U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                  Form 10-KSB/A

  (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 March 23,
2004, was  $193,797,505.  The number of shares of common stock outstanding as of
March 23, 2004 was 22,934,616.



<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).

o           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.

o           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   leukaemia  (AML)  and  chronic  myeloid
                        leukaemia  in blast  crisis  (CML-BP) of between 55% and
                        64% achieved.

o           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%.

<TABLE>
<CAPTION>


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

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>


                                                                                                                            Growth
                                                                                         1999         2000      2001       2000-01
Company      Brand                   Generic                 Class                       ($m)         ($m)      ($m)          (%)
------------ ----------------------- ----------------------  ------------------------  ---------  ----------  --------  ------------
<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/Ellence   cpirubein               Cytotoxic Antibiotics         206         199        261           31.2
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/ doxorubicin  Cytotoxic Antibiotics          66          82        100           22.0
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>


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


                                                                                                                            Growth
                                                                                         1999         2000      2001       2000-01
Company      Brand                   Generic                 Class                       ($m)         ($m)      ($m)          (%)
------------ ----------------------- ----------------------  ------------------------  ---------  ----------  --------  ------------
<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.  Although all known  material  risks are presented in this annual report,
the  Company  may face  other  risks  that are not  discussed  in the  following
description of its risk factors,  either because we are unaware of such risks or
because we  presently  believe that such risks are  immaterial.  These risks may
also adversely affect our business, financial condition or operating results. If
any of the  events  we have  identified  or those  that we cannot  now  identify
occurs,  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 March 23,
2004, our closing stock price has ranged from a high of $8.40 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  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


                                       15
<PAGE>


substantially  in  response  to  actual  or  rumored  takeover  attempts.  These
provisions may also prevent changes in our management.

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  $4,373,118  for the  six-month  period  ended  December  31, 2003 and
$1,773,811  for the three month period ended  December 31, 2003. At December 31,
2003, we had a deficit  accumulated of  $33,436,828.  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;



                                       16
<PAGE>


            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;

            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  oblihgations,  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 may  fail to  address  risks we face as a  developing  business  which  could
adversely affect the implementation of our business plan.


            We are prone to all of the  risks  inherent  in being a  development
stage  business  venture  including   insurance  risks,  risks  related  to  the
establishment  of new vendor  relationships  to develop  our lead  drugs,  risks
related  to  establishing  a work  force of our own both in the U.K.  and in the
U.S.,  certain  internal  accounting  control risks.  Although we have addressed
these risks in part based on consultation  with our  professional  advisors,  no
assurance can be given that we have  addressed  these risks  appropriately.  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 maintain our product portfolio;



                                       17
<PAGE>



o successfully execute our business and marketing strategy;

o continue to 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 are unable to do so,
our business  prospects,  financial condition and results of operations would be
materially adversely affected.

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.

            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.



                                       18
<PAGE>


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 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


                                       19
<PAGE>


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.

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


                                       20
<PAGE>


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.


            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



                                       21
<PAGE>



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.

            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



                                       22
<PAGE>


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.

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.

If we lose key management or other personnel our business will suffer.

            We are highly  dependent on the principal  members of our scientific
and management  staff. We also rely on consultants  and advisors,  including our
scientific  advisors,  to assist us in formulating  our research and


                                       23
<PAGE>


development strategy. Our success also depends upon retaining key management and
technical  personnel,  as well as our  ability to continue to attract and retain
additional highly-qualified personnel. We face intense competition for personnel
from other companies, government entities and other organizations. We may not be
successful  in retaining  our current  personnel.  We may not be  successful  in
hiring or retaining  qualified  personnel in the future. If we lose the services
of any of our scientific and management staff or key technical personnel,  or if
we fail to  continue  to attract  qualified  personnel,  our ability to acquire,
develop or sell products would be adversely affected.


            Dr.  Wood  constitutes  a key  employee of the Company and he has an
employment  agreement with the Company.  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 our  co-founders  and, as such,  is most familiar with all of
our key  relationships  (for  example,  the  inventors and licensors of our lead
products); all of our material agreements which were negotiated at his direction
and with the science which underlies our lead drugs and ancillary  technologies.
Dr.  Wood  maintains  a position  on the  Clofarabine  management  team which is
responsible for drug development activities. Based on the responsibilities noted
above and the ongoing  clinical trials we are conducting,  losing Dr. Wood could
materially and adversely affect the timing of our development  objectives and/or
the goodwill  created by our  management  with our key business,  scientific and
medical contacts.


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 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).


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.


                                       24
<PAGE>



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.


            In March 2004, we completed a $12,500,000  offering through the sale
of shares of common stock and issuance of common stock  purchase  warrants.  The
common stock purchase warrants are exercisable within five years of the issuance
date. 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.

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.


                                       25
<PAGE>



            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.

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


                                       26
<PAGE>


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
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 September 11, 2003, we had 534 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.



                                       27
<PAGE>



            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  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.



                                       28
<PAGE>


            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
Capital,  pursuant to which SCO Capital 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

            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


                                       29
<PAGE>


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.  We have several products and technologies  under
development, but our two lead drugs are Clofarabine and Modrenal(R).

            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 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



                                       30
<PAGE>



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 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.


                                       31
<PAGE>


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
four  projects  for 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.

            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.



                                       32
<PAGE>



            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.

            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.


                                       33
<PAGE>


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:

<TABLE>
<CAPTION>

                                                Payments Due in
-------------------------------------------------------------------------------------------------------------
                                        Total                2004              2005              2006
-------------------------------------------------------------------------------------------------------------
<S>                                     <C>                  <C>               <C>               <C>
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
-------------------------------------------------------------------------------------------------------------

-------------------------------------------------------------------------------------------------------------
</TABLE>

            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


                                       34
<PAGE>


            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 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.


                                       35
<PAGE>


            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

            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


                                       36
<PAGE>


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  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.


                                       37
<PAGE>


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

            None.


                                       38
<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


                                       39
<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


                                       40
<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:


                                       41
<PAGE>


<TABLE>
<CAPTION>


                                              Summary Compensation Table
                                Annual compensation                             Long term compensation
                          ----------------------------------- --------------------------------------------------------------
                                                                          Awards                        Payouts
                                                     Other
                                                     Annual     Restricted      Securities
                                                     Comp-        Stock         underlying                       All other
Name &                      Salary                  ensation      Awards       options/SARs   LTIP 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

r

                                       42
<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



                                       43
<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.



                                       44
<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>   <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.


                                       45
<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.


                                       46
<PAGE>


<TABLE>
<CAPTION>


NAME                                                       BENEFICIAL OWNERSHIP OF STOCK            CURRENT PERCENTAGE OF 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>


                                       47
<PAGE>


<TABLE>
<CAPTION>


NAME                                                       BENEFICIAL OWNERSHIP OF STOCK            CURRENT PERCENTAGE OF 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


                                       48
<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


                                       49
<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
Capital, 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 Capital
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,


                                       50
<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)


                                       51
<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)


                                       52
<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-


                                       53
<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.


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/A 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: April 1, 2004





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


<PAGE>


(b) Certificate of Director of Finance.

I, David P. Luci, certify that:

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

8. 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;

9. 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;

10. 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;

11. 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

12. 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: April 1, 2004






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


                                       54
<PAGE>


INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>

<S>                                                                                           <C>
Report of Independent Certified Public Accountants                                            F-2
Consolidated Balance Sheets as of June 30, 2003 and 2002                                      F-3
Consolidated Statements of Operations for years ended June 30, 2003 and 2002                  F-4
Consolidated Statements of Stockholders' Equity (Deficit) for years ended June 30,            F-5
2003 and 2002
Consolidated Statements of Cash Flows for years ended June 30, 2003 and 2002                  F-6
Notes to Consolidated Financial Statements                                                    F-7
</TABLE>



<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



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 auditing standards generally accepted
in the  United  States of  America.  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-2
<PAGE>


<TABLE>
<CAPTION>

                       Bioenvision, Inc. and Subsidiaries
                           CONSOLIDATED BALANCE SHEETS

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

The accompanying notes are an integral part of these statements.
</TABLE>

                                       F-3


<PAGE>

<TABLE>
<CAPTION>

                       Bioenvision, Inc. and Subsidiaries

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                    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
                                                            ============     =============


The accompanying notes are an integral part of these statements.
</TABLE>


                                      F-4
<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)
dividend 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-5


<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
     Adjustments to reconcile net loss to net                                $ (6,746,326)              $ (5,735,981)
                                                                             ---------------            -------------
         cash used in operating activities
            Depreciation and amortization                                       1,344,969                    579,342
            Financing charges - noncash                                                                    2,129,482
            Amortization of deferred tax liability                               (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

The accompanying notes are an integral part of these statements.
</TABLE>

                                      F-6

<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-7


<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. If
the estimated period is subsequently modified, the period over which the
up-front fee is recognized is 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. 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, 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-8


<PAGE>


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 usine 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,
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

                                      F-8



<PAGE>

as accumulated other comprehensive income in stockholders' equity (deficit).
Effective July 1, 2001, the functional and reporting currency is the United
States dollar.

                                      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

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 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


                                      F-9


<PAGE>


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.

                                      F-9


<PAGE>


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

Impact of recently issued accounting pronouncements - continued

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 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

                                      F-10


<PAGE>

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

                                      F-10


<PAGE>

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


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 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.

                                      F-11


<PAGE>


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


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.

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.

                                      F-12


<PAGE>


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 concurrent with certain development
activities described in the contract, 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-12


<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)

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-develop trilostane for
other therapeutic indications. Management believes that trilostane currently is
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.

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.

                            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-13


<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 and  capitalized  $175,000  related to
development costs over an eighteen month period.



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-14


<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-15


<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-16

<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 David Luci 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 Mr Luci, 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-17

<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 fo $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 Capital,
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 David Luci 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 Mr Luci, 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-19

<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>
     $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-20


<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-20


<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-21


<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
April 1, 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                       April 1, 2004
-----------------------------    and Officer and Director
Christopher B. Wood, M.D.        (Principal Executive Officer)

         *                       Director of Finance, General Counsel and           April 1, 2004
----------------------           Corporate Secretary
David P. Luci                    (Principal Financial and Accounting Officer)

         *                       Director                                           April 1, 2004
----------------------
Thomas S. Nelson, C.A.


/s/ Michael Kauffman
----------------------           Director                                           April 1, 2004
Michael Kauffman

         *                       Director                                           April 1, 2004
----------------------
Jeffrey B. Davis

         *                       Director                                           April 1, 2004
----------------------
Andrew N. Schiff
                                                                                    April 1, 2004
         *                       Director
----------------------
Steven A. Elms
</TABLE>