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

                                    Form 10-K

   Mark One)
     X     Annual report pursuant to Section 13 or 15(d) of the Securities
    -----  Exchange Act of 1934.

              For the fiscal year ended June 30, 2006.

                                 OR

           Transition report pursuant to Section 13 or 15(d) of the Securities
    -----  Exchange Act of 1934

             For the transition period from ____________ to ____________.

                         Commission File Number: 0-18299

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

                        Delaware                              13-4025857
              ------------------------------                 ------------
             (State or other jurisdiction of                (IRS Employer
             incorporation or organization)                Identification No.)

                 345 Park Avenue, 41st Floor
                 New York, New York                               10154
                 -------------------------                       -------
              (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:  None

Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $0.001
par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes __ No X
                                                    ---

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Act. Yes __ No X
                                                             ---

Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the 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 __
                     ---

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein,  and will not 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-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer,  or a  non-accelerated  filer.  Large  accelerated  filer __
Accelerated filer X Non-accelerated filer __.

<PAGE>

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

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 August 1,
2006, was $190,285,863.

The number of shares of Bioenvision common stock, par value $.001 per share,
outstanding as of August 1, 2006 was 41,456,616.

Portions of the registrant's definitive proxy statement for its 2006 annual
meeting of stockholders are incorporated by reference into Items 10, 11, 12, 13,
and 14 of Part III of this Form 10-K.

<PAGE>


                                BIOENVISION, INC.
                           Annual Report on Form 10-K
                         Fiscal Year Ended June 30, 2006
                                      INDEX

PART I
ITEM 1. BUSINESS.............................................................1
ITEM 1A.  RISK FACTORS......................................................11
ITEM 1B.  UNRESOLVED STAFF COMMENTS.........................................24
ITEM 2. PROPERTIES..........................................................24
ITEM 3. LEGAL PROCEEDINGS...................................................24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................24

PART II
ITEM 5.MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND
       ISSUER PURCHASES OF EQUITY SECURITIES................................25
ITEM 6. SELECTED FINANCIAL DATA.............................................27
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
       PLAN OF OPERATION....................................................28
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.........37
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................37
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
        AND FINANCIAL DISCLOSURE............................................37
ITEM 9(a) CONTROLS AND PROCEDURES...........................................38
ITEM 9(b) OTHER INFORMATION.................................................40

PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT...........................40
ITEM 11. EXECUTIVE COMPENSATION.............................................40
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT AND RELATED STOCKHOLDER MATTERS.........................41
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................41
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.............................41

PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.........................41



<PAGE>


                                     PART I

        Except for historical information contained herein, this annual report
on Form 10-K 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, "Risk
Factors ", and Managements Discussion and Analysis of Financial Condition and
Results of Operation". 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.  Business

Overview

     We are a product-orientated biopharmaceutical company primarily focused
upon the acquisition, development, distribution and marketing of compounds and
technologies for the treatment of cancer, autoimmune disease and infection. Our
product pipeline includes Evoltra(R) (clofarabine), Modrenal(R) (for which
Bioenvision has obtained regulatory approval for marketing in the United Kingdom
for the treatment of post-menopausal breast cancer following relapse to initial
hormone therapy), and certain anti-infective technologies including the
OLIGON(R) technology; an advanced biomaterial that has been incorporated into
various FDA approved medical devices and Suvus(TM), an antimicrobial agent
currently in clinical development for refractory chronic hepatitis C infection.

     Evoltra(R) is our lead product.  In May 2006 the European  Medicines Agency
approved Evoltra(R) for the treatment of acute  lymphoblastic  leukemia (ALL) in
pediatric  patients who have  relapsed or are  refractory  to at least two prior
regimens.  The licensed indication includes patients who were less than 21 years
of age at the time of initial  diagnosis of their leukemia.  Evoltra(R) has been
granted orphan drug designation, providing marketing exclusivity for 10 years in
Europe,  which  10-year  period  commenced  in May 2006 upon our  receipt of EMA
marketing  approval.  We have a dedicated  sales  force in the U.K.  and several
other  countries  within the E.U. and will continue to expand our sales force as
we continue to work through pricing and  reimbursement  in individual  countries
within the E.U.

      In March 2006, we entered into a Marketing and Distribution Agreement with
Mayne Pharma Limited, a public company in Australia, to sell, market and
distribute Evoltra(R) (Clofarabine) in Australia and New Zealand in certain
cancer indications. We anticipate entering into similar arrangements with other
marketing and distribution partner(s) around the world (outside North America)
to capitalize on the commercial potential of Evoltra(R) (Clofarabine), with a
fully integrated sales and marketing team being a primary focus for the sales
and marketing partner(s) we may select at any time or from time to time.

     We also are developing  Evoltra(R) for the treatment of adult acute myeloid
leukemia (AML) as first-line  therapy.  The Company has completed  enrollment of
its Phase II clinical  trial for the treatment of adult AML in elderly  patients
unfit for intensive  chemotherapy and expects to file a Marketing  Authorization
Application in 2006 for this  indication - the Company's  first  label-extension
for Evoltra(R).

     Also,  in  conjunction  with our North  American  co-development  partners,
Genzyme Corporation, clofarabine (Evoltra(R)) is in clinical development for the
treatment of myelodysplastic syndrome (MDS), chronic lymphocytic leukemia (CLL),
chronic myeloid leukemia (CML),  non-Hodgkin's  lymphoma (NHL), multiple myeloma
(MM), solid tumors and as a preconditioning regimen for transplantation.

     Bioenvision  is  also  conducting  late-stage  preclinical  development  of
Evoltra(TM)  for the  treatment of psoriasis and is planning  further  worldwide
development of Evoltra(TM) in autoimmune diseases.

     Bioenvision holds an exclusive  worldwide license for clofarabine  (outside
Japan and  Southeast  Asia) and an  exclusive,  irrevocable  option to  develop,
market  and  distribute  clofarabine  for all  human  applications  in Japan and
Southeast  Asia.  Bioenvision  granted  an  exclusive  sublicense  to Genzyme to
co-develop  clofarabine for cancer indications in the US and Canada.  Genzyme is
commercializing  clofarabine for certain cancer indications in the US and Canada
under the brand name Clolar(R). Bioenvision holds an exclusive license in the US
and Canada for all


                                      -1-
<PAGE>

non-cancer indications.  Bioenvision originally obtained clofarabine development
and commercialization rights under patents held by Southern Research Institute.

     In the U.S., in December  2004, the Food and Drug  Administration,  or FDA,
approved  clofarabine,  for  the  treatment  of  pediatric  acute  lymphoblastic
leukemia,  or ALL, in patients  who are relapsed or  refractory  to at least two
prior regimens of treatment.  We believe  clofarabine was the first new medicine
initially  approved  in the U.S.,  for  children  with  leukemia  in more than a
decade. Our U.S. partner, Genzyme Corporation,  received Orphan Drug designation
status for clofarabine in the U.S., providing marketing exclusivity for 7 years.
Genzyme is marketing clofarabine under the brand name Clolar(R) in the U.S.

     We are marketing our second product, Modrenal(R), in the United Kingdom, or
U.K., through our sales force of six sales specialists.  Modrenal(R) is approved
in the  U.K.  for  the  treatment  of  post-menopausal  advanced  breast  cancer
following relapse to initial hormone therapy.

     With the approval of Evoltra(R)  under the EMA's  centralized  process,  we
intend  to  continue  to  expand  our  sales  force  by  adding  six to 10 sales
specialists  in each of five other key regions within the E.U. which include the
countries of France,  Germany,  Italy, Spain,  Portugal,  Netherlands,  Austria,
Belgium,  Denmark and Sweden.  Further,  we intend to penetrate all of the other
markets within the E.U. upon establishing  traction in the E.U.'s major markets.
Initially,  outside the U.K., we maintain a fully  dedicated sales force through
Innovex, an affiliate of Quintiles Corporation,  which we intend to convert to a
direct sales force of our own by fourth quarter of calendar 2007.

     In addition to  Evoltra(R)  and  Modrenal(R),  we are currently in clinical
development  of  Suvus(R)  for  chronic  hepatitis  C. This  product  is also in
pre-clinical development for the treatment of West Nile Virus and influenza.

     For the year ended June 30, 2006, our total revenue and net loss applicable
to  common   stockholders   were   approximately   $5,309,000  and  $24,236,000,
respectively.  Our revenues  from U.S. and European  operations  are detailed in
Note 7 to our Consolidated  Financial  Statements included in this Annual Report
on Form  10-K.  While  we seek to  increase  profitability  and cash  flow  from
operations,  we will need to  continue  to achieve  growth of product  sales and
other  revenues  sufficient for us to attain these  objectives.  The rate of our
future growth will depend, in part, upon our ability to successfully  market and
distribute our approved products and upon our ability to successfully develop or
acquire and commercialize new product candidates.



Products and pipeline

<TABLE>
<CAPTION>

       Candidate           Indication       Status                 U.S. and        Ex-U.S. and
                                                                   Canada rights   Canada rights

       ------------------- ---------------- ---------------------- --------------- -------------
<S>                        <C>              <C>                    <C>             <C>
       Evoltra(R)          Relapsed or      Marketed in U.S.       Genzyme         Bioenvision
       Clofarabine         Refractory       (pediatric); Filed
       (Clolar(R))         Acute            in E.U. (pediatric)
                           Lymphoblastic
                           Leukemia (ALL)
       ------------------- ---------------- ---------------------- --------------- -------------
                           Acute            Phase II in E.U.       Genzyme         Bioenvision
                           Myelogenous      (adult)
                           Leukemia (AML)
       ------------------- ---------------- ---------------------- --------------- -------------
                           Refractory       Phase II in U.S.       Genzyme         Bioenvision
                           Chronic          (adult)
                           Lymphocytic
                           Leukemia (CLL)
       ------------------- ---------------- ---------------------- --------------- -------------
                           Solid Tumors     Phase I (Intravenous)  Genzyme         Bioenvision
       ------------------- ---------------- ---------------------- --------------- -------------
                           Solid Tumors     Phase I (Oral)         Genzyme         Bioenvision
       ------------------- ---------------- ---------------------- --------------- -------------
                           Non-Cancer       Developmental          Bioenvision     Bioenvision
       ------------------- ---------------- ---------------------- --------------- -------------
       Modrenal(R)         Breast Cancer    At Market in U.K &     Bioenvision     Bioenvision
                                            Germany.;
                                            Phase IV in U.K.;
                                            Phase II in U.K.
       ------------------- ---------------- ---------------------- --------------- -------------
                           Prostate Cancer  Phase II in U.S.       Bioenvision     Bioenvision
       ------------------- ---------------- ---------------------- --------------- -------------
       Suvus               Hepatitis C      Investigator           Bioenvision     Bioenvision
                                            Sponsored Phase II
                                            in Europe and Middle
                                            East
       ------------------- ---------------- ---------------------- --------------- -------------
</TABLE>

                                        2
<PAGE>

Our Products

Evoltra(R) (Clofarabine)

     Evoltra(R) is our lead product.  In May 2006 the European  Medicines Agency
approved Evoltra(R) for the treatment of acute  lymphoblastic  leukemia (ALL) in
pediatric  patients who have  relapsed or are  refractory  to at least two prior
regimens.  The licensed indication includes patients who were less than 21 years
of age at the time of initial  diagnosis of their leukemia.  Evoltra(R) has been
granted orphan drug designation, providing marketing exclusivity for 10 years in
Europe  which  10-year  period  commenced  in May 2006 upon our  receipt  of EMA
marketing  approval.  We have a dedicated  sales  force in the U.K.  and several
other  countries  within the EU and will  continue to expand our sales force and
medical  science  liaison  team as we  continue  to  work  through  pricing  and
reimbursements locally within the EU.

     We also are developing  Evoltra(R) for the treatment of adult acute myeloid
leukemia (AML) as first-line  therapy.  The Company has completed  enrollment of
its Phase II clinical  trial for the treatment of adult AML in elderly  patients
unfit for intensive  chemotherapy and expects to file a Marketing  Authorization
Application in 2006 for the Company's first label-extension for Evoltra(R) .

     In addition,  clofarabine  (Evoltra(R)) is in clinical  development for the
treatment of myelodysplastic syndrome (MDS), chronic lymphocytic leukemia (CLL),
chronic myeloid leukemia (CML),  non-Hodgkin's  lymphoma (NHL), multiple myeloma
(MM), solid tumors and as a preconditioning regimen for transplantation.

     Bioenvision  is  also  conducting  late-stage  preclinical  development  of
Evoltra(R)  for the  treatment of psoriasis  and is planning  further  worldwide
development of Evoltra(R) in autoimmune diseases.

     Bioenvision holds an exclusive  worldwide license for clofarabine  (outside
Japan and  Southeast  Asia) and an  exclusive,  irrevocable  option to  develop,
market  and  distribute  clofarabine  for all  human  applications  in Japan and
Southeast  Asia.  Bioenvision  granted  an  exclusive  sublicense  to Genzyme to
co-develop  clofarabine for cancer indications in the US and Canada.  Genzyme is
commercializing  clofarabine for certain cancer indications in the US and Canada
under the brand name Clolar(R). Bioenvision holds an exclusive license in the US
and Canada  for all  non-cancer  indications.  Bioenvision  originally  obtained
clofarabine  development  and  commercialization  rights  under  patents held by
Southern Research Institute.

     In the U.S., in December 2004, the Food and Drug Administration, or FDA,
approved clofarabine, for the treatment of pediatric acute lymphoblastic
leukemia, or ALL, in patients who are relapsed or refractory to at least two
prior regimens of treatment. We believe clofarabine was the first new medicine
initially approved in the U.S., for children with leukemia in more than a
decade. Our U.S. partner, Genzyme Corporation, received Orphan Drug designation
status for clofarabine in the U.S., providing marketing exclusivity for 7 years.
Further, in July 2004, the FDA granted a six-month extension of the marketing
exclusivity for clofarabine in pediatric ALL under the federal Best
Pharmaceuticals for Children Act.

     Pediatric leukemia is the most prevalent form of cancer among children up
to age 19 in the U.S. It is estimated that approximately 3,400 children were
diagnosed with leukemia in the U.S. in 2004, with ALL accounting for over 75% of
the incidence rate. Although survival rates for childhood leukemia have improved
significantly since the early 1970's, approximately 20% of pediatric patients
with ALL and 60% of pediatric patients with AML do not achieve long-term
survival and we believe there is a medical need for new agents to treat this
population of patients. Clofarabine is approved for the treatment of pediatric
patients, ages one to 21, with relapsed or refractory ALL after at least two
prior regimens. The adult leukemia market represents a potentially significantly
larger commercial opportunity with over 11,500 patients with AML and over 8,000
patients with CLL, diagnosed each year within the U.S. Based on population and
incidence rates data, we believe that the E.U. patient population with pediatric
leukemias and adult AML and CLL approximates that of the U.S.

     Clofarabine is a purine nucleoside analog, which is a small molecule, that
we are developing with Genzyme, our co-development partner, for the treatment of
acute and chronic leukemias, lymphomas and solid tumors. Clofarabine attacks
cancer cells by damaging DNA in cancer cells, preventing DNA repair by damaged
cancer cells, damaging the cancer cell's important control structures, and
initiating the process of programmed cell death, or apoptosis, in cancer cells.
Clofarabine appears to combine many of the favorable properties of the two most
commonly used purine nucleoside analog drugs, fludarabine and cladribine, but
appears to have greater potency at damaging the DNA of leukemia cells and a
broader range of clinical activity.

     In the U.S., pivotal Phase II clinical trials were conducted for the
treatment of relapsed or refractory acute leukemia in children and a NDA was
filed by Genzyme with the FDA in March 2004, based upon the interim


                                        3
<PAGE>

results of 70 patients enrolled in these two trials. In August 2004, clinical
data on an additional cohort of 14 patients were submitted to the FDA and of the
aggregate ALL group of 49 patients, a 31% overall response rate was achieved,
and of the aggregate AML group of 35 patients, a 26% overall response rate was
achieved.

     In Europe, we facilitated an investigator sponsored trial, or an IST, of
clofarabine as first line therapy for older adult patients with AML who were
unsuitable for intensive chemotherapy. The IST was closed to recruitment in
August 2004 because a 67% overall response rate was achieved. This response rate
was more than three times greater than the expected response rate under the
current standard of care for this patient population and the investigator
determined that these positive results warranted accelerated initiation of the
Phase II regulatory study of clofarabine as a first-line treatment for older
adult patients newly diagnosed with AML. We completed enrollment of this
Bioenvision-sponsored Phase II regulatory trial in February 2006 and locked the
database in anticipation of our submitting a Marketing Authorization Application
with EMA later in calendar 2006 based in large part upon this clinical data.

     On December 1, 2004, the FDA's Oncologic Drug Advisory Committee, or ODAC,
convened to determine if clinical data from Phase II trials in relapsed and
refractory pediatric ALL and AML demonstrated a durable clinical response that
would predicate a clinical benefit in future clinical administration. The panel
voted in favor of the approval of clofarabine for pediatric ALL under its
accelerated approval pathway and voted against immediate marketing in pediatric
AML, requesting additional information. In connection with the approval that was
granted by the FDA, Genzyme is required to conduct further controlled clinical
studies of clofarabine to verify and describe its clinical benefit in ALL.

     Clofarabine is currently being evaluated in an IST Phase II clinical trial
for refractory CLL in the U.S. In addition, commencing in fourth quarter of
calendar 2006, we intend to investigate clofarabine in European Phase II
clinical trials for MDS and solid tumor cancer indications. In pre-clinical
studies, clofarabine has shown anti-tumor activity against several human
cancers, including cancers of the lung, colon, kidney, breast, pancreas and
prostate, as well as its action against leukemia cells. Bioenvision believes the
initial data from the Phase I clinical trials indicate sufficient possible
activity for clofarabine in certain solid tumor types to warrant further
clinical development. We intend to develop clofarabine as a potential drug for
the treatment of certain solid tumors, such as colon, pancreatic, lung, breast
and prostate cancer.

     Pursuant to the terms of our co-development agreement with Genzyme, the
successor-in-interest to ILEX Oncology, Inc. following the merger consummated
between Genzyme and Ilex in December 2004, both parties are required to share
promptly all information, including clinical data, generated under the
co-development program and Genzyme is obligated to pay all of the U.S. and
Canadian research and development costs and 50% of all approved ex-U.S. and
Canada research and development costs (except for Japan and Southeast Asia and
except for non-cancer indications). If additional resources are required above
the agreed upon costs, we may elect to pay these additional costs and certain of
these payments will be credited against future royalty payments to Genzyme at
the rate of $1.50 for every $1.00 of additional expenditures. Under the
co-development agreement with Genzyme, we receive royalties on Genzyme's annual
net sales on a sliding scale based on the level of annual net sales. Similarly,
we pay a royalty to Genzyme and Southern Research Institute, or SRI, the
inventor of clofarabine, on our European annual net sales. Although we have not
received payment from Genzyme for our development costs incurred since the
Genzyme's acquisition of Ilex, we are actively discussing these reimbursements
with Genzyme in an ongoing dialogue and are actively working on developing a
consensus with Genzyme management for a development plan and budget going
forward.

     Pursuant to the terms of our co-development agreement with SRI, we have the
exclusive license to market and distribute clofarabine throughout the world for
all human applications except for certain U.S. and Canadian cancer indications
and except for any indications in Japan and Southeast Asia. Our exclusive
license expires upon the last to expire of the patents used or useful in
connection with the development and marketing of clofarabine, which we expect to
expire in 2021. In addition, we hold an exclusive option from SRI to market and
distribute clofarabine in Japan and Southeast Asia for all human applications.
We have exercised the right to convert the option into an exclusive license and
are actively negotiating with SRI to finalize the terms of the license for
clofarabine rights in Japan and Southeast Asia and hope to conclude a
transaction in the second half of 2006.

     To date, the majority of our development activities and resulting R&D
expenditures have related to the development of clofarabine. Our primary
business strategy has included taking clofarabine to market in the E.U. and
using the proceeds from our resulting marketing efforts, in part, to progress
the other products and technologies in our pipeline.

                                        4
<PAGE>

Modrenal(R)

     We currently market Modrenal(R) (trilostane) in the U.K. for the treatment
of post-menopausal advanced breast cancer following relapse to initial hormone
therapy. We have a team of six sales specialists and two marketing executives
selling and marketing Modrenal(R) (and Evoltra(R)) in the U.K.

     Modrenal's(R) approved indication enables us to promote Modrenal(R) for use
immediately after relapse to initial hormone therapy such as tamoxifen or one of
a class of drugs known as aromatase inhibitors (including Faslodex and
Arimidex). However, we are initially positioning Modrenal(R) as a third or
fourth line treatment option in post-menopausal advanced breast cancer. In the
five largest E.U. countries (France, Germany, Italy, Spain and the U.K.), we
believe approximately 520,000 women are currently living with post-menopausal
advanced breast cancer of which over a third require third or fourth line agents
following prior treatment failure.

     Modrenal(R) has been extensively studied in clinical trials in the U.S.,
Europe and Australia, and an analysis, known as a meta-analysis, of a series of
these clinical studies, that together included 714 patients with post-menopausal
advanced breast cancer who received Modrenal(R) has been conducted. Overall, a
clinical benefit rate of 35% was achieved in patients with both
hormone-sensitive and hormone-insensitive breast cancers. Generally, a clinical
benefit is achieved when a patient's disease disappears, is decreased by greater
than fifty percent or is stabilized for at least six months. In a sub-set
analysis of these clinical trial data, a clinical benefit rate of 46% was
achieved for 351 patients with hormone-sensitive breast cancer who had responded
to one or more prior hormonal therapies and were given Modrenal(R) upon relapse
of the cancer. In one of the studies which was conducted in Australia, a
clinical benefit rate of 55% was achieved for 64 patients who received
Modrenal(R) having previously responded to tamoxifen and subsequently relapsed.
We believe these data compare favorably to currently marketed aromatase
inhibitors and other agents given as second line or subsequent therapies.
Furthermore, Modrenal(R) has an acceptable side-effect profile. On the basis of
these data, Modrenal(R) was granted a product license in the U.K. for the
treatment of post-menopausal advanced breast cancer following relapse to initial
hormone therapy.

     We began marketing Modrenal(R) in May 2004 in the U.K. for the treatment of
post-menopausal advanced breast cancer following relapse to initial hormone
therapy. Our strategy may include seeking regulatory approval for Modrenal(R) in
the U.S. as a therapy for hormone-sensitive breast cancers and hormone
independent prostate cancers, but this strategy is dependent upon the results of
the ongoing clinical trials and the resource capability of the Company. Our
ongoing clinical trials in breast cancer target patients that have
hormone-sensitive cancers and have become refractory to prior hormone
treatments, such as tamoxifen or any of the aromatase inhibitors. We will
continue to develop our commercial and regulatory strategies for Modrenal(R) as
we continue to analyze the results of these clinical data.

     In mid-2005 we began enrollment in a U.K., Phase IV study in
post-menopausal advanced breast cancer, a Phase II study in pre-menopausal
breast cancer and a Phase II study in neo-adjuvent, pre-operative breast cancer.
We plan to use the data from these clinical trials to support a filing process
for mutual recognition for approval of Modrenal(R) on a country-by-country basis
in Europe. Each such approval, if granted, would be based upon Modrenal's(R)
approval in the U.K. for post-menopausal advanced breast cancer following
relapse to initial hormone therapy. The grant of any such approval is entirely
within the control of the individual regulatory authorities.

     We have the exclusive right to market and distribute Modrenal(R) throughout
the world for all human applications, except for South Africa and Japan where
the drug is marketed for the treatment of low-renin hypertension. 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 of our
underlying patents to expire in 2020.

Other Products and Technologies

     We anticipate that revenues derived from clofarabine and Modrenal(R) will
permit us to further develop the other products currently in our product
pipeline. The work to date on these compounds has been limited because of the
need to concentrate on clofarabine and Modrenal(R) but management believes these
compounds have potential value.

Suvus(TM)

     Suvus(TM), especially when photo-sensitized by light, acts by preventing
replication of nucleic acid (DNA and RNA) in pathogens. Investigator sponsored
Phase II clinical trials have been completed in the Middle East to study

                                        5
<PAGE>

Suvus'(TM) use in treating hepatitis C virus infection. We announced interim
results at the UBS Global Life Sciences Conference in New York in September 2005
and continue to monitor these data. Suvus(TM) was given to 25 patients with
genotype 4 hepatitis C who had failed a prior treatment, including interferon in
many of the patients. Sixteen (64%) of the patients had cirrhosis. Suvus(TM) was
given orally for 100 days and measurement of the viral load was made at 50 days.
At 50 days, 22 (88%) patients had shown a reduction in viral load of greater
than 70%. Of these responders, 14 (64%) had a clearance of greater than 90%,
with four responders having complete viral clearance.

     Seven of the 25 patients have had viral load measured at 100 days. Six of
these patients show continued reduction in viral load and the seventh patient,
who had been one of the three non-responders at 50 days, had a greater than 90%
reduction in viral load. No major adverse events were noted.

     Methylene blue, the parent compound in Suvus(TM), is currently used in
several European countries to inactivate pathogens, notably certain viruses, in
fresh frozen plasma. Prior to the fourth quarter of 2005, we tested for
impairment our methylene blue intangibles acquired in connection with the
Pathagon acquisition and determined that, based on our assumptions, the sum of
the expected future cash flows, undiscounted and pertaining solely and
exclusively to approved indications, exceeded the carrying value of its
long-lived assets and therefore we did not recognize an impairment. Due to the
loss of an intellectual property patent suit relating to the international use
of methylene blue in fresh frozen plasma we re-evaluated the intangible asset
relating to methylene blue at June 30, 2005. At that date, we estimated that our
undiscounted future cash flows, again relating solely and exclusively to
approved uses of methylene blue, were less than the carrying value. As a result,
we recognized a non-cash impairment loss of $5,276,000, equal to the difference
between the estimated future cash flows for approved uses of methylene blue,
discounted at an appropriate rate, and the carrying amount of the asset. Making
the impairment determination and the amount of impairment requires significant
judgment by management and assumptions with respect to the future cash flows.
Changes in events or circumstances that may affect long-lived assets makes
judgments and assumptions with respect to the future cash flows highly
subjective. At June 30, 2006, we received an independent third-party valuation
of this intangible asset which confirmed that such estimated future cash flows
continued to be worth more than the carrying value of methylene blue and,
therefore, no further impairment was deemed to be required.

Velostan

     Velostan is a cytostatic drug currently under investigation as an
anticancer agent and as an antimicrobial. Velostan is the first compound in a
group of chemically related compounds that are believed to work by blocking cell
division and reversing the malignant process in the cancer cell. We believe the
optical isomer we have developed is more active and less toxic than its parent
compound.

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
for the use of thiazine dyes, including methylene blue, for other anti-infective
uses.

     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.


Gene Therapy Technology

     Our product portfolio also includes a variety of gene therapy products
that, 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 gene vector
technologies which, based on pre-clinical research and early Phase I clinical
trials, we believe have potential in a wide array of clinical conditions. To
date, the technology has undergone small-scale clinical testing with the


                                        6
<PAGE>

albumin and thrombopoietin genes. The results showed the technology is capable
of producing a prolonged elevation in serum albumin levels in cancer and
cirrhosis patients with hypo-albuminemia, a serious physiological disorder. The
gene therapy technology has been allocated limited resources for development
because of the emphasis on the commercial development of clofarabine. However,
it is our intention to add resource to the development of this platform
technology when sufficient revenue resources allow.


Animal Health Products

     We also have one animal health product, Vetoryl(R) (trilostane), 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 U.K., 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 U.K. 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 U.S. 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 U.S. 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 U.S. 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 several 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. 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 U.S. 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 U.S. patents one of which expired in 2005 and two of
which expire in 2008 and 2014 relating to compounds, pharmaceutical compositions
and methods of use encompassing clofarabine. We have also filed two United
States patent applications relating to the use of clofarabine in autoimmune
diseases. Although the composition of matter 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 and the exclusive licensee to a manufacturing process patent
for trilostane. In addition, for Gene Therapy we have international process and
use patent applications filed which, if patents are issued, will expire in April
2018 and for OLIGON(R) we have process, use and composition of matter patents in
the U.S. and internationally which expire on or before April 2019 and a patent
application in Japan which expires in October 2018.

     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.

                                        7
<PAGE>

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

Sales and Marketing

     Currently we have an arrangement in place with Genzyme for the
co-development and marketing of clofarabine and another arrangement with Edwards
Lifesciences for the marketing of short-term vascular access catheters using the
OLIGON(R) technology. Recently, we have entered into arrangements with Innovex,
an affiliate of Quintiles Corporation, for the sales and marketing of Evoltra(R)
(clofarabine) in certain E.U. countries from the date of marketing approval in
May 2006 through November 2007, subject to certain circumstances. However, in
order to market Evoltra(R) effectively and independently, 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.
We are currently considering the most appropriate long term strategy to
capitalize on the commercial value of Evoltra(R) which may include pursuing an
independent, fully-integrated sales and marketing force within the E.U. or,
alternatively, marketing and distributing Evoltra(R) through one or more sales
agents or marketing and distribution partner(s) in the E.U. or any other part of
the world within which we have marketing rights to Evoltra(R). In this regard,
in March 2006, we entered into a Marketing and Distribution Agreement with Mayne
Pharma Limited, a public company in Australia, to develop, market and distribute
Evoltra(R) (Clofarabine) in Australia and New Zealand in certain cancer
indications. We anticipate entering into similar arrangements with other
marketing and distribution partner(s) around the world (outside North America)
to capitalize on the commercial potential of Evoltra(R) (Clofarabine), with a
fully integrated sales and marketing team being a primary focus for the sales
and marketing partner(s) we may select at any time or from time to time.

     We have also engaged in our own marketing and sales efforts in connection
with the marketing and sale of Modrenal(R) in the U.K.

     Our marketing policy is to generate awareness of our products and target
the two key audiences for our products, doctors and patients. Medical education
is also 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.

Manufacturing

     Our strategy is to enter into collaborative arrangements with other
companies for the clinical testing, manufacture and distribution of the
products. Manufacturers of our products are subject to Good Manufacturing
Practices prescribed by the FDA or other rules and regulations prescribed by
foreign regulatory authorities, which may change from time to time. We do not
have and do not intend to establish any internal product testing, manufacturing
or distribution capabilities; rather, we will rely solely and exclusively on
third party providers of these services for 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


                                        8
<PAGE>

benefits of scientific, clinical and other personnel; analytical and other
testing costs; professional fees; and insurance and other administrative
expenses. We have spent approximately $11,727,000 and $10,895,000 on research
and development activities for the fiscal years ended June 30, 2006 and 2005,
respectively.

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;

     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:

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

                                        9
<PAGE>

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 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, local and foreign 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 U.S. 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 be assured
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 U.S., the clinical stages
generally are comparable to the phases of clinical development established by
the FDA.

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<PAGE>

Competition

     The pharmaceutical industry is characterized by rapidly evolving technology
and intense competition. Many companies of all sizes, including a number of
large pharmaceutical companies as well as several specialized biotechnology
companies, are developing cancer drugs similar to ours. There are products on
the market that will compete directly with the products that we are seeking to
develop. In addition, colleges, universities, government agencies and other
public and private research institutions will continue to conduct research and
are becoming more active in seeking patent protection and licensing arrangements
to collect license fees, milestone payments and royalties in exchange for
license rights to technologies that they have developed, some of which may
directly compete with our technologies. These companies and institutions also
compete with us in recruiting qualified scientific personnel. Many of our
competitors have substantially greater financial, research and development,
human and other resources than we do. Furthermore, large pharmaceutical
companies have significantly more experience than we do in preclinical testing,
human clinical trials and regulatory approval procedures. Our competitors may
develop safer or more effective products than ours, obtain patent protection or
intellectual property rights that limit our ability to commercialize products,
or commercialize products more quickly than we can.

     We expect technology developments in our industry to continue to occur at a
rapid pace. Commercial developments by our competitors may render some or all of
our potential products obsolete or non-competitive, which would materially harm
our business and financial condition.

Employees

     As of June 30, 2006, we had 33 full-time employees based in New York, New
York, and Edinburgh, Scotland.

Corporate Information

     We were incorporated as Express Finance, Inc. under the laws of the State
of Delaware on August 16, 1996, and changed our name to Ascot Group, Inc. in
August 1998 and further to Bioenvision, Inc. in January 1999. Our principal
executive offices are located at 345 Park Avenue, 41st Floor, New York, New York
10154. Our telephone number is (212) 750-6700 and our fax number is (212)
750-6777. Our website is www.bioenvision.com. Information included or referred
to on our website is not incorporated by reference in or otherwise a part of
this prospectus. Our website address is included in this annual report as an
inactive textual reference only.
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K and all amendments to those reports are available free of charge
through the Investor Relations section of our web site as soon as reasonably
practicable after such material is electronically filed with or furnished to the
Securities and Exchange Commission. The public may read and copy any materials
filed by us with the SEC at the SEC's Public Reference Room at 100 F Street, NW,
Washington, D.C. 20549. The public 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 (http://www.sec.gov) that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the SEC.

Item 1A.  Risk Factors

Factors that May Affect Our Business

     You should carefully consider the following risks before you decide to buy
our common stock. Our business, financial condition or operating results may
suffer if any of the events described in the following risk factors actually
occur. All known risks are presented in this annual report on Form 10-K. These
risks may adversely affect our business, financial condition or operating
results. If any of the events we have identified occur, the trading price of our
common stock could decline, and you may lose all or part of the money you paid
to buy our common stock.

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

   Since our inception in August of 1996, we have been primarily engaged in
organizational activities, including developing a strategic operating plan,
raising capital, entering into various collaborative agreements for the
in-licensing and/or development of products and technologies, hiring personnel
and developing and testing our


                                       11
<PAGE>

products. We have not generated any substantial revenues to date and we are not
profitable. Accordingly, we have a limited operating history upon which an
evaluation of our performance and prospects can be made.

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

   To date, we have incurred significant net losses, including net loss
applicable to common stockholders of approximately $24,236,000 for the fiscal
year ended June 30, 2006. At June 30, 2006, we had an accumulated deficit of
approximately $86,567,000. We anticipate that we may continue to incur operating
losses for the foreseeable future. We may never generate substantial revenues or
achieve profitability and, if we do achieve profitability, we may not be able to
maintain profitability.

Clinical trials for our products are expensive and time consuming, and may not
result in 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 our lead drugs, Evoltra(R) and Modrenal(R), each of
which has received at least one regulatory approval, additional pre-clinical and
clinical studies are required in our effort to seek further approved indications
for these drugs.

   Modrenal(R) is approved and we market Modrenal(R) in the U.K. for the
treatment of advanced, post-menopausal breast cancer. Currently, we are
conducting a Phase II clinical trial in the U.K. for its treatment of
pre-menopausal breast cancer which is a new potential indication for this
approved drug.

   Evoltra(R) is being studied in pediatric ALL, adult AML, MDS, solid tumor
cancers and certain non-cancer indications in studies ranging from pre-clinical
to Phase II/III.

   The results from pre-clinical testing and early clinical trials have often
not been predictive of results obtained in later clinical trials as 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.

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

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

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

     o    inability to adequately follow patients after treatment;

     o    unforeseen safety issues or side effects;

     o    lack of efficacy during the clinical trials; or

     o    government or regulatory delays.

A significant portion of our assets relate to ancillary products, which may not
be successfully commercialized.

   Our ancillary products include OLIGON(R), an anti-microbial compound, and
Suvus(TM), an anti-viral agent, respectively, which we acquired in February 2002
in the Pathagon acquisition. At June 30, 2005, due to the loss of an
intellectual property patent suit relating to the international use of Suvus(TM)
in fresh frozen plasma, we re-evaluated the fair value of the intangible assets
relating to Suvus(TM). At that date, we estimated that our undiscounted future
cash flows pertaining solely and exclusively to approved uses of Suvus(TM) were
less than the carrying value of our long-lived asset. As a result, we recognized
a non-cash impairment loss of $5,276,000, equal to the difference between the
estimated future cash flows related solely to approved uses of Suvus(TM),
discounted at an appropriate rate, and the carrying amount of the asset. Making
the determinations of impairment and the amount of impairment requires
significant judgment by management and assumptions with respect to the future
cash flows of the assets. At June 30, 2006, subsequent to the recognition of the
impairment, the net intangible assets


                                       12
<PAGE>

associated with these products amounted to approximately $6,886,000 and
constituted approximately 11% of our total assets and approximately 15% of our
stockholders' equity.

   We do not currently devote any significant time or resources to the research
and development of OLIGON and only intend to do so if, and to the extent, we
successfully commercialize our lead drugs, Evoltra(R) and Modrenal(R), over the
next two years. Historically, we have not devoted significant time or resource
to the research and development of Suvus(TM) but our management and board of
directors is currently considering the appropriate level of time and resource to
be devoted to Suvus(TM) over the next several years. Based on the estimated
useful life of these assets of approximately 13 years and market considerations,
no assurance can be given that there will not be a further impairment of these
assets in the future, which could result in a material impact on our future
results of operations. Changes in events or circumstances that may affect
long-lived assets, particularly in the pharmaceutical industry, makes judgments
and assumptions with respect to the future cash flows highly subjective and may
include, but are not limited to, cancellations or terminations of license
agreements or the risk of competition that could render our products
noncompetitive or obsolete.

We depend on our co- development agreement with Genzyme and if it does not
proceed as planned, we may incur delay in the commercial value realized from
Evoltra(R) ( clofarabine), which may delay our ability to generate significant
revenues and cash flow from the sale of Evoltra(R).

   We have a co-development agreement with Genzyme, and pursuant to that
agreement, Genzyme and any third party to which Genzyme grants a sublicense or
transfer its obligations, has primary responsibility for conducting clinical
trials and administering regulatory compliance and approval matters in certain
cancer indications in the U.S. and Canada.

   If Genzyme fails to meet its obligations under the co-development agreement
including its obligation to cooperate and share data with us, we could lose
valuable time in further developing clofarabine and further commercializing the
drug both in the U.S. and in Europe. We can not provide assurance that Genzyme
will cooperate with us or that Genzyme 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 Genzyme.
There would also be testing delays if, for example, our sources of drug supply
could not produce enough Evoltra(R) 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 and/or market Evoltra(R), obtain necessary regulatory
approvals, and generate sales and cash flow from the sale of Evoltra(R).

   If delays in completion constitute a breach by Genzyme or there are certain
other breaches of the co-development agreement by Genzyme, 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 successfully complete such responsibilities or, if successfully
completed, to complete such tasks in timely fashion.

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 Genzyme, our U.S. co-development partner since its acquisition
of ILEX Oncology, which occurred on December 21, 2004. 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 now that Genzyme has replaced ILEX as our U.S. cancer-indication
marketing partner. No assurance can be given that we or Genzyme have the
oncology experience required to work successfully with the applicable regulatory
authorities to build upon the licensed indications for Clofarabine.

   With respect to Modrenal(R), our long-term drug development objectives for
Modrenal(R) may include attempting to test the drug and get approval in the U.S.
for treatment of advanced post-menopausal breast cancer patients. These trials
would take significant time and resources and no assurance can be given that
developing the drug in this indication will result in a U.S. approval for
Modrenal(R) in advanced post-menopausal breast cancer patients.

   Certain of our unapproved compounds or potential new indications for our
approved drugs 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;

                                       13
<PAGE>

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.


We rely on compounds and technology licensed from third parties and termination
of any of those licenses would result in the loss of significant rights

     We hold an exclusive worldwide license for clofarabine (outside Japan and
Southeast Asia) and we are currently negotiating the terms of a proposed
exclusive license for clofarabine in Japan and Southeast Asia. We granted an
exclusive sublicense to Genzyme to develop and commercialize clofarabine for
cancer indications in the US and Canada. We hold an exclusive license in the US
and Canada for all non-cancer indications. We originally obtained clofarabine
development and commercialization rights under patents held by Southern Research
Institute ("SRI").

     Our licenses generally may be terminated by SRI under the co-development
agreement under certain circumstances. If any of our licenses are terminated, we
may lose certain rights to manufacture, sell, market and distribute clofarabine
or other product candidates which would significantly reduce our actual and
potential revenues and have a material and negative impact on our operations.
With regard to our license negotiations with SRI pursuant to which we may
license the rights to manufacture, sell, market and distribute clofarabine in
Japan and Southeast Asia, no assurance can be given that we will successfully
in-license these rights; or if we do that these rights will be in-licensed on
terms favorable to us.

If we are unsuccessful in developing and commercializing our products, our
business, financial condition and results of operations could be materially
adversely affected which could have a negative impact on the value of our
securities.

     Many of our products and processes are in the early or mid-stages of
research, development and/or commercialization and, therefore, will require the
commitment of substantial financial resources, extensive research, development,
sales and marketing activities prior to being ready for sale or marketed in
significant quantities. All of our commercially available products will require
further development, clinical testing and regulatory approvals as we seek
approvals in new indications and geographic markets. If it becomes too expensive
to sustain our present commitment of resources on a long-term basis, we will be
unable to continue certain necessary research and development activities.
Furthermore, we cannot be certain that our clinical testing will render
satisfactory results, or that we will receive required regulatory approvals for
our new products or new indications. If any of our products, even if developed
and approved, cannot be successfully commercialized, our business, financial
condition, results of operations and liquidity could be materially adversely
affected which could have a negative impact on the value of our common stock or
debt securities obligations.

During the next several years, we will be very dependent on the commercial
success of Evoltra(R).

     At our present and anticipated level of operations, we may not be able to
achieve and maintain profitability without continued growth in our revenues. The
growth of our business during the next several years will be largely dependent
on the commercial success of Evoltra(R) and our other products. We do not have
long-term data on the use of the product and cannot predict whether Evoltra(R)
will gain widespread acceptance, which will mostly depend on the acceptance of
regulators, physicians, patients and other key opinion leaders as a relatively
safe and effective drug that has certain advantages as compared to existing or
future therapies.

                                       14
<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, state and local statutes and governmental agencies in the U.S. 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 U.S. 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 U.S. 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 U.S. In both cases, the FDA has the authority
to determine what testing procedures are appropriate for a particular product
and, in some instances, has not published or otherwise identified guidelines as
to the appropriate procedures. The FDA has the authority to withdraw existing
new drug application and abbreviated application approvals and to review the
regulatory status of products marketed under the enforcement policy. The FDA may
require an approved new drug application or abbreviated application for any drug
product marketed under the enforcement policy if new information reveals
questions about the drug's safety or effectiveness. All drugs must be
manufactured in conformity with current good manufacturing practices and drugs
subject to an approved new drug application or abbreviated application must be
manufactured, processed, packaged, held and labeled in accordance with
information contained in the new drug application or abbreviated application.

   The required product testing and approval process can take a number of years
and require the expenditure of substantial resources. Testing of any product
under development may not result in a commercially-viable product. Further, we
may decide to modify a product in testing, which could materially extend the
test period and increase the development costs of the product in question. Even
after time and expenses, regulatory approval by the FDA may not be obtained for
any products we develop. In addition, delays or rejections may be encountered
based upon changes in FDA policy during the period of product development and
FDA review. Any regulatory approval may impose limitations in the indicated use
for the product. Even if regulatory approval is obtained, a marketed


                                       15
<PAGE>

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 U.S. 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 U.S. 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 EMA, 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
similar drugs 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 a competing drug in
the same indication is approved first, that sponsor is entitled to exclusive
marketing rights if that sponsor has received orphan drug designation for its
drug. In that case, the FDA would refrain from approving an application by us to
market our competing product for seven years, subject to limitations. Competing
products may receive orphan drug designations and FDA marketing approval before
the products under development by us.

   New drug application approval for 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


                                       16
<PAGE>

developed by us have received orphan drug designation and new drug application
approval, and the same is true with the EMA in Europe. Prescribing of approved
drugs for unapproved uses, commonly referred to as "off label" sales, 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 Evoltra(R) and Modrenal(R), our
co-lead drugs, have demonstrated activity are areas of unmet clinical need, such
as Evoltra's(R) application to pediatric acute leukemias 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(R), envision, initially, that Modrenal(R) would be used as second or
third line therapy, only after patients with advanced post-menopausal breast
cancer receive regimens of tamoxifen and/or aromatase inhibitors (or similar
drug) treatments. If generic drug companies develop a compound which is more
effective than either Evoltra(R) or Modrenal(R) 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 than us, they may be able to develop products before us or develop
more effective products or market them more effectively, which would adversely
affect our ability to generate revenue and cash flow.

   Competition in our industry is intense. Potential competitors in the U.S. 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
Evoltra(R), 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 AG. Potential competitors with respect to
Modrenal(R) include Astra-Zeneca and Novartis, which market tamoxifen and other
aromatase inhibitors, which could be used by clinicians as first and second line
therapies in patients with hormone sensitive, advanced, post-menopausal breast
cancer prior to a Modrenal(R) 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


                                       17
<PAGE>

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 operations, revenue and cash flow.

If we are unable to respond to rapid technological change and evolving
therapies, our technologies and products could become less competitive or
obsolete and our revenues and results of operations will be adversely affected.

   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" above.

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 have no commercial manufacturing facilities and if the third-party
manufacturers upon whom we rely fail to produce consistently and on a timely
basis the raw materials or finished products in the volumes that we require or
fail to meet quality standards and maintain necessary licensure from regulatory
authorities, we may be unable to meet demand for our products, potentially
resulting in lost revenues.

  We have never manufactured any of our products and our third party
manufacturers will need to consistently manufacture appropriate commercial
quantities of drug supply for our products in order to fully exploit the
commercial potential for our commercial products. No assurance can be given our
products will be consistently manufactured 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 U.S., 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 outside of the UK or be
successful in gaining market acceptance for proprietary products or for other
products. We currently have very limited sales and marketing capabilities
outside of the UK. We currently employ six full-time sales employees and two
full-time marketing employees. Recently, we have entered into arrangements with
Innovex, an affiliate of Quintiles Corporation, for the sales and marketing of
Evoltra(R) (clofarabine) in certain E.U. countries from the date of marketing
approval in May 2006 through November 2007, subject to certain circumstances To
market any products directly, we will need to develop a more fulsome marketing
and sales force with technical expertise and distribution capability or contract
with other pharmaceutical and/or health care companies with distribution systems
and direct sales forces. To the extent that we enter into co-promotion or other
licensing arrangements, any revenues to be received by us will be dependent on
the efforts of third parties. The efforts of third parties may not be
successful. Our failure to establish marketing and distribution capabilities or
to enter into marketing and distribution arrangements with third parties could
have a material adverse effect on our revenue and cash flows.

                                       18
<PAGE>

We are dependent on certain key personnel and the loss of one or more these
individuals could disrupt our operations and adversely affect our financial
results.

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

   In addition, we will be required to hire additional qualified scientific and
technical personnel, as well as personnel with expertise in clinical testing and
government regulation to expand our research and development programs and pursue
our product development and marketing plans. There is intense competition for
qualified personnel in the areas of our activities, and there can be no
assurance that we will be able to attract and retain the qualified personnel
necessary for the development of its business. We face competition for qualified
individuals from numerous pharmaceutical and biotechnology companies,
universities and research institutions. The failure to attract and retain key
scientific, marketing and technical personnel would have a material adverse
effect on the development of our business and our ability to develop, market and
sell our products. See also "- We have limited sales and marketing capability,
and may not be successful in selling or marketing our products" above.

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, New York and Edinburgh, Scotland, respectively).

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

   The pharmaceutical industry places considerable importance on obtaining
patent and trade secret protection for new technologies, products and processes.
Our success will depend on our ability to obtain and enforce protection for
products that we develop under U.S. 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
Modrenal(R) have expired in the U.S. and foreign countries. Thus, we and our
licensor, Stegram Pharmaceutical Ltd., are pursuing patent applications to
specific uses, combination therapy and dosages or formulations of Modrenal(R).
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 U.S. 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 SRI. 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


                                       19
<PAGE>

provide a competitive advantage over our competitors. Moreover, we cannot
guarantee that SRI was the first to invent the subject matter of these patents.
In addition, we are aware of a third party U.S. patent which is directed to the
treatment of chronic myeloid leukemia, or CML, using specific doses of
clofarabine. We believe that our development and marketing of clofarabine for
treatment of acute leukemias will not infringe any of the claims of this U.S.
patent. Further, we believe that our development and potential marketing of
clofarabine for treatment of chronic lymphocytic leukemia will not infringe any
of the claims of this U.S. 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. In addition, 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 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.

Our international operations subject us to social, political and economic risks
of doing business in foreign countries.

   We have the right to manufacture, market and distribute our lead drugs,
Evoltra(R) and Modrenal(R), in territories outside of the U.S. Specifically, we
currently market Modrenal(R) in the United Kingdom and Evoltra(R) throughout
Europe. Further, more than 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;

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

o    risks related to the fluctuation in currency exchange rates.

   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,
Clinical 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.

                                       20
<PAGE>

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.

   As of June 30, 2006, we had stockholders' equity of approximately $46,588,000
and working capital of approximately $40,065,000. However, we may need
additional financing to continue to fund the research and development and
marketing programs for our products and to generally expand and grow our
business. Because we will be required to fund additional operating losses in the
foreseeable future, our financial position will continue to 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 would 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 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.

   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. We believe that Government officials and
private health insurers are increasingly challenging the price of medical
products and services. Significant uncertainty exists as to the pricing
flexibility which distributors will have with respect to newly approved health
care products as well as the reimbursement status for such approved healthcare
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 aromatase
inhibitor treatment but not treatments of Modrenal(R), this would cause a
decline in sales of Modrenal(R). This lack of reimbursement would diminish the
market for products developed by us and would 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 EMA, FDA, the FTC
or other government agencies having regulatory authority for product sales.
Product recalls, if any in the future, may harm our reputation and cause us to
lose development opportunities, or customers or pay refunds. Products may need
to be recalled due to disputed labeling claims, manufacturing issues, quality
defects, or other reasons. We do not carry any insurance to cover the risk of
potential product recall. Any product recall could have a material adverse
effect on us, our prospects, our financial condition and results of operations.

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

   We face exposure to product liability claims if the use of our technologies
or products or those we license from third parties is alleged to have resulted
in adverse effects to users of such products. Product liability claims may be
brought by clinical 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 and clinical trial
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 activities. We currently maintain claims
made product liability insurance coverage in an amount which we believe is
commercially reasonable. 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

                                       21
<PAGE>

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.

Complying with changing corporate governance regulations, including an
evaluation of our internal controls, may adversely affect our business and
operations.

   Changing laws, regulations and standards relating to corporate governance and
public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations
and Nasdaq market rules, are creating uncertainty for companies such as ours.
These new or changed laws, regulations and standards are subject to varying
interpretations in many cases due to their lack of specificity. As a result,
their application in practice may evolve over time as new guidance is provided
by regulatory and governing bodies, which could result in continuing uncertainty
regarding compliance matters and higher costs necessitated by ongoing revisions
to disclosure and governance practices. We are committed to maintaining high
standards of corporate governance, internal control and public disclosure. As a
result, we intend to invest resources to comply with evolving laws, regulations
and standards, and this investment may result in increased administrative
expenses and a diversion of management time and attention from
revenue-generating activities to compliance activities. If our efforts to comply
with new or changed laws, regulations and standards differ from the activities
intended by regulatory or governing bodies, our reputation may be harmed and our
operations and revenues may be adversely affected.

We are exposed to potential risks from recent legislation requiring companies to
evaluate their internal control over financial reporting under Section 404 of
the Sarbanes-Oxley Act of 2002.

   We are evaluating our internal controls systems in order to allow management
to report on the effectiveness of our internal control over financial reporting
and our registered independent public accounting firm to attest to this report,
as required by Section 404 of the Sarbanes-Oxley Act. We are performing the
system and process evaluation and testing, and implementing any necessary
remediation, required in an effort to comply with the management report and
public accounting firm attestation requirements and continue to incur additional
expenses and devote significant management time towards completing actions
required for management's evaluation. The evaluation and attestation processes
required by Section 404 are new and neither public companies nor public
accounting firms have significant experience in testing or complying with these
requirements. While we have developed and are implementing plans to fully
implement the requirements relating to internal controls and all other aspects
of Section 404 in a timely fashion, we cannot be certain as to the timing of
completion of our evaluation, testing and remediation actions or the impact of
the same on our operations since, like other public companies, we and our
registered independent public accounting firm are undergoing the process for the
first time in a regulatory environment where the standards to assess adequacy of
compliance are under development. We cannot assure you that there may not be
significant deficiencies or material weaknesses that would be required to be
reported as a result of the process.

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 June 30, 2006,
our stock price has ranged from a high of $9.18 to a low of $4.76. 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.


                                       22
<PAGE>


Future sales or the possibility of future sales of substantial amounts of our
common stock by stockholders or by our officers and directors may cause the
price of our common stock to decline.

   Officers, directors and employees, and certain other stockholders hold
significant numbers of shares of our common stock. Some of those shares are
freely tradable without restriction under the federal securities laws, and those
that are not may be sold in the future pursuant to newly filed effective
registration statements, in compliance with the requirements of Rule 144 under
the Securities Act. Sales in the public market of substantial amounts of our
common stock, whether by our officers, directors, employees or others, or the
perception that such sales could occur, could materially adversely affect
prevailing market prices for our common stock and our ability to raise
additional capital through the sale of equity securities.

Anti-takeover laws, our shareholder rights plan, and provisions of our
certificate of incorporation may discourage, delay, or prevent a merger or
acquisition that our stockholders may consider favorable.

   Section 203 of the Delaware General Corporation Law contains provisions that
may delay or prevent a third party from acquiring control of us, even if doing
so might be beneficial to our stockholders by providing them an opportunity to
sell their shares at a premium to the then current market price. In general,
Section 203 prohibits designated types of business combinations, including
mergers, for a period of three years between us and any third party who owns 15%
or more of our common stock. This provision does not apply if:

o    our board of directors approves the transaction before the third party
     acquires 15% of our common stock;

o    the third party acquires at least 85% of our common stock at the time its
     ownership exceeds the 15% level; or

o    our board of directors and two-thirds of the shares of our common stock not
     held by the third party vote in favor of the transaction.

   We also adopted a shareholder rights plan on November 17, 2004 to deter
hostile or coercive attempts to acquire us. Under the plan, if any person or
group acquires more than 15% of our common stock without approval of the board
of directors under specified circumstances, our other stockholders have the
right to purchase shares of our common stock, or shares of the acquiring
company, at a substantial discount to the public market price. This plan makes
an acquisition much more costly to a potential acquirer, which may deter a
potential acquisition.

   Our certificate of incorporation also authorizes us to issue up to 20,000,000
shares of preferred stock in one or more different series with terms fixed by
the board of directors. Stockholder approval is not necessary to issue preferred
stock in this manner. Thus, our board of directors can authorize and issue
shares of preferred stock with voting or conversion rights that could adversely
affect the voting or other rights of holders of our common stock and thereby
reduce its value. These rights could have the effect of making it more difficult
for a person or group to acquire control of us, as well as prevent or frustrate
any attempt by stockholders to change our direction or management. While our
board of directors has no current intention to issue any preferred stock, the
issuance of these shares may deter potential acquirors.

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

   As of June 30, 2006, we had 41,456,616 shares of common stock outstanding,
2,250,000 shares of Series A Convertible Participating Preferred Stock
outstanding which are currently convertible into 4,500,000 shares of common
stock and common stock equivalents, and warrants and stock options, convertible
or exercisable into 11,563,313 shares of our common stock. The exercise and
conversion prices of the common stock equivalents range from $1.25 to $8.80 per
share. We have also reserved for issuance an aggregate of 4,500,000 shares of
common stock for a stock option plan for our employees. Historically, from time
to time, we have awarded our common stock to our officers, in lieu of cash
compensation, although we do not expect to do so in the future. As of June 30,
2006, we have the sale of shares of common stock underlying 4,500,000 options
are registered under the Securities Act on Form S-8. The future resale of these
shares underlying stock options will result in a dilution to your percentage
ownership of our common stock and could adversely affect the market price of our
common stock.

   The terms of our cumulative Series A Convertible Participating 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 the
holder's percentage ownership of our common stock. The resale of many of the
shares of

                                       23
<PAGE>

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.

Item 1B.  Unresolved Staff Comments

None.

Item 2.  Description of Property

     As of the date of this report we do not own any interest in real property.
We currently lease 5,549 square feet of office space at our principal executive
offices at 345 Park Avenue, 41st Floor, New York, New York 10154 for base rent
of approximately $26,351 per month. These facilities are the center for all of
our administrative functions in the United States. Also, we rent approximately
2,437 square feet of office space in Edinburgh, Scotland for approximately
(pound)15,120 per month. In June of 2006, we signed an addendum to the Edinburgh
lease whereby beginning in September of 2006 we will be leasing additional space
of 1,004 square feet for approximately and additional (pound)6,600 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 U.S. and Europe. We do not plan to
conduct laboratory research in any of our facilities in the near future, rather,
we plan to conduct research through collaborative arrangements with SRI and
others.

Item 3.  Legal Proceedings

      We are not currently engaged in any legal proceedings.

     On December 19, 2003, the Company filed a complaint against Dr. Deidre
Tessman and Tessman Technology Ltd. (the "Tessman Defendants") in the Supreme
Court of the State of New York, County of New York (Index No. 03-603984). An
amended complaint alleges, among other things, breach of contract and negligence
by Tessman and Tessman Technology and demands judgment against Tessman and
Tessman Technology in an amount to be determined by the Court. The Tessman
Defendants removed the case to federal court, then remanded it to state court
and served an answer with several purported counterclaims. Each of the parties
had moved for summary judgment dismissing all but one of the claims of the other
parties. Those motions were all denied by the Court, and a trial date had been
set for early 2006. On April 10, 2006, an out of court settlement was reached
and each party executed a release, releasing all claims against the other. A
Stipulation of Discontinuance was filed with the court.

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

        None.


                                       24
<PAGE>


                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters and Issuer
Purchases of Equity Securities

 Market Information

    Our common stock trades on the Nasdaq National Market under the symbol
"BIVN". The following table sets forth the high and low sales of our common
stock for the periods indicated, as reported by Nasdaq:

                                                  High              Low
                                            ----------------   ----------------
Fiscal year ended June 30, 2005
First Quarter........................            $9.24             $5.90
Second Quarter.......................            11.74              6.86
Third Quarter........................             9.18              5.17
Fourth Quarter ......................             7.50              5.30



Fiscal year ended June 30, 2006
First Quarter........................            $9.18             $6.60
Second Quarter.......................             8.22              5.42
Third Quarter........................             8.95              6.35
Fourth Quarter ......................             7.55              4.76


   The last reported sale price of our common stock on the Nasdaq National
Market on August 4, 2006 was $4.49.

   As of August 4, 2006, there were approximately 143 holders of record of our
common stock.

Dividend Policy

   We have never declared or paid cash dividends on our common stock, and our
board of directors does not intend to declare or pay any dividends on the common
stock in the foreseeable future. However, we are required to accrue for and pay
a dividend of 5%, subject to certain adjustments, on our cumulative Series A
Convertible Participating Preferred Stock. 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.

                                       25
<PAGE>

Equity Compensation Plan Information


     The following table provides information about the securities authorized
for issuance under the Company's equity compensation plans as of June 30, 2006:

<TABLE>
<CAPTION>
                                                                       Number of securities
                                                                     remaining available for
                                   Number of                          future issuance under
                               securities to be   Weighted-average     equity compensation
                                 issued upon      exercise price of     plans (excluding
                                 exercise of         outstanding     securities reflected in
                              utstanding options       options             column (a))

        Plan category                (a)                 (b)                   (c)
----------------------------------------------------------------------------------------------
<S>                               <C>               <C>                      <C>
Equity compensation plans         3,203,167         $      5.68              503,500
   approved by security
   holders
Equity compensation plans
   not approved by security
   holders(1)                            --               --                      --

Total                             3,203,167         $      5.68              503,500
</TABLE>


    (1) We have no equity compensation plans not approved by security holders.

     The Board of Directors adopted, and our stockholders approved our 2003
Stock Incentive Plan at the Annual Meeting held in January of 2004. The plan was
adopted to recognize the contributions made by our employees, officers,
consultants, and directors, to provide those individuals with additional
incentive to devote themselves to our future success and to improve our ability
to attract, retain and motivate individuals upon whom our growth and financial
success depends. There are 4,500,000 shares reserved for grants of options and
rights under the plan and at June 30, 2006, 3,996,500 of these options and
rights had been issued.

Issuer Purchases of Equity Securities

None.



                                       26
<PAGE>

Item 6.  Selected Financial Data.

The following Selected Consolidated Financial Data should be read in conjunction
with our Consolidated Financial Statements and the related Notes thereto,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other financial information included elsewhere in this Annual
Report. The data set forth below with respect to our Consolidated Statements of
Operations for the years ended June 30, 2006, 2005 and 2004, the Consolidated
Balance Sheets as of June 30, 2006 and 2005 and the Consolidated Statements of
Cash Flows Data for the years ended June 30, 2006, 2005 and 2004 are derived
from our Consolidated Financial Statements which are included elsewhere in this
Annual Report and are qualified by reference to such Consolidated Financial
Statements and related Notes thereto.

The data set forth below with respect to our Consolidated Statements of
Operations for the years ended June 30, 2003 and 2002, the Consolidated Balance
Sheets as of June 30, 2004, 2003 and 2002 and the Consolidated Statements of
Cash Flows Data for the years ended June 30, 2003 and 2002 are derived from our
Consolidated Financial Statements, which are not included elsewhere in this
Annual Report. Our historical results are not necessarily indicative of future
results of operations.

<TABLE>
<CAPTION>

                                                            Year Ended June 30,
                                     ------------------------------------------------------------------------
    Consolidated Statements of
          Operations Data                2006         2005           2004           2003             2002
          ---------------                ----         ----           ----           ----             ----

<S>                                    <C>            <C>            <C>             <C>             <C>
Revenue                                $5,309,072     $4,651,174     $3,102,214      $504,857        $802,965
                                       ----------     ----------     ----------      --------        --------
Cost of products sold                   1,662,975        921,262              -             -               -
Operating expenses
    Research and development           11,726,981     10,894,925      4,882,574     1,689,278       1,912,258
    Selling, general and
    administrative                     16,562,770     10,181,711      9,082,420     4,567,413       2,127,664
    Depreciation and amortization         974,440      1,438,517      1,348,064     1,344,969         579,342
Provision for bad debts                    24,564        869,220              -             -               -
Loss on impairment                              -      5,276,162              -             -               -
                                       ----------     ----------     ----------     ---------       ---------
Total operating expenses               30,951,730     29,581,797     15,313,058     7,601,660       4,619,264
                                       ----------     ----------     ----------     ---------       ---------
Loss from operations                 (25,642,658)   (24,930,623)   (12,210,844)   (7,096,803)     (3,816,299)
Other income (expense), net             1,743,895        667,838         99,763     (186,426)     (2,172,682)
                                        ---------        -------         ------     ---------    ------------
Loss before income taxes             (23,898,763)   (24,262,785)   (12,111,081)   (7,283,229)     (5,988,981)
Income tax benefit                              -              -      1,459,814     2,117,103       1,168,145
                                       ----------     ----------     ----------     ---------       ---------
Net loss                             (23,898,763)   (24,262,785)   (10,651,267)   (5,166,126)     (4,820,836)
Cumulative preferred stock dividend     (337,500)      (404,079)      (856,776)     (877,818)     (9,482,667)
                                        ---------      ---------      ---------     ---------    ------------
Net loss applicable to common
stockholders                        $(24,236,263)  $(24,666,864)  $(11,508,043)  $(6,043,944)   $(14,303,503)
                                    =============  =============  =============  ============   =============
Basic and diluted shares
outstanding                            40,865,384     34,042,391     20,257,482    16,920,939      12,184,152
Basic and diluted net loss
applicable to stockholders per
share                                 $    (0.59)   $     (0.72)   $     (0.57)  $     (0.36)  $       (1.17)
</TABLE>


                                       27
<PAGE>


<TABLE>
<CAPTION>

                                                              As of June 30,
                                      ----------------------------------------------------------------
              Consolidated Balance
              --------------------
                   Sheets Data            2006        2005         2004         2003        2002
                   -----------            ----        ----         ----         ----        ----

<S>                                    <C>         <C>          <C>          <C>         <C>
             Cash & cash equivalents   $3,377,937  $31,407,533  $18,875,675  $7,929,686  $12,882,521
             Short-term securities     41,637,106   32,746,948            -           -            -
             Intangible assets, net     7,549,520    8,252,936   14,563,660  15,779,399   16,921,792
             Total assets              62,250,464   80,790,135   42,170,844  26,173,132   32,380,548
             Total current
             liabilities                8,592,018    6,738,722    3,460,419   2,264,896    2,447,685
             Total shareholder's
             equity                    46,587,721   66,613,815   30,800,827  21,323,737   25,554,550

<CAPTION>

                                                                   Year Ended June 30,
                                         --------------------------------------------------------------
Consolidated Statements of Cash Flows
-------------------------------------
                 Data                       2006         2005         2004        2003        2002
                 ----                       ----         ----         ----        ----        ----

<S>                                      <C>          <C>          <C>         <C>         <C>
Net cash used in operating activities    (20,794,013) (13,417,438) (4,641,193) (4,411,581) (2,675,113)
Net cash used in investing activities     (7,463,820) (33,384,403)   (130,917)   (541,254)   (455,500)
Net cash provided by financing
activities                                    433,370   59,296,122  15,730,847           -  16,013,134
</TABLE>


Item 7. Management's Discussion and Analysis of Financial Condition and Results
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 8 of
this Annual Report on Form 10-K, which are presented beginning at page F-1.

Summary of Critical Accounting Policies

     Financial Reporting Release No. 60, which was 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 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, 2006 included
under Item 8 in this Annual Report on Form 10-K, which are presented beginning
at page F-1.

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

Revenue Recognition

     In accordance with SEC Staff Accounting Bulletin No. 104, or SAB 104,
upfront nonrefundable fees associated with research and development
collaboration agreements where the Company has continuing involvement in the
agreement, are recorded as deferred revenue and recognized over the estimated
research and development period using the straight-line method. If the estimated
period is subsequently modified, the period over which the up-front fee is
recognized is modified accordingly on a prospective basis using the
straight-line method. 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 term of the licensing arrangement using the straight line
method, which approximates the life of the last to expire of the underlying
patents.

     Royalty revenue from product licensees is recorded when persuasive evidence
of an arrangement exists, the price is fixed or determinable, the goods have
been delivered and collectibility is reasonably assured.

                                       28
<PAGE>

     The Company currently sells its products to wholesale distributors and
directly to hospitals, clinics, and retail pharmacies. Revenue from product
sales is recognized when the risk of loss is passed to the customer, the sales
price is fixed and determinable, and collectibility is reasonably assured.

     Research and development contract revenue includes sales in our
pre-commercial stage named patient program for Evoltra(R) as well as certain
payments due from our co-development partner relating to the reimbursement of
50% for certain of our ongoing research costs in the development of Evoltra(R)
outside the United States.

     The Company follows the guidance of Emerging Issues Task Force, or ETIF,
99-19, "Reporting Revenue Gross as a Principal versus Net as an Agent" in the
presentation of revenues and direct costs of revenues. This guidance requires
the Company to assess whether it acts as a principal in the transaction or as an
agent acting on behalf of others. The Company records revenue transactions gross
in its statements of operations if it is deemed the principal in the
transaction, which includes being the primary obligor and having the risks and
rewards of ownership.

Stock-Based Compensation

     On July 1, 2005, the Company adopted the fair value recognition provisions
of SFAS No. 123 (R) (revised 2004), "Share-Based Payment" ("SFAS 123 (R)"),
requiring the Company to recognize expense related to the fair value of
stock-based compensation. The modified prospective transition method was used as
allowed under SFAS 123 (R). Under this method, the stock-based compensation
expense includes: (a) compensation expense for all stock-based compensation
awards granted prior to, but not yet vested as of July 1, 2005, based on the
grant date fair value estimated in accordance with the original provisions of
SFAS 123, "Accounting for Stock-Based Compensation"; and (b) compensation
expense for all stock-based compensation awards granted subsequent to July 1,
2005, based on the grant date fair value estimated in accordance with the
provisions of SFAS 123 (R). Prior to the adoption of SFAS 123 (R), the Company
had accounted for stock-based compensation arrangements in accordance with
provisions of Accounting Principles Board ("APB") Opinion No. 25 "Accounting for
Stock Issued to Employees", as permitted by SFAS 123. Under APB Opinion No. 25,
no stock-based employee compensation cost was reflected in reported net loss,
when options granted to employees have an exercise price equal to the market
value of the underlying common stock at the date of grant.

      We utilize the Black-Scholes model to measure the value of an employee
option. The Black-Scholes model is a trading options-pricing model that neither
considers the non-traded nature of employee stock options, nor the restrictions
on such trading, the lack of transferability or the ability of employees to
forfeit the options prior to expiry. If the model adequately permitted
consideration of the unique characteristics of employee stock options, the
resulting estimate of the fair value of the stock options could be different.
Our estimates of employee stock option values rely on estimates of factors we
input into the Black-Scholes model. The key factors involve an estimate of
future uncertain events. We determine expected volatility based on historical
activity. We believe that these market-based inputs provide a better estimate of
our future stock price movements. We also use historical exercise patterns as
our best estimate of future exercise patterns. We utilize historical turnover
rates in estimating expected forfeitures separately for executives and
non-executives.

Impairment of Long-Lived Assets

     We believe that the accounting estimate relating to impairment of our
intangible assets involves a critical accounting estimation methodology. The
estimate is highly susceptible to change from period to period because it
requires management to make significant judgments and assumptions about future
revenue, operating costs and development expenditures. Some of the more
significant estimates and assumptions inherent in the intangible asset
impairment estimation process include: the timing and amount of projected future
cash flows; the discount rate selected to measure the risks inherent in the
future cash flows; and the competitive trends impacting the asset, including
consideration of any technical, legal, regulatory, or economic barriers to entry
as well as expected changes in standard of practice for indications addressed by
the asset. Changes in events or circumstances that may affect long-lived assets,
particularly in the pharmaceutical industry, makes judgments and assumptions
with respect to the future cash flows highly subjective and may include, but are
not limited to, cancellations or terminations of license agreements or the risk
of competition that could render our products noncompetitive or obsolete.

Overview and Company Status

     We are a product-oriented biopharmaceutical company primarily focused upon
the acquisition, development, distribution and marketing of compounds and
technologies for the treatment of cancer, autoimmune disease and infection. Our
product pipeline includes Evoltra(R) (Clofarabine), Modrenal(R) (for which
Bioenvision has obtained regulatory approval for marketing in the United Kingdom
for the treatment of post-menopausal breast cancer

                                       29
<PAGE>

following relapse to initial hormone therapy), and certain anti-infective
technologies including the OLIGON(R) technology; an advanced biomaterial that
has been incorporated into various FDA approved medical devices and Suvus(TM),
an antimicrobial agent currently in clinical development for refractory chronic
hepatitis C infection.

     Evoltra(R) is our lead product. In May 2006 the European Medicines Agency
approved Evoltra(R) for the treatment of acute lymphoblastic leukemia (ALL) in
pediatric patients who have relapsed or are refractory to at least two prior
regimens. The licensed indication includes patients who were less than 21 years
of age at the time of initial diagnosis of their leukemia. Evoltra(R) has been
granted orphan drug designation, providing marketing exclusivity for 10 years in
Europe, which 10-year period commenced in May 2006 upon our receipt of EMA
marketing approval. We have a dedicated sales force in the U.K. and several
other countries within the E.U. and will continue to expand our sales force as
we continue to work through pricing and reimbursement in individual countries
within the E.U.

     In March 2006, we entered into a Marketing and Distribution Agreement with
Mayne Pharma Limited, a public company in Australia, to sell, market and
distribute Evoltra(R) (Clofarabine) in Australia and New Zealand in certain
cancer indications. We anticipate entering into similar arrangements with other
marketing and distribution partner(s) around the world (outside North America)
to capitalize on the commercial potential of Evoltra(R) (Clofarabine), with a
fully integrated sales and marketing team being a primary focus for the sales
and marketing partner(s) we may select at any time or from time to time.

    We also are developing Evoltra(R) for the treatment of adult acute myeloid
leukemia (AML) as first-line therapy. The Company has completed enrollment of
its Phase II clinical trial for the treatment of adult AML in elderly patients
unfit for intensive chemotherapy and expects to file a Marketing Authorization
Application in 2006 for this indication - the Company's first label-extension
for Evoltra(R).

     Also, in conjunction with our North American co-development partners,
Genzyme Corporation, clofarabine (Evoltra(R)) is in clinical development for the
treatment of myelodysplastic syndrome (MDS), chronic lymphocytic leukemia (CLL),
chronic myeloid leukemia (CML), non-Hodgkin's lymphoma (NHL), multiple myeloma
(MM), solid tumors and as a preconditioning regimen for transplantation.

     Bioenvision is also conducting late-stage preclinical development of
Evoltra(R) for the treatment of psoriasis and is planning further worldwide
development of Evoltra(R) in autoimmune diseases.

     Bioenvision holds an exclusive worldwide license for clofarabine (outside
Japan and Southeast Asia) and an exclusive, irrevocable option to develop,
market and distribute clofarabine for all human applications in Japan and
Southeast Asia. Bioenvision granted an exclusive sublicense to Genzyme to
co-develop clofarabine for cancer indications in the US and Canada. Genzyme is
commercializing clofarabine for certain cancer indications in the US and Canada
under the brand name Clolar(R). Bioenvision holds an exclusive license in the US
and Canada for all non-cancer indications. Bioenvision originally obtained
clofarabine development and commercialization rights under patents held by
Southern Research Institute.

     In the U.S., in December 2004, the Food and Drug Administration, or FDA,
approved clofarabine, for the treatment of pediatric acute lymphoblastic
leukemia, or ALL, in patients who are relapsed or refractory to at least two
prior regimens of treatment. We believe clofarabine was the first new medicine
initially approved in the U.S., for children with leukemia in more than a
decade. Our U.S. partner, Genzyme Corporation, received Orphan Drug designation
status for clofarabine in the U.S., providing marketing exclusivity for 7 years.
Genzyme is marketing clofarabine under the brand name Clolar(R) in the U.S.

     We are marketing our second product, Modrenal(R), in the United Kingdom, or
U.K., through our sales force of six sales specialists. Modrenal(R) is approved
in the U.K. for the treatment of post-menopausal advanced breast cancer
following relapse to initial hormone therapy.

     With the approval of Evoltra(R) under the EMA's centralized process, we
intend to continue to expand our sales force by adding six to 10 sales
specialists in each of five other key regions within the E.U. either directly or
through a sales agent or marketing and distribution partner(s) which include the
countries of France, Germany, Italy, Spain, Portugal, Netherlands, Austria,
Belgium, Denmark and Sweden. Further, we intend to penetrate all of the other
markets within the E.U. upon establishing traction in the E.U.'s major markets.
Initially, outside the U.K., we maintain a fully dedicated sales force through
Innovex, an affiliate of Quintiles Limited, which we intend to convert to a
direct sales force of our own by fourth quarter calendar 2007.

     In addition to Evoltra(R) and Modrenal(R), we are currently in clinical
development of Suvus(R) for chronic Hepatitis C. This product is also in
pre-clinical development for the treatment of West Nile Virus and influenza.

                                       30
<PAGE>

     Over the next 12 months, we intend to continue our internal growth strategy
to provide the necessary regulatory, sales and marketing capabilities which will
be required to pursue the expanded development programs described above.

     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 early stage of our operations.

     We anticipate that revenues derived from Evoltra(R) will permit us to
further develop the other products currently in our product pipeline. In
addition to clofarabine and Modrenal(R), we are performing development work
Suvus(TM) for the treatment of Hepatitis C. The work to date on these compounds
has been limited because of the need to concentrate on Evoltra(R), but
management believes these compounds have potential value. With Suvus(TM) the
Company has commenced a phase II clinical trial in patients with hepatitis C
viral infection. 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 License and Sub-License Agreement with
Dechra Pharmaceuticals, plc, or Dechra, pursuant to which we sub-licensed the
marketing and development rights to Vetoryl(R) (trilostane), solely with respect
to animal health applications, in the U.S. 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 capitalize on these types of opportunities as they arise. The Company
also owns rights to OLIGON(R) technology and we have had discussions with
potential product licensing 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.

     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    continue to establish and maintain relationships with manufacturers for our
     products;

o    respond to industry and competitive developments; and

o    attract, retain, and motivate qualified personnel.

    We may not be successful in addressing these or any risks associated with
our business and/or products. 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, 2006 Compared to Year Ended June 30, 2005

     We reported revenues of approximately $5,309,000 and $4,651,000 for the
years ended June 30, 2006 and 2005, respectively, representing an increase of
approximately $658,000. This increase was primarily an increase in royalties
from US sales of clofarabine of approximately $773,000 and named patient
reimbursements of approximately $2,044,000 for sales of Evoltra(TM) . This
increase was partially offset by a decrease in research and development contract
revenue of approximately $1,910,000 as the Company did not record revenue for
the year ended June 30, 2006, related to the reimbursement from our
co-development partner for certain of our ongoing research costs in the
development of Evoltra(TM) outside the United States because it determined that
the criteria for recognizing such contract revenue had not been met. If and when
the Company determines that collectibility is reasonably assured, the Company
will record the revenue.

     The cost of products sold for years ended June 30, 2006 and June 30, 2005
was approximately $1,663,000 and $921,000, respectively, representing an
increase of approximately $742,000. The cost of products sold reflects the
direct costs associated with our commercial sales and royalties due on the sale
of our lead products of approximately $1,277,000 and $525,000 for the years
ended June 30, 2006 and 2005, respectively.

     Research and development costs for the years ended June 30, 2006 and 2005
were approximately $11,727,000 and $10,895,000 respectively, representing an
increase of approximately $832,000.

      Our research and development costs include costs associated with the six
projects shown in the table below, five of which the Company currently devotes
time and resources:

                                (in thousands)
Product                      2006           2005          Change
--------                     ----           ----          -------

Evoltra(R)                  $9,125        $8,697          $428

Modrenal(R)                  2,283         1,972           311

Suvus(TM)                      319           131           188

Velostan                        -             79           (79)

OLIGON(R)                       -             16           (16)

Gene Therapy                    -             -             -
                           ---------      ---------      ------

Total                      $11,727       $10,895          $832
                           =======       ========         ====

     Evoltra(R) research and development costs for the years ended June 30, 2006
and 2005 were approximately $9,125,000 and $8,697,000, respectively,
representing an increase of approximately $428,000. The increase primarily
reflects costs which are associated with our increased development activities
and clinical trials of Evoltra(R) being conducted in Europe (which includes the
filing process for EU approval) coupled with recording stock-based compensation
expense, relating to stock options granted to employees that devote their time
to clofarabine research and development.

      Modrenal(R) research and development costs for the years ended June 30,
2006 and 2005 were approximately $2,283,000 and $1,972,000, respectively,
representing an increase of approximately $311,000. This increase is due
primarily to the costs associated with our Phase II clinical trial in
pre-menopausal cancer and Phase IV clinical trial in patients with
post-menopausal cancer, which are each being conducted in the UK.

     Suvus(TM) research and development costs for the years ended June 30, 2006
and 2005 were approximately $319,000 and $131,000, respectively, representing an
increase of approximately $188,000. The increase primarily reflects the costs
associated with the ongoing, multi-center investigator sponsored Phase II
clinical trial being conducted in Egypt during the twelve months ended June 30,
2006 and costs associated with the preparation of an IND application to be filed
with FDA.

                                       32
<PAGE>

     Velostan research and development costs for the years ended June 30, 2006
and 2005 were approximately $0 and $79,000, respectively, representing a
decrease of approximately $79,000. There were no research and development costs
associated with Velostan for the year ended June 30, 2006 because our third
party vendors must develop a manufacturing process to create a raceamic form of
the compound for use in the Company's clinical development program in order for
us to continue our development activities with this compound. No assurance can
be given the Company will be able to create the L-form Velostan required for the
clinical development program or, if it can, the timing of such development.

      OLIGON(R) research and development costs for the years ended June 30, 2006
and 2005 were $0 and $16,000, respectively, representing a decrease of $16,000.
Our continued lack of devoted resource to develop this compound reflects our
continued emphasis on the development of Evoltra(R) during this period.

     The clinical trials and development strategy for the Evoltra(R) and
Modrenal(R) 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. Total costs to date for
each of our projects is as follows: (i) Evoltra(R) research and development
costs have been approximately $23,441,000; (ii) Modrenal(R) research and
development costs have been approximately $8,652,000; (iii) Velostan research
and development costs have been approximately $380,000; (iv) Suvus(TM) research
and development costs have been approximately $508,000; (v) OLIGON(R) research
and development costs have been approximately $24,000; and (vi) Gene Therapy
research and development costs have been approximately $451,000.

     Selling, general and administrative expenses for the years ended June 30,
2006 and 2005 were approximately $16,563,000 and $10,182,000, respectively,
representing an increase of approximately $6,381,000. This increase primarily is
due to:

     o    an increase of approximately $3,450,000 in employee stock based
          compensation expense (a non-cash item) primarily due to the Company's
          adoption of SFAS 123 (R) on July 1, 2005 and the extension of the
          exercise period of 1,500,000 vested options originally granted to an
          officer of the Company from five to ten years;
     o    an increase in sales and marketing costs of approximately $1,200,000
          related to the Company's development of a sales and marketing force in
          Europe;
     o    an increase in payroll due to the significant increase in employee
          headcount in both New York and Edinburgh offices of approximately
          $540,000;
     o    an increase of approximately $256,000 due to an increase in insurance
          premiums paid by the Company.

     Depreciation and amortization expense for the years ended June 30, 2006 and
2005 were approximately $974,000 and $1,439,000, respectively, representing a
decrease of approximately $465,000. The decrease is due to the Company recording
an impairment charge of approximately $5,276,000 at June 30, 2005, which
decreased the cost basis of our methylene blue intangibles.

     Provision for bad debts for the years ended June 30, 2006 and 2005 were
approximately $25,000 and $869,000, respectively, representing a decrease of
approximately $844,000. The decrease is due to the Company recording a valuation
allowance relating to certain of the outstanding receivable balances from our
co-development partner totaling $869,000 in the prior year.


Year Ended June 30, 2005 Compared to Year Ended June 30, 2004

     We reported revenues of approximately $4,651,000 and $3,102,000 for the
years ended June 30, 2005 and 2004, respectively, representing an increase of
approximately $1,549,000. This increase primarily was due to an increase in
license and royalty revenue from milestone payments and royalties received from
certain of our co-development partners in the amount of approximately $450,000,
an increase in research and development contract revenue due to increased sales
in the Named Patient Program, increased reimbursements from Genzyme related to
clofarabine research and development expenses, in the amount of approximately
$488,000, and revenue from the sale of Modrenal(R) of approximately $611,000.

                                       33
<PAGE>

     The cost of products sold for years ended June 30, 2005 and June 30, 2004
were approximately $921,000 and $0, respectively. The cost of products sold
reflects the direct costs associated with our sales of Modrenal(R) and royalties
due on the sale of our lead products of approximately $525,000.

      Research and development costs for the years ended June 30, 2005 and 2004
were approximately $10,895,000 and $4,883,000 respectively, representing an
increase of approximately $6,012,000.

      Our research and development costs include costs associated with the six
projects shown in the table below, five of which the Company currently devotes
time and resources:

                                  (in thousands)
Product                    2005          2004          Change
--------                   ----          ----          ------

Evoltra(R)                  $8,697        $2,650        $6,047

Modrenal(R)                  1,972         2,026           (54)

Suvus(TM)                      131            48            83

Velostan                        79           152           (73)

OLIGON(R)                       16             7             9

Gene Therapy                     -             -             -
                           -------        ------         -----
Total                      $10,895        $4,883        $6,012
                           =======        ======        ======


     Evoltra(R) research and development costs for the years ended June 30, 2005
and 2004 were approximately $8,697,000 and $2,650,000, respectively,
representing an increase of approximately $6,047,000. The increase primarily
reflects costs which are associated with our increased development activities
and clinical trials of Evoltra(R) being conducted in Europe, certain of which
are partially reimbursed by Genzyme.

    Modrenal(R) research and development costs for the years ended June 30, 2005
and 2004 were approximately $1,972,000 and $2,026,000, respectively,
representing a decrease of approximately $54,000. The decrease primarily
reflects the Company's primary focus on Evoltra(R) during this period.

    Suvus(TM) research and development costs for the years ended June 30, 2005
and 2004 were approximately $131,000 and $48,000, respectively, representing an
increase of approximately $83,000. The increase primarily reflects the costs
associated with the ongoing, multi-center investigator sponsored Phase II
clinical trial being conducted in Egypt and Southern Europe during the year
ended June 30, 2005.

     Velostan research and development costs for the years ended June 30, 2005
and 2004 were approximately $79,000 and $152,000, respectively, representing a
decrease of approximately $73,000. The decrease primarily reflects the Company's
primary focus on Evoltra(R) during this period.

     OLIGON research and development costs for the years ended June 30, 2005 and
2004 were $16,000 and $7,000, respectively, representing an increase of
approximately $9,000. The increase primarily reflects pre-development costs
incurred in connection with continuing co-partnering discussions.

     The clinical trials and development strategy for the Evoltra(R) and
Modrenal(R) 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. Total costs to date for
each of our projects is as follows: (i) Evoltra(R) research and development
costs have been approximately $14,315,000; (ii) Modrenal(R) research and
development costs have been approximately $6,369,000; (iii) Velostan research
and development costs have been approximately $380,000; (iv) Suvus(TM) research
and development costs have been approximately $189,000; (v) OLIGON research and
development costs have been approximately $25,000; and (vi) Gene Therapy
research and development costs have been approximately $451,000.

                                       34
<PAGE>

     Selling, general and administrative expenses for the years ended June 30,
2005 and 2004 were approximately $10,182,000 and $9,082,000, respectively,
representing an increase of approximately $1,100,000. This increase primarily is
due to:

     o    an increase in payroll due to the significant increase in employee
          headcount in both New York and Edinburgh offices of approximately
          $800,000;
     o    an increase in consulting and legal fees due to the Company's
          expansion of regulatory and investor relations initiatives, and the
          restatement of the Company's financial statements included in the
          Company's 2004 annual report on Form 10-KSB, in the amount of
          $1,559,000;
     o    an increase in sales and marketing costs of approximately $592,000
          related to the Company's development of a sales and marketing force in
          the UK;
     o    an increase of approximately $250,000 due to an increase in the
          Company's annual rent expense; and
     o    an increase of approximately $97,000 due to an increase in insurance
          premiums paid by the Company.

     These increases are substantially offset by a decrease in costs associated
with the variable accounting treatment of options issued to an officer of the
Company in the amount of approximately $2,200,000.

     Depreciation and amortization expense for the years ended June 30, 2005 and
2004 were approximately $1,439,000 and $1,348,000, respectively, representing an
increase of approximately $91,000. This increase primarily reflects the
corresponding increase in our net asset base.

      Provision for bad debts for the years ended June 30, 2005 and 2004 were
approximately $869,000 and $0, respectively. The increase is due to the Company
recording a valuation allowance relating to certain of the outstanding
receivable balances from our co-development partner totaling $869,000 in the
current year. Management believes the amounts billed to its co-development
partner and previously recorded as revenue through March 31, 2005 are
supportable and continues to actively pursue collection of the outstanding
balances. During its quarterly closing process the Company further evaluated the
collectibility of such amounts and concluded that based upon the available
information a valuation allowance was required. Additionally, based on the delay
in payment from our co-development partner and other information, management
concluded that collectibility was no longer reasonably assured and therefore,
did not recognize revenue on amounts billed in the quarter ended June 30, 2005.

     Prior to the fourth quarter of 2005, we tested for impairment our methylene
blue intangibles acquired in connection with the Pathagon acquisition and
determined that, based on our assumptions, the sum of the expected future cash
flows, undiscounted and pertaining solely and exclusively to approved
indications, exceeded the carrying value of its long-lived assets and therefore
we did not recognize an impairment. Due to the loss of an intellectual property
patent suit relating to the international use of methylene blue in fresh frozen
plasma, we re-evaluated the intangible asset relating to methylene blue at June
30, 2005. At that date, we estimated that our undiscounted future cash flows,
again relating solely and exclusively to approved uses of methylene blue, were
less than the carrying value. As a result, we recognized a non-cash impairment
loss of $5,276,000, equal to the difference between the estimated future cash
flows for approved uses of methylene blue, discounted at an appropriate rate,
and the carrying amount of the asset. Making the impairment determination and
the amount of impairment requires significant judgment by management and
assumptions with respect to the future cash flows. Changes in events or
circumstances that may affect long-lived assets makes judgments and assumptions
with respect to the future cash flows highly subjective.

     The Company has been incurring losses since inception and therefore has not
recorded an income tax provision for the years ended June 30, 2005 and 2004. The
Company has recorded a deferred income tax benefit of approximately $0 and
$1,460,000 for the years ended June 30, 2005 and 2004, respectively.

Liquidity and Capital Resources

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

     On June 30, 2006, we had cash and cash equivalents of approximately
$3,378,000, short-term securities of $41,637,000 and working capital of
$40,065,000. Management believes the Company has sufficient cash and cash
equivalents, short-term securities and working capital to continue currently
planned operations through June 30, 2007.

                                       35
<PAGE>

     However, we may need additional financing to continue to fund the research
and development and marketing programs for our products and to generally expand
and grow our business. Because we will be required to fund additional operating
losses in the foreseeable future, our financial position will continue to
deteriorate. We cannot be sure that we will be able to find financing in the
future or, if found, such funding may not be on terms favorable to us. 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.

   Although we do not currently plan to acquire or obtain licenses for new
technologies, if any such opportunity arises and our board deems it to be in our
interests to pursue such an opportunity, it is possible that additional
financing would be required for such a purpose.

     For the fiscal year ended June 30, 2006 and 2005, net cash used in
operating activities was approximately $20,794,000 and $13,417,000,
respectively, representing an increase of approximately $7,377,000. This
increase is primarily due to increased costs associated with (i) our expanded
research and development activity, (ii) selling general and administrative
expenses, including an increase in costs associated with the expanded sales and
marketing and administrative infrastructure and costs associated with the
internal build out of the Company and (iii) cash paid for insurance premiums.
For the fiscal year ended June 30, 2006 and 2005, net cash used in investing
activities was approximately $7,464,000 and $33,384,000, respectively,
representing a decrease of approximately $25,920,000. This decrease is primarily
due to the Company investing the proceeds from our February 2005 secondary
offering in short-term securities in the fiscal year ended June 30, 2005 in
order to obtain a higher investment yield. For the fiscal year ended June 30,
2006 and 2005, net cash provided by financing activities was approximately
$433,000 and $59,296,000 representing a decrease of $58,863,000. This decrease
is primarily due to the completion of the secondary public offering in February
2005 which yielded net proceeds of approximately $55,747,000.

 For the fiscal years ended June 30, 2005 and 2004, net cash used in operating
activities was approximately $13,417,000 and $4,641,000, respectively,
representing an increase of approximately $8,776,000. This increase is primarily
due to increased costs associated with (i) our expanded research and development
activity, with Evoltra(R) specifically, (ii) selling general and administrative
expenses, including an increase in costs associated with the expanded sales and
marketing and administrative infrastructure and costs associated with the
internal build out of the Company and (iii) cash paid for insurance premiums.
For the fiscal years ended June 30, 2005 and 2004, net cash used in investing
activities was approximately $33,384,000 and $131,000, respectively,
representing an increase of approximately $33,253,000. This increase is
primarily due to the Company investing the proceeds from our February 2005
secondary offering in short-term securities in order to obtain a higher
investment yield. For the fiscal years ended June 30, 2005 and 2004, net cash
provided by financing activities was approximately $59,296,000 and $15,731,000
representing an increase of $43,565,000. This increase is primarily due to the
completion of the secondary public offering in February 2005 which yielded
proceeds of $55,747,000, net of related expenses.

The Company has the following commitments due over the next five years:

                                    Payments Due in
                          2007         2008        2009        2010       2011


Operating Leases        $ 1,019,728   $ 819,600   $ 371,623    $178,570       -
Contractual
obligations                 214,602           -           -           -       -
                     -----------------------------------------------------------
Total                   $ 1,234,330   $ 819,600   $ 371,623    $178,570       -
                     ===========================================================

The contractual obligations relate to minimum payments due for research
conducted on modrenal.

Off-balance sheet arrangements

We have no off-balance sheet arrangements.

                                       36
<PAGE>


Recent Accounting Pronouncements

        In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109 ("FIN
48"). This Interpretation clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes
that a company should use a more likely than not recognition threshold based on
the technical merits of the tax position taken. Tax positions that meet the more
likely than not recognition threshold should be measured in order to determine
the tax benefit to be recognized in the financial statements. FIN 48 is
effective in fiscal years beginning after December 15, 2006. We do not expect
the adoption of FIN 48 to have a material impact on the results of operations or
financial condition of the Company.

        In May 2005, the FASB issued SFAS 154 "Accounting Changes and Error
Corrections," a replacement of APB Opinion 20 and SFAS 3. SFAS 154 changes the
accounting for, and reporting of, a change in accounting principle. SFAS 154
requires retrospective application to prior period's financial statements of
voluntary changes in accounting principle, and changes required by new
accounting standards when the standard does not include specific transition
provisions, unless it is impracticable to do so. SFAS 154 is effective for
accounting changes and corrections made in fiscal years beginning after December
15, 2005.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

     Our excess cash is invested in Certificates of Deposit with various
short-term maturities. We hold no derivative financial instruments and we do not
currently engage in hedging activities. As of June 30, 2006, we do not have any
outstanding debt. Accordingly, due to the maturity and credit quality of our
investments, we are not subjected to any substantial risk arising from changes
in interest rates, currency exchange rates and commodity and equity prices.
However, the Company does have some exposure to foreign currency rate
fluctuations arising from maintaining an office for the Company's U.K. based,
wholly-owned subsidiary which transacts business in the local functional
currency. Management periodically reviews such foreign currency risk and to date
has not undertaken any foreign currency hedges through the use of forward
exchange contracts or options and does not foresee doing so in the near future.

Item 8.  Financial Statements and Supplementary Data

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


Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

     As more fully disclosed in Bioenvision's current report on Form 8-K filed
on April 19, 2006, on April 18, 2006, Bioenvision appointed J.H. Cohn LLP ("J.H.
Cohn") as its new independent registered public accounting firm for the fiscal
year ending June 30, 2006. The decision to engage J.H. Cohn was made by the
Audit Committee of the Company's Board of Directors. J.H. Cohn replaced Deloitte
& Touche LLP who, as more fully disclosed in Bioenvision's current report on
Form 8-K/A filed on February 21, 2006, resigned as the Company's independent
registered public accounting firm, effective February 15, 2006.

Item 9A.   Controls and Procedures

Conclusion Regarding the Effectiveness of Disclosure Controls and
Procedures

     As of the end of the period covered by this annual report, we carried out
an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e)
and 15d-15(e)). Based upon the foregoing evaluation, our Chief Executive Officer
and Chief Financial Officer have concluded that our disclosure controls and
procedures are effective to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
rules and forms of the Securities and Exchange Commission.

                                       37
<PAGE>

Management's Report on Internal Control Over Financial Reporting

     Our management is responsible for establishing and maintaining adequate
internal control over financial reporting and for the assessment of the
effectiveness of internal control over financial reporting. As defined by the
Securities and Exchange Commission, internal control over financial reporting is
a process designed by, or under the supervision of our principal executive and
principal financial officers and effected by our Board of Directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of the consolidated financial
statements in accordance with U.S. generally accepted accounting principles.

     Our internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect our transactions and dispositions of our
assets; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of the consolidated financial statements in
accordance with generally accepted accounting principles, and that our receipts
and expenditures are being made only in accordance with authorizations of our
management and directors; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use or disposition
of our assets that could have a material effect on the consolidated financial
statements.

     Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

     In connection with the preparation of our annual consolidated financial
statements, management has undertaken an assessment of the effectiveness of our
internal control over financial reporting as of June 30, 2006, based on criteria
established in Internal Control - Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission, or the COSO Framework.
Management's assessment included an evaluation of the design of our internal
control over financial reporting and testing of the operational effectiveness of
those controls.

     Based on this evaluation, management has concluded that our internal
control over financial reporting was effective as of June 30, 2006.

     J.H. Cohn LLP, the independent registered public accounting firm that
audited our consolidated financial statements included elsewhere in our report
on Form 10-K, has issued their report on management's assessment of and the
effectiveness of internal control over financial reporting, a copy of which is
included below.



                                       38
<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of Bioenvision, Inc.:

We  have  audited   management's   assessment,   included  in  the  accompanying
"Management's  Report  on  Internal  Control  Over  Financial  Reporting",  that
Bioenvision, Inc. and Subsidiaries ("Bioenvision") maintained effective internal
control  over  financial  reporting  as of June  30,  2006,  based  on  criteria
established in Internal  Control - Integrated  Framework issued by the Committee
of Sponsoring  Organizations of the Treadway  Commission  (COSO).  Bioenvision's
management  is  responsible  for  maintaining  effective  internal  control over
financial  reporting  and for its  assessment of the  effectiveness  of internal
control over financial reporting. Our responsibility is to express an opinion on
management's  assessment and an opinion on the  effectiveness  of  Bioenvision's
internal control over financial reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other procedures as we consider necessary in the circumstances.  We believe that
our audit provides a reasonable basis for our opinion.

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with accounting principles generally accepted in the United States of America. A
company's internal control over financial  reporting includes those policies and
procedures  that (1) pertain to the  maintenance  of records that, in reasonable
detail,  accurately and fairly reflect the  transactions and dispositions of the
assets of the company;  (2) provide  reasonable  assurance that transactions are
recorded  as  necessary  to  permit  preparation  of  financial   statements  in
accordance with accounting principles generally accepted in the United States of
America,  and that receipts and  expenditures of the company are being made only
in accordance  with  authorizations  of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company's assets that could
have a material effect on the financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion,  management's  assessment that Bioenvision  maintained effective
internal control over financial reporting as of June 30, 2006, is fairly stated,
in all material  respects,  based on criteria  established in Internal Control -
Integrated Framework issued by the Committee of Sponsoring  Organizations of the
Treadway Commission (COSO). Also in our opinion,  Bioenvision maintained, in all
material  respects,  effective  internal control over financial  reporting as of
June 30, 2006,  based on criteria  established in Internal  Control - Integrated
Framework  issued by the Committee of Sponsoring  Organizations  of the Treadway
Commission (COSO).

We have also  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States), the 2006 consolidated balance sheet
and related  statements of  operations,  stockholders'  equity and cash flows of
Bioenvision  and our report  dated  August 21,  2006  expressed  an  unqualified
opinion on those statements.



 /s/ J.H. Cohn LLP


 Roseland, New Jersey
 August 21, 2006


                                       39
<PAGE>

Changes in Internal Controls

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

Remediation of Past Material Weaknesses in Internal Controls Over Financial
Reporting

In connection with the filing of our annual report on Form 10-KSB, for the
fiscal year ended June 30, 2005, under the direction of our principal executive
officer and principal financial officer, we evaluated our disclosure controls
and procedures and concluded that as of June 30, 2005, the following material
weakness in internal control over financial reporting existed:

     o    we did not maintain effective controls relating to the timely
          identification, evaluation and accurate resolution of non-routine or
          complex accounting matters, specifically, (i) we did not timely
          identify and evaluate a change of circumstances that resulted in an
          impairment of our intangible assets relating to certain patents, (ii)
          we did not timely identify and accurately resolve an accounting issue
          related to contractual revenue recognition and (iii) we did not timely
          evaluate our accounts receivable for the need of a valuation
          allowance, each of which resulted in a material adjustment to our
          consolidated financial statements for the fiscal year ended June 30,
          2005.

Management discussed this material weakness with the audit committee. As of
December 31, 2005, we had taken the following measures to remediate the above
material weakness in our internal controls over financial reporting that existed
as of June 30, 2005. The remedial actions included:

     o    improving training and education for all relevant personnel involved
          in the preparation and review of the Company's financial statements;

     o    the formation of a Disclosure Committee;

     o    hiring an additional accountant; and

     o    Use of prepared checklists for the preparation of periodic SEC reports
          to ensure the completeness and accuracy of those reports. The Company
          has adopted the practice of using prepared checklists for upcoming SEC
          periodic reports that set forth new and changing requirements to
          ensure that those requirements are satisfied in the periodic reports.

We believe that the material weakness referenced above has been remediated as of
June 30, 2006.

Item 9B.   Other Information.

     None.

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

     Pursuant to Paragraph G(3) of the General Instructions to Form 10-K, the
information required by Part III (Items 10, 11, 12 , 13 and 14) is being
incorporated by reference herein from our definitive proxy statement (or an
amendment to our Annual Report on Form 10-K) to be filed with the Securities and
Exchange Commission within 120 days of the end of the fiscal year ended June 30,
2006 in connection with our 2006 Annual Meeting of Stockholders.

Item 11.  Executive Compensation

     See Item 10.

                                       40
<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

     See Item 10.

Item 13.  Certain Relationships and Related Transactions

     See Item 10.

Item 14. Principal Accountant Fees and Services

     See Item 10.

                                     PART IV

Item 15. Exhibits, Financial Statement Schedules

         (a) The following documents are being filed as part of this report:

           (1) Consolidated Financial Statements

           Reference is made to the Index to Consolidated Financial Statements
           of Bioenvision appearing on page F-1 of this report.

           (2) Consolidated Financial Statement Schedules

           The following consolidated financial statement schedule of the
           Company for each of the years ended June 30, 2006, 2005 and 2004, is
           filed as part of this Annual Report on Form 10-K and should be read
           in conjunction with the Consolidated Financial Statements, and the
           related notes thereto, of the Company.

                                                                      Page
                                                                     Number
                                                                     --------

      Schedule II -- Valuation and Qualifying Accounts                    S-3

         (3) Exhibits:


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, filed March 15, 2002 (6)

                                       41
<PAGE>

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

3.1(d)                        Certificate of Designations, Preferences and
                              Rights of series A Preferred Stock (6)

3.1(e)                        Certificate of Amendment to the Certificate of
                              Incorporation, filed January 14, 2004 (15)

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

4.1                           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)

4.2                           Stockholders Lock-Up 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)

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

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

4.5                           Form of Warrant (6)

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

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

4.8                           Common Stock and Warrant Purchase Agreement, dated
                              as of March 22, 2004, by and among Bioenvision,
                              Inc. and the Investors set forth on Schedule I
                              thereto (16)

4.9                           Registration Rights Agreement, dated March 22,
                              2004, by and between Bioenvision, Inc. and the
                              Investors set forth on Schedule I thereto (16)

4.10                          Form of Warrant (16)

4.11                          Bioenvision, Inc. 2003 Stock Incentive Plan (17)

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


                                       42
<PAGE>

                              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)

10.14                         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)

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

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

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

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

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

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

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

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

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

                                       43
<PAGE>

10.24                         Employment Agreement between Bioenvision Limited
                              and Hugh Griffith, effective as of October 23,
                              2002 (18)

10.25                         Employment Agreement between Bioenvision Limited
                              and Ian Abercrombie, effective as of January 6,
                              2003 (18)

10.26                         Amendment # 2 to the Co-Development Agreement
                              between Bioenvision and ILEX Oncology, Inc. dated
                              December 30, 2003.(21)

10.27                         Amendment to the Co-Development Agreement between
                              Bioenvision, Inc. and SRI, dated as of March 12,
                              2001.(21)

10.28                         Letter Agreement For Co-Development Of An Oral
                              Clofarabine Formulation and First Amendment to
                              Co-Development Agreement dated March 12, 2001
                              between Bioenvision, Inc. and ILEX .(21)

10.29                         Joinder made by Bioenvision, Inc., dated February
                              26, 2004 (22)

10.30                         Supply Agreement-Trilostane, by and among, Stegram
                              Pharmaceuticals, Bioenvision, Inc., Dechra Ltd.
                              and Sterling SNIFF, dated as of August 12, 2005
                              (22)

10.31                         Supply Agreement-Trilostane, by and among, Stegram
                              Pharmaceuticals, Bioenvision, Inc., Dechra Ltd.
                              and Steroid SpA, dated as of August 12, 2005 (22)

10.32                         Amendment to Employment Agreement, by and between
                              Bioenvision and David P. Luci, dated February 6,
                              2006 (23)

10.33                         Clofarabine Marketing and Development Agreement,
                              by and between Bioenvision Inc. and Mayne Pharma
                              Limited, dated March 24, 2006 (24)

14.1                          Bioenvision Inc.'s Code of Business Conduct and
                              Ethics (19)

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)

16.4                          Letter from Grant Thornton LLP to the Securities
                              and Exchange Commission , dated April 7, 2005 (20)

16.5                          Letter from Deloitte & Touche LLP to the
                              Securities and Exchange Commission , dated January
                              19, 2006 (25)

21.1                          Subsidiaries of the registrant (4)

23.1                          Consent of Independent Registered Public
                              Accounting Firm

23.2                          Consent of Prior Independent Registered Public
                              Accounting Firm

23.3                          Consent of Prior Independent Registered Public
                              Accounting Firm

24.1                          Power of Attorney (appears on Signature page)

31.1                          Certification of Christopher B. Wood, Chief
                              Executive Officer, as adopted pursuant to


                                       44
<PAGE>

                              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-month period ended March 31,
      2003.

(15)  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, 2004.

(16)  Incorporated by reference and filed as an Exhibit to Registrant's Current
      Report on Form 8-K, filed with the SEC on March 24, 2004.

                                       45
<PAGE>

(17)  Registrant's definitive proxy statement on Schedule 14-A, filed in
      connection with the annual meeting held on January 14, 2004.

(18)  Incorporated by reference and filed as an Exhibit to Registrant's
      Quarterly Report on Form 10-QSB for the three- month period ended
      September 30, 2003.

(19)  Incorporated by reference and filed as an Exhibit to Registrant's Annual
      Report on Form 10-KSB for the year ended June 30, 2004.

(20)  Incorporated by reference and filed as an Exhibit to Registrant's Current
      Report on Form 8-K, filed with the SEC on April 7, 2005.

(21)  Incorporated by reference and filed as an Exhibit to Registrant's Annual
      Report on Form 10-KSB, filed with the SEC on October 13, 2005.

(22)  Incorporated by reference and filed as an Exhibit to Registrant's
      Quarterly Report on Form 10-QSB for the three- month period ended
      September 30, 2005.

(23)  Incorporated by reference and filed as an Exhibit to Registrant's Current
      Report on Form 8-K, filed with the SEC on February 10, 2006.

(24)  Incorporated by reference and filed as an Exhibit to Registrant's
      Quarterly Report on Form 10-Q for the three- month period ended March 31,
      2006.

(25)  Incorporated by reference and filed as an Exhibit to Registrant's Current
      Report on Form 8-K filed with the SEC on January 20, 2006.



                                       46
<PAGE>


                        SIGNATURES AND POWER OF ATTORNEY


        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
September 11, 2006, 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
                                       Chief Financial Officer, General Counsel
                                       and Corporate Secretary
                                             (Principal Financial and
                                             Accounting Officer)

        Each person whose signature appears below hereby constitutes and
appoints either Christopher B. Wood, M.D. or David P. Luci his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this report, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying all that said attorney-in-fact and agent or his
substitute or substitutes, or any of them, may lawfully do or cause to be done
by virtue hereof. 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        September 11, 2006
-----------------------------           Officer and Director
Christopher B. Wood, M.D.               (Principal Executive Officer)

/s/ David P. Luci                       Chief Financial Officer, General    September 11, 2006
-----------------                       Counsel and Corporate  Secretary
David P. Luci                           (Principal Financial and
                                        Accounting Officer)

/s/ Thomas S. Nelson                    Director                            September 11, 2006
--------------------
Thomas S. Nelson, C.A.

/s/  Michael Kauffman
---------------------
Michael Kauffman                        Director                            September 11, 2006

/s/ Andrew N. Schiff                    Director                            September 11, 2006
--------------------
Andrew N. Schiff
                                        Director                            September 11, 2006
/s/ Steven A. Elms
------------------
Steven A. Elms
</TABLE>



                                       47
<PAGE>






INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                                              <C>
Report of Independent Registered Public Accounting Firm                                          F-1

Report of Prior Independent Registered Public Accounting Firm                                    F-2

Report of Prior Independent Registered Public Accounting Firm                                    F-3

Consolidated Balance Sheets as of June 30, 2006 and 2005                                         F-4

Consolidated Statements of Operations for years ended June 30, 2006, 2005 and 2004               F-5

Consolidated Statements of Stockholders' Equity for years ended June 30, 2006, 2005 and 2004     F-6

Consolidated Statements of Cash Flows for years ended June 30, 2006, 2005 and 2004               F-8

Notes to Consolidated Financial Statements                                                       F-9

Report of Independent Registered Public Accounting Firm                                          S-1

Report of Prior Independent Registered Public Accounting Firm                                    S-2

Schedule II -- Valuation and Qualifying Accounts                                                 S-3

</TABLE>



<PAGE>



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


The Board of Directors and Stockholders of Bioenvision, Inc.:

We have audited the accompanying consolidated balance sheet of Bioenvision, Inc.
and  Subsidiaries  (the  "Company")  as  of  June  30,  2006,  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  year  then  ended.   These  consolidated   financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial  position of Bioenvision,  Inc.
and  Subsidiaries  as of June 30, 2006, and their results of operations and cash
flows  for the  year  then  ended,  in  conformity  with  accounting  principles
generally accepted in the United States of America.

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the effectiveness of the Company's
internal control over financial reporting as of June 30, 2006, based on criteria
established in Internal  Control - Integrated  Framework issued by the Committee
of  Sponsoring  Organization  of the Treadway  Commission  (COSO) and our report
dated  August  21,  2006,  expressed  an  unqualified  opinion  on  management's
assessment  of internal  control over  financial  reporting  and an  unqualified
opinion on the effectiveness of the internal control over financial reporting.



/s/ J.H. Cohn LLP


Roseland, New Jersey
August 21, 2006



                                      F-1
<PAGE>



REPORT OF PRIOR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Bioenvision, Inc.:

We have audited the accompanying consolidated balance sheet of Bioenvision, Inc.
and subsidiaries (the "Company") as of June 30, 2005, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. Our audit also included the consolidated financial
statement schedule listed in the Index at Item 15. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the 2005 consolidated financial statements present fairly, in
all material respects, the financial position of Bioenvision, Inc. and
subsidiaries as of June 30, 2005, and the results of its operations and its cash
flows for the year ended June 30, 2005, in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, such
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.


/s/ Deloitte & Touche LLP
Parsippany, New Jersey
October 12, 2005







                                      F-2
<PAGE>



REPORT OF PRIOR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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

We have audited the accompanying consolidated statement of operations,
stockholders' equity (deficit), and cash flows of Bioenvision Inc. and
subsidiaries for the year ended June 30, 2004. 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 audit.


We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company was not required to
have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.


In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated result of the operations and cash flows
of Bioenvision, Inc. and subsidiaries for the year ended June 30, 2004 in
conformity with accounting principles generally accepted in the United States of
America.





/s/ Grant Thornton LLP
New York, New York
September 16, 2004








                                      F-3
<PAGE>




                       BIOENVISION, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                         June 30,                 June 30,
                                                                           2006                     2005
                                                                           ----                     ----

                ASSETS
<S>                                                              <C>                       <C>
Current assets
   Cash and cash equivalents                                     $     3,377,937           $    31,407,533
   Restricted cash                                                             -                   290,000
   Short-term securities                                              41,637,106                32,746,948
   Accounts receivable, less allowances of $898,714 and of
   $869,220, respectively                                              2,369,446                 1,785,779
   Inventories                                                           427,514                   277,908
   Prepaids and other current assets                                     844,810                   342,628
                                                                   -------------            --------------
       Total current assets                                           48,656,813                66,850,796

  Property and equipment, net                                            273,632                   279,778
  Intangible assets, net                                               7,549,520                 8,252,936
  Goodwill                                                             1,540,162                 1,540,162
  Other assets                                                           706,840                   209,665
  Deferred costs                                                       3,523,497                 3,656,798
                                                                   -------------             -------------

       Total assets                                                 $ 62,250,464              $ 80,790,135
                                                                     ===========               ===========

              LIABILITIES AND STOCKHOLDERS' EQUITY

  Current liabilities
   Accounts payable                                              $     1,557,507           $     1,602,267
   Accrued expenses and other current liabilities                      6,464,445                 4,581,444
   Accrued dividends payable                                              56,404                    56,404
   Deferred revenue                                                      513,662                   498,607
                                                                   -------------              ------------

       Total current liabilities                                       8,592,018                 6,738,722


  Deferred revenue                                                     7,070,725                7,437,598
                                                                   -------------              ------------

       Total liabilities                                              15,662,743                14,176,320
                                                                    ------------              ------------
  Commitments and contingencies                                                -                         -

  Stockholders' equity
   Convertible participating preferred stock - $0.001 par value;
   20,000,000 shares authorized; 2,250,000 issued and outstanding
   at June 30, 2006 and June 30, 2005, respectively (liquidation
   preference $6,750,000 and $6,750,000, respectively)                     2,250                     2,250
   Common stock - $0.001 par value; 70,000,000 shares authorized;
   41,456,616 and 40,558,948 shares issued and outstanding at
   June 30, 2006 and June 30, 2005, respectively                          41,457                    40,559
   Additional paid-in capital                                        133,604,996               128,946,717
   Deferred compensation                                                     -                    (145,646)
   Accumulated deficit                                               (86,567,268)              (62,331,005)
   Receivable from stockholder                                          (340,606)                      -
   Accumulated other comprehensive income (loss)                        (153,108)                  100,940
                                                                  ---------------            -------------

        Total stockholders' equity                                    46,587,721                66,613,815
                                                                   --------------              -----------

        Total liabilities and stockholders' equity                $   62,250,464            $   80,790,135
                                                                   =============             =============
</TABLE>

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



                                      F-4
<PAGE>


                       BIOENVISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                FOR THE YEARS ENDED JUNE 30, 2006, 2005, and 2004
<TABLE>
<CAPTION>
                                                                      2006                2005                  2004
                                                                 -------------        ------------         -------------
<S>                                                             <C>                     <C>               <C>
Revenue
     License and royalty revenue                                $    1,929,526          $1,463,326        $    1,014,717
     Product sales                                                     668,975             611,346                   -
     Research and development contract revenue                       2,710,571           2,576,502             2,087,497
                                                                 -------------          ----------         -------------

Total revenue                                                        5,309,072           4,651,174             3,102,214
                                                                 -------------          ----------         -------------

Costs and expenses
    Cost of products sold (including royalty
    expense of $1,277,411, $524,755 and
    $0 for the years ended June 30,
    2006, 2005 and 2004, respectively)                              1,662,975              921,262                     -
    Research and development                                       11,726,981           10,894,925             4,882,574
    Provision for bad debts                                            24,564              869,220                     -
    Selling, general and administrative                            16,562,770           10,181,711             9,082,420
    Depreciation and amortization                                     974,440            1,438,517             1,348,064
    Loss on impairment                                                      -            5,276,162                     -
                                                                 -------------          ----------         -------------

Total costs and expenses                                           30,951,730           29,581,797            15,313,058
                                                                 -------------          ----------         -------------

Loss from operations                                              (25,642,658)         (24,930,623)          (12,210,844)

Interest income (expense)
     Interest and finance charges                                     (66,762)             (79,484)                    -
     Interest income                                                1,810,657              747,322                99,763
                                                                 -------------          ----------         -------------

Loss before income tax benefit                                    (23,898,763)         (24,262,785)          (12,111,081)

Income tax benefit                                                          -                    -             1,459,814
                                                                 -------------          ----------         -------------

Net loss                                                          (23,898,763)         (24,262,785)          (10,651,267)

Cumulative preferred stock dividend                                  (337,500)            (404,079)             (856,776)
                                                                 -------------          ----------         -------------

Loss applicable to common stockholders                          $ (24,236,263)        $(24,666,864)       $  (11,508,043)
                                                                 ============          ===========         =============

Basic and diluted net loss per share applicable to common
stockholders                                                    $       (0.59)        $      (0.72)       $        (0.57)
                                                                 ============          ===========         =============

Weighted-average shares used in
    computing basic and diluted
    net loss per share of common stock                             40,865,384           34,042,391            20,257,482
                                                                 ============          ===========         =============
</TABLE>




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


                                      F-5
<PAGE>




                       BIOENVISION, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                FOR THE YEARS ENDED JUNE 30, 2006, 2005 and 2004
<TABLE>
<CAPTION>
                                      Convertible
                                     Participating                               Additional
                                    Preferred Stock          Common Stock          Paid-in       Deferred
                                    Shares        $       Shares         $         Capital     Compensation
                                    ------        -       ------         -         -------     ------------
<S>                                 <C>         <C>      <C>           <C>        <C>            <C>
Balance at July 1, 2003             5,916,966   $5,917   17,122,739    $17,123    $47,304,449    $        -

Net loss for the period
Cumulative preferred stock
dividend for the period

Currency translation adjustment

Deferred compensation                                                                              (223,990)
Shares issued in connection
with private placement                                    2,602,898      2,603     16,265,495
Cost related to March private
placement financing                                                                (1,301,035)
Preferred stock converted to
common stock                       (2,575,300)  (2,575)   5,150,000      5,150         (2,575)
Expense related to repricing of
options                                                                             2,381,066
Options exercised for common
stock                                                     2,122,682      2,122         (2,122)
Warrants issued in connection
with services                                                                         671,601
Shares issued to consultants
for services                                                 14,510         15        305,972

Shares issued to employee                                    20,000         20         28,380
Options issued in connection
with services                                                                          93,987

Options issued to employees                                                           262,601
Warrants exercised for common
stock                                                     1,283,334      1,283      2,509,883
                                  -----------  -------  -----------  ---------  -------------  ------------
Balance at July 1, 2004             3,341,666   $3,342   28,316,163   $ 28,316    $68,517,702    $ (223,990)

Net loss for the period

Cumulative preferred stock
 dividend for the  period

Currency translation adjustment

Deferred compensation                                                                                78,344
Preferred stock converted to
common stock                       (1,091,666)  (1,092)   2,183,332      2,183         (1,092)
Income related to repricing of
options                                                                              (314,950)
Warrants issued in connection
with services                                                                -        524,928
Shares issued in connection
with services                                                62,500         63        496,188
Options exercised for common
stock                                                       685,833        686        707,638
Warrants exercised for common
stock                                                     1,811,120      1,811      3,277,151

Shares issued in connection
with public offering, net of
related expenses                                          7,500,000      7,500     55,739,152
                                  -----------  -------  -----------  ---------  -------------  ------------
    Balance at June 30, 2005        2,250,000   $2,250   40,558,948   $ 40,559   $128,946,717    $ (145,646)

<CAPTION>

                                                                    Accumulated
                                                      Receivable       Other
                                      Accumulated        from      Comprehensive       Total
                                         Deficit      Stockholder  Income (Loss)      Equity
                                         -------      -----------  -------------      ------
<S>                                    <C>            <C>               <C>         <C>
Balance at July 1, 2003                $(26,156,098)  $         -       $152,346    $21,323,737

Net loss for the period                 (10,651,267)                                (10,651,267)
Cumulative preferred stock
dividend for the period                    (856,776)                                   (856,776)

Currency translation adjustment                                          (12,748)       (12,748)

Deferred compensation                                                                  (223,990)
Shares issued in connection
with private placement                                                               16,268,098
Cost related to March private
placement financing                                                                  (1,301,035)
Preferred stock converted to
common stock                                                                                  -
Expense related to repricing of
options                                                                               2,381,066
Options exercised for common
stock                                                                                         -
Warrants issued in connection
with services                                                                           671,601
Shares issued to consultants
for services                                                                            305,987

Shares issued to employee                                                                28,400
Options issued in connection
with services                                                                            93,987

Options issued to employees                                                             262,601
Warrants exercised for common
stock                                                                                 2,511,166
                                     --------------  ------------  -------------  -------------

Balance at July 1, 2004                $(37,664,141)  $         -    $   139,598     30,800,827

Net loss for the period                 (24,262,785)                                (24,262,785)

Cumulative preferred stock
 dividend for the  period                  (404,079)                                   (404,079)

Currency translation adjustment                                          (38,658)       (38,658)

Deferred compensation                                                                    78,344
Preferred stock converted to
common stock                                                                                  -
Income related to repricing of
options                                                                                (314,950)
Warrants issued in connection
with services                                                                           524,928
Shares issued in connection
with services                                                                           496,250
Options exercised for common
stock                                                                                   708,324
Warrants exercised for common
stock                                                                                 3,278,962

Shares issued in connection
with public offering, net of
related expenses                                                                     55,746,652
                                     --------------  ------------  -------------  -------------
    Balance at June 30, 2005           $(62,331,005)  $         -    $   100,940   $ 66,613,815

</TABLE>

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




                                      F-6
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                FOR THE YEARS ENDED JUNE 30, 2006, 2005 and 2004
                                   (Continued)
<TABLE>
<CAPTION>

                                                                               Additional
                                   Convertible
                                  Participating                                  Paid-in
                                 Preferred Stock           Common Stock                       Deferred
                                Shares         $        Shares         $         Capital     Compensation
                                ------         -        ------         -         -------     ------------

<S>                             <C>           <C>      <C>          <C>        <C>            <C>
  Balance at June 30, 2005      2,250,000     $2,250   40,558,948   $ 40,559   $128,946,717   $(145,646)


Net loss for the period
Cumulative preferred stock
dividend
Currency translation
adjustment

Due from stockholder
Employee and board of
director stock-based
compensation                                                                      3,684,158

Deferred compensation                                                              (136,457)    145,646
Options exercised for
common stock                                              491,196        491        390,984
Warrants exercised for
common stock                                              406,472        407        719,594
                              -----------  ---------  -----------  ---------  -------------  ----------

  Balance at June 30, 2006      2,250,000     $2,250   41,456,616   $ 41,457   $133,604,996   $       -
                              ===========  =========  ===========  =========  =============  ==========

<CAPTION>
                                                            Accumulated
                                               Receivable                      Total
                                                               Other
                                                 from                      Stockholders'
                                Accumulated                Comprehensive
                                  Deficit     Stockholder  Income (Loss)      Equity
                                  -------     -----------  -------------      ------

<S>                            <C>            <C>               <C>       <C>
  Balance at June 30, 2005     $(62,331,005)  $        -        $100,940  $ 66,613,815


Net loss for the period         (23,898,763)                               (23,898,763)
Cumulative preferred stock
dividend                           (337,500)                                  (337,500)
Currency translation
adjustment                                                      (254,048)     (254,048)

Due from stockholder                            (340,606)                     (340,606)
Employee and board of
director stock-based
compensation                                                                 3,684,158

Deferred compensation                                                            9,189
Options exercised for
common stock                                                                   391,475
Warrants exercised for
common stock                                                                   720,001
                              -------------  -----------  --------------  ------------

  Balance at June 30, 2006     $(86,567,268)  $ (340,606)      $(153,108) $ 46,587,721
                              =============  ===========  ==============  ============
</TABLE>

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



                                      F-7
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                FOR THE YEARS ENDED JUNE 30, 2006, 2005 and 2004
<TABLE>
<CAPTION>
                                                                        2006                   2005                   2004
                                                               -----------------------------------------------------------------
<S>                                                                <C>                    <C>                    <C>
Cash flows from operating activities
Net loss                                                           $(23,898,763)          $(24,262,785)          $(10,651,267)
Adjustments to reconcile net loss to net
     cash used in operating activities:
Depreciation and amortization                                           974,440              1,438,517              1,348,064
Provision for bad debts                                                  24,564                869,220                      -
Deferred tax benefit                                                          -                      -             (1,459,814)
Stock-based compensation                                              3,693,347                793,761              3,491,252
Deferred cost                                                           133,301                236,497             (3,645,631)
Deferred revenue                                                       (351,818)              (525,220)             7,223,105
Loss on disposal                                                          1,654                      -                      -
Loss on impairment                                                            -              5,276,162                      -
Changes in operating assets and liabilities
     Accrued interest on investments                                 (1,405,798)                     -                      -
     Inventories                                                       (143,383)              (286,089)                     -
     Prepaids and other current assets                                 (484,937)               (94,797)              (147,335)
     Accounts receivable                                               (574,610)               (56,596)            (2,602,773)
     Other assets                                                      (482,026)              (132,072)               126,870
     Accounts payable and other liabilities                           1,720,017              3,325,964              1,676,336
                                                                   ------------           ------------           ------------
                    Net cash used in operating activities           (20,794,012)           (13,417,438)            (4,641,193)
                                                                   ------------           ------------           ------------

Cash flows from investing activities
     Purchase of intangible assets                                     (166,926)              (359,411)              (112,580)
     Capital expenditures                                              (102,535)              (278,044)               (18,337)
     Release of restricted cash                                         290,000                      -                     -
     Redemption of short-term securities                             17,834,104                      -                      -
     Purchase of short-term securities                              (25,318,463)           (32,746,948)                     -
                                                                   ------------           ------------           ------------
                   Net cash used in investing activities             (7,463,820)           (33,384,403)              (130,917)
                                                                   ------------           ------------           ------------

Cash flows from financing activities
     Proceeds from issuance of common stock, net of related
     expenses                                                                 -             55,746,652             14,967,064
     Due from stockholder                                              (340,606)                     -                      -
     Proceeds from exercise of options and warrants                   1,111,476              3,987,286              2,539,565
     Dividends paid                                                    (337,500)              (437,816)            (1,775,782)
                                                                   ------------           ------------           ------------
                   Net cash provided by financing activities            433,370             59,296,122             15,730,847

Effect of exchange rate changes on cash                                (205,134)                37,577                (12,748)
                                                                   ------------           ------------           ------------

Net increase (decrease) in cash and cash equivalents                (28,029,596)            12,531,858             10,945,989

Cash and cash equivalents, beginning of year                         31,407,533             18,875,675              7,929,686
                                                                   ------------           ------------           ------------

Cash and cash equivalents, end of year                             $  3,377,937           $ 31,407,533           $ 18,875,675
                                                                   ============           ============           ============
</TABLE>


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





                                      F-8
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Description of Business and Summary of Significant Accounting Policies

(a) Description of Business:

The Company is a product-orientated biopharmaceutical company primarily focused
upon the acquisition, development, distribution and marketing of compounds and
technologies for the treatment of cancer, autoimmune disease and infection. Its
product pipeline includes Evoltra(R) (Clofarabine), Modrenal(R) (for which
Bioenvision has obtained regulatory approval for marketing in the United Kingdom
for the treatment of post-menopausal breast cancer following relapse to initial
hormone therapy), and certain anti-infective technologies including the
OLIGON(R) technology; an advanced biomaterial that has been incorporated into
various Federal Drug Administration, or FDA, approved medical devices and
Suvus(TM), an antimicrobial agent currently in clinical development for
refractory chronic hepatitis C infection.

(b) Principles of Consolidation and Use of Estimates:

The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Inter-company accounts and
transactions have been eliminated. Certain reclassifications of balances
previously reported have been made to conform to current presentation.

The preparation of financial statements in conformity with accounting principles
generally accepted 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.

(c) Revenue Recognition:

In accordance with SEC Staff Accounting Bulletin No. 104 "Revenue Recognition",
or "SAB 104", upfront nonrefundable fees associated with research and
development collaboration agreements in which the Company has continuing
involvement in the agreement, are recorded as deferred revenue and recognized
over the estimated research and development period using the straight-line
method. If the estimated period is subsequently modified, the period over which
the up-front fee is recognized is modified accordingly on a prospective basis
using the straight-line method. 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 period of the licensing arrangement using the straight-line
method, which approximates the life of the last to expire of the underlying
patents.

Royalty Revenue from product licenses is recorded as earned.

The Company currently sells its products to wholesale distributors and directly
to hospitals, clinics, and retail pharmacies. Revenue from product sales is
recognized when the risk of loss is passed to the customer, the sales price is
fixed and determinable, and collectibility is reasonably assured.

Research and development contract revenue includes sales in our pre-commercial
stage named patient program for Evoltra(R) as well as certain payments due from
our co-development partner relating to the reimbursement of 50% for certain of
our ongoing research costs in the development of Evoltra(R) outside the United
States. Currently, the Company has billed but not recorded approximately
$2,513,000 of revenue relating to the reimbursement from our co-development
partner for certain of our ongoing research costs in the development of
Evoltra(R) outside the United States. If and when the Company has determined
that collectibility is reasonably assured, the Company will record the revenue.
At June 30, 2006, the Company continues to hold a reserve for bad debts of
$869,000 relating to the outstanding research and development reimbursements due
from the co-development partner.

The Company follows the guidance of Emerging Issues Task Force 99-19, "Reporting
Revenue Gross as a Principal versus

                                      F-9
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Description of Business and Summary of Significant Accounting Policies
- continued

Net as an Agent" in the presentation of revenue and direct costs of revenue.
This guidance requires the Company to assess whether it acts as a principal in
the transaction or as an agent acting on behalf of others. The Company records
revenue transactions gross in its statements of operations if it is deemed the
principal in the transaction, which includes being the primary obligor and
having the risks and rewards of ownership.

(d) Research and Development:

Research and development costs are charged to expense as incurred. Research and
development costs include the cost of Evoltra(R) sold prior to product approval
through our named patient program.

(e) Stock-based Compensation:

On July 1, 2005, the Company adopted the fair value recognition provisions of
SFAS No. 123 (R) (revised 2004), "Share-Based Payment" ("SFAS 123 (R)"),
requiring the Company to recognize expense related to the fair value of
stock-based compensation. The modified prospective transition method was used as
allowed under SFAS 123 (R). Under this method, the stock-based compensation
expense includes: (a) compensation expense for all stock-based compensation
awards granted prior to, but not yet vested as of July 1, 2005, based on the
grant date fair value estimated in accordance with the original provisions of
SFAS 123, "Accounting for Stock-Based Compensation"; and (b) compensation
expense for all stock-based compensation awards granted subsequent to July 1,
2005, based on the grant date fair value estimated in accordance with the
provisions of SFAS 123 (R). Prior to the adoption of SFAS 123 (R), the Company
had accounted for stock-based compensation arrangements in accordance with
provisions of Accounting Principles Board ("APB") Opinion No. 25 "Accounting for
Stock Issued to Employees", as permitted by SFAS 123. Under APB Opinion No. 25,
no stock-based employee compensation cost was reflected in reported net loss,
when options granted to employees have an exercise price equal to the market
value of the underlying common stock at the date of grant.

Upon adoption of SFAS 123 (R), the Company reversed the unrecognized deferred
compensation costs associated with options granted to certain employees of
approximately $136,000 with a corresponding reduction to the Company's
additional paid-in capital (see Note 7). The Company also no longer re-measures
the intrinsic value of the 380,000 re-priced options granted to an officer of
the Company (see Note 7). The Company recognized compensation expense of
approximately $36,000 for these options for the year ended June 30, 2006, based
on the fair value, as determined in accordance with SFAS 123, the guidance then
in effect, of the modified award that remains unvested.

Beginning July 1, 2005, the Company is recognizing compensation expense for
stock option awards to employees based on their grant-date fair value. We
utilize the Black-Scholes model to measure the value of an employee option. Our
estimates of employee stock option values rely on estimates of factors we input
into the Black-Scholes model. The key factors involve an estimate of future
uncertain events. We determine expected volatility based on historical activity.
We believe that these market-based inputs provide a better estimate of our
future stock price movements. We also use historical exercise patterns as our
best estimate of future exercise patterns. We utilize historical turnover rates
in estimating expected forfeitures separately for executives and non-executives.
We have incorporated the following assumptions into the Black Scholes model:

                                               2006        2005          2004
                                               ----        ----          ----
Risk-free interest rate                     3.89-4.95%   2.93-4.05%   1.95-3.28%
Expected weighted average term (in years)      3.79         3.87         3.50
Expected weighted average volatility           66%           80%          80%
Expected dividend yield                         0%           0%           0%

The weighted average fair value per share for stock options granted to employees
during years ended June 30, 2006, 2005 and 2004 was $3.63, $4.75 and $3.13,
respectively.




                                      F-10
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Description of Business and Summary of Significant Accounting Policies
- continued

As required by SFAS 123 (R), management made an estimate of expected forfeitures
for all unvested awards and is recognizing compensation costs only for those
equity awards expected to vest. The impact on previously reported pro forma
disclosures under SFAS 123 where forfeitures were recognized as incurred is not
material. The Company recorded, as a component of net loss, employee stock-based
compensation (expense) income of approximately $(3,609,000), $227,000 and
($2,419,000) for the years ended June 30, 2006, 2005 and 2004, respectively. As
of June 30, 2006, the total compensation cost related to unvested equity awards
granted to employees but not yet recognized is approximately $3,844,000. This
cost will be amortized on a straight-line basis over the remaining weighted
average vesting period of 1.82 years.

For the years ended June 30, 2005 and 2004, the Company accounted for
stock-based compensation in accordance with APB No. 25. The following table
summarizes the pro forma effect of stock-based compensation as if the fair value
method of accounting for stock options had been applied in measuring
compensation cost for the years ended June 30, 2005 and 2004:

<TABLE>
<CAPTION>
                                                           June 30,             June 30,
                                                             2005                2004
                                                             ----                ----
<S>                                                      <C>                <C>
Net loss applicable to common stockholders,
as reported                                              $ (24,666,864)     $ (11,508,043)
Add:  Stock-based employee compensation (income)
expense as reported                                           (227,417)          2,419,677

Deduct:  Total stock-based employee compensation
expense determined under fair value-based method
for all awards                                              (2,427,771)          (861,297)
                                                            -----------          ---------

Pro forma net loss applicable to common stockholders      $(27,322,052)       $(9,949,663)
                                                          =============       ============
Loss per share
     Basic and diluted - as reported                      $      (0.72)       $     (0.57)

     Basic and diluted - pro forma                        $      (0.80)       $     (0.49)

</TABLE>

The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS 123 and EITF 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, 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. We utilize the Black-Scholes model to measure the
value of warrants issued to consultants.

(f) Income Taxes:

The Company accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes". Under SFAS 109, deferred tax assets and liabilities are determined based
on the differences between the financial reporting and tax basis 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.

(g) 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 income 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
11,563,314, 11,472,414 and 13,674,242 shares of common stock have not been
included in the calculation of net loss per share for the years ended June 30,
2006, 2005 and 2004, respectively, as their effect would have



                                      F-11
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Description of Business and Summary of Significant Accounting Policies
- continued

been anti-dilutive. Additionally, convertible participating preferred stock that
is convertible into 4,500,000, 4,500,000 and 6,683,332 shares of common stock
have not been included in the calculation of net loss per share for the years
ended June 30, 2006, 2005 and 2004, respectively, as their effect would have
been anti-dilutive.

(h) Comprehensive Loss:

Total comprehensive loss for the years ended June 30, 2006, 2005 and 2004 was
$24,490,311, $24,705,522 and $11,520,791, respectively.

(i) Foreign Currency Translation:

The reporting currency of the Company is the US dollar. The functional currency
of Bioenvision Limited, the Company's wholly-owned subsidiary, organized under
the laws of the United Kingdom with offices in Edinburgh, Scotland, is the Pound
Sterling. We translate assets and liabilities to their US dollar equivalents at
rates in effect at the balance sheet date and record translation adjustments in
accumulated other comprehensive income (loss). We translate statement of
operations accounts at average rates for the period. For the years ended June
30, 2006 and 2005, the net foreign currency transaction gains (losses) included
in selling, general and administrative expense were approximately $(2,300) and
27,000, respectively.

(j) Cash and Cash Equivalents and Short-term Securities:

The Company considers all highly liquid financial instruments with a maturity of
three months or less when purchased to be cash equivalents. All funds invested
in Certificates of Deposit with maturities greater than three months and less
than one year are classified as short-term securities determined by management
to be available-for-sale securities.

(k) Deferred Costs:

Deferred costs represent payments to Southern Research Institute, or SRI, and to
Stegram Pharmaceutical Ltd, which directly relate to milestone payments received
in connection with the Genzyme Co-Development Agreement, Mayne-Pharma
Pharmaceutical and the Dechra Sub-License Agreement. These costs are being
amortized straight-line over the life of the contract and the amortization of
these costs has been presented in research and development on the consolidated
statement of operations.

(l) Accounts Receivable:

Our accounts receivable are primarily due from wholesale distributors and our
co-development partners. We maintain an allowance for doubtful accounts at an
amount estimated to be sufficient to provide adequate protection against losses
resulting from collecting less than the full payment on our currently
outstanding receivables. We make judgments as to our ability to collect
receivables and provide allowances for the portion of receivables when
collection becomes doubtful. Provisions are made based upon a specific review of
all significant outstanding invoices. In determining our allowances, we analyze
our historical collection experience and current economic trends. One customer
comprises approximately 33%, 62% and 67% of revenues earned for the years ended
June 30, 2006, 2005, and 2004. Based on our evaluation of the collectibility of
these accounts receivable, we believe that the balance relating to research and
development reimbursements may not be collectible and therefore have reserved
this balance at June 30, 2006.




                                      F-12
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Description of Business and Summary of Significant Accounting Policies
- continued

 (m) Inventories:

Inventories are stated at the lower of cost or market, cost being determined
under the first-in, first-out method. We only capitalize inventory that is
produced for commercial sale. The Company periodically reviews inventories and
items outdated or obsolete are reduced to their estimated net realizable value.
Below is a break down of inventories at June 30, 2006 and 2005:


                                      2006             2005

   Raw materials                 $   118,213      $         -
   Work-in-progress                  180,048          170,730
   Finished goods                    129,253          107,178
                                 -----------      -----------

   Total                         $   427,514      $   277,908
                                 ===========      ===========

(n) 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 their estimated useful lives, which range from 3 to 7 years.

                                      Estimated
          Asset Description          Useful Life        2006          2005

Computer equipment and software     3 to 5 years   $     390,044  $     304,892
Furniture and fixtures                 7 years            54,503         49,364
                                                   -------------  -------------
                                                         444,547        354,256

Less: accumulated depreciation                          (170,915)       (74,478)
                                                   -------------  -------------

Net property and equipment                         $     273,632  $     279,778
                                                   =============  =============

The Company recorded depreciation expense for the years ended June 30, 2006,
2005 and 2004 of approximately $104,000, $45,000 and $20,000, respectively.


(o) Fair Value of Financial Instruments:


The Company has estimated the fair value of financial instruments using
available market information and other valuation methodologies in accordance
with SFAS No. 107, "Disclosures About Fair Value of Financial Instruments."
Management of the Company believes that the fair value of financial instruments,
consisting of cash, cash equivalents, short-term securities, accounts
receivable, accounts payable and accrued liabilities, approximates carrying
value due to the immediate or short-term maturity associated with these
instruments.

(p) Goodwill and Other Intangible Assets:

Goodwill represents the excess of costs over the fair value of identifiable net
assets of Pathagon (see Note 2). Intangible assets include patents and licensing
rights acquired in connection with the acquisition of Pathagon. The Company
accounts for these assets in accordance with SFAS No. 142, "Goodwill and Other
Intangible Assets." Goodwill is 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." For goodwill, each
year and whenever impairment indicators are present, we will calculate the
implied fair value of each goodwill amount and record an impairment loss for the


                                      F-13
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Description of Business and Summary of Significant Accounting Policies
- continued

excess of book value over the implied fair value, if any.

(q) Impairment of 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 (see Note 3).

(r) Accrued Expenses:

Below is a breakdown of our accrued expenses and other current liabilities at
June 30, 2006 and 2005.
                                          June 30, 2006   June 30, 2005

    Accrued research and development        $ 4,389,951     $ 3,098,264
    Accrued professional fees                   493,924         309,807
    Accrued compensation costs                  702,097         639,236
    Accrued other                               878,473         534,137
                                            -----------     -----------

    Total accrued expenses                  $ 6,464,445     $ 4,581,444
                                            ===========     ===========

Accrued research and development expenses include amounts relating to clinical
trials as well as pre-clinical operating costs. Other accrued expenses include
inventories, marketing costs, royalties due on product sales, and other
operating expense accruals.

(s) Recent Accounting Pronouncements:

In June 2006, the FASB issued FASB Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN
48"). This Interpretation clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in accordance with FASB
Statement No. 109, Accounting for Income Taxes. This Interpretation prescribes
that a company should use a more likely than not recognition threshold based on
the technical merits of the tax position taken. Tax positions that meet the more
likely than not recognition threshold should be measured in order to determine
the tax benefit to be recognized in the financial statements. FIN 48 is
effective in fiscal years beginning after December 15, 2006. We do not expect
the adoption of FIN 48 to have a material impact on the results of operations or
financial condition of the Company.

In May 2005, the FASB issued SFAS 154 "Accounting Changes and Error
Corrections," a replacement of APB Opinion 20 and SFAS 3. SFAS 154 changes the
accounting for, and reporting of, a change in accounting principle. SFAS 154
requires retrospective application to prior period's financial statements of
voluntary changes in accounting principle, and changes required by new
accounting standards when the standard does not include specific transition
provisions, unless it is impracticable to do so. SFAS 154 is effective for
accounting changes and corrections made in fiscal years beginning after December
15, 2005.


                                      F-14
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. Pursuant to paragraph 39 of SFAS 141, the Company can capitalize
acquired intangible assets if it meets one of the following two criteria: (1) if
they arise from contractual or legal rights (regardless of whether those rights
are transferable and separable from the acquired entity or from other rights and
obligations); or (2) if they are separable, that is, capable of being separated
or divided from the acquired entity and sold, transferred, licensed, rented, or
exchanged (regardless of whether there is intent to do so). The Company
determined that the patent and licensing rights of the purchased technologies
are separately identifiable legal rights. 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 Company assigned
values to the intellectual property rights acquired based on the expected future
cash flows from the existing approved uses of the technologies. The patent and
licensing rights acquired are being amortized over 13 years, which is the
estimated remaining contractual life of these assets. Since the estimated fair
value of the Purchased Technologies was at least equal to the amount paid, the
purchase price, net of assumed liabilities, was allocated to Purchased
Technologies. The transaction qualified as a tax-free merger which resulted in a
difference between the tax basis value of the assets acquired and the fair
market value of the patents and licensing rights. As a result, a deferred tax
liability was recorded for approximately $7,909,000. The purchase price exceeded
the fair market value of the net assets acquired resulting in the recording of
goodwill of $2,341,000. 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.

The Company now has the worldwide rights to the use of thiazine dyes, including
methylene blue, for in vitro and in vivo 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.

At the time of acquisition, OLIGON(R) had been approved by the FDA for its use
as a coating of catheters or incorporation into catheter material for the
avoidance of catheter related sepsis associated with central venous catheters,
pulmonary catheters and urinary catheters. By acquiring Pathagon, we inherited
the sublicense of the OLIGON(R) technology to Edwards Lifescience for its use in
short-term central venous catheters and pulmonary catheters. We plan on further
commercializing this technology and are currently in discussions with major
international medical device companies to sublicense the OLIGON(R) technology in
its other approved uses and possibly incorporate it into a broader range of
devices.

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 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.

At the time of acquisition, we also inherited a license to certain rights to
methylene blue. Methylene blue is an anti-microbial agent used to cleanse fresh
frozen plasma of viruses including Hepatitis-B, Hepatitis-C and HIV. At
acquisition, it was approved in Europe for sterilizing fresh frozen plasma and
is currently marketed and sold by several companies for anti-viral sterilizing
of fresh frozen plasma. At acquisition, the Company planned to sublicense the
product in certain European Union countries for its use in cleansing plasma.
Prior to the loss of an intellectual patent in April of 2005, the Company had
been in discussion with the American Red Cross to bring the



                                      F-15
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 2 - Acquisition of Pathagon - continued

product into the U.S. market. Since methylene blue is generally regarded as a
safe drug, no further approval was needed to sell it for its intended use at
acquisition. However, we did plan on performing clinical trials to support to
the American Red Cross the commercial viability of methylene blue in sterilizing
fresh frozen plasma. See Note 3 for further discussion.

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

Note 3 - Intangible Assets

Intangible assets at June 30, 2006 and 2005 are as follows:


                                                 2006                  2005
                                                 ----                  ----

Patents and licensing rights                   $9,382,450            $9,337,819
Other intangible assets                           298,505               176,207
                                               ----------            ----------
                                                9,680,955             9,514,026
Less:  accumulated amortization                (2,131,435)           (1,261,090)
                                               ----------            ----------
Total intangible assets, net                   $7,549,520            $8,252,936

Amortization of patents, licensing rights and other intangible assets amounted
to approximately $870,000, $1,394,000 and $1,328,000 for the years ended June
30, 2006, 2005 and 2004, respectively, and are amortized over periods generally
ranging form 1-20 years. Other intangible assets are recorded at cost.
Amortization for each of the next five fiscal years will amount to approximately
$820,000 annually. The weighted average remaining life of our intangibles at
June 30, 2006 is approximately seven years.

At June 30, 2005, we recognized an impairment of approximately $5,276,000
relating to the methylene blue intangible acquired in connection with the
Pathagon acquisition. Due to the loss of an intellectual property patent suit
which occurred during the Company's fourth quarter, relating to the
international use of methylene blue in fresh frozen plasma, we re-evaluated the
intangible asset relating to methylene blue at June 30, 2005. At that date, we
estimated that our undiscounted future cash flows, relating solely and
exclusively to approved uses of methylene blue, were less than the carrying
value of our long-lived asset. As a result, we recognized a non-cash impairment
loss of approximately $5,276,000, equal to the difference between the estimated
future cash flows for approved uses of methylene blue, discounted at an
appropriate rate, and the carrying amount of the asset. Making the
determinations of impairment and the amount of impairment requires significant
judgment by management and assumptions with respect to the future cash flows of
the assets. Changes in events or circumstances that may affect long-lived assets
makes judgments and assumptions with respect to the future cash flows highly
subjective. At June 30, 2006, we received an independent third-party valuation
of this intangible asset which confirmed that such estimated future cash flows
continued to be worth more than the carrying value of methylene blue and,
therefore, no further impairment was deemed to be required.

Note 4 - License and Co-Development Agreements

Clofarabine (Evoltra(R))

The Company has a license from SRI to develop, manufacture, market, distribute
and sell a class of purine nucleoside analogs which, based on third-party
studies conducted to date, may be effective in the treatment of leukemia,
lymphoma and certain solid tumor cancers. The lead compound of these
purine-based nucleosides is known as clofarabine (Evoltra(R)). Under the terms
of the agreement with SRI, the Company was granted the exclusive worldwide
license, excluding Japan and Southeast Asia, to make, use and sell products
derived



                                      F-16
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - License and Co-Development Agreements - continued

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 the
Company and by SRI from the technology. Initially, the Company is developing
Evoltra(R) for the treatment of leukemia and lymphoma and studying its potential
role in treatment of solid tumors.

In August 2003, SRI granted the Company an irrevocable, exclusive option to
make, use and sell products derived from the technology (including Evoltra(R))
in Japan and Southeast Asia. The Company intends to convert the option to a
license and is actively working on this initiative.

To facilitate the development of Evoltra(R) in March 2001, the Company entered
into a co-development agreement with ILEX Oncology, Inc. ("ILEX"), our
sub-licensor until it was acquired by Genzyme Corporation ("Genzyme") on
December 21, 2004, for the development of Evoltra(R) in cancer indications.
Under the terms of the co-development agreement, Genzyme 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), in each case, for the development of Evoltra(R) in cancer
indications. Currently, the Company has billed but not recorded approximately
$2,513,000 of revenue relating to the reimbursement from our co-development
partner for certain of our ongoing research costs in the development of
Evoltra(R) outside the United States. If and when the Company has determined
that collectibility is reasonably assured, the Company will record the revenue.
Genzyme is responsible for conducting all clinical trials and the filing and
prosecution of applications with applicable regulatory authorities in the United
States and Canada for certain cancer indications. The Company retains the right
to handle those matters in all territories outside the United States and Canada
(excluding Japan and Southeast Asia) and retains the right to handle these
matters in the U.S. and Canada in all non-cancer indications. 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, Genzyme will have certain rights if it
performs its development obligations in accordance with that agreement. The
Company is required to pay Genzyme a royalty on direct sales outside the U.S.,
Canada, Japan and Southeast Asia. In turn, Genzyme, which would have U.S. and
Canadian distribution rights in cancer indications, is paying the Company a
royalty on sales in the U.S. and Canada. Under the terms of the co-development
agreement, Genzyme also pays royalties to SRI based on certain milestones. The
Company also is obligated to pay certain royalties to SRI with respect to
Evoltra(R).

The Company received a nonrefundable upfront payment of $1,350,000 when it
entered into the co-development agreement with Genzyme and received an
additional $3,500,000 in December 2003 when it converted Genzyme's option to
market clofarabine in the U.S. into a sublicense. Upon Genzyme's filing the New
Drug Application (NDA) for clofarabine with the FDA, the Company received an
additional (i) $2,000,000 in April 2004 and (ii) $2,000,000 in September 2004.
The Company deferred the upfront payment and recognized revenues ratably, on a
straight-line basis over the related service period. The Company has deferred
the milestone payments received to date and recognizes revenues ratably, on a
straight-line basis over the related service period, through March 2021. For the
years ended June 30, 2006, 2005 and 2004, the Company recognized revenues of
approximately $438,000, $438,000 and $161,000 respectively, in connection with
the milestone payments received to date.

Deferred costs include royalty payments that became due and payable to SRI upon
the Company's execution of the co-development agreement with Genzyme. The
Company defers all royalty payments made to SRI and recognizes these costs
ratably, on a straight-line basis over the related service period, concurrent
with the revenue that is recognized in connection with these research and
development costs through 2021. The Company recognized approximately $219,000,
$219,000 and $89,000 for the years ended June 30, 2006, 2005 and 2004.

Modrenal(R)
-----------

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




                                      F-17
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 4 - License and Co-Development Agreements - continued

The Company received a nonrefundable upfront payment of $1,250,000 when it
entered into the License and Sublicense Agreement with Dechra Pharmaceuticals in
May 2003. The Company deferred the upfront payment and recognizes revenues
ratably, on a straight-line basis over the related service period, currently
through September 2022. The Company recognized revenues of approximately
$60,000, $87,000 and $114,000, respectively, in connection with the upfront
payment from Dechra for the years ended June 30, 2006, 2005 and 2004,
respectively.

Deferred costs include royalty payments that became due and payable to Stegram
Pharmaceuticals Ltd. upon the Company's execution of the License and Sub-License
Agreement with Dechra in May 2003. The Company defers all royalty payments made
to Stegram and recognizes these costs ratably, on a straight-line basis
concurrent with revenue that is recognized in connection with the Dechra
agreement. Research and development costs related to this agreement include
approximately $12,000 and $17,400 and $23,000 for the years ended June 30, 2006,
2005 and 2004, respectively.

Note 5 - Marketing and Distribution Agreements

In March 2006, the Company entered into a Marketing and Distribution Agreement
with Mayne Pharma Limited, a public company in Australia, to develop, market and
distribute Evoltra(R) in Australia and New Zealand in certain cancer
indications. The Company anticipates entering into similar arrangements with
other marketing and distribution partner(s) around the world (outside North
America) to capitalize on the commercial potential of Evoltra(R), with a fully
integrated sales and marketing team being a primary focus for the sales and
marketing partner(s) the Company may select at any time or from time to time.

Note 6 - Income Taxes

The components of the income tax benefit are as follows:

                                                Years ended June 30,
                                      ----------------------------------------
                                         2006           2005          2004
                                      ----------    ----------    ------------

                  Current:
                  Federal             $    --       $    --        $    --
                  State                    --            --             --

                  Deferred:
                  Federal                  --            --        (1,099,000)
                  State                    --            --          (361,000)
                                      ----------    ----------    ------------
                                           --            --        (1,460,000)

                                      ----------    ----------    ------------
                  Total benefit       $    --       $    --       $(1,460,000)
                                      ----------    ==========    ============

The domestic and foreign components of loss before income taxes are as follows:

                                                Years ended June 30,
                                -----------------------------------------------
                                    2006              2005             2004
                                    ----              ----             ----
        Domestic                $(19,333,000)    $(22,601,000)    $(10,781,000)
        Foreign                   (4,566,000)      (1,662,000)      (1,330,000)
                                  -----------      -----------      -----------
        Loss before taxes       $(23,899,000)    $(24,263,000)    $(12,111,000)
                                =============    =============    =============




                                      F-18
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Income Taxes - continued

The following is a reconciliation of benefit for income taxes computed at the
federal statutory rates to the effective rates for the years ended June 30,
2006, 2005 and 2004:

<TABLE>
<CAPTION>
                                                           2006        2005         2004
                                                           ----        ----         ----
<S>                                                        <C>          <C>          <C>
Consolidated tax benefit at federal statutory rate         (34.0%)      (34.0%)      (34.0%)
Other non-deductible expenses                                 1.3%       (0.3%)         6.8%
State income tax benefit, net of federal                    (5.1%)       (6.1%)       (4.5%)
provision
Valuation allowance                                          36.9%        40.1%        19.3%
Foreign rate differential                                     0.7%         0.3%         0.4%
Other, net                                                    0.2%         0.0%       (0.1%)
                                                             ----         ----      -------

Effective tax rate                                            0.0%         0.0%      (12.1%)
                                                              ====         ====      =======
</TABLE>


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


                                                              June 30,
                                                         -----------------

                                                         2006         2005
                                                       --------     --------

    Deferred tax liabilities
           Acquired intangibles                      $(2,780,000) $(2,923,000)
           Deferred costs                             (1,427,000)  (1,481,000)
           Amortization                                 (203,000)    (115,000)
           Depreciation                                  (16,000)     (33,000)
           Other                                          (3,000)      (3,000)

                                                      ----------   ----------
           Total deferred tax liabilities             (4,429,000)  (4,555,000)
                                                      ----------   ----------

    Deferred tax assets
            Net operating loss                        23,966,000   14,344,000
            Options, warrants and shares issued to
            non-employees                                273,000      534,000
            Options issued to employees                1,081,000      164,000
            Deferred revenue                           3,072,000    3,214,000
            Provision for bad debts                      352,000      352,000
            Accrued expenses                             303,000      126,000
            Other                                         13,000            -

                                                      -----------  ----------
            Total deferred tax assets                 29,060,000   18,734,000

            Valuation allowance for deferred tax
            assets                                   (24,631,000) (14,179,000)

                                                     -----------  -----------
             Net deferred tax assets                   4,429,000    4,555,000
                                                     -----------  -----------
    Net deferred tax liabilities                     $         -  $         -
                                                     ===========  ===========




                                      F-19
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 6 - Income Taxes - continued

At June 30, 2006, the Company had estimated $53,246,000 of net operating loss
carryforwards for U.S. Federal and state income tax purposes, respectively that
begin to expire in fiscal year ending 2020, with a tax value of $21,565,000. At
June 30, 2006, the Company also had estimated $8,005,000 of net operating loss
carryforwards relating to foreign operations, respectively, with no expiration
date, with a tax value of $2,402,000.

At June 30, 2006 and 2005, the Company has recorded a valuation allowance of
approximately $24,631,000 and $14,179,000, respectively, relating to the net
deferred tax asset due the uncertainty of both the foreign and domestic
companies being more likely than not to utilize these deferred tax assets.

Included in the tax net operating loss for the years ended June 30, 2006, 2005
and 2004 is approximately $3,222,000 and $3,857,000 and $415,000, respectively
related to exercise of non-qualified stock options or disqualifying dispositions
of stock acquired with incentive stock options. A valuation allowance has been
established against this loss. If the valuation allowance is removed, the tax
effected benefit of $1,305,000, $1,562,000 and $168,000, respectively, related
to this loss will be credited to equity.

The Tax Reform Act of 1986 enacted a complex set of rules (Internal Revenue Code
Section 382) limiting the utilization of net operating losses 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 changes, if any, could limit the amount of net operating
losses available in a given year, which could ultimately cause net operating
losses to expire prior to utilization.

Note 7 - Stockholders' Transactions

Common Stock:

On February 8, 2005, the Company completed a secondary public offering in which
it sold 7,500,000 common shares at $8.00 per share, with net proceeds to the
Company of approximately $55,747,000, after deducting underwriting discounts and
commissions and offering expenses.

On December 18, 2004, the Company issued 62,500 shares of its common stock to a
consultant to the Company for services rendered to the Company. The Company
recorded compensation expense of approximately $497,000 for the year ended June
30, 2005 in connection with such issuance.

Convertible Participating 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 Convertible Participating 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. The Company
received gross proceeds of $17.7 million from the placement. Holders of Series A
Convertible Participating Preferred Stock also received, in respect of each
share of Series A Convertible Participating 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 Convertible Participating 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, at
the holder's option, 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. 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.




                                      F-20
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 - Stockholders' Transactions - continued

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. The Company has paid the dividend in cash to holders of its
cumulative Series A Convertible Participating Preferred Stock through July 30,
2006.

During the year ended June 30, 2005, certain holders of 1,091,666 shares of the
Company's Convertible Participating Preferred Stock converted such shares into
2,183,332 shares of the Company's common stock. During the year ended June 30,
2004, certain holders of 2,575,900 shares of the Company's Convertible
Participating Preferred Stock converted such shares into 5,150,000 shares of the
Company's common stock.

Stock Options:

The Board of Directors adopted, and the stockholders approved, the 2003 Stock
Incentive Plan at the Annual Meeting held in January 2004. The plan was adopted
to recognize the contributions made by the Company's employees, officers,
consultants, and directors, to provide those individuals with additional
incentive to devote themselves to our future success and to improve the
Company's ability to attract, retain and motivate individuals upon whom the
Company's growth and financial success depends. Under the plan, stock options
may be granted as approved by the Board of Directors or the Compensation
Committee. There are 4,500,000 shares reserved for grants of options under the
plan and, at June 30, 2006, options to purchase 3,996,500 shares of common stock
had been issued. The Company's policy is to issue new shares for option
exercises. Stock options vest pursuant to individual stock option agreements. No
options granted under the plan are exercisable after the expiration of ten years
(or less in the discretion of the Board of Directors or the Compensation
Committee) from the date of the grant. The plan will continue in effect until
terminated or amended by the Board of Directors or until expiration of the plan
on November 17, 2013.

In June 2002, the Company granted options to an officer of the Company to
purchase 380,000 shares of common stock at an exercise price of $1.95 per share,
which equaled the fair value on the date of grant. Of this amount 50,000 options
vested on June 28, 2002 and the remaining 330,000 options vest ratably over a
three-year period on each anniversary date. On March 31, 2003, the Company
entered into an Employment Agreement with such officer of the Company, pursuant
to which, among other things, the exercise price for all of the 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 repricing of
all of the 380,000 options, the Company remeasured the intrinsic value of these
options at the end of each reporting period based on changes in the stock price
through June 30, 2005. For the years ended June 30, 2005 and 2004, the Company
recognized stock-based employee compensation income (expense) of approximately
$315,000 and $(2,381,000), respectively, related to these options. As a result
of the adoption of SFAS 123 (R) on July 1, 2005, the Company no longer
re-measures the intrinsic value of the 380,000 re-priced options. The Company
determined the fair value of the modified award in accordance with SFAS 123, the
guidance then in effect, and has recognized expense of $36,000 for the year
ended June 30, 2006 relating to the portion of the options that were unvested on
July 1, 2005.

For the years ended June 30, 2005 and 2004, the Company recorded compensation
expense of approximately $88,000 and $39,000, respectively, as a result of
505,000 options granted to certain employees at an exercise price below the
grant date trading price. Upon adoption of SFAS 123 (R), beginning July 1, 2005,
the Company reversed the unrecognized deferred compensation costs of
approximately $136,000, associated with these options, with a corresponding
reduction to the Company's additional paid-in capital and is recognizing the
fair value estimated in accordance with the original provisions of SFAS 123 for
the unvested options. In December 2005, the Company cancelled a total of 251,667
options relating to the unexercised options issued to three of the employees
that were originally issued below fair market value with a strike price of
$4.05. The Company reissued these options at the fair market value on January
20, 2004 (original grant date) with a strike price of $4.55 and provided cash
bonuses to the employees in return for the increase in the strike price. The
original vesting terms and remaining exercise period of the original grant on
date of modification was utilized in the amended grant. The Company has recorded
additional compensation expense equal to the amount of the cash bonuses paid of
$125,000. The Company will continue to record compensation expense for the fair
value of the stock options over the remaining vesting term.




                                      F-21
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 - Stockholders' Transactions - continued

On March 30, 2006, the Company extended the exercise period of 1,500,000 vested
options originally granted to an officer of the Company from five to ten years.
The extension of the exercise period was treated as a modification of an award
under SFAS 123 (R) and resulted in the immediate recognition of incremental
compensation expense of approximately $591,000.

On January 6, 2006, the Company granted 15,000 options to each of two board
members for serving as a member of the Board of Directors, of which 3,750
options vested immediately and the remaining 11,250 vest ratably on the first,
second and third anniversaries of the grant date. The Company recognized
approximately $40,000 as consulting expense for the year ended June 30, 2006.

On January 6, 2005, the Company granted 7,500 options to a board member for
serving as a member of the Board of Directors, of which 1,875 vest immediately
on the grant date and the remaining 5,625 vest ratably on the first, second and
third anniversaries of the grant date. The Company recognized approximately
$9,000 and $13,000 as consulting expense for the years ended June 30, 2006 and
2005, respectively.

On January 20, 2004, the Company granted 25,000 options to a member of the Board
of Directors, for serving as a member of the Board of Directors, which vest
ratably on the first and second anniversaries of the grant date. The Company
recognized $26,000, $47,000 and $21,000 as consulting expenses for the years
ended June 30, 2006, 2005 and 2004, respectively.

During the years ended June 30, 2006 and 2005, certain option holders of the
Company exercised with cash their options to acquire 300,000 and 685,833, shares
of the Company's common stock, respectively. The Company received proceeds of
approximately $391,000 and $708,000, respectively, from the exercise of these
options.

During the years ended June 30, 2006 and 2005, certain non-employee holders of
options exercised pursuant to the cashless exercise feature available to such
option holders and the Company issued 191,196 and 212,709 shares of its common
stock in connection therewith, respectively.



                                      F-22
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 - Stockholders' Transactions - continued


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

<TABLE>
<CAPTION>
                                                                                 Weighted
                                                                   Weighted      Average
                                                                    Average     Remaining          Aggregate
                                                Number             Exercise    Contractual         Intrinsic
                                              of Shares              Price         Life              Value
                                              ---------              -----         ----              -----

<S>                                            <C>               <C>               <C>             <C>
Balance - June 30, 2003                        3,570,000         $     1.23

Granted                                          720,000               5.02

Exercised                                        (20,000)              1.42                    $        69,000
                                            ------------         ----------
Balance - June 30, 2004                        4,270,000               1.87

Granted                                          784,000               7.99
Exercised                                      (885,500)               1.08                    $       858,000
Forfeited                                       (12,500)               3.53
                                            ------------         ----------
Balance - June 30, 2005                        4,156,000               3.18

Granted                                        1,287,000               6.49
Exercised                                      (525,000)               1.28                    $       872,000
Cancelled                                      (252,000)               4.05
Forfeited                                       (25,000)               8.22
                                            ------------         ----------
Balance - June 30, 2006                        4,641,000         $     4.24       4.44         $    11,270,000
                                            ============

Exercisable - June 30, 2006                    3,250,000         $     3.09       6.34         $     5,993,000

</TABLE>


A summary of the Company's nonvested employee options at June 30, 2006 and
changes during the year ended June 30, 2006 is presented below:

                                               Weighted
                                               Average
                                 Non-vested   Fair Value   Aggregate
                                   Number        at        Intrinsic
                                 of Shares    Grant Date     Value
                                 ---------    ----------     -----

Balance - June 30, 2005            1,434,000    $ 3.13
Granted                            1,208,000      3.50
Vested                            (1,060,000)     3.07     $3,254,000
Cancelled                           (173,000)     2.70
Forfeited                            (18,000)     4.69
                               -------------
Balance - June 30, 2006            1,391,000    $ 3.79
                               =============



                                      F-23
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 - Stockholders' Transactions - continued

Warrants:

On August 9, 2004, the Company issued two warrants to a consultant pursuant to
which said consultant has the right to purchase 45,000 shares of the Company's
common stock at a price of $6.10 per share. The Company recognized approximately
$9,000 and $138,000 as consulting expense for years ended June 30, 2006 and
2005, respectively relating to said warrants. All milestones were met as of June
30, 2006 related to said warrants.

On August 4, 2004, the Company issued a warrant to a consultant pursuant to
which said consultant has the right to purchase 40,000 shares of the Company's
common stock at a price of $7.22 per share upon satisfaction of certain
milestones included in the warrant. The Company recognized approximately $75,000
as consulting expense for the year ended June 30, 2005, relating to said
warrants. No additional milestones were met during the year ended June 30, 2006.

On June 22, 2004, the Company entered into a consulting agreement pursuant to
which consultant will provide certain investor relation services on behalf of
the Company. In connection therewith, the Company issued a warrant to said
consultant pursuant to which said consultant has the right to purchase 50,000
shares of Company's common stock at a price of $8.25 per share upon the
completion of certain milestones, as set forth in such agreement. All milestones
were met as of June 30, 2005 and the Company recognized approximately $243,000
as consulting expense for the year then ended.

During the year ended June 30, 2006, certain warrant holders of the Company
exercised their warrants to acquire 406,472 shares of the Company's common
stock, in which the Company received proceeds of approximately $720,000 from the
exercise of such warrants. During the year ended June 30, 2005, certain warrant
holders of the Company exercised their warrants to acquire 1,598,411 shares of
the Company's common stock. The Company received proceeds of approximately
$3,279,000 during the year ended June 30, 2005 from the exercise of these
warrants. During the year ended June 30, 2004, certain warrant holders of the
Company exercised their warrants to acquire 1,283,334 shares of the Company's
common stock. The Company received proceeds of approximately $2,511,000 from the
exercise of these warrants.

Receivable from Stockholder:

Subsequent to the exercise of an option by a former member of management on
September 27, 2005, the Company became aware of the statutorily required
withholding taxes due to the UK tax regulatory authority. In order to maintain
compliance with the UK tax regulatory authority, the Company remitted the taxes
due on behalf of the former employee in January 2006 and, in return, received a
promissory note from the former member of management dated November 28, 2005 for
$341,000. The payment of these taxes was not part of the option agreement. The
Company has classified such note as a receivable from stockholder in the equity
section of the consolidated balance sheet.

Note 8 -  Geographic Information

We have one operating segment and define geographical regions as countries in
which we operate. Our corporate headquarters in the United States collects
licensing, royalties and research & development contract revenue from our
arrangements with external customers and our co-development partners. Our wholly
owned subsidiary, Bioenvision Limited, located in the United Kingdom manages our
product sales (including the named patient program). The following table
reconciles our revenues by geographic region to the consolidated total:

    Region
                                  2006             2005             2004
                                  ----             ----             ----
    United States              $ 1,929,527      $ 3,373,547     $ 2,929,719
    United Kingdom               3,379,545        1,277,627         172,495
                               -----------      -----------     -----------
         Total Revenues        $ 5,309,072      $ 4,651,174     $ 3,102,214
                               ===========      ===========     ===========



                                      F-24
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 - Commitments and Contingencies

Leases:

The Company leases office space for its New York, New York headquarters under a
non-cancelable operating lease expiring on December 29, 2009 and office space in
Edinburgh, Scotland under a lease agreement for its subsidiary Bioenvision Ltd.
which expires February 29, 2008. Rent expense for both facilities in the
aggregate for the years ended June 30, 2006, 2005 and 2004 was approximately
$680,000, $421,000 and $421,000, respectively. Further, the Company leases two
vehicles under leases which expire November 29, 2008 and one set to expire
February 28, 2007. Lease expense was approximately $49,000, $34,000 and $37,000
for the years ended June 30, 2006, 2005 and 2004, respectively. At June 30,
2006, total minimum rentals under operating leases with initial or remaining
non-cancelable lease terms of more than one year were approximately:

                    Year ended June 30,

                  2007           $  1,234,000

                  2008                820,000

                  2009                372,000

                  2010                179,000
                                     --------

                                 $  2,605,000
                                 ============
Litigation:

On December 19, 2003, the Company filed a complaint against Dr. Deidre Tessman
and Tessman Technology Ltd. (the "Tessman Defendants") in the Supreme Court of
the State of New York, County of New York (Index No. 03-603984). An amended
complaint alleges, among other things, breach of contract and negligence by
Tessman and Tessman Technology and demands judgment against Tessman and Tessman
Technology in an amount to be determined by the Court. The Tessman Defendants
removed the case to federal court, then remanded it to state court and served an
answer with several purported counterclaims. Each of the parties had moved for
summary judgment dismissing all but one of the claims of the other parties.
Those motions were all denied by the Court, and a trial date had been set for
early 2006. On April 10, 2006, an out of court settlement was reached and each
party executed a release, releasing all claims against the other. A Stipulation
of Discontinuance was filed with the Court.




                                      F-25
<PAGE>



                       BIOENVISION, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 - Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>

2006                              Quarter Ended   Quarter Ended  Quarter Ended    Quarter Ended
                                    9/30/2005      12/31/2005      3/31/2006       6/30/2006
                                    ---------      ----------      ---------       ---------
<S>                                 <C>            <C>             <C>             <C>
Revenue                             $670,218       $1,091,307      $1,741,095      $1,806,452

Loss from operations               (5,200,736)    (4,197,037)     (8,591,790)     (7,653,095)

Net loss                           (4,804,592)    (3,793,862)     (8,138,302)     (7,162,007)

Net loss applicable to
shareholders                      $(4,889,660)   $(3,878,931)    $(8,221,521)    $(7,246,151)
                                   -----------    -----------     -----------     -----------

Basic and diluted net loss
applicable to shareholders per
share                               $ (0.12)        $ (0.10)        $ (0.20)        $ (0.18)

<CAPTION>

2005                                9/30/2004      12/31/2004      3/31/2005       6/30/2005
                                    ---------      ----------      ---------       ---------

<S>                                <C>             <C>             <C>              <C>
Revenue                            $1,085,328     $1,175,923      $1,398,969         $990,954

Loss from operations               (3,149,988)    (4,061,409)     (3,257,875)     (14,461,351)

Net loss                           (3,094,551)    (4,004,831)     (3,072,410)     (14,090,993)

Net loss applicable to
shareholders                      $(3,220,892)   $(4,115,206)    $(3,155,629)    $(14,175,137)
                                   -----------    -----------     -----------    ------------

Basic and diluted net loss
applicable to shareholders per
share                               $ (0.11)        $ (0.14)        $ (0.08)        $ (0.38)

</TABLE>

The quarterly net loss per share applicable to common stockholders amounts are
rounded to the nearest cent. Annual net loss per share applicable to common
stockholders may vary depending on the effect of such rounding.


                                      F-26
<PAGE>




             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





The Board of Directors and Stockholders of Bioenvision, Inc.:


In  connection  with  our  audit of the  consolidated  financial  statements  of
Bioenvision, Inc as of and for the year ended June 30, 2006, we also audited the
2006  consolidated  financial  statement  Schedule II. In our opinion,  the 2006
financial  statement  schedule,   when  considered  in  relation  to  the  basic
consolidated  financial  statements taken as a whole,  presents  fairly,  in all
material respects, the information required to be included therein.


/s/ J.H. Cohn LLP

Roseland, New Jersey
August 21, 2006




                                       S-1
<PAGE>




          REPORT OF PRIOR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




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


We  have  audited  in  accordance  with  the  standards  of the  Public  Company
Accounting Oversight Board (United States) the consolidated financial statements
of Bioenvision,  Inc. and Subsidiaries referred to in our report dated September
16, 2004,  which is included in the Annual Report on Form 10K for the year ended
June 30, 2006.  Our audit was conducted for the purpose of forming an opinion on
the basic financial  statements  taken as a whole.  The Schedule II is presented
for  purposes of  additional  analysis  and is not a required  part of the basic
financial  statements.   This  schedule  has  been  subjected  to  the  auditing
procedures  applied in the audit of the basic  financial  statements and, in our
opinion,  is fairly  stated in all  material  respects  in relation to the basic
financial statements taken as a whole.



/s/ Grant Thornton LLP

New York, New York
September 16, 2004






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<PAGE>

<TABLE>
<CAPTION>
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                    Years Ended June 30, 2006, 2005 and, 2004


                                                       Balance at     Charged to       Write-offs       Loss on    Balance at
                                                      Beginning of     Cost and      To Accounts and    Foreign      End of
                                                         Period         Expense        Recoveries      Exchange      Period
                                                         ------         -------        ----------      --------      ------
                  Allowance for doubtful accounts
                  -------------------------------
<S>                                          <C>       <C>             <C>             <C>             <C>         <C>
                                         June 30,
                                             2006      $ 869,220       $  25,564       $        -      $ 3,930     $ 898,714
                                             2005      $       -       $ 869,220       $        -      $     -     $ 869,220
                                             2004      $       -       $       -       $        -      $     -     $       -

          Deferred tax asset valuation allowance

                                         June 30,
                                             2006   $ 14,178,975    $ 10,452,291 (1)   $         -     $     -   $24,631,266
                                             2005   $  2,893,873    $ 11,285,102 (1)   $         -     $     -   $14,178,975
                                             2004   $    396,693    $  2,498,180 (1)   $         -     $     -   $ 2,893,873
</TABLE>





(1) Reflects the increase in the valuation allowance associated with net
operating losses of the Company.








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