRD International LLC
("RRD"), pursuant to which RRD serves as the global product development
consultant to the Company in connection with the development of Clofarabine,
Modrenal (TM) and OLIGON and assists with designing and managing our clinical
development program for our products. On April 2, 2003, the Company and RRD
further memorialized their agreement pursuant to a formal Master Services
Agreement and Registration Rights Agreement and, in connection therewith, the
Company issued a Warrant to RRD pursuant to which RRD has the right to acquire
175,000 shares of our common stock at an exercise price of $2.00 per share,
which warrant includes registration rights under certain circumstances.
Compensation expense of $182,350 was recorded as consulting fees for the year
ended June 30, 2003.


                                      F-18
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


NOTE 6 - Stockholders' transactions - continued

                                 Preferred Stock


On May 7, 2002 the Company authorized the issuance and sale of up to 5,920,000
shares of Series A Convertible Participating Preferred Stock, par value $0.001
per share ("Series A Preferred Stock"). Series A Preferred Stock may be
converted into two shares of common stock at an initial conversion price of
$1.50 per share of common stock, subject to adjustment for stock splits, stock
dividends, mergers, issuances of cheap stock and other similar transactions. In
May 2002, the Company consummated a Private Placement of Series A Preferred
Stock and received gross proceeds of $17.7 million (see Note 8). Holders of
Series A Preferred Stock also received, in respect of each share of Series A
Preferred Stock purchased in the May 2002 Private Placement by the Company, one
warrant to purchase one share of the Company's common stock at an initial
exercise price of $2.00, subject to adjustment. The purchasers of Series A
Preferred Stock also received certain registration rights. The preferred stock
generally carries rights to vote with the holders of common stock as one class
on a two-for-one basis. The preferred stock is convertible into the Company's
common stock on a two-for-one basis subject to certain adjustments at the
earlier to occur of (i) at the election of each holder from and after the
issuance date, or (ii) the date at any time after the one year anniversary of
the issuance date upon which both (x) the average of the market price for a
share of common stock for thirty consecutive trading days exceeds $10.00 per
share, subject to certain adjustments, and (y) the average of the trading volume
for the Company's common stock during such period exceeds 150,000, subject to
certain adjustments.


The Company is required to accrue for and pay a dividend of 5%, subject to
certain adjustments, on its cumulative Series A Convertible Participating
Preferred Stock. In the event of a voluntary or involuntary liquidation or
dissolution of the Company, before any distribution of assets shall be made to
the holders of the Company's securities which are junior to the preferred stock
(such as the common stock), holders of the preferred stock shall be paid out of
the assets of the Company legally available for distribution to the Company's
stockholders an amount per share equal to the initial original issue price
($3.00) subject to certain adjustments plus all accrued but unpaid dividends on
such preferred stock.


NOTE 7 - Related party transactions


On November 16, 2001, we entered into an engagement letter with SCO Financial
Group, pursuant to which SCO would act as our financial advisor. In connection
with the engagement letter, we issued a warrant to purchase 100,000 shares of
common stock at an exercise price of $1.25 per share, subject to certain
anti-dilution adjustments. The warrants expire five years from the date of
issuance. The issuance of these shares was capitalized as deferred financing
costs and was amortized over a twelve-month period.


In connection with securing a credit facility with SCO Capital, we issued
warrants to purchase 1,500,000 shares of our common stock at a strike price of
$1.25 per share, subject to certain anti-dilution adjustments. The warrants
expire five years from the date of issuance. The credit facility with SCO
Capital was terminated in May 2002 at which time the Company received a payoff
letter evidencing such termination.

On February 5, 2002, we completed the acquisition of Pathagon Inc. Affiliates of
SCO Capital owned 82% of Pathagon prior to the acquisition. In connection
therewith, on February 1, 2002 we issued 7,000,000 shares of common stock to the
former stockholders of Pathagon Inc.


                                      F-19
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


NOTE 8 - Stock options

The Company adopted its 2001 Stock Option Plan (the "Plan") on April 30, 2001.
The purchase price of stock options under the Plan is determined by the
Compensation Committee of the Board of Directors of the Company (the
"Committee"). The term is fixed by the Committee, but no incentive stock option
is exercisable after 5 years from the date of grant.


In June 2002, the Company granted options to an officer of the Company to
purchase 380,000 shares of common stock at an exercise price of $1.95 per share,
which equaled the stock price on the date of the grant. Of this amount, 50,000
options vested on June 28, 2002 and the remaining 330,000 options vest ratably
over a three-year period on each anniversary date. On March 31, 2003 the Company
entered into an Employment Agreement with such officer of the Company, pursuant
to which, among other things, the exercise price for all 380,000 options were
changed to $0.735 per share, which equaled the stock price on that date. In
addition, the Company issued an additional 120,000 options at an exercise price
of $0.735 per share which vested immediately. As a result of the re-pricing of
380,000 options, the Company will re-measure the intrinsic value of these
options at the end of each reporting period and will record a charge for
compensation expense to the extent the vested portions are in the money.
Compensation expense recognized as a result of this re-pricing amounted to
$372,467 for the year ended June 30, 2003.


On October 23, 2002, the Company granted options to purchase 300,000 shares of
common stock at an exercise price of $1.45 per share to the Commercial Director
(Europe) of the Company. Of these options, options to purchase 100,000 shares of
common stock vest and become exercisable on each of the first, second and third
anniversary of October 23, 2002, the grant date.

On October 23, 2002, the Company granted options to purchase 50,000 shares of
common stock at an exercise price of $1.45 per share to another employee of the
Company. Of these options, options to purchase 50,000 shares of common stock
vest and become exercisable on each of the first and second anniversary of
October 23, 2002, the grant date.

On December 31, 2002 the Company issued options to purchase 500,000 shares of
common stock at an exercise price equal to $1.45 per share (average of the high
and low bid price on the grant date), to its Chairman and Chief Executive
Officer, Dr. Christopher B. Wood. Of these options, subject to certain
circumstances, options to purchase 166,666 shares of common stock vest on each
of the first, second and third anniversary of the grant date.

On December 31, 2002 the Company issues options to purchase 200,000 shares of
common stock at an exercise price of $2.00 per share to a consultant to the
Company who performs European regulatory services for the Company. Of these
options, options to purchase 66,666 shares of common stock vest on each of the
first, second and third anniversary of the grant date. Compensation expense of
$24,333 was recorded as consulting fees for the year ended June 30, 2003.

On January 9, 2003 the Company issued to an employee of the Company, options to
purchase 20,000 shares of common stock at an exercise price of $1.42 per share,
which equaled the stock price on the date of grant. Of these options, subject to
certain circumstances, options to purchase 10,000 shares of common stock vest
and become exercisable on the first anniversary of the grant date and the
remaining options to purchase 10,000 shares of common stock vest and become
exercisable on the second anniversary of the grant date.


                                      F-20
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


NOTE 8 - Stock options - continued

A summary of the Company's stock option activity for options issued to employees
and related information follows:

                                                                  Weighted Avg.
                                               No. of Shares     Exercise  Price
                                               -------------    ----------------
Balance - July 1, 2001                            2,200,000     $         1.25

              Granted during 2002                        -                 -

              Exercised during 2002                      -                 -

              Forfeiture during 2002                     -                 -
                                               -------------

Balance - June 30, 2002                           2,200,000               1.25


              Granted during 2003                 1,370,000               1.19

              Exercised during 2003                     -                  -

              Forfeiture during 2003                    -                  -
                                               ---------------------------------
Balance - June 30, 2003                           3,570,000     $         1.23
                                               =================================

<TABLE>
<CAPTION>


                                                 Stock Options Outstanding
              ---------------------------------------------------------------------------------------------------
                                                                                 Weighted
                                                                                 Average
                                                Weighted                         Remaining        Number of
                                                Average         Number of        Contractual      Stock Options
              Exercise Price Range              Exercise price  Options          Life             Exercisable
              --------------------------------- --------------- ---------------- --------------- ----------------
<S>           <C>                               <C>                  <C>                <C>             <C>

              $0.74                             $    0.74            500,000            9.13            170,000

              $1.25 - $1.45                     $    1.29          3,070,000            8.89          2,210,000
                                                                ----------------                 ----------------
                                                                   3,570,000                          2,380,000
                                                                ================                 ================
</TABLE>


                                      F-21
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


NOTE 9 - Commitments and Contingencies

Leases
------

The Company leases 3,229 square feet of office space for its New York
headquarters under a non-cancellable operating lease expiring on September 30,
2005. Rent expense in 2003, excluding real estate taxes, insurance and repair
costs, was approximately $110,000. At June 30, 2003, total minimum rentals under
operating leases with initial or remaining non-cancellable lease terms of more
than one year were:

                           Year ended June 30,

                                    2004    $193,317

                                    2005     197,873

                                    2006      63,439

                                    2007      10,185

                                    2008      ______

                                            $464,814
                                            ========

The Company is a party to an additional month-to-month lease agreement for its
subsidiary, Bioenvision Ltd. in Edinburgh, Scotland.

Employment Agreements
---------------------

On September 1, 1999, we entered into an employment agreement with Christopher
B. Wood, M.D. under which he serves as our Chairman and Chief Executive Officer.
The initial term of Dr. Wood's employment agreement is two years with automatic
one-year extensions thereafter unless either party gives written notice to the
contrary. On December 31, 2002, we entered into a new employment agreement with
Dr. Wood, under which he continues to serve as our Chairman and Chief Executive
Officer. Under this contract, the term is one year, with automatic one-year
extensions thereafter unless either party provides written notice to the
contrary. Dr. Wood's new employment agreement provides for an initial base
salary of $225,000, a bonus as determined by the Board of Directors, health
insurance and other benefits currently or in the future provided to key
employees of the Company. If Dr. Wood's employment is terminated other than for
cause or if he resigns for good reason or if a change of control occurs, he will
receive a lump sum payment in an amount equal to his then current annual base
salary and any and all unvested options will vest and immediately become
exercisable.

On January 1, 2000, we entered into an employment agreement with Stuart Smith
under which he serves as our Senior Vice President. The initial term of Mr.
Smith's employment agreement is two years, with automatic one-year extensions
thereafter unless either party gives written notice to the contrary. Mr. Smith's
agreement provides for an initial base salary of $150,000, a bonus as determined
by the board of directors, life insurance benefits equal to his annual salary,
health insurance and other benefits currently or in the future provided to our
key employees. On September 30, 2002, Mr. Smith resigned from his position as
Senior Vice President of the Company; his employment agreement was terminated
and the Company agreed to issue shares of its common stock to Mr. Smith at the
then current fair market value in satisfaction of all outstanding obligations of
the Company to Mr. Smith pursuant to the employment agreement.


                                      F-22
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             JUNE 30, 2003 AND 2002


Note 9 - Commitments and Contingencies - continued

On March 31, 2003, we entered into an employment agreement with David P. Luci,
pursuant to which he serves as our Director of Finance, General Counsel and
Corporate Secretary. The initial term of Mr. Luci's employment agreement is
one-year, with automatic one-year extensions thereafter unless either party
provides written notice to the contrary. If Mr. Luci's employment is terminated
other than for cause or if he resigns for good reason or if a change of control
occurs, he will receive a lump sum payment in an amount equal to 1.5 multiplied
by the sum of (i) his then current annual base salary plus (ii) his then average
annual bonus for the preceding two years and any and all unvested options will
vest and immediately become exercisable.

Litigation
----------

On April 1, 2003, RLB Capital, Inc. filed a complaint against the Company in the
Supreme Court of the State of New York (Index No. 601058/03). The Complaint
alleges a breach of contract by the Company and demands judgment against the
Company for $112,500 and warrants to acquire 75,000 shares of the Company's
common stock. The Company submitted its Verified Answer on June 25, 2003 and, in
pertinent part, denied RLB's allegations and asserted counterclaims based on
negligence. The Company believes that the grounds for the complaint are
meritless and intends to defend this matter vigorously. If the Company is not
able to successfully defend this complaint, management does not believe that any
resulting judgment or settlement would have a material adverse effect on the
Company, its financial position or results of operations.


NOTE 10 - Subsequent Events

In August 2003, we entered into an amendment to the co-development agreement
with Stegram Pharmaceuticals plc ("Stegram"), pursuant to which, in pertinent
part, we succeeded to the U.K. marketing rights to modrenal.

In August 2003, SRI granted us an irrevocable, exclusive option to make, use and
sell products derived from the technology in Japan and Southeast Asia. We intend
to convert the option to a license upon sourcing an appropriate co-marketing
partner to develop these rights in such territory.

In September 2003, we entered into a letter agreement with ILEX Oncology, Inc.
pursuant to which we are working with ILEX to co-develop an oral formulation for
clofarabine; the rights and related costs to which we agreed to split equally
with ILEX.


                                      F-23
<PAGE>


                                   SIGNATURES



      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned on May 24,
2004, thereunto duly authorized.



                         BIOENVISION, INC.


                         By  /s/ Christopher B. Wood, M.D.
                             -----------------------------------------------
                             Christopher B. Wood, M.D.
                             Chairman and Chief Executive Officer
                             (Principal Executive Officer)


                         By  /s/ David P. Luci
                             -----------------------------------------------
                             David P. Luci
                             Director of Finance, General Counsel and Corporate
                             Secretary
                             (Principal Financial and Accounting Officer)


      In accordance with the requirements of the Exchange Act, this report has
been signed by the following persons in the capacities and on the dates
indicated.



<TABLE>
<CAPTION>


                  Signature                                        Title                               Date
<S>                                             <C>                                          <C>

/s/ Christopher B. Wood, M.D.                   Chairman and Chief Executive Officer and     May 24, 2004
-----------------------------                   Director
Christopher B. Wood, M.D.                       (Principal Executive Officer)

______*_________                                Director of Finance, General Counsel and     May 24, 2004
David P. Luci                                   Corporate  Secretary
                                                (Principal Financial and Accounting
                                                Officer)

______*_________                                Director                                     May 24, 2004
Thomas S. Nelson, C.A.

_______*__________
Michael Kauffman                                Director                                     May 24, 2004

______*_________                                Director                                     May 24, 2004
Jeffrey B. Davis

______*_________                                Director                                     May 24, 2004
Andrew N. Schiff
                                                Director                                     May 24, 2004
______*_________
Steven A. Elms
</TABLE>


* By: /s/ Christopher B. Wood
      -----------------------
      Christopher B. Wood,
      Attorney-in-Fact