##### Table of Contents






As filed with the Securities and Exchange Commission on
June 28, 2006








Registration
No. 333-134311











UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549








AMENDMENT NO. 1








TO








FORM S-1





REGISTRATION STATEMENT


UNDER THE SECURITIES ACT OF 1933





ImaRx Therapeutics, Inc.


(Exact Name of Registrant as Specified in Its Charter)


|                                                                   |  |                                                              |  |                                            
|------------------------------------------------------------------ |  | ------------------------------------------------------------ |  | -------------------------------------------
|Delaware                                                           |  | 2834                                                         |  | 86-0974730                                 
|(State or Other Jurisdiction of
    Incorporation or Organization) |  | (Primary Standard Industrial
    Classification Code Number) |  | (I.R.S. Employer
    Identification Number)

1635 East 18th Street


Tucson, AZ 85719


(520) 770-1259


(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrants Principal Executive Offices)





Evan C. Unger


1635 East 18th Street


Tucson, AZ 85719


(520) 770-1259


(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)





Copies to:


|                                                                                                                                                                 |  |                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|John M. Steel, Esq.
    Mark F. Hoffman, Esq.
    DLA Piper Rudnick Gray Cary US LLP
    701 Fifth Ave., Ste. 7000
    Seattle, WA 98104-7044
    (206) 839-4800 |  | Laura A. Berezin, Esq.
    Glen Y. Sato, Esq.
    Cooley Godward LLP
    Five Palo Alto Square
    3000 El Camino Real
    Palo Alto, CA 94306-2155
    (650) 843-5000

Approximate date of commencement of proposed sale to the
public:




o


o


o


o





The registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment that
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as
the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.













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##### Table of Contents



|The
information in this prospectus is not complete and may be
changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not
permitted.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




Subject to Completion, Dated
June      , 2006





PROSPECTUS





Shares


Common Stock


$             per
share






Investing in our common stock involves risks. See Risk
Factors beginning on page 7.




|                                                       |  |           |  |  |       |   |  | 
|------------------------------------------------------ |  | --------- |  |  | ----- | - |  | 
|                                                       |  | Per Share |  |  | Total |  
|                                                       |  |           |  |  |       |  
|Public Offering Price                                  |  | $         |  |  |       | $ |  | 
|Underwriting Discounts                                 |  | $         |  |  |       | $ |  | 
|Proceeds to ImaRx Therapeutics, Inc. (before expenses) |  | $         |  |  |       | $ |  | 



CIBC World Markets




| |                        
| | -----------------------
| | Jefferies &
    Company



| |                         
| | ------------------------
| | First Albany
    Capital









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##### 










Table of Contents





|                                                                                          |  |      |     | 
|----------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                          |  | Page |    
|                                                                                          |  |      |    
|Summary                                                                                   |  |      | 1   | 
|Risk Factors                                                                              |  |      | 8   | 
|Forward-Looking Statements                                                                |  |      | 28  | 
|Use of Proceeds                                                                           |  |      | 29  | 
|Dividend Policy                                                                           |  |      | 29  | 
|Capitalization                                                                            |  |      | 30  | 
|Dilution                                                                                  |  |      | 32  | 
|Conversion of Series F Preferred
    Stock                                                |  |      | 34  | 
|Selected Consolidated Financial Data                                                      |  |      | 35  | 
|Managements Discussion and Analysis
    of Financial Condition and Results of Operations |  |      | 36  | 
|Our Business                                                                              |  |      | 47  | 
|Management                                                                                |  |      | 69  | 
|Certain Relationships and Related
    Transactions                                        |  |      | 80  | 
|Principal Stockholders                                                                    |  |      | 82  | 
|Description of Capital Stock                                                              |  |      | 84  | 
|Material U.S. Federal Tax Consequences
    to Non-U.S. Holders                            |  |      | 88  | 
|Shares Eligible for Future Sale                                                           |  |      | 91  | 
|Underwriting                                                                              |  |      | 93  | 
|Legal Matters                                                                             |  |      | 99  | 
|Experts                                                                                   |  |      | 99  | 
|Where You Can Find Additional
    Information                                             |  |      | 99  | 
|Index to Consolidated Financial
    Statements                                            |  |      | F-1 | 
|EXHIBIT 3.3                                                                              
|EXHIBIT 10.1                                                                             
|EXHIBIT 10.4                                                                             
|EXHIBIT 10.6                                                                             
|EXHIBIT 10.11                                                                            
|EXHIBIT 10.15                                                                            
|EXHIBIT 10.22                                                                            
|EXHIBIT 10.23                                                                            
|EXHIBIT 10.24                                                                            
|EXHIBIT 10.29                                                                            
|EXHIBIT 10.30                                                                            
|EXHIBIT 23.1                                                                             















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##### Table of Contents



Summary
 You should read the entire prospectus carefully before
deciding to invest in shares of our common stock.
 ImaRx Therapeutics, Inc.
 Overview
 
  
  Our Products
  
 ProductIndication
    
    Candidate
    
    Product Elements
    
    Development StatusIschemic Stroke
    
    PROLYSEtm
    
     Recombinant pro-urokinase
    
     Completed one Phase 3 clinical trialSonoLysis
    tmtherapy
    
     SonoLysis bubbles and ultrasound
    
     PreclinicalSonoLysis combination therapy
    
     SonoLysis bubbles, ultrasound and a thrombolytic
    
     Preclinical(1);
    ongoing Phase 2 proof of concept clinical trial using
    FDA-approved diagnostic bubbles and the thrombolytic tPAAcute Massive Pulmonary Embolism
    
    Abbokinase®
    
     Tissue-culture urokinase
    
     Approved for marketingCatheter Clearance
    
    Open-Cath-R®
    
     Recombinant urokinase
    
     Completed two Phase 3 clinical trials 
  
 (1)
    We have an approved investigational new drug application, or
    IND, for a Phase 1/2 dose escalation clinical trial using
    SonoLysis bubbles for which we intend to start enrolling
    patients in the second half of 2006.


1



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Open-Cath-R.
 
 
 Open-Cath-R Open-Cath-R,


2



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Our Business Strategy
   
    expand the number of patients eligible for treatment by
    developing and commercializing our portfolio of ischemic stroke
    product candidates;
    capitalize on near-term revenue opportunities and develop an
    initial commercial infrastructure;
    leverage our product candidates to address additional vascular
    indications; and
    expand the use of our bubble technology to create a deep
    pipeline with broad therapeutic applications. 
 Risks Related to Our Business and Business Strategy
 
 
  
  
    we have a history of operating losses, including an accumulated
    deficit of approximately $64.3 million and an overall
    stockholders deficit of approximately $32.6 million
    at March 31, 2006, and expect to continue to incur
    substantial losses for the foreseeable future;
    we will need substantial additional capital to fund our
    operations;
    we may never complete clinical development of our product
    candidates or have more than one product approved for marketing,
    and if approved our product candidates may never achieve market
    acceptance;
    failure to comply with various government regulations in
    connection with the development, manufacture and
    commercialization of our product candidates and post-approval
    manufacturing and marketing of our products could result in
    significant interruptions or delays in our development and
    commercialization activities;
    if we fail to satisfy our obligations to Abbott Laboratories
    that we assumed in connection with our acquisition of PROLYSE,
    Open-Cath-R, Abbokinase
    and related assets, Abbott Laboratories could reclaim the
    acquired technologies and other assets;
    if we are not able to use the clinical trial data acquired from
    Abbott Laboratories in support of our applications for
    regulatory approval, we will not be able to maintain our current
    development and commercialization timelines; and
    we compete against companies that have longer operating
    histories, more established products and greater resources than
    we do. 
  
 Our Corporate Information


3



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® ® tm tm


4



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##### Table of Contents



The Offering  Common stock offered
    
    sharesCommon stock to be outstanding after this offering
    
    sharesInitial public offering price
    
    $Use of proceeds
    
    To repay indebtedness, to continue the development of our
    product candidates, including clinical trials, to fund
    manufacturing of our product candidates and for working capital
    and other general corporate purposes. See Use of
    Proceeds.Proposed Nasdaq National Market symbol
    
    IMRX 
  
  
    2,777,024 shares of common stock issuable upon the exercise
    of options outstanding under our 2000 Stock Plan, having a
    weighted average exercise price of $3.01 per share;
    1,761,749 shares of common stock issuable upon the exercise
    of warrants outstanding, having a weighted average exercise
    price of $3.16 per share;
    1,658,376 shares of common stock reserved for future grants
    under our 2000 Stock Plan; and
    an aggregate of 1,800,000 shares of common stock reserved
    for future issuance under our 2006 Performance Incentive Plan,
    which has been approved by our board of directors and, subject
    to stockholder approval, will become effective immediately upon
    the signing of the underwriting agreement for this offering.   
    the conversion of all our outstanding shares of preferred stock
    into 8,164,157 shares of common stock upon the closing of
    this offering, assuming a one-for-one conversion ratio of our
    Series F preferred stock. See Conversion of
    Series F Preferred Stock;
    a      -for-     reverse
    stock split of our common stock that was effected
    on                     ,
    2006;
    the filing of our amended and restated certificate of
    incorporation upon completion of this offering; and
    no exercise of the underwriters over-allotment option.


5



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Summary Consolidated Financial Data
  Three Months EndedYears Ended December 31,
    
    March 31,2003
    
    2004
    
    2005
    
    2005
    
    2006(unaudited)(in thousands, except share and per share data)Consolidated Statements of Operations Data:Grant and other revenue
    
    $
    224
    
    
    $
    575
    
    
    $
    619
    
    
    $
    173
    
    
    $
    177Costs and expenses:Research and development
    
    
    1,878
    
    
    
    2,490
    
    
    
    3,579
    
    
    
    764
    
    
    
    1,724General and administrative
    
    
    1,654
    
    
    
    3,183
    
    
    
    4,142
    
    
    
    661
    
    
    
    1,618Depreciation and amortization
    
    
    209
    
    
    
    186
    
    
    
    194
    
    
    
    47
    
    
    
    60Acquired in-process research and development
    
    
    
    
    
    
    
    
    
    
    24,000
    
    
    
    
    
    
    
    Total operating expenses
    
    
    3,741
    
    
    
    5,859
    
    
    
    31,915
    
    
    
    1,472
    
    
    
    3,402Interest and other income
    
    
    22
    
    
    
    29
    
    
    
    122
    
    
    
    23
    
    
    
    105Interest expense
    
    
    (325
    )
    
    
    (469
    )
    
    
    (587
    )
    
    
    (53
    )
    
    
    (225
    )Gain on extinguishment of note
    
    
    
    
    
    
    
    
    
    
    3,835
    
    
    
    3,835
    
    
    
    Net (loss) income
    
    
    (3,820
    )
    
    
    (5,724
    )
    
    
    (27,926
    )
    
    
    2,506
    
    
    
    (3,345
    )Accretion of dividends on preferred stock
    
    
    (1,287
    )
    
    
    (301
    )
    
    
    (601
    )
    
    
    (150
    )
    
    
    (150
    )Net (loss) income available to common stockholders
    
    $
    (5,107
    )
    
    $
    (6,025
    )
    
    $
    (28,527
    )
    
    $
    2,356
    
    
    $
    (3,495
    )Net (loss) income available to common stockholders per
    share  Basic
    
    $
    (1.74
    )
    
    $
    (1.07
    )
    
    $
    (3.01
    )
    
    $
    0.30
    
    
    $
    (0.27
    )Weighted average shares outstanding  Basic
    
    
    2,936,094
    
    
    
    5,637,042
    
    
    
    9,463,279
    
    
    
    7,769,415
    
    
    
    12,930,820Net (loss) income available to common stockholders per
    share  Diluted
    
    $
    (1.74
    )
    
    $
    (1.07
    )
    
    $
    (3.01
    )
    
    $
    0.18
    
    
    $
    (0.27
    )Weighted average shares outstanding  Diluted
    
    
    2,936,094
    
    
    
    5,637,042
    
    
    
    9,463,279
    
    
    
    13,146,131
    
    
    
    12,930,820


6



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
    on an actual basis;
    on a pro forma basis to reflect:  
    the issuance of Series F preferred stock in April and May
    2006 resulting in net proceeds of approximately
    $13.0 million;
    a $5.0 million initial payment and the issuance of a
    $15.0 million promissory note in connection with an asset
    acquisition in April 2006; and
    the conversion of all outstanding shares of preferred stock,
    valued at approximately $38.9 million, into
    8,164,157 shares of common stock upon the closing of this
    offering; and  
    On a pro forma as adjusted basis to reflect our receipt of the
    estimated net proceeds from our sale
    of                      shares
    of common stock in this offering at an assumed initial public
    offering price of
    $          ,
    the midpoint of the range on the front cover of this prospectus,
    after deducting underwriting discounts and commissions and
    estimated offering expenses payable by us. At March 31, 2006Pro FormaActual
    
    Pro Forma
    
    as Adjusted(unaudited)(in thousands)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    6,349
    
    
    $
    14,349
    
    
    $Working capital (deficit)
    
    
    (11,388
    )
    
    
    (3,388
    )Total assets
    
    
    7,369
    
    
    
    30,369Long-term notes payable, less current portion
    
    
    
    
    
    
    15,000Total stockholders equity (deficit)
    
    
    (32,618
    )
    
    
    2,260


7



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Risk Factors





Investing in our common stock involves a high degree of risk.
You should carefully consider the following risk factors and all
other information contained in this prospectus before purchasing
our common stock. If any of the following events were to occur,
our business, financial condition or results of operations could
be materially and adversely affected. In these circumstances,
the market price of our common stock could decline, and you may
lose some or all of your investment.





Risks Relating to Our Business


Unless we are able to generate sufficient product or other
revenue, we will continue to incur losses from operations and
may never achieve or maintain profitability.














| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | successfully market and sell our recently-acquired Abbokinase
    product or any of our product candidates following regulatory
    approval, if ever;
|
|
| |  | obtain regulatory approval for PROLYSE, SonoLysis therapy,
    SonoLysis combination therapy and Open-Cath-R;                                         
|
| |  | obtain commercial quantities of our approved products at
    acceptable cost levels; and                                                              
|
| |  | successfully enter into partnerships for some of our product
    candidates, including Open-Cath-R.                                                   





| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | research and development programs, including significant
    requirements for contract manufacturing, clinical trials,
    preclinical testing and potential regulatory submissions;    
|
| |  | developing additional infrastructure and hiring additional
    management and other employees to support the anticipated growth
    of our sales, development and regulatory activities;
|
| |  | regulatory submissions and commercialization activities; and                                                                                                                            
|
| |  | additional costs for intellectual property protection and
    enforcement and expenses as a result of being a public company.                                                           



Our independent registered public accounting firm has
expressed substantial doubt about our ability to continue as a
going concern.










8



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We incurred significant indebtedness in connection with our
acquisitions of assets from Abbott Laboratories. If we are
unable to satisfy these obligations in 2006 and 2007 when due,
Abbott Laboratories will have a right to reclaim the assets and
our rights relating to PROLYSE, Open-Cath-R and Abbokinase,
including a portion of the cash from our sales of Abbokinase.












We will need substantial additional capital to fund our
operations. If we are unable to raise capital when needed, we
may be forced to delay, reduce or eliminate our research and
development programs or commercialization efforts, and we may be
unable to timely pay our debts or may be forced to sell or
license assets or otherwise terminate further development of one
or more of our programs.











| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the timing, scope and results of our preclinical studies and
    clinical trials;                                                                                                                                   
|
| |  | the timing of initiation of manufacturing for our product
    candidates;                                                                                                                                           
|
| |  | the timing and amount of revenue;                                                                                                                                                                                   
|
| |  | the timing of, and the costs involved in, obtaining regulatory
    approvals;                                                                                                                                       
|
| |  | our ability to establish and maintain collaborative
    relationships;                                                                                                                                              
|
| |  | personnel, facilities and equipment requirements; and                                                                                                                                                               
|
| |  | the costs involved in preparing, filing, prosecuting,
    maintaining and enforcing patent claims and other patent-related
    costs, including litigation costs, if any, and the result of any
    such litigation.



9



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We recently expanded our business strategy to include
development and sale of thrombolytics that expose us to
additional risks, which we may not overcome successfully.






The thrombolytic market is highly competitive and dominated
by products from Genentech. We have limited sales and marketing
capabilities and will depend on drug wholesalers to distribute
our products.












10



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Our competitors generally are larger than we are, have
greater financial resources available to them than we do and may
have a superior ability to develop and commercialize competitive
products. In addition, if our competitors have products that are
approved in advance of ours, marketed more effectively or
demonstrated to be safer or more effective than ours, our
commercial opportunity will be reduced or eliminated and our
business will be harmed.






If we are unable to successfully develop, manufacture and
commercialize our product candidates, we may not generate
sufficient revenue to continue our business.




We may be unable to sell our existing inventory of Abbokinase
before product expiration, and even if we are able to sell the
existing inventory, the product may be returned prior to use by
hospitals and clinics. Additionally, if we are successful in
extending the product expiration dates, we will need to re-brand
the product.










11



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##### Table of Contents










If we want to sell urokinase beyond our existing inventory of
Abbokinase, we would need to undertake manufacturing and secure
regulatory approval for a new manufacturing process and
facility.
















If we are not able to use the data and drug substance
acquired from Abbott Laboratories for further clinical
development of our PROLYSE and Open-Cath-R product candidates
and our Abbokinase product, we will not be able to maintain our
current timelines for further development and commercialization
of these potential products and Abbokinase. Any additional
clinical trial requirements could significantly increase our
expenses and reduce the commercial value of PROLYSE, Open-Cath-R
and Abbokinase.





Open-Cath-R


To receive FDA marketing approval for PROLYSE or
Open-Cath-R, we must
demonstrate that the material manufactured for commercial use is
equivalent to the material previously manufactured.





Open-Cath-R,





12



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Open-Cath-R Open-Cath-R Open-Cath-R





We do not plan to manufacture any of our product candidates
and will depend on commercial contract manufacturers to
manufacture our products.






If our clinical trials are not successful, or if we are
unable to obtain regulatory approvals, we will not be able to
commercialize our products and we will continue to incur
significant operating losses.












| |   |                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we did not conduct any of the prior clinical trials related to
    PROLYSE and Open-Cath-R, and we may be unable to demonstrate the
    same level of safety and effectiveness in clinical trials we
    conduct with these product candidates;                                                      
|
| |  | the only clinical trials related to our development of SonoLysis
    therapy or SonoLysis combination therapy that we have conducted
    or are conducting use neither our SonoLysis bubbles nor PROLYSE
    and may not be indicative of the safety and effectiveness of our
    product candidates;
|
| |  | clinicians, physicians and regulators may not favorably
    interpret the results of our preclinical studies and clinical
    trials;                                                                                                                                                                
|
| |  | some patients in our clinical trials may experience unforeseen
    adverse medical events related or unrelated to the use of our
    product candidates;                                                                                                                                             

13



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| |   |                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we may be unable to secure a sufficient number of clinical trial
    sites or patients to enroll in our clinical trials;                                                                                                               
|
| |  | we may experience delays in securing the services of, or
    difficulty scheduling, clinical investigators for our clinical
    trials;                                                                                                
|
| |  | third parties who conduct our clinical trials may not fulfill
    their obligations;                                                                                                                                                   
|
| |  | we may in the future experience, and have in the past
    experienced, deviations from the approved clinical trial
    protocol by our clinical trial investigators;                                                                   
|
| |  | the FDA or the local institutional review board, or IRB, at one
    or more of our clinical trial sites may interrupt, suspend or
    terminate a clinical trial or the participation of a particular
    site in a clinical trial; and
|
| |  | the FDA or other regulatory bodies may change the policies and
    procedures we are required to follow in connection with our
    clinical trials.                                                                                    









We rely on third parties to conduct our clinical trials who
may not successfully carry out their contractual duties, with
resulting negative impacts on our clinical trials.


follow-up


Our product candidates may never achieve market
acceptance.












| |   |                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------
|
| |  | the timing and scope of regulatory approvals of our products and
    market entry compared to competitive products;                    
|
|
| |  | the safety and efficacy of our products, including any
    inconveniences in administration, as compared to alternative
    treatments;

14



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| |   |                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------
| |  | the rate of adoption of our products by hospitals, doctors and
    nurses and acceptance by the health care community;
|
| |  | the product labeling permitted or required by regulatory
    agencies for each of our products;                       
|
| |  | the competitive features of our products, including price, as
    compared to other similar products;                 
|
| |  | the availability of sufficient third party coverage or
    reimbursement for our products;                            
|
| |  | the extent and success of our sales and marketing
    efforts; and                                                    
|
| |  | possible unfavorable publicity concerning our products or any
    similar products.                                   



Technological change and innovation in our market sector may
cause our products to become obsolete shortly after or even
before such products reach the market.










If we are unable to obtain acceptable prices or adequate
reimbursement from third-party payors for any product candidates
that we seek to commercialize, our revenue and prospects for
profitability will suffer.










15



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##### Table of Contents



We intend to rely heavily on third parties to implement
critical aspects of our business strategy, and our failure to
enter into and maintain these relationships on acceptable
business terms, or at all, would materially adversely affect our
business.






| |   |                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------
| |  | manufacturing of our thrombolytics and SonoLysis bubbles;                                                       
|
|
| |  | conducting clinical trials;                                                                                     
|
|
| |  | preparing, submitting and maintaining regulatory records
    sufficient to meet the requirements of the FDA; and
|
|
| |  | marketing and distribution of our products.                                                                     












We rely on third party products, technology and intellectual
property, which could negatively affect our ability to sell our
SonoLysis bubble or other products commercially or adversely
affect our ability to derive revenue from such products.







As a highly specialized scientific business enterprise, our
success is substantially dependent on certain key members of our
scientific and management staff, the loss of any of whom could
have a material adverse effect on our business.










16



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We will need to increase the size of our organization, and we
may experience difficulties in managing our growth.






| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | successfully utilize a small sales and marketing organization;                                                                                                   
|
|
| |  | identify and manage third party manufacturers for our products;                                                                                                  
|
|
| |  | manage our clinical trials effectively;                                                                                                                          
|
|
| |  | manage our internal research and development efforts effectively
    while carrying out our contractual obligations to collaborators
    and other third parties;
|
|
| |  | continue to improve our operational, financial and management
    controls, reporting systems and procedures under increasing
    regulatory requirements; and   
|
|
| |  | attract and retain sufficient numbers of talented employees.                                                                                                     









We depend on patents and other proprietary rights, some of
which are uncertain and unproven. Further, our patent portfolio
and other intellectual property rights are expensive to
maintain, protect against infringement claims by third parties,
and enforce against third party infringements, and are subject
to potential adverse claims.


Open-Cath-R






17



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| |   |                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | challenge, invalidation, circumvention or expiration of issued
    patents already owned by or licensed to us;                                                                                                                                                                            
|
|
| |  | claims by our consultants, key employees or other third parties
    that our products or technologies are the result of
    technological advances independently developed by them and,
    therefore, not owned by us;                                                                   
|
|
| |  | our failure to pay product development costs, license fees,
    royalties, milestone payments or other compensation required
    under our technology license and technology transfer agreements,
    and the subsequent termination of those agreements;                                 
|
|
| |  | failure by our licensors or licensees to comply with the terms
    of our license agreements;                                                                                                                                                                                             
|
|
|
| |  | misrepresentation by technology owners of the extent to which
    they have rights to the technologies that we purport to acquire
    or license from them;                                                                                                                               
|
|
|
| |  | a potentially shorter patent term as a result of legislation
    which sets the patent termination date at 20 years from the
    earliest effective filing date of the patent application instead
    of 17 years from the date of the grant; and                                         
|
|
|
| |  | loss of rights that we have licensed due to our failure or
    decision not to fund further research or failure to achieve
    required development or commercialization milestones or
    otherwise comply with our obligations under the license and
    technology transfer agreements.
|






We do not have any patent protection for Abbokinase, and
third parties could develop urokinase without a license from us,
which could decrease the market opportunity for Abbokinase.













Other companies may claim that we infringe their patents or
trade secrets, which could subject us to substantial damages.










18



---



##### Table of Contents







| |   |                                                
| | - | -----------------------------------------------
| |  | pay substantial damages;                       
|
|
| |  | stop using infringing technologies and methods;
|
|
| |  | stop certain research and development efforts; 
|
|
| |  | develop non-infringing products or methods; and
|
|
| |  | obtain one or more licenses from third parties.



Our rights to develop and commercialize certain of our
product candidates are subject to the terms and conditions of
licenses or sublicenses granted to us by third parties,
including other pharmaceutical companies, that contain
restrictions that may limit our ability to capitalize on these
products.














19



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##### Table of Contents



We could be exposed to significant product liability claims,
which could be time consuming and costly to defend, divert
management attention and adversely impact our ability to obtain
and maintain insurance coverage. The expense and potential
unavailability of insurance coverage for our company or our
customers could adversely affect our ability to sell our
products, which would negatively impact our business.












If we use hazardous or biological materials in a manner that
causes injury or violates applicable law, we may be liable for
damages.




20



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##### Table of Contents



The FDA approval process for drugs involves substantial time,
effort and financial resources, and we may not receive any new
approvals for our product candidates on a timely basis, or at
all.






| |   |                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | preclinical laboratory and animal testing;                                                                                                                                             
|
|
| |  | submission of an investigational new drug application which must
    become effective before clinical trials may begin;                                                                
|
|
| |  | adequate and well-controlled human clinical trials to establish
    the safety and efficacy of proposed drugs or biologics for their
    intended use;                                 
|
|
| |  | pre-approval inspection of manufacturing facilities, company
    regulatory files and selected clinical investigators; and                                                             
|
|
| |  | FDA approval of a new drug application, or NDA, or FDA approval
    of an NDA supplement in the case of a new indication if the
    product is already approved for another indication.









21



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##### Table of Contents



If we or our contract manufacturers fail to comply with
applicable regulations, sales of our products could be delayed
and our revenue could be harmed.






Our products will remain subject to ongoing regulatory review
even if they receive marketing approval. If we fail to comply
with applicable regulations, we could lose these approvals, and
the sale of our products could be suspended.





200-patient









| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | restrictions on the products, manufacturers or manufacturing
    processes;
|
|
| |  | warning letters;                                                           
|
|
| |  | civil or criminal penalties or fines;                                      
|
|
| |  | injunctions;                                                               

22



---



##### Table of Contents





| |   |                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------
| |  | product seizures, detentions or import bans;                                                                           
|
|
| |  | voluntary or mandatory product recalls and publicity
    requirements;                                                 
|
|
| |  | suspension or withdrawal of regulatory approvals;                                                                      
|
|
| |  | total or partial suspension of production; and                                                                         
|
|
| |  | refusal to approve pending applications of marketing approval of
    new drugs or supplements to approved applications.



Marketing and reimbursement practices and claims processing
in the pharmaceutical and medical device industries are subject
to significant regulation in the U.S.
















If we seek regulatory approvals for our products in foreign
jurisdictions, we may not obtain any such approvals.




23



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##### Table of Contents





Risks Related to this Offering


We have broad discretion in the use of the net proceeds from
this offering and may not use them effectively.










Our principal stockholders and management own a significant
percentage of our stock and will be able to exercise significant
influence over our affairs.










We will incur increased costs as a public company which may
make it more difficult to achieve profitability.










24



---



##### Table of Contents



If you purchase shares of common stock in this offering, you
will suffer immediate and substantial dilution of your
investment.










There has been no prior public market for our common stock,
and an active trading market for our common stock may not
develop, potentially lessening the value of your shares and
impairing your ability to sell.




We expect the price of our common stock to be volatile, and
if you purchase shares of our common stock you could incur
substantial losses if you are unable to sell your shares at or
above the offering price.






| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | announcements of technological innovations or new products by us
    or our competitors;                                                                                    
|
|
| |  | announcements of the status of FDA review of our products;                                                                                                                  
|
|
| |  | the success rate of our discovery efforts, animal studies and
    clinical trials;                                                                                          
|
|
| |  | developments or disputes concerning patents or proprietary
    rights, including announcements of infringement, interference or
    other litigation regarding these rights;
|
|
| |  | the willingness of collaborators to commercialize our products
    and the timing of commercialization;                                                                     
|
|
| |  | changes in our strategic relationships which adversely affect
    our ability to acquire or commercialize products;                                                         
|
|
| |  | announcements concerning our competitors or the health care
    industry in general;                                                                                        
|
|
| |  | public concerns over the safety of our products or our
    competitors products;                                                                                           
|
|
| |  | changes in governmental regulation of the health care industry;                                                                                                             
|
|
| |  | changes in the reimbursement policies of third-party insurance
    companies or government agencies;                                                                        

25



---



##### Table of Contents





| |   |                                                                                       
| | - | --------------------------------------------------------------------------------------
| |  | actual or anticipated fluctuations in our operating results from
    period to period;
|
|
| |  | variations in our quarterly results;                                                  
|
|
| |  | changes in financial estimates or recommendations by securities
    analysts;         
|
|
| |  | changes in accounting principles; and                                                 
|
|
| |  | the loss of any of our key scientific or management personnel.                        



A significant portion of our outstanding common stock may be
sold into the market in the near future. Substantial sales of
common stock, or the perception that such sales are likely to
occur, could cause the price of our common stock to decline.





180-day lock-up








lock-up








lock-up





If we fail to develop and maintain an effective system of
internal controls, we may not be able to accurately report our
financial results or prevent fraud; as a result, current and
potential stockholders could lose confidence in our financial
reporting, which could harm our business and the trading price
of our common stock, should a market for such securities ever
develop.










26



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##### Table of Contents





Anti-takeover defenses that we have in place could prevent or
frustrate attempts to change our direction or management.






| |   |                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limit who may call a special meeting of stockholders;                                                                                                                          
|
|
| |  | establish advance notice requirements for nominations for
    election to our board of directors or for proposing matters that
    can be acted on at stockholder meetings;    
|
|
| |  | prohibit cumulative voting in the election of our directors,
    which would otherwise permit holders of less than a majority of
    our outstanding shares to elect directors;
|
|
| |  | prohibit stockholder action by written consent, thereby
    requiring all stockholder actions to be taken at a meeting of
    our stockholders; and                            
|
|
| |  | provide our board of directors the ability to designate the
    terms of and issue a new series of preferred stock without
    stockholder approval.                           



We may become involved in securities class action litigation
that could divert managements attention and harm our
business.










We do not intend to pay cash dividends on our common stock in
the foreseeable future.




27



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##### Table of Contents






Forward-looking Statements






| |   |                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------
| |  | our ability to market and sell Abbokinase;                                                                                                   
|
| |  | our ability to conduct and complete our clinical trials and our
    use of acquired data;                                                    
|
| |  | our expectations with respect to regulatory submissions and
    approvals;                                                                   
|
| |  | our ability to engage and retain qualified third parties to
    manufacture our product candidates in a timely and
    cost-effective manner;
|
| |  | our ability to commercialize our product candidates;                                                                                         
|
| |  | our estimates regarding our capital requirements and our need
    for additional financing; and                                              
|
| |  | our expectations with respect to our intellectual property
    position.                                                                     











28



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##### Table of Contents






Use of Proceeds










| |   |                                                                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | approximately $16 million for payment of a $15 million
    promissory note plus accrued interest, that we issued in
    connection with our 2005 acquisition of recombinant urokinase
    drug technologies, which matures on December 31, 2006 and
    accrues interest at 6% annually;                                          
|
|
|
| |  | approximately $12 million to fund a portion of our PROLYSE
    development activities, including a portion of a Phase 3
    clinical trial (approximately $12 million in additional
    funds will likely be required to complete the Phase 3
    clinical trial), and manufacturing and materials costs related
    to the trial;
|
|
|
| |  | approximately $10 million to fund a portion of our
    SonoLysis therapy development activities, including a
    Phase 1/2 clinical trial, preclinical safety and mechanism
    of action studies, manufacturing and material costs related to
    the trial;                                                                     
|
|
|
| |  | approximately $11 million to fund a portion of our
    SonoLysis combination therapy development activities, including
    a Phase 1/2 clinical trial, preclinical safety studies,
    manufacturing and material costs related to the trial;                                                                                     
|
|
|
| |  | approximately $5 million to fund research and development
    activities for Abbokinase, Open-Cath-R and our other preclinical
    and research-stage product candidates;                                                                                                                                                         
|
|
|
| |  | approximately $4 million to fund Abbokinase sales and
    marketing costs and other business development
    activities; and                                                                                                                                                                                                      
|
|
| |  | for working capital and other general corporate purposes.                                                                                                                                                                                                                                                                         






Dividend Policy




29



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##### Table of Contents






Capitalization






| |   |                                             
| | - | --------------------------------------------
| |  | On an actual basis;                         
|
| |  | On a pro forma basis after giving effect to:



| |   |                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the issuance of 2,835,000 shares of Series F preferred
    stock in April and May 2006 resulting in net proceeds of
    approximately $13.0 million;                                                                                     
|
|
| |  | a $5.0 million initial payment and the issuance of a
    $15.0 million promissory note in connection with an asset
    acquisition in April 2006, consisting of $16.7 million of
    inventory and $3.3 million of intangible assets; and
|
|
|
| |  | the conversion of all outstanding shares of preferred stock,
    valued at approximately $38.9 million, into
    8,164,157 shares common stock upon the closing of this
    offering; and                                                
|



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On a pro forma as adjusted basis to reflect our receipt of the
    estimated net proceeds from our sale
    of                      shares
    of common stock in this offering at an assumed initial public
    offering price of
    $          ,
    the midpoint of the range on the front cover of this prospectus,
    after deducting underwriting discounts and commissions and
    estimated offering expenses payable by us.




|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               |                                      |                      |           |           |         |         |             |       |        |        |   |   |  | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | -------------------- | --------- | --------- | ------- | ------- | ----------- | ----- | ------ | ------ | - | - |  | 
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               | At March 31, 2006                    |                     
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               |                                      |                     
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               |                                      |                      | Pro Forma |          
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               | Actual                               |                      |           | Pro Forma |         |         | as Adjusted |      
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               |                                      |                      |           |           |         |         |             |      
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               | (in thousands)                       |                     
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               | (unaudited)                          |                     
|Long-term notes payable, less current portion                                                                                                                                                            |                                                                                                                                                                                                                                                                                                                                               | $                                    |                     |           |           | $       | 15,000  |             |       | $      | 15,000 |  
|Mandatorily redeemable convertible preferred stock,
    $0.0001 par value: 3,608,316 shares issued and
    outstanding, actual, no shares issued or outstanding, pro
    forma and pro forma as adjusted |                                                                                                                                                                                                                                                                                                                                               |                                      | 21,878               |           |           |         |        |             |       |        |       |  
|Stockholders (deficit) equity:                                                                                                                                                                          |                                                                                                                                                                                                                                                                                                                                               |                                      |                      |           |           |         |         |             |       |        |        |  
|                                                                                                                                                                                                         | Preferred stock, $0.0001 par value: 30,000,000 shares
    authorized, actual and pro forma, 5,000,000 shares
    authorized, pro forma as adjusted; 1,000,000 shares issued
    and outstanding, actual, no shares issued or outstanding, pro
    forma and pro forma as adjusted                                                             |                                      |                      | 4,000     |           |         |         |            |       |        |        |  |  
|                                                                                                                                                                                                         | Common stock, $0.0001 par value: 70,000,000 shares
    authorized, actual and pro forma, 100,000,000 shares authorized,
    pro forma as adjusted; 12,931,638 shares issued and
    outstanding, actual, 21,197,795 shares issued and
    outstanding, pro forma,
    and            shares
    issued and outstanding, pro forma as adjusted |                                      |                      | 1         |           |         |         | 2           |       |        |        |   |  
|Additional paid-in capital                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                               |                                      | 27,638               |           |           |         | 66,515  |             |       |        |        |  
|Deficit accumulated during the development stage                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               |                                      | (64,257              | )         |           |         | (64,257 | )           |       |        | (      | )
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               |                                      |                      |           |           |         |         |             |      
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               | Total stockholders (deficit) equity |                      |           | (32,618   | )       |         |             | 2,260 |        |        |   |   | 
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               |                                      |                      |           |           |         |         |             |      
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               |                                      | Total capitalization |           | $         | (10,740 | )       |             | $     | 17,260 |        |   | $ |  | 
|                                                                                                                                                                                                         |                                                                                                                                                                                                                                                                                                                                               |                                      |                      |           |           |         |         |             |      




30



---



##### Table of Contents













| |   |                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 2,579,024 shares of common stock issuable upon the exercise
    of options outstanding having a weighted average exercise price
    of $2.66 per share;                                                                                                                                                                             
|
| |  | 1,761,749 shares of common stock issuable upon the exercise
    of warrants outstanding having a weighted average exercise price
    of $3.16 per share;                                                                                                                                                                            
|
| |  | 1,958,376 shares of common stock reserved for future grants
    under our 2000 Stock Plan; and                                                                                                                                                                                                                                      
|
| |  | an aggregate of 1,800,000 shares of common stock reserved
    for future issuance under our 2006 Performance Incentive Plan,
    which has been approved by our board of directors and, subject
    to stockholder approval, will become effective immediately upon
    the signing of the underwriting agreement for this offering.

31



---



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Dilution














|  |                                                                                                                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| | the issuance of 2,835,000 shares of Series F preferred
    stock in April and May 2006 resulting in net proceeds of
    approximately $13.0 million;                                                                                    
| 
| 
| 
| | a $5.0 million initial payment and the issuance of a
    $15.0 million promissory note in connection with an asset
    acquisition in April 2006 consisting of $16.7 million of
    inventory and $3.3 million of intangible assets; and
| 
| 
| 
| | the conversion of all outstanding shares of preferred stock,
    valued at approximately $38.9 million, into
    8,164,157 shares common stock upon the closing of this
    offering.                                                   
| 














|                                                                                              |                                                                                                      |  |   |       |   |   |  |  | 
|--------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- |  | - | ----- | - | - |  |  | 
|Assumed initial public offering price per share                                               |                                                                                                      |  |   |       |   | $ |  | 
|                                                                                              | Actual net tangible book value (deficit) per share as of
    March 31, 2006                          |  | $ | (2.52 | ) |   |  |  | 
|                                                                                              | Increase per share due to pro forma adjustments                                                      |  |   | 2.47  |   |   |  |  | 
|                                                                                              | Pro forma net tangible book value (deficit) per share as of
    March 31, 2006, before this offering |  |   | (0.05 | ) |   |  |  | 
|                                                                                              |                                                                                                      |  |   |       |   |  
|                                                                                              | Increase in pro forma net tangible book value per share
    attributable to this offering            |  |   |       |   |   |  |  | 
|                                                                                              |                                                                                                      |  |   |       |   |  
|Pro forma as adjusted net tangible book value per share after
    this offering               |                                                                                                      |  |   |       |   |   |  | 
|                                                                                              |                                                                                                      |  |   |       |   |  
|Dilution in pro forma net tangible book value per share to new
    investors in this offering |                                                                                                      |  |   |       |   | $ |  | 
|                                                                                              |                                                                                                      |  |   |       |   |  






32



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|                      |       |              |            |  |                     |  |  |               |   |   |            |  |  |           |  |       |   |   |      |  | 
|--------------------- | ----- | ------------ | ---------- |  | ------------------- |  |  | ------------- | - | - | ---------- |  |  | --------- |  | ----- | - | - | ---- |  | 
|                      |       | Total Shares |            |  | Total Consideration |  |  |              
|                      |       |              |            |  |                     |  |  | Average Price |  
|                      |       | Number       |            |  | %                   |  |  | Amount        |   |   | %          |  |  | Per Share | 
|                      |       |              |            |  |                     |  |  |               |   |   |            |  |  |           | 
|Existing stockholders |       |              | 18,260,795 |  |                     |  |  |               |   | $ | 46,736,000 |  |  |           |  |       |   | $ | 2.20 | 
|New investors         |       |              |            |  |                     |  |  |               |   |   |            |  |  |           |  |       |   |   |      | 
|                      |       |              |            |  |                     |  |  |               |   |   |            |  |  |           | 
|                      | Total |              |            |  |                     |  |  | 100.0         | % |   |            |  |  |           |  | 100.0 | % |   |      |  | 














| |   |                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 2,579,024 shares of common stock issuable upon the exercise
    of options outstanding having a weighted average exercise price
    of $2.66 per share;                                                                                                                                                                             
|
| |  | 1,761,749 shares of common stock issuable upon the exercise
    of warrants outstanding having a weighted average exercise price
    of $3.16 per share;                                                                                                                                                                            
|
| |  | 1,958,376 shares of common stock reserved for future grants
    under our 2000 Stock Plan as of March 31, 2006; and                                                                                                                                                                                                                 
|
| |  | an aggregate of 1,800,000 shares of common stock reserved
    for future issuance under our 2006 Performance Incentive Plan,
    which has been approved by our board of directors and, subject
    to stockholder approval, will become effective immediately upon
    the signing of the underwriting agreement for this offering.





| |   |                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the percentage of shares of common stock held by existing
    stockholders will decrease to
    approximately      % of the total
    number of shares of common stock outstanding after this
    offering; and
|
| |  | the number of shares held by new investors will increase
    to                     ,
    or approximately      %, of the total
    number of shares of common stock outstanding after this offering.          



33



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Conversion of Series F Preferred Stock




one-to




34



---



##### Table of Contents






Selected Consolidated Financial Data







|                                                                           |                                                 |                                                 |           |                    |           |   |           |       |       |   |           |             |       |      |           |       |       |   |           |        |        |   |            |     |       |   |            |       |       | 
|-------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------------------------- | --------- | ------------------ | --------- | - | --------- | ----- | ----- | - | --------- | ----------- | ----- | ---- | --------- | ----- | ----- | - | --------- | ------ | ------ | - | ---------- | --- | ----- | - | ---------- | ----- | ----- | 
|                                                                           |                                                 |                                                 |           | Three Months Ended |          
|                                                                           |                                                 | Years Ended December 31,                        |           |                    | March 31, |  
|                                                                           |                                                 |                                                 |           |                    |           |  
|                                                                           |                                                 | 2001                                            |           |                    | 2002      |   |           | 2003  |       |   | 2004      |             |       | 2005 |           |       | 2005  |   |           | 2006   |       
|                                                                           |                                                 |                                                 |           |                    |           |   |           |       |       |   |           |             |       |      |           |       |       |   |           |        |       
|                                                                           |                                                 |                                                 |           |                    |           |   |           |       |       |   |           | (unaudited) |      
|                                                                           |                                                 | (in thousands, except share and per share data) |          
|Consolidated Statements of Operations Data:                                |                                                 |                                                 |           |                    |           |   |           |       |       |   |           |             |       |      |           |       |       |   |           |        |        |   |            |     |       |   |            |      
|Grant and other revenue                                                    |                                                 | $                                               | 261       |                    |           | $ | 71        |       |       | $ | 224       |             |       | $    | 575       |       |       | $ | 619       |        |        | $ | 173        |     |       | $ | 177        |      
|Costs and expenses:                                                        |                                                 |                                                 |           |                    |           |   |           |       |       |   |           |             |       |      |           |       |       |   |           |        |        |   |            |     |       |   |            |      
|                                                                           | Research and development                        |                                                 |           | 1,812              |           |   |           | 1,399 |       |   |           | 1,878       |       |      |           | 2,490 |       |   |           | 3,579  |        |   |            | 764 |       |   |            | 1,724 |      
|                                                                           | General and administrative                      |                                                 |           | 2,943              |           |   |           | 1,840 |       |   |           | 1,654       |       |      |           | 3,183 |       |   |           | 4,142  |        |   |            | 661 |       |   |            | 1,618 |      
|                                                                           | Depreciation and amortization                   |                                                 |           | 210                |           |   |           | 245   |       |   |           | 209         |       |      |           | 186   |       |   |           | 194    |        |   |            | 47  |       |   |            | 60    |      
|                                                                           | Acquired in-process research and development(1) |                                                 |           |                   |           |   |           |      |       |   |           |            |       |      |           |      |       |   |           | 24,000 |        |   |            |    |       |   |            |      |      
|                                                                           | License fees to development partner(2)          |                                                 |           | 10,000             |           |   |           |      |       |   |           |            |       |      |           |      |       |   |           |       |        |   |            |    |       |   |            |      |      
|                                                                           |                                                 |                                                 |           |                    |           |   |           |       |       |   |           |             |       |      |           |       |       |   |           |        |       
|                                                                           |                                                 | Total operating expenses                        |           |                    | 14,965    |   |           |       | 3,484 |   |           |             | 3,741 |      |           |       | 5,859 |   |           |        | 31,915 |   |            |     | 1,472 |   |            |       | 3,402 | 
|Minority interest in loss of consolidated subsidiary                       |                                                 |                                                 | 2,269     |                    |           |   | 369       |       |       |   |          |             |       |      |          |       |       |   |          |        |        |   |           |     |       |   |           |      
|Interest and other income                                                  |                                                 |                                                 | 162       |                    |           |   | 14        |       |       |   | 22        |             |       |      | 29        |       |       |   | 122       |        |        |   | 23         |     |       |   | 105        |      
|Interest expense                                                           |                                                 |                                                 | (53       | )                  |           |   | (170      | )     |       |   | (325      | )           |       |      | (469      | )     |       |   | (587      | )      |        |   | (53        | )   |       |   | (225       | )    
|Gain on extinguishment of note(3)                                          |                                                 |                                                 |          |                    |           |   |          |       |       |   |          |             |       |      |          |       |       |   | 3,835     |        |        |   | 3,835      |     |       |   |           |      
|                                                                           |                                                 |                                                 |           |                    |           |   |           |       |       |   |           |             |       |      |           |       |       |   |           |        |       
|Net (loss) income                                                          |                                                 |                                                 | (12,326   | )                  |           |   | (3,200    | )     |       |   | (3,820    | )           |       |      | (5,724    | )     |       |   | (27,926   | )      |        |   | 2,506      |     |       |   | (3,345     | )    
|Accretion of dividends on preferred stock                                  |                                                 |                                                 | (537      | )                  |           |   | (1,640    | )     |       |   | (1,287    | )           |       |      | (301      | )     |       |   | (601      | )      |        |   | (150       | )   |       |   | (150       | )    
|                                                                           |                                                 |                                                 |           |                    |           |   |           |       |       |   |           |             |       |      |           |       |       |   |           |        |       
|Net (loss) income available to common stockholders                         |                                                 | $                                               | (12,863   | )                  |           | $ | (4,840    | )     |       | $ | (5,107    | )           |       | $    | (6,025    | )     |       | $ | (28,527   | )      |        | $ | 2,356      |     |       | $ | (3,495     | )    
|                                                                           |                                                 |                                                 |           |                    |           |   |           |       |       |   |           |             |       |      |           |       |       |   |           |        |       
|Net (loss) income available to common stockholders per
    share  Basic   |                                                 | $                                               | (4.39     | )                  |           | $ | (1.65     | )     |       | $ | (1.74     | )           |       | $    | (1.07     | )     |       | $ | (3.01     | )      |        | $ | 0.30       |     |       | $ | (0.27      | )    
|Weighted average shares outstanding  Basic                                |                                                 |                                                 | 2,927,961 |                    |           |   | 2,938,706 |       |       |   | 2,936,094 |             |       |      | 5,637,042 |       |       |   | 9,463,279 |        |        |   | 7,769,415  |     |       |   | 12,930,820 |      
|Net (loss) income available to common stockholders per
    share  Diluted |                                                 | $                                               | (4.39     | )                  |           | $ | (1.65     | )     |       | $ | (1.74     | )           |       | $    | (1.07     | )     |       | $ | (3.01     | )      |        | $ | 0.18       |     |       | $ | (0.27      | )    
|Weighted average shares outstanding  Diluted                              |                                                 |                                                 | 2,927,961 |                    |           |   | 2,938,706 |       |       |   | 2,936,094 |             |       |      | 5,637,042 |       |       |   | 9,463,279 |        |        |   | 13,146,131 |     |       |   | 12,930,820 |      




|                                                   |  |                 |         |   |      |                |           |      |  |   |         |   |  |             |         |   |  |   |         |   |  |  |  |  |  |   |         |  
|-------------------------------------------------- |  | --------------- | ------- | - | ---- | -------------- | --------- | ---- |  | - | ------- | - |  | ----------- | ------- | - |  | - | ------- | - |  |  |  |  |  | - | ------- | -
|                                                   |  | At December 31, |         |   |      |                | At        |     
|                                                   |  |                 |         |   |      |                | March 31, |     
|                                                   |  | 2001            |         |   | 2002 |                |           | 2003 |  |   | 2004    |   |  | 2005        |         |   |  |   | 2006    |  
|                                                   |  |                 |         |   |      |                |           |      |  |   |         |   |  |             |         |   |  |   |         |  
|                                                   |  |                 |         |   |      |                |           |      |  |   |         |   |  | (unaudited) |        
|                                                   |  |                 |         |   |      | (in thousands) |          
|                                                   |  | (in thousands)  |         |   |      |                |          
|Consolidated Balance Sheet Data:                   |  |                 |         |   |      |                |           |      |  |   |         |   |  |             |         |   |  |   |         |   |  |  |  |  |  |   |         |  
|Cash and cash equivalents                          |  | $               | 368     |   |      | $              | 2,104     |      |  | $ | 736     |   |  | $           | 1,538   |   |  | $ | 8,513   |   |  |  |  |  |  | $ | 6,349   |  
|Working capital (deficit)                          |  |                 | (102    | ) |      |                | 1,568     |      |  |   | (1,440  | ) |  |             | 739     |   |  |   | (8,111  | ) |  |  |  |  |  |   | (11,388 | )
|Total assets                                       |  |                 | 1,438   |   |      |                | 2,908     |      |  |   | 1,298   |   |  |             | 2,122   |   |  |   | 9,516   |   |  |  |  |  |  |   | 7,369   |  
|Long-term notes payable, less current portion      |  |                 |        |   |      |                | 3,740     |      |  |   | 4,002   |   |  |             | 4,282   |   |  |   |        |   |  |  |  |  |  |   |        |  
|Mandatorily redeemable convertible preferred stock |  |                 | 16,715  |   |      |                | 19,189    |      |  |   | 20,826  |   |  |             | 21,127  |   |  |   | 21,727  |   |  |  |  |  |  |   | 21,878  |  
|Total stockholders deficit                        |  |                 | (16,113 | ) |      |                | (20,971   | )    |  |   | (26,003 | ) |  |             | (24,529 | ) |  |   | (29,327 | ) |  |  |  |  |  |   | (32,618 | )




|    |                                                                                                                                                                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Research and development expense for the year ended
    December 31, 2005 includes the purchase of in-process
    research and development operations valued at $24,000,000 in
    accordance with an Asset Purchase Agreement entered into with
    Abbott Laboratories in September 2005 related to our
    acquisition of PROLYSE and Open-Cath-R.
|   
|   
|(2) | License fees in the amount of $10,000,000 were incurred in
    conjunction with entering into a joint development agreement
    with a development partner in January 2001.                                                                                                                                                                          
|   
|   
|(3) | Extinguishment of the note payable to the development partner in
    the joint development agreement entered into in 2001 resulted in
    a gain on extinguishment of debt of $3.8 million in March
    2005.                                                                                                                                        
|   

35



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Managements Discussion and Analysis of


Financial Condition and Results of Operations





The following discussion and analysis should be read in
conjunction with Selected Consolidated Financial
Information and our consolidated financial statements and
related notes included elsewhere in this prospectus. This
discussion and analysis and other parts of the prospectus
contain forward-looking statements based upon current beliefs,
plans and expectations that involve risks, uncertainties and
assumptions. Our actual results and the timing of selected
events could differ materially from those anticipated in these
forward-looking statements as a result of several factors,
including those set forth under Risk Factors and
elsewhere in this prospectus. You should carefully read the
Risk Factors section of this prospectus to gain an
understanding of the important factors that could cause actual
results to differ materially from our forward-looking
statements. Please also see the section entitled Special
Note Regarding Forward-Looking Statements.





Overview








-Cath-R,




36



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##### Table of Contents



Open-Cath-R




| |        
| | -------
| | Revenue





| |                                  
| | ---------------------------------
| | Research and Development Expenses











| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | For PROLYSE, we intend to establish contract manufacturing and
    to commence a Phase 3 clinical trial for ischemic stroke in
    2007 after, and if, we secure regulatory approvals. We estimate
    these activities will cost approximately $24 million to
    complete. However, we have not yet discussed this planned
    clinical trial with the FDA. The outcome of our discussions with
    the FDA could significantly alter the costs to complete this
    stage of development of PROLYSE. We expect to allocate
    approximately $12 million of the net proceeds from this
    offering toward PROLYSE development.                                                                                                           
|
|
|
| |  | For SonoLysis therapy, we intend to establish commercial-scale
    contract manufacturing of our SonoLysis bubbles, and conduct a
    Phase 1/2 trial for ischemic stroke beginning in the first
    half of 2007 after, and if, we secure appropriate regulatory
    approvals. We estimate that these efforts will cost
    approximately $10 million. However, we have not yet
    discussed this planned clinical trial with the FDA. The outcome
    of our discussions with the FDA could significantly alter the
    costs to complete this stage of development of SonoLysis
    therapy. We expect to allocate approximately $10 million of
    the net proceeds from this offering toward development of our
    SonoLysis therapy.
|
|
|
| |  | For SonoLysis combination therapy, we intend to establish
    commercial-scale contract manufacturing of our SonoLysis
    bubbles, establish contract manufacturing of PROLYSE and conduct
    a Phase 1/2 clinical trial for ischemic stroke using
    t-PA beginning in the
    second half of 2006. We estimate that these efforts will cost
    approximately $11 million. We intend to allocate the costs
    of SonoLysis bubble manufacturing equally between our SonoLysis
    therapy and our SonoLysis combination therapy product
    candidates. We also intend to allocate the costs of PROLYSE
    manufacturing equally between our PROLYSE and                                                                              
|

37



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##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |   | SonoLysis combination therapy product candidates. We expect to
    allocate approximately $11 million of the net proceeds from
    this offering toward development of our SonoLysis combination
    therapy.                                                                                                                                                              
|
|
|
| |  | We intend to maintain the regulatory status of Abbokinase as an
    FDA-approved product
    and to investigate the feasibility and challenges of
    reestablishing manufacturing of the product. We estimate that
    these efforts may cost approximately $3 million through
    2007, some or all of which would be funded by anticipated
    Abbokinase product sales.
|
|
|
| |  | The next stage of development for
    Open-Cath-R is to
    establish contract manufacturing and to demonstrate
    comparability with the recombinant urokinase previously
    manufactured by Abbott Laboratories. We estimate this effort may
    cost approximately $12 million, some or all of which may be
    financed through a development partner.               
|




Open-Cath-R















| |                                    
| | -----------------------------------
| | General and Administrative Expenses









Critical Accounting Policies and Significant Judgments and
Estimates




38



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##### Table of Contents









| |                                
| | -------------------------------
| | Clinical Trial Accrued Expenses





| |                                       
| | --------------------------------------
| | Deferred Tax Asset Valuation Allowance





| |                         
| | ------------------------
| | Stock-Based Compensation

Share-Based
Payment Accounting for Stock-Based Compensation Accounting for Stock Issued to Employees




39



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##### Table of Contents







Accounting
for Certain Transactions Involving Stock
Compensation  an Interpretation of APB
No. 25 Accounting for
Stock-Based Compensation  Transaction and
Disclosure






Results of Operations




| |                                              
| | ---------------------------------------------
| | Quarter Ended March 31, 2005 Compared to 2006

Grant and Other Revenue.





Research and Development Expenses.








General and Administrative Expenses.





40



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##### Table of Contents











Interest and Other Income.


Interest Expense.


Gain on Extinguishment of Note.




| |                                              
| | ---------------------------------------------
| | Year Ended December 31, 2004 Compared to 2005

Grant and Other Revenue.





Research and Development Expenses.








General and Administrative Expenses.





Interest and Other Income.


Interest Expense.





Gain on Extinguishment of Note.





41



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##### Table of Contents





| |                                              
| | ---------------------------------------------
| | Year Ended December 31, 2003 Compared to 2004

Grant and Other Revenue.





Research and Development Expenses.








General and Administrative Expenses.





Interest and Other Income.


Interest Expense.


Liquidity and Capital Resources




| |                     
| | --------------------
| | Sources of Liquidity











42



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##### Table of Contents
















|                         |  |                 |              | 
|------------------------ |  | --------------- | ------------ | 
|Asset                    |  | Estimated Value |             
|                         |  |                 |             
|Inventory                |  | $               | 16.7 million | 
|Identifiable Intangibles |  | $               | 3.3 million  | 














| |           
| | ----------
| | Cash Flows




Net Cash Used in Operating Activities.





Net Cash Used in Investing Activities.





Net Cash Provided by Financing Activities.









| |                     
| | --------------------
| | Funding Requirements



43



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##### Table of Contents







| |   |                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the timing, scope and results of our preclinical studies and
    clinical trials;                                                                                                                                   
|
|
| |  | the timing of initiation of manufacturing for our product
    candidates;                                                                                                                                           
|
|
| |  | the timing and amount of revenue from sales of Abbokinase;                                                                                                                                                          
|
|
| |  | the timing and amount of revenue;                                                                                                                                                                                   
|
|
| |  | the timing of, and the costs involved in, obtaining regulatory
    approvals;                                                                                                                                       
|
|
| |  | our ability to establish and maintain collaborative
    relationships;                                                                                                                                              
|
|
| |  | personnel, facilities and equipment requirements; and                                                                                                                                                               
|
|
| |  | the costs involved in preparing, filing, prosecuting,
    maintaining and enforcing patent claims and other patent-related
    costs, including litigation costs, if any, and the result of any
    such litigation.



Contractual Obligations




|                 |       |                        |         |           |        |   |        |           |           |   |           |         |  |         |  |  |  |  |  |  | 
|---------------- | ----- | ---------------------- | ------- | --------- | ------ | - | ------ | --------- | --------- | - | --------- | ------- |  | ------- |  |  |  |  |  |  | 
|                 |       | Payments Due By Period |        
|                 |       |                        |        
|                 |       |                        |         | Less than |        |   |        |           | More than |  
|Total            |       | Total                  |         |           | 1 Year |   |        | 1-3 Years |           |   | 3-5 Years |         |  | 5 Years | 
|                 |       |                        |         |           |        |   |        |           |           |   |           |         |  |         | 
|Operating leases |       | $                      | 182,546 |           |        | $ | 64,428 |           |           | $ | 118,118   |         |  |         |  |  |  |  |  | 
|                 |       |                        |         |           |        |   |        |           |           |   |           |         |  |         | 
|                 | Total |                        | $       | 182,546   |        |   | $      | 64,428    |           |   | $         | 118,118 |  |         |  |  |  |  |  |  | 
|                 |       |                        |         |           |        |   |        |           |           |   |           |         |  |         | 











44



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Quantitative and Qualitative Disclosure About Market Risk






Off-Balance Sheet Transactions




Recently Issued Accounting Pronouncements


Exchanges of Nonmonetary
Assets Accounting
for Nonmonetary Transactions





Accounting
Changes and Error Corrections A Replacement of APB Opinion
No. 20 and FASB Statement No. 3





45



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##### Table of Contents






115-1 124-1, The
Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments





46



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##### Table of Contents






Our Business


Overview
















| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | PROLYSE, one of our proprietary thrombolytics;                                              
|
| |  | SonoLysis therapy, our proprietary SonoLysis bubbles with
    ultrasound; and               
|
| |  | SonoLysis combination therapy, our SonoLysis bubbles with
    ultrasound and a thrombolytic.











47



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##### Table of Contents




















Open-Cath-R Open-Cath-R










|                                 |  |                               |  |                                                    |  |                                                                                                                                         
|-------------------------------- |  | ----------------------------- |  | -------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------
|                                 |  | Product                       |  |                                                    |  |                                                                                                                                         
|Indication                       |  | Candidate                     |  | Product Elements                                   |  | Development Status                                                                                                                      
|                                 |  |                               |  |                                                    |  |                                                                                                                                         
|Ischemic Stroke                  |  | PROLYSE                       |  |  Recombinant pro-urokinase                        |  |  Completed one Phase 3 clinical trial                                                                                                  
|                                 |  | SonoLysis therapy             |  |  SonoLysis bubbles and ultrasound                 |  |  Preclinical                                                                                                                           
|                                 |  | SonoLysis combination therapy |  |  SonoLysis bubbles, ultrasound and a thrombolytic |  |  Preclinical(1);
    ongoing Phase 2 proof of concept clinical trial using
    FDA-approved diagnostic bubbles and the thrombolytic tPA
|                                
|Acute Massive Pulmonary Embolism |  | Abbokinase                    |  |  Tissue-culture urokinase                         |  |  Approved for marketing                                                                                                                
|                                
|Catheter Clearance               |  | Open-Cath-R                   |  |  Recombinant urokinase                            |  |  Completed two Phase 3 clinical trials                                                                                                 
|                                









|    |                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | We have an approved investigational new drug application, or
    IND, for a Phase 1/2 dose escalation clinical trial using
    SonoLysis bubbles for which we intend to start enrolling
    patients in the second half of 2006.




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##### Table of Contents



Business Strategy






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Expand the number of patients eligible for treatment by
    developing and commercializing our portfolio of ischemic stroke
    product candidates.We are focused on further developing our
    ischemic stroke product portfolio that includes PROLYSE,
    SonoLysis therapy and SonoLysis combination therapy. We believe
    these product candidates may address significant unmet medical
    needs and expand the number of patients eligible for treatment.
    We believe our product candidates may lengthen the treatment
    window beyond three hours, treat patients contraindicated for
    thrombolytic therapy, shorten the time required to restore blood
    flow and provide both interventional and intravenous treatment
    options.                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Capitalize on near-term revenue opportunities and develop an
    initial commercial infrastructure.In the second half of
    2006, we intend to begin selling Abbokinase. We are also
    clarifying the regulatory and manufacturing requirements and
    investigating possible licensing opportunities related to
    Open-Cath-R. We believe that these late-stage product
    opportunities will provide us with a source of revenue that will
    help fund our development programs and allow us to broaden our
    domestic sales and marketing efforts. If we are successful in
    obtaining FDA approval to commercialize our portfolio of
    ischemic stroke product candidates, we plan to build on the
    sales relationships that we form with vascular physicians and
    acute care institutions through our Abbokinase sales and
    marketing program.                                                                                                                                                                                                                                                                                
|
| |  | Leverage our product candidates to address additional
    vascular indications.We intend to explore using our core
    thrombolytic and SonoLysis bubble product candidates in other
    potential indications. We believe PROLYSE may be well suited for
    intravenous administration as a treatment for sub-massive
    pulmonary embolism. In addition, we plan to explore further
    developing Abbokinase or Open-Cath-R for the prevention of
    catheter occlusion. For example, Abbokinase demonstrated
    activity in a Phase 3 clinical trial in preventing catheter
    occlusions as compared to heparin. In addition, we believe that
    opportunities exist for the expansion of our SonoLysis
    combination therapy for the treatment of myocardial infarction,
    peripheral arterial occlusion and deep vein thrombosis.                                                                                                                                                                                                                                                                                                         
|
|
| |  | Expand the use of our bubble technology to create a deep
    pipeline with broad therapeutic applications. We believe
    that our bubble technology could be adapted, by changing the
    composition and size of the bubbles, to a variety of
    applications that involve the delivery of gases such as oxygen
    or nitric oxide, drugs or genetic materials, either systemically
    or to targeted sites in the body. We have conducted preclinical
    studies relating to the delivery of oxygen using a proprietary
    bubble formulation that we call
    NanO2.
    We intend to further investigate the potential use of our
    NanO2
    as an oxygen-delivery agent to help preserve tissues that are at
    risk due to blood clots in ischemic stroke, myocardial
    infarction and other ischemic indications. Separately, we are
    researching other classes of bubbles that could be used to
    deliver drugs to targeted cells and remove vulnerable plaque.
    Further, these various classes of bubbles may be applicable in
    neurovascular and oncology indications, as well as additional
    cardiovascular disorders.
|

Industry Background






49



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##### Table of Contents



Ischemic Stroke












Pulmonary Embolism




Catheter Occlusion










Existing Blood Clot
Therapies and Their Limitations






| |              
| | -------------
| | Thrombolytics



50



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##### Table of Contents







| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Risk of Bleeding Thrombolytics dissolve blood
    clots, including those formed naturally as a protective response
    to vessel injury, which can result in bleeding. The risk of
    bleeding increases relative to the dosage and duration of
    treatment and differs among the various thrombolytics. Patients
    who are already taking other medications to prevent formation of
    clots, such as anticoagulants or antiplatelets, also may not be
    good candidates for the use of thrombolytics, due to the
    increased difficulty of controlling bleeding. As such,
    thrombolytics approved by the FDA are subject to strict
    limitations on when, how long and in what dosages they can be
    administered.
|
|
| |  | Time Window for Administration Due to the risk of
    bleeding, which increases over time, tPA is only approved for
    administration to ischemic stroke patients within three hours
    after the onset of stroke symptoms. This three- hour window is
    considered to be one of the primary limiting factors in treating
    ischemic stroke. Approximately 23% of ischemic stroke patients
    in the U.S. recognize their symptoms and reach an emergency
    room within the three-hour window, however, due to this and
    other limitations, only between 10.4% to 18.8% of these patients
    ultimately receive treatment with a thrombolytic.                                                                          
|
|
| |  | Possible Immune Response Some patients experience
    an immune response due to the continued administration of
    thrombolytics. For example, thrombolytics that are based on
    non-human biological material, such as streptokinase, which is
    produced using streptococcus bacteria, may stimulate such an
    immune reaction.                                                                                                                                                                                                                                                                                                                                                                                             



| |                                  
| | ---------------------------------
| | Mechanical Devices and Procedures





Our Development Programs and Product Candidates






| |                                      
| | -------------------------------------
| | Urokinase-based Thrombolytic Programs



51



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##### Table of Contents







| |                          
| | -------------------------
| | Bubble Technology Program












® batch-to








Our Product Candidates for Treatment of Ischemic Stroke







| |        
| | -------
| | PROLYSE











| |                      
| | ---------------------
| | Prior Clinical Trials




180-patient p-value p-value





52



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##### Table of Contents








90-day













53



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##### Table of Contents





|               |           |          |       |  |           |           |  |           |           |  |  |                                          |         |         |  |                                                 |         |  |     |         |  |  |    |   |  |  |       | 
|-------------- | --------- | -------- | ----- |  | --------- | --------- |  | --------- | --------- |  |  | ---------------------------------------- | ------- | ------- |  | ----------------------------------------------- | ------- |  | --- | ------- |  |  | -- | - |  |  | ----- | 
|               |           | Total    |       |  |           |           |  |           |           |  |  |                                          |         |         | 
|               |           | Patients |       |  | Patients  |           |  | Patients  |           |  |  |                                          |         |         |  |                                                 |        
|               |           | in       |       |  | Receiving |           |  | Receiving |           |  |  |                                          |         |         |  |                                                 |        
|               |           | Clinical |       |  | PROLYSE   |           |  | Heparin   |           |  |  |                                          | PROLYSE |         |  |                                                 |         | 
|Clinical Trial |           |          | Trial |  |           | + Heparin |  |           | (control) |  |  | Primary and Selected Secondary Endpoints |         | Therapy |  |                                                 | Control |  |     | P-value | 
|               |           |          |       |  |           |           |  |           |           |  |  |                                          |         |         |  |                                                 |         |  |     |         | 
|               | PROACT    |          |       |  | 40        |           |  |           | 26        |  |  |                                          | 14      |         |  | Recanalization (%) at
    2 hours(1)            |         |  | 57% |         |  |  | 14 | % |  |  | 0.017 | 
|               |           |          |       |  |           |           |  |           |           |  |  |                                          |         |         |  | Intracranial Hemorrhage (%) at 24 hours
    (1) |         |  | 15% |         |  |  | 7  | % |  |  | 0.64  | 
|               | PROACT II |          |       |  | 180       |           |  |           | 121       |  |  |                                          | 59      |         |  | Modified Rankin Score£ 2 at
    90 days
    (1) |         |  | 40% |         |  |  | 25 | % |  |  | 0.04  | 
|               |           |          |       |  |           |           |  |           |           |  |  |                                          |         |         |  | Recanalization (%) at 2 hours                   |         |  | 66% |         |  |  | 18 | % |  |  | 0.001 | 
|               |           |          |       |  |           |           |  |           |           |  |  |                                          |         |         |  | Intracranial Hemorrhage (%) at 24 hours         |         |  | 10% |         |  |  | 2  | % |  |  | 0.06  | 
|               |           |          |       |  |           |           |  |           |           |  |  |                                          |         |         |  | Mortality at 90 days                            |         |  | 25% |         |  |  | 27 | % |  |  | 0.80  | 
|               |           |          |       |  |           |           |  |           |           |  |  |                                          |         |         |  | Barthel Index3 90 at 90 days                    |         |  | 41% |         |  |  | 32 | % |  |  | 0.24  | 
|               |           |          |       |  |           |           |  |           |           |  |  |                                          |         |         |  | NIHSS Score£ 2 at 90 days                       |         |  | 18% |         |  |  | 12 | % |  |  | 0.30  | 




|    |                   
|--- | ------------------
|(1) | Primary endpoints.











| |                       
| | ----------------------
| | Competitive Advantages











| |                             
| | ----------------------------
| | Planned Clinical Development



54



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##### Table of Contents













| |                  
| | -----------------
| | SonoLysis Therapy





| |                       
| | ----------------------
| | Competitive Advantages

breaks-up




| |                             
| | ----------------------------
| | Planned Clinical Development

23-patient


55



---



##### Table of Contents













| |                              
| | -----------------------------
| | SonoLysis Combination Therapy





| |                      
| | ---------------------
| | Prior Clinical Trials




p-value















| |                       
| | ----------------------
| | Competitive Advantages









56



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##### Table of Contents





| |                             
| | ----------------------------
| | Planned Clinical Development






Our Product for Treatment of Massive Pulmonary Embolism







| |           
| | ----------
| | Abbokinase













| |                  
| | -----------------
| | Commercialization









57



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##### Table of Contents






re-approval.





Our Product Candidate for Treatment of Catheter Occlusions




| |            
| | -----------
| | Open-Cath-R

-Cath-R,




| |                      
| | ---------------------
| | Prior Clinical Trials

















| |                             
| | ----------------------------
| | Planned Clinical Development

-Cath-R. -Cath-R, -Cath-R


58



---



##### Table of Contents






-Cath-R.





-Cath-R -Cath-R -Cath-R.


Future Research and Development






| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | intravenous application of PROLYSE as a treatment for
    sub-massive pulmonary embolism;                                                                                                                                                                                    
|
| |  | a catheter occlusion prophylaxis indication for Abbokinase or
    Open-Cath-R. Abbokinase
    has been shown in a Phase 3 clinical trial to be generally
    well tolerated and has demonstrated activity in preventing
    catheter occlusions when compared to heparin; and
|
| |  | SonoLysis and thrombolytic combination therapy for myocardial
    infarction, peripheral arterial occlusion and deep vein
    thrombosis.                                                                                                                                    

Combination Treatment of Vascular Disorders.





Bubbles for Oxygen and Targeted Drug Delivery. 2 2





Manufacturing




59



---



##### Table of Contents





















Sales and Marketing












Competition


















60



---



##### Table of Contents







| |                         
| | ------------------------
| | Thrombolytic Competitors











| |                   
| | ------------------
| | Device Competitors











Material Contracts






| |                                                                                     
| | ------------------------------------------------------------------------------------
| | September 2005 Agreements with Abbott Laboratories
    (Open-Cath-R and
    PROLYSE)




Open-Cath-R







61



---



##### Table of Contents








Open-Cath-R























| |                                                                
| | ---------------------------------------------------------------
| | April 2006 Agreements with Abbott Laboratories
    (Abbokinase)





62



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##### Table of Contents







| |                                                                      
| | ---------------------------------------------------------------------
| | License Agreement with Bristol-Myers Squibb Medical Imaging,
    Inc.











| |                                          
| | -----------------------------------------
| | License Agreement with UNEMED Corporation











| |                                                 
| | ------------------------------------------------
| | License Agreement with Dr. med. Reinhard Schlief











| |                                              
| | ---------------------------------------------
| | License Agreement with University of Arkansas



63



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Patents and Proprietary Rights










| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | methods of preparing gas filled bubbles;                                                                                                             
|
| |  | methods of using gas filled bubbles in combination with
    ultrasound for eliminating or reducing thrombi or for delivering
    drug compounds;     
|
| |  | methods of preparing gas filled bubbles that are targeted to
    specific cells in the body or that are activated at a specified
    temperature; and
|
| |  | apparatus for preparing gas filled bubbles described above.                                                                                          







64



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##### Table of Contents







Government Regulation






| |                         
| | ------------------------
| | Categories of Regulation





| |                              
| | -----------------------------
| | Drug and Biologics Regulation





| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | preclinical laboratory and animal tests;                                                                                                                                                                                
|
| |  | submission and approval of an investigational new drug
    application, or IND;                                                                                                                                         
|
| |  | adequate and well-controlled human clinical trials to establish
    the safety and efficacy of proposed drugs for their intended use
    and safety, purity and potency of biologic products for their
    intended use;
|
| |  | preapproval inspection of manufacturing facilities, company
    regulatory files and selected clinical investigators;                                                                                                   
|
| |  | for drugs, FDA approval of a new drug application, or NDA, or
    FDA approval of an NDA supplement in the case of a new
    indication if the product is already approved for another
    indication; and              
|
| |  | for biologics, FDA approval of a biologics license application,
    or BLA, or FDA approval of a BLA supplement in the case of a new
    indication if the product is already approved for another
    indication.      



65



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Phase 1:


Phase 2:


Phase 3:










| |                          
| | -------------------------
| | Medical Device Regulation





| |   |                                                      
| | - | -----------------------------------------------------
| |  | product design, development and manufacture;         
|
| |  | product safety, testing, labeling and storage;       
|
| |  | preclinical testing in animals and in the laboratory;
|
| |  | clinical investigations in humans;                   
|
| |  | pre-marketing clearance or approval;                 
|
| |  | record keeping and document retention procedures;    
|
| |  | advertising and promotion;                           

66



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| |   |                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | product marketing, sales and distribution; and                                                                                                                 
|
| |  | post-marketing surveillance and medical device reporting,
    including reporting of deaths, serious injuries, device
    malfunctions or other adverse events.









67



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| |                       
| | ----------------------
| | Regulatory Enforcement





| |   |                                                                                             
| | - | --------------------------------------------------------------------------------------------
| |  | warning letters, fines, injunctions, consent decrees and civil
    penalties;               
|
| |  | product recalls or market withdrawals;                                                      
|
| |  | customer notifications, repair, replacement, refunds, recall or
    seizure of our products;
|
| |  | operating restrictions, partial suspension or total shutdown of
    production;             
|
| |  | refusal to grant new regulatory approvals;                                                  
|
| |  | withdrawing NDAs, BLAs, 510(k) clearance or PMA that have
    already been granted; and     
|
| |  | criminal prosecution.                                                                       

Employees




Facilities




Legal Proceedings




68



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##### Table of Contents






Management







|                              |  |     |    |  |          |                                                                                    
|----------------------------- |  | --- | -- |  | -------- | -----------------------------------------------------------------------------------
|Name                          |  | Age |    |  | Position
|                              |  |     |    |  |         
|Evan C. Unger, M.D.           |  |     | 52 |  |          | President, Chief Executive Officer and Director                                    
|Greg Cobb                     |  |     | 36 |  |          | Chief Financial Officer, Secretary and Treasurer                                   
|Terry Matsunaga, Ph.D.        |  |     | 53 |  |          | Vice President, Research                                                           
|Rajan Ramaswami, Ph.D.        |  |     | 53 |  |          | Vice President, Product Development                                                
|Walter Singleton              |  |     | 64 |  |          | Chief Medical Officer                                                              
|Lynne E. Weissberger, Ph.D.   |  |     | 58 |  |          | Vice President, Regulatory Affairs, Quality Assurance and
    Regulatory Compliance
|Brad Zakes                    |  |     | 40 |  |          | Vice President, Business Development                                               
|Reena Zutshi, Ph.D.           |  |     | 38 |  |          | Vice President, Program Management                                                 
|Richard
    Otto(1)(3)        |  |     | 56 |  |          | Chairman of the Board and Director                                                 
|Richard
    Love(2)(3)        |  |     | 62 |  |          | Director                                                                           
|Thomas W.
    Pew(2)(3)       |  |     | 67 |  |          | Director                                                                           
|Philip
    Ranker(1)(3)       |  |     | 46 |  |          | Director                                                                           
|James M.
    Strickland(1)(2) |  |     | 63 |  |          | Director                                                                           







|    |                                                             
|--- | ------------------------------------------------------------
|(1) | Member of the audit committee.                              
|(2) | Member of the compensation committee.                       
|(3) | Member of the nominating and corporate governance committee.

Evan C. Unger, M.D.


Greg Cobb


Terry Matsunaga, Ph.D.


Rajan Ramaswami, Ph.D.





Walter Singleton





69



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##### Table of Contents











Lynne E. Weissberger, Ph.D.


Brad Zakes


Reena Zutshi, Ph.D.


Richard E. Otto





Richard L. Love








Thomas W. Pew





Philip Ranker


James M. Strickland


70



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Board Composition






Committees of the Board of Directors






| |                
| | ---------------
| | Audit Committee







| |                       
| | ----------------------
| | Compensation Committee







| |                                              
| | ---------------------------------------------
| | Nominating and Corporate Governance Committee





71



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Compensation Committee Interlocks and Insider
Participation




Director Compensation






| |   |                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $1,500 for each board and committee meeting attended in person;                                                                                                                                                                                                                                                         
|
| |  | $250 for each board and committee meeting attended via
    teleconference;                                                                                                                                                                                                                                              
|
| |  | $1,500 annual retainer for each non-employee director that
    participates on a committee, plus an additional $1,000 for each
    non-employee director that participates on the audit committee,
    plus an additional $1,000 annual retainer for each non-employee
    director that is the chairman of a committee;
|
| |  | one-time grant upon joining the board of directors of an option
    to purchase 55,000 shares of common stock with a
    four-year annual vesting schedule and an exercise price equal to
    fair market value of our common stock on the date of
    grant; and                                                       
|
| |  | reimbursement of actual, reasonable travel expenses incurred in
    connection with attending board or committee meetings.                                                                                                                                                                                              





|                    |  |                  |        |  |                |   |      |            |  |  |                  |  |  |  |                | 
|------------------- |  | ---------------- | ------ |  | -------------- | - | ---- | ---------- |  |  | ---------------- |  |  |  | -------------- | 
|Name                |  | Number of Shares |        |  | Exercise Price |   |      | Grant Date |  |  | Termination Date | 
|                    |  |                  |        |  |                |   |      |            |  |  |                  | 
|Richard Otto        |  |                  | 55,000 |  |                | $ | 3.00 |            |  |  | July 19, 2004    |  |  |  | July 19, 2014  | 
|James M. Strickland |  |                  | 55,000 |  |                | $ | 3.00 |            |  |  | August 2, 2004   |  |  |  | August 2, 2014 | 
|Thomas W. Pew       |  |                  | 55,000 |  |                | $ | 3.00 |            |  |  | August 2, 2004   |  |  |  | August 2, 2014 | 
|Richard Love        |  |                  | 55,000 |  |                | $ | 5.00 |            |  |  | May 6, 2006      |  |  |  | May 6, 2016    | 
|Philip Ranker       |  |                  | 55,000 |  |                | $ | 5.00 |            |  |  | May 6, 2006      |  |  |  | May 6, 2016    | 



72



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Executive Compensation




Summary Compensation Table





|                             |                                                  |                     |         |  |            |                        |        |           |  |  |              |  |  |   |        |     | 
|---------------------------- | ------------------------------------------------ | ------------------- | ------- |  | ---------- | ---------------------- | ------ | --------- |  |  | ------------ |  |  | - | ------ | --- | 
|                             |                                                  |                     |         |  |            | Long-Term Compensation |       
|                             |                                                  |                     |         |  |           
|                             |                                                  | Annual Compensation |         |  | Securities |                        |        |          
|                             |                                                  |                     |         |  | Underlying |                        |        | All Other | 
|Name and Principal Position  |                                                  | Salary              |         |  | Bonus      |                        |        | Options   |  |  | Compensation | 
|                             |                                                  |                     |         |  |            |                        |        |           |  |  |              | 
|Evan Unger, M.D.             |                                                  | $                   | 229,617 |  |            | $                      | 58,334 |           |  |  | 665,000      |  |  | $ |       |    
|                             | President and Chief Executive Officer            |                     |         |  |            |                        |        |           |  |  |              |  |  |   |        |     | 
|John
    Moore(1)            |                                                  |                     | 125,000 |  |            |                        | 18,750 |           |  |  |             |  |  |   |       |    
|                             | Chairman and Executive Vice President            |                     |         |  |            |                        |        |           |  |  |              |  |  |   |        |     | 
|Randall Miller,
    Ph.D.(2) |                                                  |                     | 132,809 |  |            |                        | 12,000 |           |  |  | 195,000      |  |  |   | 22,212 | (3)
|                             | Chief Operating Officer                          |                     |         |  |            |                        |        |           |  |  |              |  |  |   |        |     | 
|Greg
    Cobb(4)             |                                                  |                     | 100,963 |  |            |                        | 24,000 |           |  |  | 195,000      |  |  |   | 10,434 | (3)
|                             | Chief Financial Officer, Secretary and Treasurer |                     |         |  |            |                        |        |           |  |  |              |  |  |   |        |     | 
|Terry Matsunaga, Ph.D        |                                                  |                     | 120,770 |  |            |                        | 19,750 |           |  |  | 32,000       |  |  |   |       |    
|                             | Vice President, Research                         |                     |         |  |            |                        |        |           |  |  |              |  |  |   |        |     | 









|    |                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Moore joined us in February 2004. Mr. Moores
    employment with us terminated in February 2006, and he resigned
    as a director on March 31, 2006.                                                                                                               
|(2) | Dr. Miller joined us in April 2005. Dr. Miller
    voluntarily terminated his employment with us in February 2006.                                                                                                                                                       
|(3) | Amount represents relocation expense reimbursement.                                                                                                                                                                                                                      
|(4) | Mr. Cobb provided consulting services to us from
    April 11, 2005 to April 26, 2005, and began full-time
    employment as our chief financial officer on April 27,
    2005. The amounts reflected in the table include all
    compensation paid to Mr. Cobb in 2005.

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Stock Option Grants in 2005







|                |  |                   |         |     |                      |  |      |          |  |                       |            |  |                        |    |          |  |     |  |  |  |  |  |  | 
|--------------- |  | ----------------- | ------- | --- | -------------------- |  | ---- | -------- |  | --------------------- | ---------- |  | ---------------------- | -- | -------- |  | --- |  |  |  |  |  |  | 
|                |  | Individual Grants |         |     | Potential Realizable | 
|                |  |                   |         |     | Value at Assumed     | 
|                |  | Number of         |         |     | % of Total           |  |      |          |  | Annual Rates of Stock |           
|                |  | Securities        |         |     | Options              |  |      | Exercise |  |                       |            |  | Price Appreciation for |   
|                |  | Underlying        |         |     | Granted to           |  |      | Price    |  |                       |            |  | Option Term            |   
|                |  | Options           |         |     | Employees in         |  |      | Per      |  |                       | Expiration |  |                        |    |         
|Name            |  | Granted(1)        |         |     | 2005(2)              |  |      | Share    |  |                       | Date       |  |                        | 5% |          |  | 10% | 
|                |  |                   |         |     |                      |  |      |          |  |                       |            |  |                        |    |          |  |     | 
|Evan Unger      |  |                   | 30,303  |     |                      |  | 2.0  | %        |  | $                     | 3.30       |  |                        |    | 08/08/10 |  |     |  |  |  |  |  |  | 
|                |  |                   | 149,697 | (3) |                      |  | 9.9  | %        |  |                       | 3.00       |  |                        |    | 08/08/15 |  |     |  |  |  |  |  |  | 
|                |  |                   | 100,000 | (4) |                      |  | 6.6  | %        |  |                       | 3.00       |  |                        |    | 08/08/15 |  |     |  |  |  |  |  |  | 
|                |  |                   | 100,000 | (4) |                      |  | 6.6  | %        |  |                       | 3.00       |  |                        |    | 08/08/15 |  |     |  |  |  |  |  |  | 
|                |  |                   | 100,000 | (5) |                      |  | 6.6  | %        |  |                       | 3.00       |  |                        |    | 08/08/15 |  |     |  |  |  |  |  |  | 
|                |  |                   | 120,000 | (6) |                      |  | 8.0  | %        |  |                       | 3.00       |  |                        |    | 08/08/15 |  |     |  |  |  |  |  |  | 
|                |  |                   | 65,000  |     |                      |  | 4.3  | %        |  |                       | 4.00       |  |                        |    | 12/14/15 |  |     |  |  |  |  |  |  | 
|John Moore      |  |                   |        |     |                      |  |     |          |  |                       |            |  |                        |    |          |  |     |  |  |  |  |  |  | 
|Randall Miller  |  |                   | 175,000 | (4) |                      |  | 11.6 | %        |  |                       | 3.00       |  |                        |    | 04/18/15 |  |     |  |  |  |  |  |  | 
|                |  |                   | 20,000  | (4) |                      |  | 1.3  | %        |  |                       | 4.00       |  |                        |    | 12/14/15 |  |     |  |  |  |  |  |  | 
|Greg Cobb       |  |                   | 150,000 | (7) |                      |  | 10.0 | %        |  |                       | 3.00       |  |                        |    | 04/27/15 |  |     |  |  |  |  |  |  | 
|                |  |                   | 45,000  |     |                      |  | 3.0  | %        |  |                       | 4.00       |  |                        |    | 12/14/15 |  |     |  |  |  |  |  |  | 
|Terry Matsunaga |  |                   | 22,000  |     |                      |  | 1.5  | %        |  |                       | 4.00       |  |                        |    | 11/01/15 |  |     |  |  |  |  |  |  | 
|                |  |                   | 10,000  |     |                      |  | 0.7  | %        |  |                       | 4.00       |  |                        |    | 12/14/15 |  |     |  |  |  |  |  |  | 









|    |                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | All options were granted under our 2000 Stock Plan. Unless
    otherwise indicated, options vest in equal annual installments
    over four years.                                                                                                                                                                                                         
|   
|   
|(2) | Percentages shown under % of Total Options Granted to
    Employees in 2005 are based on an aggregate of
    1,504,099 shares of common stock subject to stock options
    granted to our employees during 2005. These percentages do not
    include 275,000 shares of common stock subject to stock
    options granted to our consultants during 2005.
|   
|   
|(3) | 14,697 shares are vested, and the remaining shares vest in
    equal annual installments over three years.                                                                                                                                                                                                                                                 
|   
|   
|(4) | These options were not exercised and have expired in accordance
    with their terms.                                                                                                                                                                                                                                                                      
|   
|   
|(5) | Vesting subject to achievement of financial milestones which
    have not been met.                                                                                                                                                                                                                                                                        
|   
|   
|(6) | Vesting subject to achievement of regulatory milestones which
    have not been met.                                                                                                                                                                                                                                                                       
|   
|   
|(7) | Options to purchase 15,000 shares of our common stock
    vested on the date of the grant and options to purchase
    33,750 shares of our common stock vest in equal annual
    installments and become exercisable annually over
    four years.                                                                                                         
|   







74



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| |   |                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | multiplying the number of shares of common stock subject to a
    given stock option by an assumed initial public offering price
    of
    $           per
    share, the midpoint of the range on the front cover of this
    prospectus;
|
|
| |  | assuming that the aggregate stock value derived from that
    calculation compounds at the annual 5% or 10% rate shown in the
    table until the expiration of the option and                                                             
|
|
| |  | subtracting from that result the aggregate option exercise price.                                                                                                                                                                          

Aggregated Option Exercises in 2005 and Fiscal Year-End
Option Values




|                |  |             |         |  |             |                                 |                   |                |                         |                      |               |     |  |             |   |  |               |   |  |  |  |   |  | 
|--------------- |  | ----------- | ------- |  | ----------- | ------------------------------- | ----------------- | -------------- | ----------------------- | -------------------- | ------------- | --- |  | ----------- | - |  | ------------- | - |  |  |  | - |  | 
|                |  |             |         |  |             | Number of Securities Underlying |                   |                | Value of Unexercised    |                     
|                |  |             |         |  |             | Unexercised Options at          |                   |                | In-the-Money Options at |                     
|                |  | Shares      |         |  |             |                                 | December 31, 2005 |                |                         | December 31, 2005(1) |              
|                |  | Acquired on |         |  | Value       |                                 |                   |                |                         |                      |               |    
|Name            |  | Exercise    |         |  | Realized(1) |                                 |                   | Exercisable(2) |                         |                      | Unexercisable |     |  | Exercisable |   |  | Unexercisable |  
|                |  |             |         |  |             |                                 |                   |                |                         |                      |               |     |  |             |   |  |               |  
|Evan Unger      |  |             | 200,000 |  |             | $                               |                   |                |                         |                      | 565,000       |     |  |             | 0 |  |               | $ |  |  |  | $ |  | 
|John Moore      |  |             |        |  |             |                                 |                  |                |                         |                      | 250,000       |     |  |             | 0 |  |               |   |  |  |  |   |  | 
|Randall Miller  |  |             |        |  |             |                                 |                  |                |                         |                      | 195,000       | (3) |  |             | 0 |  |               |   |  |  |  |   |  | 
|Greg Cobb       |  |             |        |  |             |                                 |                  |                |                         |                      | 195,000       |     |  |             | 0 |  |               |   |  |  |  |   |  | 
|Terry Matsunaga |  |             |        |  |             |                                 |                  |                |                         |                      | 120,000       |     |  |             | 0 |  |               |   |  |  |  |   |  | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | There was no public trading market for our common stock as of
    December 31, 2005. Accordingly, the amounts presented under
    the captions Value Realized and Value of
    Unexercised
    In-the-Money Options at
    December 31, 2005 are based on an assumed initial
    public offering price of
    $        per share, the
    midpoint of the range on the front cover of this prospectus,
    less the exercise price per share, multiplied by the number of
    shares subject to the stock option, without taking into account
    any taxes that may be payable in connection with the transaction.
|(2) | All options are immediately exercisable, and, when and if
    exercised, will be subject to a repurchase right held by us,
    which right lapses in accordance with the respective vesting
    schedules for such options.                                                                                                                                                                                                                                                                                                                                                                                            
|(3) | These options were not exercised and have expired in accordance
    with their terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Employment Agreements




President and Chief Executive
Officer


six-month


75



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##### Table of Contents





Chief Financial Officer




Former Chairman of the Board and Executive Vice
President




Former Chief Operating Officer




Benefit Plans




| |                
| | ---------------
| | 2000 Stock Plan









76



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##### Table of Contents







| |                                
| | -------------------------------
| | 2006 Performance Incentive Plan















| |   |                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | accelerate the vesting and exercisability of any or all
    outstanding options and stock appreciation rights upon such
    terms as it determines; or
|
| |  | cancel each or any outstanding option or stock appreciation
    right in exchange for a payment to the holder with respect to
    each share.         

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Limitation of Liability and Indemnification






| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | breach of their duty of loyalty to the corporation or its
    stockholders;                                 
|
| |  | act or omission not in good faith or that involves intentional
    misconduct or a knowing violation of law;
|
| |  | unlawful payment of dividends or redemption of shares; or                                                   
|
| |  | transaction from which the directors derived an improper
    personal benefit.                              









78



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79



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##### Table of Contents






Certain Relationships and Related Transactions




Lease




Stock Sales














Consulting Agreement




80



---



##### Table of Contents











Agreements and Future Agreements with Executive Officers and
Directors






81



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##### Table of Contents






Principal Stockholders






| |   |                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------
| |  | each person, or group of affiliated persons, known by us to be
    the beneficial owner of 5% or more of any class of our voting
    securities;
|
| |  | each of our current directors;                                                                                                                  
|
| |  | each of our named executive officers; and                                                                                                       
|
| |  | all current directors and executive officers as a group.                                                                                        


















|                                       |                                                            |                                                |  |           |          |  |  |             |   |  |  |  |   | 
|-------------------------------------- | ---------------------------------------------------------- | ---------------------------------------------- |  | --------- | -------- |  |  | ----------- | - |  |  |  | - | 
|                                       |                                                            | Shares of                                      |  |           | Percent  | 
|                                       |                                                            | Common Stock                                   |  |           |          | 
|                                       |                                                            | Beneficially                                   |  |           | Before   |  |  | After       |  
|Name and Address of Beneficial Owner   |                                                            | Owned(1)                                       |  |           | Offering |  |  | Offering(1) |  
|                                       |                                                            |                                                |  |           |          |  |  |             |  
|5% Stockholders                        |                                                            |                                                |  |           |          |  |  |             |   |  |  | 
|                                       | Evan and Susan Unger Family Trust dated
    10/24/95(2)    |                                                |  | 2,047,476 |          |  |  | 9.7         | % |  |  |  | %
|                                       | Edson Moore Healthcare Ventures, Inc.
    (3)              |                                                |  | 1,480,710 |          |  |  | 7.0         |   |  |  |  |  
|                                       |                                                            | 101 Brook Meadow Road
    Wilmington, DE 19807 |  |           |          |  |  |             |   |  |  |  |   | 
|                                      
|Directors and Named Executive Officers |                                                            |                                                |  |           |          |  |  |             |   |  |  | 
|                                       | Evan C. Unger,
    M.D.(4)                                 |                                                |  | 2,713,726 |          |  |  | 12.5        |   |  |  |  |  
|                                       | John
    Moore(5)                                          |                                                |  | 1,829,962 |          |  |  | 8.5         |   |  |  |  |  
|                                       | James M.
    Strickland(6)                                 |                                                |  | 460,476   |          |  |  | 2.2         |   |  |  |  |  
|                                       | Greg
    Cobb(7)                                           |                                                |  | 195,000   |          |  |  | *           |   |  |  |  |  
|                                       | Terry
    Matsunaga(8)                                     |                                                |  | 155,924   |          |  |  | *           |   |  |  |  |  
|                                       | Randall Miller                                             |                                                |  | 12,500    |          |  |  | *           |   |  |  |  |  
|                                       | Richard
    Otto(9)                                        |                                                |  | 55,000    |          |  |  | *           |   |  |  |  |  
|                                       | Thomas W.
    Pew(10)                                      |                                                |  | 348,042   |          |  |  | 1.6         |   |  |  |  |  
|                                       | Richard
    Love(11)                                       |                                                |  | 55,000    |          |  |  | *           |   |  |  |  |  
|                                       | Phil
    Ranker(12)                                        |                                                |  | 55,000    |          |  |  | *           |   |  |  |  |  
|                                       | All Directors and Officers as a Group
    (13 persons)(13) |                                                |  | 4,703,168 |          |  |  | 20.6        |   |  |  |  |  




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| |   |                            
| | - | ---------------------------
| | * | Less than one percent (1%).




|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) | Upon completion of this offering, our existing stockholders will
    own                  shares,
    representing         %
    of our outstanding common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|   
|(2) | Consists of 2,031,832 shares of common stock and
    15,644 shares issuable upon exercise of warrants to
    purchase common stock held by the Evan and Susan Unger Family
    Trust dated 10/24/95, of which Dr. Unger and Susan J. Unger are
    co-trustees and share voting and dispositive power.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|   
|(3) | Consists of 1,330,930 shares of common stock held by Edson
    Moore Corp, and 127,317 shares of common stock and
    22,463 shares issuable upon exercise of warrants to
    purchase common stock held by Edson Moore Healthcare Ventures,
    Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|   
|(4) | Consists of 2,031,832 shares of common stock and
    15,644 shares of common stock issuable upon exercise of
    warrants to purchase common stock held by Evan C. and Susan J.
    Unger Trust dated 10/24/95, of which Dr. Unger and Susan J.
    Unger are co-trustees and share voting and dispositive power,
    200,000 shares of common stock held by Dr. Unger,
    1,250 shares of common stock held by Evan C. Unger and
    Susan J. Unger, and 465,000 shares issuable upon exercise
    of stock options, 420,000 of which, if exercised, are subject to
    repurchase by us.                                                                                                                                                                                                                       
|   
|   
|(5) | Consists of 1,330,930 shares of common stock held by Edson
    Moore Corp, 127,317 shares of common stock and
    22,463 shares issuable upon exercise of warrants to
    purchase common stock held by Edson Moore Healthcare Ventures,
    Inc., and 96,618 shares of common stock,
    250,000 shares issuable upon exercise of stock options and
    2,634 shares issuable upon exercise of warrant to purchase
    common stock held by Mr. Moore.                                                                                                                                                                                                                                                                                                                                                           
|   
|   
|(6) | Consists of 395,476 shares of common stock held by Coronado
    Venture Fund IV, LP, 10,000 shares of common stock
    held by Mr. Strickland, and 55,000 shares of common
    stock issuable upon exercise of options held by Mr. Strickland,
    41,250 of which, if exercised, are subject to repurchase by us.
    With regard to Coronado Venture Fund IV, LP, Coronado Venture
    Management LLC is the sole general partner of and may be deemed
    to have voting and dispositive power over shares held by
    Coronado Venture Fund IV, LP. Mr. Strickland is a managing
    director of Coronado Venture Management LLC. Mr. Strickland
    disclaims beneficial ownership of the shares held by Coronado
    Venture Fund IV, LP, except to the extent of his direct
    pecuniary interest therein.
|   
|   
|(7) | Consists of 195,000 shares of common stock issuable upon
    exercise of options, 146,250 of which, if exercised, are subject
    to repurchase by us within 60 days after May 15, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|   
|(8) | Consists of 35,924 shares of common stock and
    120,000 shares of common stock issuable upon exercise of
    options, 47,000 of which, if exercised, are subject to
    repurchase by us within 60 days after May 15, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|   
|(9) | Consists of 55,000 shares of common stock issuable upon
    exercise of options, 41,250 of which, if exercised, are subject
    to repurchase by us within 60 days after May 15, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   

|     |                                                                                                                                                                                                                                                                                                                                                                                        
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(10) | Consists of 276,629 shares of common stock,
    16,413 shares of common stock issuable upon exercise of
    warrants and 55,000 shares of common stock issuable upon
    exercise of options, 47,000 of which, if exercised, are subject
    to repurchase by us within 60 days after May 15, 2006.                                                                                    
|    
|    
|(11) | Consists of 55,000 shares of common stock issuable upon
    exercise of options, 41,250 of which, if exercised, are subject
    to repurchase by us within 60 days after May 15, 2006.                                                                                                                                                                                                 
|    
|    
|(12) | Consists of 55,000 shares of common stock issuable upon
    exercise of options, 41,250 of which, if exercised, are subject
    to repurchase by us within 60 days after May 15, 2006.                                                                                                                                                                                                 
|    
|    
|(13) | Includes shares described in Footnotes (4), (6) through (8) and
    (10) through (12) above, 95,000 shares of common stock held
    by Rajan Ramaswami, and 570,000 shares issuable upon
    exercise of stock options held by Brad Zakes, Rajan Ramaswami,
    Reena Zutshi, Walter Singleton and Lynne E. Weissberger, 470,975
    of which, if exercised, are subject to repurchase.
|    

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Description of Capital Stock




Common Stock












Preferred Stock




Warrants






| |   |                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Warrant to purchase 11,407 shares of our common stock, at
    an exercise price of $2.75 per share. This warrant may be
    exercised at any time prior to the later of either
    January 16, 2011 or five years after our initial public
    offering.    
|
| |  | Warrant to purchase an aggregate of 3,071 shares of our
    common stock at an exercise price of $7.00 per share. This
    warrant may be exercised at any time prior to March 6, 2011.                                                                     
|
| |  | Warrant to purchase an aggregate of 5,000 shares of our
    common stock at an exercise price of $2.00 per share. This
    warrant may be exercised at any time prior to October 10,
    2013.                                                              
|
|
| |  | Warrants to purchase an aggregate of 188,938 shares of our
    common stock at an exercise price of $2.00 per share issued
    pursuant to our March 2003 bridge financing. These warrants may
    be exercised from time to time prior to January 28, 2011.
|

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| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Warrants to purchase an aggregate of 500,000 shares of our
    common stock at an exercise price of $3.00 per share. These
    warrants may be exercised at any time prior to March 28,
    2009.    
|
| |  | Warrants to purchase an aggregate of 250,000 shares of our
    common stock at an exercise price of $2.00 per share. These
    warrants may be exercised at any prior to October 5, 2008.            
|
| |  | Warrant to purchase an aggregate of 20,000 shares of our
    common stock at an exercise price of $3.00 per share. This
    warrant may be exercised at any time prior to January 3,
    2010.       
|
| |  | Warrants to purchase an aggregate of 233,333 shares of our
    common stock at an exercise price of $3.30 per share. These
    warrants may be exercised at any time prior February 27,
    2010.    
|
| |  | Warrants to purchase an aggregate of 100,000 shares of our
    common stock at an exercise price of $4.00 per share. These
    warrants may be exercised at any time prior to
    September 27, 2015.
|
| |  | Warrants to purchase an aggregate of 375,000 shares of our
    common stock at an exercise price of $4.25 per share. These
    warrants may be exercised at any time prior to October 6,
    2012.   
|
| |  | Warrants to purchase an aggregate of 75,000 shares of our
    common stock at an exercise price of $4.00 per shares.
    These warrants may be exercised at any time prior to
    January 13, 2013.  



Registration Rights





S-3





Anti-Takeover Provisions


Delaware Anti-Takeover Law






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our board of directors approved the business combination or the
    transaction in which the person became an interested stockholder
    prior to the date the person attained this status;                                                                                                                                                                                                                                                                                                                                     
|
| |  | upon consummation of the transaction that resulted in the person
    becoming an interested stockholder, the person owned at least
    85% of our voting stock outstanding at the time the transaction
    commenced, excluding shares owned by persons who are directors
    and also officers and issued under employee stock plans under
    which employee participants do not have the right to determine
    confidentially whether shares held subject to the plan will be
    tendered in a tender or exchange offer; or

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | on or subsequent to the date the person became an interested
    stockholder, our board of directors approved the business
    combination and the stockholders other than the interested
    stockholder authorized the transaction at an annual or special
    meeting of stockholders by the affirmative vote of at least
    two-thirds of the outstanding stock not owned by the interested
    stockholder.





| |   |                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | any merger or consolidation involving us and the interested
    stockholder;                                                                                        
|
| |  | any sale, transfer, pledge or other disposition involving the
    interested stockholder of 10% or more of our assets;                                              
|
| |  | in general, any transaction that results in the issuance or
    transfer by us of any of our stock to the interested stockholder;                                   
|
| |  | any transaction involving us that has the effect of increasing
    the proportionate share of our stock owned by the interested
    stockholders; and               
|
| |  | the receipt by the interested stockholder of the benefit of any
    loans, advances, guarantees, pledges, or other financial
    benefits provided by or through us.



Certificate of Incorporation
and Bylaw Provisions






| |   |                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our board can issue up to 5,000,000 shares of preferred
    stock, with any rights or preferences, including the right to
    approve or not approve an acquisition or other change in control;                                                                                                                                              
|
| |  | our bylaws provide that our board of directors may be removed
    with or without cause by the affirmative vote of a majority of
    our stockholders;                                                                                                                                                                                       
|
| |  | our bylaws limit who may call a special meeting of stockholders
    to our board of directors, chairman of the board, president and
    one or more stockholders holding not less than 25% of all shares
    entitled to be cast on any issue proposed to be considered at
    that meeting;                                                 
|
| |  | our bylaws provide that stockholders seeking to present
    proposals before a meeting of stockholders or to nominate
    candidates for election as directors at a meeting of
    stockholders must provide timely advance written notice to us in
    writing;                                                                             
|
| |  | our bylaws specify requirements as to the form and content of a
    stockholders notice;                                                                                                                                                                                                                                                    
|
| |  | our bylaws provides that, subject to the rights of the holders
    of any outstanding series of our preferred stock, all vacancies,
    including newly created directorships, may, except as otherwise
    required by law, be filled by the affirmative vote of a majority
    of our directors then in office, even if less than a quorum;
|
| |  | our bylaws provides that our board of directors may fix the
    number of directors by resolution;                                                                                                                                                                                                                                           
|
| |  | our amended and restated certificate of incorporation provide
    that all stockholder actions must be effected at a duly called
    meeting of stockholders and not by written consent; and                                                                                                                                                 
|
| |  | our amended and restated certificate of incorporation do not
    provide for cumulative voting for our directors. The absence of
    cumulative voting may make it more difficult for stockholders
    owning less than a majority of our stock to elect any directors
    to our board.                                                     

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Transfer Agent and Registrar










Listing




87



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##### Table of Contents






Material U.S. Federal Tax Consequences


To
Non-U.S.Holders


non-U.S. non-U.S.




| |   |                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | an individual citizen or resident of the U.S.;                                                                                                                                                                                                                                          
|
| |  | a corporation or other entity taxable as a corporation created
    or organized in the U.S. or under the laws of the
    U.S. or any political subdivision thereof, other than a
    partnership treated as foreign under the U.S. treasury
    regulations;                            
|
| |  | an estate whose income is subject to U.S. federal income
    tax regardless of its source; or                                                                                                                                                                                           
|
| |  | a trust (x) whose administration is subject to the primary
    supervision of a U.S. court and which has one or more
    U.S. persons who have the authority to control all
    substantial decisions of the trust or (y) which has made an
    election to be treated as a U.S. person.





non-U.S. non-U.S. non-U.S.


This discussion is for general purposes only. Prospective
investors are urged to consult their own tax advisors regarding
the application of the U.S. federal income and estate tax
laws to their particular


88



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situations and the consequences under U.S. federal gift
tax laws, as well as foreign, state, and local laws and tax
treaties.


Dividends




non-U.S. non-U.S.


non-U.S. non-U.S. non-U.S. non-U.S. non-U.S. non-U.S. non-U.S.


non-U.S. W-8ECI


non-U.S.


Gain on Disposition of Common Stock


non-U.S.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the gain is effectively connected with a U.S. trade or
    business of the
    non-U.S.holder
    (or attributable to a permanent establishment in the
    U.S. if an income tax treaty applies), which gain, in the
    case of a corporate
    non-U.S.holder,
    must also be taken into account for branch profits tax purposes;                                                                                                                                                                   
|
| |  | the
    non-U.S.holder is
    an individual who is present in the U.S. for a period or
    periods aggregating 183 days or more during the calendar
    year in which the sale or disposition occurs and certain other
    conditions are met; or                                                                                                                                                                                                                                                       
|
| |  | our common stock constitutes a U.S. real property interest
    by reason of our status as a U.S. real property
    holding corporation for U.S. federal income tax
    purposes at any time within the shorter of the five-year period
    preceding the disposition or the holders holding period
    for our common stock. We believe that we are not currently, and
    that we are not likely to become, a U.S. real
    property holding corporation for U.S. federal income
    tax purposes.

non-U.S.


89



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non-U.S.


Backup Withholding and Information Reporting


non-U.S.


non-U.S. non-U.S. non-U.S.




Federal Estate Tax


non-U.S.


The foregoing discussion of U.S. federal income and
estate tax considerations is not tax advice. Accordingly, each
prospective
non-U.S.holder of
our common stock should consult that holders own tax
advisor with respect to the federal, state, local and
non-U.S.tax
consequences of the ownership and disposition of our common
stock.


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Shares Eligible for Future Sale
















| |   |                                                                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | 6,907,025 shares of common stock will be immediately
    eligible for sale in the public market without restriction;                                                                                                                                                                                                           
|
|
|
| |  | 6,678,239 shares of common stock will be eligible for sale
    in the public market under Rule 144 or Rule 701,
    beginning 90 days after the effective date of the
    registration statement of which this prospectus is a part,
    subject to the volume, manner of sale and other limitations
    under those rules; and
|
|
| |  | the remaining 7,612,531 shares of common stock will become
    eligible under Rule 144 for sale in the public market from
    time to time after the effective date of the registration
    statement of which this prospectus is a part upon expiration of
    their respective holding periods.                              

lock-up




Rule 144






| |   |                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | one percent of the number of shares of our common stock then
    outstanding, which will equal
    approximately                      shares
    immediately after this offering; and            
|
| |  | the average weekly trading volume of our common stock on The
    Nasdaq National Market during the four calendar weeks preceding
    the filing of a notice on Form 144 with respect to the sale.



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Rule 144(k)


manner-of


Rule 701


lock-up




| |   |                                                                                                                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | persons other than affiliates, beginning 90 days after the
    effective date of this offering, subject only to the
    manner-of-sale
    provisions of Rule 144; and                                                                                                                     
|
| |  | our affiliates, beginning 90 days after the effective date
    of this offering, subject to the
    manner-of-sale, current
    public information, and filing requirements of Rule 144, in
    each case, without compliance with the one-year holding period
    requirement of Rule 144.




lock-up





Form S-8
Registration Statements


S-8 lock-up


Lock-up


180-day lock-up lock-up lock-up 16-day lock-up lock-up 18-day lock-up bona fide lock-up lock-up lock-up 180-day lock-up


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Underwriting






|                          |       |                  |  |  | 
|------------------------- | ----- | ---------------- |  |  | 
|Underwriter               |       | Number of Shares | 
|                          |       |                  | 
|CIBC World Markets Corp.  |       |                  |  | 
|Jefferies & Company, Inc. |       |                  |  | 
|First Albany Capital Inc. |       |                  |  | 
|                          | Total |                  |  |  | 
|                          |       |                  | 









|                         |  |           |  |                |        |   |                 |        |  |   |  | 
|------------------------ |  | --------- |  | -------------- | ------ | - | --------------- | ------ |  | - |  | 
|                         |  |           |  | Total Without  |        |   | Total With Full |       
|                         |  |           |  | Exercise of    |        |   | Exercise of     |       
|                         |  |           |  | Over-Allotment |        |   | Over-Allotment  |       
|                         |  | Per Share |  |                | Option |   |                 | Option | 
|                         |  |           |  |                |        |   |                 |        | 
|ImaRx Therapeutics, Inc. |  | $         |  |                |        | $ |                 |        |  | $ |  | 





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180-day 180-day lock-up lock-up lock-up 16-day lock-up lock-up 18-day lock-up locked-up








| |   |                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the history and prospects for the industry in which we compete;                                                                                    
|
| |  | our past and present operations;                                                                                                                   
|
| |  | our historical results of operations;                                                                                                              
|
| |  | our prospects for future business and earning potential;                                                                                           
|
| |  | our management;                                                                                                                                    
|
| |  | the general condition of the securities markets at the time of
    this offering;                                                                  
|
| |  | the recent market prices of securities of generally comparable
    companies;                                                                      
|
| |  | the market capitalization and stages of development of other
    companies which we and the representatives believe to be
    comparable to us; and
|
| |  | other factors deemed to be relevant.                                                                                                               





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Stabilizing transactions The representative may
    make bids or purchases for the purpose of pegging, fixing or
    maintaining the price of the shares, so long as stabilizing bids
    do not exceed a specified maximum.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Over-allotments and syndicate covering transactions
    The underwriters may sell more shares of our common stock in
    connection with this offering than the number of shares that
    they have committed to purchase. This over-allotment creates a
    short position for the underwriters. This short sales position
    may involve either covered short sales or
    naked short sales. Covered short sales are short
    sales made in an amount not greater than the underwriters
    over-allotment option to purchase additional shares in this
    offering described above. The underwriters may close out any
    covered short position either by exercising their over-allotment
    option or by purchasing shares in the open market. To determine
    how they will close the covered short position, the underwriters
    will consider, among other things, the price of shares available
    for purchase in the open market, as compared to the price at
    which they may purchase shares through the over-allotment
    option. Naked short sales are short sales in excess of the
    over-allotment

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | option. The underwriters must close out any naked short position
    by purchasing shares in the open market. A naked short position
    is more likely to be created if the underwriters are concerned
    that, in the open market after pricing, there may be downward
    pressure on the price of the shares that could adversely affect
    investors who purchase shares in this offering.
|
| |  | Penalty bids If the representatives purchase shares
    in the open market in a stabilizing transaction or syndicate
    covering transaction, they may reclaim a selling concession from
    the underwriters and selling group members who sold those shares
    as part of this offering.                                                                                                    
|
| |  | Passive market making Market makers in the shares
    who are underwriters or prospective underwriters may make bids
    for or purchases of shares, subject to limitations, until the
    time, if ever, at which a stabilizing bid is made.                                                                                                                                                   



Notice to
Non-U.S.Investors




| |        
| | -------
| | Belgium







| |       
| | ------
| | France

Autorité des marchés financiers investisseurs
qualifiés cercle restreint dinvestisseurs Code
monétaire et financier; Code monétaire et financier Règlement Général Autorité des marchés financiers, appel publicà


95



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lépargne Code monétaire
et financier




| |                                              
| | ---------------------------------------------
| | United Kingdom/Germany/Norway/The Netherlands





| |     |                                                                                                                                                                                                  
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | to legal entities which are authorised or regulated to operate
    in the financial markets or, if not so authorised or regulated,
    whose corporate purpose is solely to invest in securities;



| |     |                                                                                                                                                                                                                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | to any legal entity which has two or more of (1) an average
    of at least 250 employees during the last financial year;
    (2) a total balance sheet of more
    than 43,000,000
    and (3) an annual net turnover of more
    than 50,000,000,
    as shown in its last annual or consolidated accounts;



| |     |                                                                                                                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | by the underwriter to fewer than 100 natural or legal persons
    (other than qualified investors as defined in the Prospectus
    Directive) subject to obtaining the prior consent of CIBC World
    Markets Corp. for any such offer; or



| |     |                                                                                        
| | --- | ---------------------------------------------------------------------------------------
| | (d) | in any other circumstances falling within Article 3(2) of
    the Prospectus Directive,









| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | it has only communicated or caused to be communicated and will
    only communicate or cause to be communicated any invitation or
    inducement to engage in investment activity (within the meaning
    of section 21 of the Financial Services and Markets Act
    2000, or the FSMA, received by it in connection with the issue
    or sale of any shares in circumstances in which
    section 21(1) of the FSMA does not apply to us; and



| |     |                                                                                                                                                                                                              
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | it has complied with and will comply with all applicable
    provisions of the FSMA with respect to anything done by it in
    relation to the shares in, from or otherwise involving the
    United Kingdom.



| |       
| | ------
| | Israel





| |     |                                                                                                                                                                                         
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | a fund for joint investments in trust (i.e., mutual fund), as
    such term is defined in the Law for Joint Investments in Trust,
    5754-1994, or a management company of such a fund;



| |     |                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | a provident fund as defined in Section 47(a)(2) of the
    Income Tax Ordinance of the State of Israel, or a management
    company of such a fund;



| |     |                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | an insurer, as defined in the Law for Oversight of Insurance
    Transactions, 5741-1981, (d) a banking entity or satellite
    entity, as such terms are defined in the Banking Law
    (Licensing), 5741-1981, other than a joint services company,
    acting for their own account or fro the account of investors of
    the type listed in Section 15A(b) of the Securities Law
    1968;

96



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| |     |                                                                                                                                                                                                                                                                                                                              
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (d) | a company that is licensed as a portfolio manager, as such term
    is defined in Section 8(b) of the Law for the Regulation of
    Investment Advisors and Portfolio Managers, 5755-1995, acting on
    its own account or for the account of investors of the type
    listed in Section 15A(b) of the Securities Law 1968;



| |     |                                                                                                                                                                                                                            
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (e) | a company that is licensed as an investment advisor, as such
    term is defined in Section 7(c) of the Law for the
    Regulation of Investment Advisors and Portfolio Managers,
    5755-1995, acting on its own account;



| |     |                                                                                                                                                                                              
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (f) | a company that is a member of the Tel Aviv Stock Exchange,
    acting on its own account or for the account of investors of the
    type listed in Section 15A(b) of the Securities Law 1968;



| |     |                                                                                                                                                                                                                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (g) | an underwriter fulfilling the conditions of Section 56(c)
    of the Securities Law, 5728-1968;                                                                                                                                                                                                    
|
| | (h) | a venture capital fund (defined as an entity primarily involved
    in investments in companies which, at the time of investment,
    (i) are primarily engaged in research and development or
    manufacture of new technological products or processes and
    (ii) involve above-average risk);



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) | an entity primarily engaged in capital markets activities in
    which all of the equity owners meet one or more of the above
    criteria; and                                                                                                                                                                                                                                                                             
|
| | (j) | an entity, other than an entity formed for the purpose of
    purchasing shares in this offering, in which the shareholders
    equity (including pursuant to foreign accounting rules,
    international accounting regulations and U.S. generally
    accepted accounting rules, as defined in the Securities Law
    Regulations (Preparation of Annual Financial Statements), 1993)
    is in excess of NIS 250 million.





| |      
| | -----
| | Italy

operatori qualificati




| |     |                                                                                                                                                                                                                                               
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | by an investment firm, bank or intermediary permitted to conduct
    such activities in Italy in accordance with Legislative Decree
    No. 58 of 24 February 1998 and Legislative Decree
    No. 385 of 1 September 1993, or the Banking Act;



| |     |                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------
| | (b) | in compliance with Article 129 of the Banking Act and the
    implementing guidelines of the Bank of Italy; and



| |     |                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (c) | in compliance with any other applicable laws and regulations and
    other possible requirements or limitations which may be imposed
    by Italian authorities.



| |       
| | ------
| | Sweden

Finansinspektionen


97



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| |            
| | -----------
| | Switzerland





98



---



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Legal Matters







Experts







Where You Can Find Additional Information


S-1 1-800-SEC-0330.




99



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)





Index to Consolidated Financial Statements


|                                                                                                                                                                                                                                                                                          |  |  |      | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ---- | 
|Report of Independent Registered Public
    Accounting Firm                                                                                                                                                                                                                               |  |  | F-2  | 
|Consolidated Financial Statements                                                                                                                                                                                                                                                         |  |  |      | 
|Consolidated Balance Sheets at
    December 31, 2004 and 2005 and March 31, 2006
    (unaudited)                                                                                                                                                                                          |  |  | F-3  | 
|Consolidated Statements of Operations for
    the years ended December 31, 2003, 2004, 2005, the periods
    from October 7, 1999 (Date of Inception) through
    December 31, 2005 and March 31, 2006 (unaudited) and
    the three months ended March 31, 2005 and 2006
    (unaudited) |  |  | F-4  | 
|Consolidated Statements of Mandatorily
    Redeemable Convertible Preferred Stock and Stockholders
    Deficit for the years ended December 31, 2003, 2004, 2005
    and the three months ended March 31, 2006 (unaudited)                                                               |  |  | F-5  | 
|Consolidated Statements of Cash Flows for
    the years ended December 31, 2003, 2004, 2005, the periods
    from October 7, 1999 (Date of Inception) through
    December 31, 2005 and March 31, 2006 (unaudited) and
    the three months ended March 31, 2005 and 2006
    (unaudited) |  |  | F-7  | 
|Notes to Consolidated Financial
    Statements                                                                                                                                                                                                                                            |  |  | F-10 | 

F-1



---



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| |                      
| | ---------------------
| | /s/ Ernst & Young LLP





F-2



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)





Consolidated Balance Sheets





|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |            |             |  
|-------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------ | ----------- | --------- | ----------- | ----------- | ----------- | ---------- | ----------- | - | ----------- | ---------- | ----------- | -
|                                                         |                                                                                                                                                                                                                                                    | December 31,                                                                                                                                           |             |           |            
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           | March 31,   |            
|                                                         |                                                                                                                                                                                                                                                    | 2004                                                                                                                                                   |             |           | 2005        |             |             | 2006       |            
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |            
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             | (unaudited) |            
|Assets                                                   |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |           
|Current assets:                                          |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |           
|                                                         | Cash and cash equivalents                                                                                                                                                                                                                          |                                                                                                                                                        | $           | 1,538,290 |             |             | $           | 8,513,387  |             |   | $           | 6,348,893  |            
|                                                         | Inventories                                                                                                                                                                                                                                        |                                                                                                                                                        |             | 36,251    |             |             |             |           |             |   |             |           |            
|                                                         | Prepaid expenses and other                                                                                                                                                                                                                         |                                                                                                                                                        |             | 187,875   |             |             |             | 272,486    |             |   |             | 153,842    |            
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |            
|Total current assets                                     |                                                                                                                                                                                                                                                    |                                                                                                                                                        | 1,762,416   |           |             |             | 8,785,873   |            |             |   | 6,502,735   |           
|Property and equipment, net                              |                                                                                                                                                                                                                                                    |                                                                                                                                                        | 359,965     |           |             |             | 729,961     |            |             |   | 866,504     |           
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |            
|Total assets                                             |                                                                                                                                                                                                                                                    | $                                                                                                                                                      | 2,122,381   |           |             | $           | 9,515,834   |            |             | $ | 7,369,239   |           
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |            
|Liabilities and stockholders deficit                    |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |           
|Current liabilities:                                     |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |           
|                                                         | Accounts payable                                                                                                                                                                                                                                   |                                                                                                                                                        | $           | 389,850   |             |             | $           | 775,684    |             |   | $           | 1,747,239  |            
|                                                         | Accrued expenses                                                                                                                                                                                                                                   |                                                                                                                                                        |             | 633,329   |             |             |             | 893,198    |             |   |             | 691,249    |            
|                                                         | Short-term notes payable                                                                                                                                                                                                                           |                                                                                                                                                        |             |          |             |             |             | 15,227,500 |             |   |             | 15,452,500 |            
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |            
|Total current liabilities                                |                                                                                                                                                                                                                                                    |                                                                                                                                                        | 1,023,179   |           |             |             | 16,896,382  |            |             |   | 17,890,988  |           
|Long-term notes payable, less current portion            |                                                                                                                                                                                                                                                    |                                                                                                                                                        | 4,281,992   |           |             |             |            |            |             |   |            |           
|Other long-term liabilities                              |                                                                                                                                                                                                                                                    |                                                                                                                                                        | 218,856     |           |             |             | 218,856     |            |             |   | 218,856     |           
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |            
|Total liabilities                                        |                                                                                                                                                                                                                                                    |                                                                                                                                                        | 5,524,027   |           |             |             | 17,115,238  |            |             |   | 18,109,844  |           
|Mandatorily redeemable convertible preferred stock:      |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |           
|                                                         | Series A 8% Redeemable Convertible Preferred Shares,
    $.0001 par, at carrying value including accrued dividends
    (liquidation value of $8,902,752 and $9,028,765 at
    December 31, 2005 and March 31, 2006 (unaudited),
    respectively): |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |            |            
|                                                         |                                                                                                                                                                                                                                                    | Authorized shares 2,302,053                                                                                                                           |             |           |             |             |             |            |             |   |             |            |             |  
|                                                         |                                                                                                                                                                                                                                                    | Issued and outstanding shares 2,291,144 at
    December 31, 2004 and 2005 and March 31, 2006
    (unaudited)                                          |             |           | 8,320,643   |             |             |            | 8,824,695   |   |             |            | 8,950,708   |  
|                                                         | Series B 7% Redeemable Convertible Preferred Shares,
    $.0001 par, at carrying value (liquidation value of $9,491,622
    at December 31, 2005 and March 31, 2006 (unaudited),
    respectively):                                                |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |            |            
|                                                         |                                                                                                                                                                                                                                                    | Authorized shares 800,000                                                                                                                             |             |           |             |             |             |            |             |   |             |            |             |  
|                                                         |                                                                                                                                                                                                                                                    | Issued and outstanding shares 593,226 at December 31,
    2004 and 2005 and March 31, 2006 (unaudited)                                                |             |           | 9,491,622   |             |             |            | 9,491,622   |   |             |            | 9,491,622   |  
|                                                         | Series C Redeemable Convertible Preferred Shares,
    $.0001 par, at carrying value (liquidation value of
    $1,999,998 at December 31, 2005 and March 31, 2006
    (unaudited), respectively):                                                   |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |            |            
|                                                         |                                                                                                                                                                                                                                                    | Authorized shares 1,700,000                                                                                                                           |             |           |             |             |             |            |             |   |             |            |             |  
|                                                         |                                                                                                                                                                                                                                                    | Issued and outstanding shares 285,714 at December 31,
    2004 and 2005 and March 31, 2006 (unaudited)                                                |             |           | 1,945,563   |             |             |            | 1,945,563   |   |             |            | 1,945,563   |  
|                                                         | Series D 8% Redeemable Convertible Preferred Shares,
    $.0001 par, at carrying value including accrued dividends
    (liquidation value of $1,487,332 and $1,511,435 at
    December 31, 2005 and March 31, 2006 (unaudited),
    respectively): |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |            |            
|                                                         |                                                                                                                                                                                                                                                    | Authorized shares 545,500                                                                                                                             |             |           |             |             |             |            |             |   |             |            |             |  
|                                                         |                                                                                                                                                                                                                                                    | Issued and outstanding shares 438,232 at December 31,
    2004 and 2005 and March 31, 2006 (unaudited)                                                |             |           | 1,369,193   |             |             |            | 1,465,593   |   |             |            | 1,489,696   |  
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |            
|Total mandatorily redeemable convertible preferred stock |                                                                                                                                                                                                                                                    |                                                                                                                                                        | 21,127,021  |           |             |             | 21,727,473  |            |             |   | 21,877,589  |           
|Stockholders deficit:                                   |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |           
|                                                         | Series E Redeemable Convertible Preferred Shares,
    $.0001 par, (no liquidation value):                                                                                                                                                          |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |            |            
|                                                         |                                                                                                                                                                                                                                                    | Authorized shares 30,000,000                                                                                                                          |             |           |             |             |             |            |             |   |             |            |             |  
|                                                         |                                                                                                                                                                                                                                                    | Issued and outstanding shares no shares in 2004, and
    1,000,000 shares at December 31, 2005 and
    March 31, 2006 (unaudited)                     |             |           |            |             |             |            | 4,000,000   |   |             |            | 4,000,000   |  
|                                                         | Common stock, $.0001 par:                                                                                                                                                                                                                          |                                                                                                                                                        |             |           |             |             |             |            |             |   |             |            |            
|                                                         |                                                                                                                                                                                                                                                    | Authorized shares 70,000,000                                                                                                                          |             |           |             |             |             |            |             |   |             |            |             |  
|                                                         |                                                                                                                                                                                                                                                    | Issued and outstanding shares 6,505,306 at
    December 31, 2004 and 12,923,440 at December 31, 2005
    and 12,931,638 at March 31, 2006 (unaudited) |             |           | 651         |             |             |            | 1,293       |   |             |            | 1,294       |  
|                                                         |                                                                                                                                                                                                                                                    | Additional paid-in capital                                                                                                                             |             |           | 7,706,137   |             |             |            | 27,434,074  |   |             |            | 27,637,592  |  
|                                                         |                                                                                                                                                                                                                                                    | Deficit accumulated during the development stage                                                                                                       |             |           | (32,235,455 | )           |             |            | (60,762,244 | ) |             |            | (64,257,080 | )
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |            
|Total stockholders deficit                              |                                                                                                                                                                                                                                                    |                                                                                                                                                        | (24,528,667 | )         |             |             | (29,326,877 | )          |             |   | (32,618,194 | )         
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |            
|Total liabilities and stockholders deficit              |                                                                                                                                                                                                                                                    | $                                                                                                                                                      | 2,122,381   |           |             | $           | 9,515,834   |            |             | $ | 7,369,239   |           
|                                                         |                                                                                                                                                                                                                                                    |                                                                                                                                                        |             |           |             |             |             |            |            






F-3



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)





Consolidated Statements of Operations


|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |   |   |            |           |   |   |             |            |  
|------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------ | ---------- | ---------- | ------------ | - | ------------------ | --------------- | - | ----------- | ----------- | ----------- | -------- | ---- | --------------- | ---------- | ---- | - | ---------- | --------- | - | - | ---------- | --------- | - | - | ----------- | ---------- | -
|                                                                          |                                                          |                          |            |            |              |   |                    | Period from     |   |             |             |             |          |      | Period from     |           
|                                                                          |                                                          |                          |            |            |              |   |                    | October 7, 1999 |   |             |             |             |          |      | October 7, 1999 |           
|                                                                          |                                                          |                          |            |            |              |   |                    | (Date of        |   |             |             |             | (Date of |     
|                                                                          |                                                          |                          |            | Inception) |              |   | Three Months Ended |                 |   | Inception)  |            
|                                                                          |                                                          | Years Ended December 31, |            |            | Through      |   |                    | March 31,       |   |             | Through     |            
|                                                                          |                                                          |                          |            |            | December 31, |   |                    |                 |   |             | March 31,   |            
|                                                                          |                                                          | 2003                     |            |            | 2004         |   |                    | 2005            |   |             | 2005        |             |          | 2005 |                 |            | 2006 |   |            | 2006      |  
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |  
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             | (unaudited) |         
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   | (unaudited) |             |             |         
|Grant and other revenue                                                   |                                                          | $                        | 224,231    |            |              | $ | 575,014            |                 |   | $           | 619,046     |             |          | $    | 2,214,980       |            |      | $ | 173,050    |           |   | $ | 177,338    |           |   | $ | 2,392,318   |           
|Costs and expenses:                                                       |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |   |   |            |           |   |   |             |           
|                                                                          | Research and development                                 |                          |            | 1,877,393  |              |   |                    | 2,489,640       |   |             |             | 3,578,703   |          |      |                 | 12,751,391 |      |   |            | 763,558   |   |   |            | 1,723,300 |   |   |             | 14,474,691 |  
|                                                                          | General and administrative                               |                          |            | 1,654,251  |              |   |                    | 3,183,850       |   |             |             | 4,142,279   |          |      |                 | 15,169,734 |      |   |            | 661,486   |   |   |            | 1,618,281 |   |   |             | 16,788,015 |  
|                                                                          | Depreciation and amortization                            |                          |            | 209,032    |              |   |                    | 185,905         |   |             |             | 194,206     |          |      |                 | 1,684,849  |      |   |            | 46,944    |   |   |            | 60,063    |   |   |             | 1,744,912  |  
|                                                                          | Acquired in-process research and development             |                          |            |           |              |   |                    |                |   |             |             | 24,000,000  |          |      |                 | 24,000,000 |      |   |            |          |   |   |            |          |   |   |             | 24,000,000 |  
|                                                                          | License fees to development partner                      |                          |            |           |              |   |                    |                |   |             |             |            |          |      |                 | 10,000,000 |      |   |            |          |   |   |            |          |   |   |             | 10,000,000 |  
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |  
|                                                                          |                                                          |                          | 3,740,676  |            |              |   | 5,859,395          |                 |   |             | 31,915,188  |             |          |      | 63,605,974      |            |      |   | 1,471,988  |           |   |   | 3,401,644  |           |   |   | 67,007,618  |           
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |  
|Loss from operations                                                      |                                                          |                          | (3,516,445 | )          |              |   | (5,284,381         | )               |   |             | (31,296,142 | )           |          |      | (61,390,994     | )          |      |   | (1,298,938 | )         |   |   | (3,224,306 | )         |   |   | (64,615,300 | )         
|Other income (expense):                                                   |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |   |   |            |           |   |   |             |           
|                                                                          | Interest and other income                                |                          |            | 22,475     |              |   |                    | 29,109          |   |             |             | 122,187     |          |      |                 | 371,621    |      |   |            | 23,224    |   |   |            | 104,586   |   |   |             | 476,207    |  
|                                                                          | Interest expense                                         |                          |            | (325,779   | )            |   |                    | (468,536        | ) |             |             | (587,341    | )        |      |                 | (1,850,357 | )    |   |            | (53,180   | ) |   |            | (225,000  | ) |   |             | (2,075,357 | )
|                                                                          | Minority interest in net loss of consolidated subsidiary |                          |            |           |              |   |                    |                |   |             |             |            |          |      |                 | 2,638,446  |      |   |            |          |   |   |            |          |   |   |             | 2,638,446  |  
|                                                                          | Gain on extinguishment of note                           |                          |            |           |              |   |                    |                |   |             |             | 3,834,959   |          |      |                 | 3,834,959  |      |   |            | 3,834,959 |   |   |            |          |   |   |             | 3,834,959  |  
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |  
|Net (loss) income                                                         |                                                          |                          | (3,819,749 | )          |              |   | (5,723,808         | )               |   |             | (27,926,337 | )           |          |      | (56,396,325     | )          |      |   | 2,506,065  |           |   |   | (3,344,720 | )         |   |   | (59,741,045 | )         
|Accretion of dividends on preferred stock                                 |                                                          |                          | (1,286,715 | )          |              |   | (301,031           | )               |   |             | (600,452    | )           |          |      | (4,365,919      | )          |      |   | (150,116   | )         |   |   | (150,116   | )         |   |   | (4,516,035  | )         
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |  
|Net (loss) income available to common stockholders                        |                                                          | $                        | (5,106,464 | )          |              | $ | (6,024,839         | )               |   | $           | (28,526,789 | )           |          | $    | (60,762,244     | )          |      | $ | 2,355,949  |           |   | $ | (3,494,836 | )         |   | $ | (64,257,080 | )         
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |  
|Net (loss) income available to common stockholders per
    share Basic   |                                                          | $                        | (1.74      | )          |              | $ | (1.07              | )               |   | $           | (3.01       | )           |          |      |                 |            |      | $ | 0.30       |           |   | $ | (0.27      | )         |   |   |             |           
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |  
|Weighted average shares outstanding Basic                                |                                                          |                          | 2,936,094  |            |              |   | 5,637,042          |                 |   |             | 9,463,279   |             |          |      |                 |            |      |   | 7,769,415  |           |   |   | 12,930,820 |           |   |   |             |           
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |  
|Net (loss) income available to common stockholders per
    share Diluted |                                                          | $                        | (1.74      | )          |              | $ | (1.07              | )               |   | $           | (3.01       | )           |          |      |                 |            |      | $ | 0.18       |           |   | $ | (0.27      | )         |   |   |             |           
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |  
|Weighted average shares outstanding Diluted                              |                                                          |                          | 2,936,094  |            |              |   | 5,637,042          |                 |   |             | 9,463,279   |             |          |      |                 |            |      |   | 13,146,131 |           |   |   | 12,930,820 |           |   |   |             |           
|                                                                          |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |  
|See accompanying notes.                                                   |                                                          |                          |            |            |              |   |                    |                 |   |             |             |             |          |      |                 |            |      |   |            |           |   |   |            |           |   |   |             |           

F-4



---



##### Table of Contents





ImaRx Therapeutics, Inc.


(A Development Stage Company)





Consolidated Statements of Mandatorily Redeemable Convertible
Preferred Stock and Stockholders Deficit


|                                                                                                    |  |                 |  |        |       |                                                    |        |  |           |                       |  |          |           |          |          |       |         |  |            |   |           |        |                       |          |              |  |              |            |           |             |            |  |         |       |        |   |           |        |  |         |          |   |             |        |   |               |        |  |  |         |  |  |       |   |  |         |  |           |   |  |   |     |  |  |   |         |   |  |   |             |   |  |   |             |  
|--------------------------------------------------------------------------------------------------- |  | --------------- |  | ------ | ----- | -------------------------------------------------- | ------ |  | --------- | --------------------- |  | -------- | --------- | -------- | -------- | ----- | ------- |  | ---------- | - | --------- | ------ | --------------------- | -------- | ------------ |  | ------------ | ---------- | --------- | ----------- | ---------- |  | ------- | ----- | ------ | - | --------- | ------ |  | ------- | -------- | - | ----------- | ------ | - | ------------- | ------ |  |  | ------- |  |  | ----- | - |  | ------- |  | --------- | - |  | - | --- |  |  | - | ------- | - |  | - | ----------- | - |  | - | ----------- | -
|                                                                                                    |  |                 |  |        |       | Mandatorily Redeemable Convertible Preferred Stock |        |  |           | Stockholders Deficit | 
|                                                                                                    |  |                 |  |        |       |                                                    |        |  |           |                       | 
|                                                                                                    |  |                 |  |        |       | Series A                                           |        |  | Series B  |                       |  | Series C |           |          | Series D |       |         |  |            |   |           |        | Series E Redeemable   |          |              |  |              | Deficit    |           |             |           
|                                                                                                    |  |                 |  |        |       |                                                    |        |  |           |                       |  |          |           |          |          |       |         |  |            |   |           |        | Convertible Preferred |          |              |  |              |            |           | Accumulated |            |  |        
|                                                                                                    |  |                 |  | Per    |       |                                                    |        |  |           |                       |  |          |           |          | Stock    |       |         |  | vr,cg13;tb |   |           | Shares |                       |          | Common Stock |  |              | Additional |           |             | During the |  |         | Total |       
|                                                                                                    |  |                 |  | Share  |       |                                                    |        |  | Carrying  |                       |  |          |           | Carrying |          |       |         |  | Carrying   |   |           |        |                       | Carrying |              |  | Subscription |            |           |             | Members   |  |         |       |        |   |           |        |  | Paid-in |          |   | Development |        |   | Stockholders |       
|                                                                                                    |  | Date            |  | Amount |       |                                                    | Shares |  |           | Value                 |  |          | Shares    |          |          | Value |         |  | Shares     |   |           | Value  |                       |          | Shares       |  |              | Value      |           |             | Receivable |  |         |       | Equity |   |           | Shares |  |         | Amount   |   |             | Shares |   |               | Amount |  |  | Capital |  |  | Stage |   |  | Deficit | 
|                                                                                                    |  |                 |  |        |       |                                                    |        |  |           |                       |  |          |           |          |          |       |         |  |            |   |           |        |                       |          |              |  |              |            |           |             |            |  |         |       |        |   |           |        |  |         |          |   |             |        |   |               |        |  |  |         |  |  |       |   |  |         | 
|Initial capitalization at October 7, 1999                                                           |  |                 |  |        |       |                                                    |        |  |          |                       |  | $        |          |          |          |       |        |  |            | $ |          |        |                       |          |             |  |              | $          |          |             |            |  |        |       |        | $ |          |        |  | $       |         |   |             |        | $ | 59,626        |        |  |  |        |  |  | $     |  |  |         |  |          |   |  | $ |    |  |  | $ |        |   |  | $ |            |   |  | $ | 59,626      |  
|Net loss for the period (unaudited)                                                                 |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (553,485    | ) |  |   | (553,485    | )
|                                                                                                    |  |                 |  |        |       |                                                    |        |  |           |                       |  |          |           |          |          |       |         |  |            |   |           |        |                       |          |              |  |              |            |           |             |            |  |         |       |        |   |           |        |  |         |          |   |             |        |   |               |        |  |  |         |  |  |       |   |  |         | 
|Balance at December 30, 1999                                                                        |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   | 59,626        |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (553,485    | ) |  |   | (493,859    | )
|Conversion of members equity to common stock                                                       |  | 8/2/2000        |  | $      | 0.02  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   | (59,626       | )      |  |  |        |  |  |       |  |  |         |  | 2,825,833 |   |  |   | 283 |  |  |   | 59,343  |   |  |   |            |   |  |   |            |  
|Issuance of Series A Redeemable Convertible Preferred
    Stock, net of issuance costs of $64,146   |  | 8/19/2000       |  |        | 2.75  |                                                    |        |  | 1,294,772 |                       |  |          | 3,719,313 |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   |            |   |  |   |            |  
|Issuance of Series A Redeemable Convertible Preferred
    Stock, upon conversion of unsecured notes |  | 9/1/00-12/27/00 |  |        | 2.75  |                                                    |        |  | 880,075   |                       |  |          | 2,442,205 |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   |            |   |  |   |            |  
|Exercise of stock options                                                                           |  | 5/1/00-12/31/00 |  |        | 0.50  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  | 83,500    |   |  |   | 8   |  |  |   | 41,742  |   |  |   |            |   |  |   | 41,750      |  
|Stock subscription receivable                                                                       |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         | (244,834 | ) |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   |            |   |  |   |            |  
|Net loss                                                                                            |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (2,849,139  | ) |  |   | (2,849,139  | )
|                                                                                                    |  |                 |  |        |       |                                                    |        |  |           |                       |  |          |           |          |          |       |         |  |            |   |           |        |                       |          |              |  |              |            |           |             |            |  |         |       |        |   |           |        |  |         |          |   |             |        |   |               |        |  |  |         |  |  |       |   |  |         | 
|Balance at December 30, 2000                                                                        |  |                 |  |        |       |                                                    |        |  | 2,174,847 |                       |  |          | 6,161,518 |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         | (244,834 | ) |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  | 2,909,333 |   |  |   | 291 |  |  |   | 101,085 |   |  |   | (3,402,624  | ) |  |   | (3,301,248  | )
|Issuance of Series A Redeemable Convertible Preferred
    Stock, net of issuance costs of $13,911   |  | 1/9/01-1/30/01  |  |        | 2.75  |                                                    |        |  | 116,297   |                       |  |          | 61,071    |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         | 244,834  |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   |            |   |  |   |            |  
|Issuance of Series B Redeemable Convertible Preferred Stock                                         |  | 1/19/2001       |  |        | 16.00 |                                                    |        |  |          |                       |  |          |          |          |          |       | 500,625 |  |            |   | 8,010,000 |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   |            |   |  |   |            |  
|Issuance of Series C Redeemable Convertible Preferred
    Stock, net of issuance costs of $54,436   |  | 1/19/2001       |  |        | 7.00  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          | 285,714      |  |              |            | 1,945,563 |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   |            |   |  |   |            |  
|Accretion of undeclared dividends on Series B Redeemable
    Convertible Preferred Stock            |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   | 537,328   |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (537,328    | ) |  |   | (537,328    | )
|Exercise of stock options                                                                           |  | 5/1/01-10/31/01 |  |        | 0.50  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  | 30,250    |   |  |   | 3   |  |  |   | 15,122  |   |  |   |            |   |  |   | 15,125      |  
|Issuance of 23,980 warrants                                                                         |  |                 |  |        | 1.49  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   | 35,734  |   |  |   |            |   |  |   | 35,734      |  
|Net loss                                                                                            |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (12,325,328 | ) |  |   | (12,325,328 | )
|                                                                                                    |  |                 |  |        |       |                                                    |        |  |           |                       |  |          |           |          |          |       |         |  |            |   |           |        |                       |          |              |  |              |            |           |             |            |  |         |       |        |   |           |        |  |         |          |   |             |        |   |               |        |  |  |         |  |  |       |   |  |         | 
|Balance at December 31, 2001                                                                        |  |                 |  |        |       |                                                    |        |  | 2,291,144 |                       |  |          | 6,222,589 |          |          |       | 500,625 |  |            |   | 8,547,328 |        |                       |          | 285,714      |  |              |            | 1,945,563 |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  | 2,939,583 |   |  |   | 294 |  |  |   | 151,941 |   |  |   | (16,265,280 | ) |  |   | (16,113,045 | )
|Issuance of Series D Redeemable Convertible Preferred
    Stock, net of issuance costs of $20,111   |  | 10/10/2002      |  |        | 2.75  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  | 310,232 |       |        |   | 833,031   |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   |            |   |  |   |            |  
|Declared dividends on Series B Redeemable Convertible
    Preferred Stock                           |  | 7/18/2002       |  |        | 16.00 |                                                    |        |  |          |                       |  |          |          |          |          |       | 53,792  |  |            |   | 323,346   |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (323,346    | ) |  |   | (323,346    | )
|Accretion of undeclared dividends on Series A Redeemable
    Convertible Preferred Stock            |  |                 |  |        |       |                                                    |        |  |          |                       |  |          | 1,037,193 |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (1,037,193  | ) |  |   | (1,037,193  | )
|Accretion of undeclared dividends on Series B Redeemable
    Convertible Preferred Stock            |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   | 279,854   |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (279,854    | ) |  |   | (279,854    | )
|Repurchase and retirement of common stock                                                           |  | 11/1/2002       |  |        | 0.50  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  | (5,250    | ) |  |   |    |  |  |   | (2,625  | ) |  |   |            |   |  |   | (2,625      | )
|Contractual reduction of warrants issued in 2001                                                    |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   | (16,110 | ) |  |   |            |   |  |   | (16,110     | )
|Net loss                                                                                            |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (3,198,479  | ) |  |   | (3,198,479  | )
|                                                                                                    |  |                 |  |        |       |                                                    |        |  |           |                       |  |          |           |          |          |       |         |  |            |   |           |        |                       |          |              |  |              |            |           |             |            |  |         |       |        |   |           |        |  |         |          |   |             |        |   |               |        |  |  |         |  |  |       |   |  |         | 
|Balance at December 31, 2002                                                                        |  |                 |  |        |       |                                                    |        |  | 2,291,144 |                       |  |          | 7,259,782 |          |          |       | 554,417 |  |            |   | 9,150,528 |        |                       |          | 285,714      |  |              |            | 1,945,563 |             |            |  | 310,232 |       |        |   | 833,031   |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  | 2,934,333 |   |  |   | 294 |  |  |   | 133,206 |   |  |   | (21,104,152 | ) |  |   | (20,970,652 | )
|Issuance of Series D Redeemable Convertible Preferred
    Stock, net of issuance costs of $1,629    |  | 1/21/2003       |  |        | 2.75  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  | 128,000 |       |        |   | 350,371   |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   |            |   |  |   |            |  
|Declared dividends on Series B Redeemable Convertible
    Preferred Stock                           |  | 7/18/2003       |  |        | 16.00 |                                                    |        |  |          |                       |  |          |          |          |          |       | 38,809  |  |            |   | 341,094   |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (341,094    | ) |  |   | (341,094    | )
|Accretion of undeclared dividends on Series A and D
    Redeemable Convertible Preferred Stock      |  |                 |  |        |       |                                                    |        |  |          |                       |  |          | 556,809   |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   | 89,371    |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (646,180    | ) |  |   | (646,180    | )
|Accretion of undeclared dividends on Series B Redeemable
    Convertible Preferred Stock            |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   | 299,441   |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (299,441    | ) |  |   | (299,441    | )
|Issuance of 145,790 warrants with convertible subordinated notes                                    |  |                 |  |        | 0.48  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   | 70,000  |   |  |   |            |   |  |   | 70,000      |  
|Issuance of 5,000 warrants                                                                          |  |                 |  |        | 0.54  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   | 2,688   |   |  |   |            |   |  |   | 2,688       |  
|Exercise of stock options                                                                           |  | 2/1/03-12/31/03 |  |        | 0.50  |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  | 2,300     |   |  |   | 1   |  |  |   | 1,149   |   |  |   |            |   |  |   | 1,150       |  
|Net loss                                                                                            |  |                 |  |        |       |                                                    |        |  |          |                       |  |          |          |          |          |       |        |  |            |   |          |        |                       |          |             |  |              |            |          |             |            |  |        |       |        |   |          |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  |          |   |  |   |    |  |  |   |        |   |  |   | (3,819,749  | ) |  |   | (3,819,749  | )
|                                                                                                    |  |                 |  |        |       |                                                    |        |  |           |                       |  |          |           |          |          |       |         |  |            |   |           |        |                       |          |              |  |              |            |           |             |            |  |         |       |        |   |           |        |  |         |          |   |             |        |   |               |        |  |  |         |  |  |       |   |  |         | 
|Balance at December 31, 2003                                                                        |  |                 |  |        |       |                                                    |        |  | 2,291,144 |                       |  |          | 7,816,591 |          |          |       | 593,226 |  |            |   | 9,791,063 |        |                       |          | 285,714      |  |              |            | 1,945,563 |             |            |  | 438,232 |       |        |   | 1,272,773 |        |  |         |         |   |             |        |   |              |        |  |  |        |  |  |       |  |  |         |  | 2,936,633 |   |  |   | 295 |  |  |   | 207,043 |   |  |   | (26,210,616 | ) |  |   | (26,003,278 | )

F-5



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##### Table of Contents





ImaRx Therapeutics, Inc.


(A Development Stage Company)


Consolidated Statements of Mandatorily Redeemable Convertible
Preferred Stock and Stockholders Deficit (continued)





|                                                                                                         |                                                    |                 |  |        |            |                                                    |        |  |                       |       |  |          |           |          |          |       |         |   |          |        |           |                       |              |          |         |            |              |       |             |          |            |       |         |        |  |   |           |        |         |        |   |             |        |   |               |        |  |  |           |   |  |       |           |   |         |  |            |   |  |   |       |   |  |   |            |   |  |   |             |          |   |   |             |          |  
|-------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | --------------- |  | ------ | ---------- | -------------------------------------------------- | ------ |  | --------------------- | ----- |  | -------- | --------- | -------- | -------- | ----- | ------- | - | -------- | ------ | --------- | --------------------- | ------------ | -------- | ------- | ---------- | ------------ | ----- | ----------- | -------- | ---------- | ----- | ------- | ------ |  | - | --------- | ------ | ------- | ------ | - | ----------- | ------ | - | ------------- | ------ |  |  | --------- | - |  | ----- | --------- | - | ------- |  | ---------- | - |  | - | ----- | - |  | - | ---------- | - |  | - | ----------- | -------- | - | - | ----------- | -------- | -
|                                                                                                         |                                                    |                 |  |        |            | Mandatorily Redeemable Convertible Preferred Stock |        |  | Stockholders Deficit |      
|                                                                                                         |                                                    |                 |  |        |            |                                                    |        |  |                       |      
|                                                                                                         |                                                    |                 |  |        |            | Series A                                           |        |  | Series B              |       |  | Series C |           |          | Series D |       |         |   |          |        |           | Series E Redeemable   |              |          |         |            | Deficit      |       |             |         
|                                                                                                         |                                                    |                 |  |        |            |                                                    |        |  |                       |       |  |          |           |          |          |       |         |   |          |        |           | Convertible Preferred |              |          |         |            |              |       | Accumulated |          |            |      
|                                                                                                         |                                                    |                 |  | Per    |            |                                                    |        |  |                       |       |  |          |           |          | Stock    |       |         |   |          | Shares |           |                       | Common Stock |          |         | Additional |              |       | During the  |          |            | Total |        
|                                                                                                         |                                                    |                 |  | Share  |            |                                                    |        |  | Carrying              |       |  |          |           | Carrying |          |       |         |   | Carrying |        |           |                       |              | Carrying |         |            | Subscription |       |             | Members |            |       |         |        |  |   |           |        | Paid-in |        |   | Development |        |   | Stockholders |       
|                                                                                                         |                                                    | Date            |  | Amount |            |                                                    | Shares |  |                       | Value |  |          | Shares    |          |          | Value |         |   | Shares   |        |           | Value                 |              |          | Shares  |            |              | Value |             |          | Receivable |       |         | Equity |  |   | Shares    |        |         | Amount |   |             | Shares |   |               | Amount |  |  | Capital   |   |  | Stage |           |   | Deficit | 
|                                                                                                         |                                                    |                 |  |        |            |                                                    |        |  |                       |       |  |          |           |          |          |       |         |   |          |        |           |                       |              |          |         |            |              |       |             |          |            |       |         |        |  |   |           |        |         |        |   |             |        |   |               |        |  |  |           |   |  |       |           |   |         | 
|Balance at December 31, 2003                                                                             |                                                    |                 |  |        |            |                                                    |        |  | 2,291,144             |       |  | $        | 7,816,591 |          |          |       | 593,226 |   |          | $      | 9,791,063 |                       |              |          | 285,714 |            |              | $     | 1,945,563   |          |            |       | 438,232 |        |  | $ | 1,272,773 |        |         | $      |  |             |        |   |              |        |  |  |          |   |  | $     |          |   |         |  | 2,936,633  |   |  | $ | 295   |   |  | $ | 207,043    |   |  | $ | (26,210,616 | )        |   | $ | (26,003,278 | )       
|Issuance of 60,679 warrants with convertible subordinated
    notes                                      |                                                    | 1/30/2004       |  | $      | 1.08       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 65,325     |   |  |   |            |          |   |   | 65,325      |         
|Discount related to warrants issued with convertible
    subordinated notes                              |                                                    |                 |  |        |            |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 32,961     |   |  |   |            |          |   |   | 32,961      |         
|Exercise of warrants                                                                                     |                                                    | 3/17/2004       |  |        | 0.50       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 10,000     |   |  |   | 1     |   |  |   | 4,999      |   |  |   |            |          |   |   | 5,000       |         
|Issuance of Common Stock, net of issuance costs of $598,334                                              |                                                    | 3/30/2004       |  |        | 2.00       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 2,500,000  |   |  |   | 250   |   |  |   | 4,401,416  |   |  |   |            |          |   |   | 4,401,666   |         
|Conversion of convertible subordinated notes to Common Stock                                             |                                                    | 3/30/2004       |  |        | 2.02       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 1,032,343  |   |  |   | 103   |   |  |   | 2,064,583  |   |  |   |            |          |   |   | 2,064,686   |         
|Issuance of 500,000 warrants in conjunction with consulting
    agreements                               |                                                    | 3/29/2004       |  |        | 0.93       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 464,378    |   |  |   |            |          |   |   | 464,378     |         
|Issuance of 250,000 warrants to placement agent                                                          |                                                    | 10/6/2004       |  |        | 1.81       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 452,269    |   |  |   |            |          |   |   | 452,269     |         
|Accretion of undeclared dividends on Series A and D
    Redeemable Convertible Preferred Stock           |                                                    |                 |  |        |            |                                                    |        |  |                      |       |  |          | 504,052   |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   | 96,420    |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   |           |   |  |   | (600,472    | )        |   |   | (600,472    | )       
|Contractual reduction of Series B Redeemable Convertible
    Preferred Stock undeclared dividend accrual |                                                    |                 |  |        |            |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        | (299,441  | )                     |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   |           |   |  |   | 299,441     |          |   |   | 299,441     |         
|Exercise of stock options                                                                                |                                                    | 2/9/04-12/31/04 |  |        | 0.50       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 26,330     |   |  |   | 2     |   |  |   | 13,163     |   |  |   |            |          |   |   | 13,165      |         
|Net loss                                                                                                 |                                                    |                 |  |        |            |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   |           |   |  |   | (5,723,808  | )        |   |   | (5,723,808  | )       
|                                                                                                         |                                                    |                 |  |        |            |                                                    |        |  |                       |       |  |          |           |          |          |       |         |   |          |        |           |                       |              |          |         |            |              |       |             |          |            |       |         |        |  |   |           |        |         |        |   |             |        |   |               |        |  |  |           |   |  |       |           |   |         | 
|Balance at December 31, 2004                                                                             |                                                    |                 |  |        |            |                                                    |        |  | 2,291,144             |       |  |          | 8,320,643 |          |          |       | 593,226 |   |          |        | 9,491,622 |                       |              |          | 285,714 |            |              |       | 1,945,563   |          |            |       | 438,232 |        |  |   | 1,369,193 |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 6,505,306  |   |  |   | 651   |   |  |   | 7,706,137  |   |  |   | (32,235,455 | )        |   |   | (24,528,667 | )       
|Issuance of Common Stock, net of issuance costs of $593,100                                              |                                                    | 1/31/2005       |  |        | 3.00       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 1,390,000  |   |  |   | 139   |   |  |   | 3,576,761  |   |  |   |            |          |   |   | 3,576,900   |         
|Issuance of 20,000 warrants in conjunction with patent
    licensing                                     |                                                    | 1/31/2005       |  |        | 1.79       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 35,870     |   |  |   |            |          |   |   | 35,870      |         
|Issuance of Common Stock, net of issuance costs of $885,931                                              |                                                    | 2/28/2005       |  |        | 3.00       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 943,331    |   |  |   | 94    |   |  |   | 1,943,968  |   |  |   |            |          |   |   | 1,944,062   |         
|Issuance of 233,333 warrants to placement agent                                                          |                                                    | 2/28/2005       |  |        | 1.78       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 415,200    |   |  |   |            |          |   |   | 415,200     |         
|Issuance of Preferred Stock related to acquisition of assets                                             |                                                    | 9/30/2005       |  |        | 4.00       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  | 1,000,000 |   |  |       | 4,000,000 |   |         |  |           |   |  |   |      |   |  |   |           |   |  |   |            |          |   |   | 4,000,000   |         
|Issuance of 100,000 warrants with subordinated notes                                                     |                                                    | 9/30/2005       |  |        | 2.73       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 273,327    |   |  |   |            |          |   |   | 273,327     |         
|Issuance of Common Stock, net of issuance costs of $1,487,527                                            |                                                    | 10/20/2005      |  |        | 4.00       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 2,658,750  |   |  |   | 266   |   |  |   | 9,147,207  |   |  |   |            |          |   |   | 9,147,473   |         
|Issuance of Common Stock, net of issuance costs of $1,510,645                                            |                                                    | 11/8/2005       |  |        | 4.00       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 1,091,250  |   |  |   | 109   |   |  |   | 2,854,246  |   |  |   |            |          |   |   | 2,854,355   |         
|Issuance of 375,000 warrants to placement agent                                                          |                                                    | 11/8/2005       |  |        | 2.52       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 943,195    |   |  |   |            |          |   |   | 943,195     |         
|Accretion of undeclared dividends on Series A and D
    Redeemable Convertible Preferred Stock           |                                                    |                 |  |        |            |                                                    |        |  |                      |       |  |          | 504,052   |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   | 96,400    |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   |           |   |  |   | (600,452    | )        |   |   | (600,452    | )       
|Exercise of warrants                                                                                     |                                                    | 10/11/2005      |  |        | 2.00       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 17,531     |   |  |   | 2     |   |  |   | 35,060     |   |  |   |            |          |   |   | 35,062      |         
|Exercise of stock options                                                                                |                                                    | 01/05 12/05    |  |        | 0.50 0.55 |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 317,270    |   |  |   | 32    |   |  |   | 296,103    |   |  |   |            |          |   |   | 296,135     |         
|Acceleration of stock options                                                                            |                                                    | 01/05 09/05    |  |        | 0.50 3.00 |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 207,000    |   |  |   |            |          |   |   | 207,000     |         
|Net loss                                                                                                 |                                                    |                 |  |        |            |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   |           |   |  |   | (27,926,337 | )        |   |   | (27,926,337 | )       
|                                                                                                         |                                                    |                 |  |        |            |                                                    |        |  |                       |       |  |          |           |          |          |       |         |   |          |        |           |                       |              |          |         |            |              |       |             |          |            |       |         |        |  |   |           |        |         |        |   |             |        |   |               |        |  |  |           |   |  |       |           |   |         | 
|Balance at December 31, 2005                                                                             |                                                    |                 |  |        |            |                                                    |        |  | 2,291,144             |       |  |          | 8,824,695 |          |          |       | 593,226 |   |          |        | 9,491,622 |                       |              |          | 285,714 |            |              |       | 1,945,563   |          |            |       | 438,232 |        |  |   | 1,465,593 |        |         |        |  |             |        |   |              |        |  |  | 1,000,000 |   |  |       | 4,000,000 |   |         |  | 12,923,638 |   |  |   | 1,293 |   |  |   | 27,434,074 |   |  |   | (60,762,244 | )        |   |   | (29,326,877 | )       
|Issuance of 75,000 warrants to consultant (unaudited)                                                    |                                                    | 2/1/2006        |  |        | 2.32       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 173,909    |   |  |   |            |          |   |   | 173,909     |         
|Accretion of undeclared dividends on Series A and D                                                      |                                                    |                 |  |        |            |                                                    |        |  |                       |       |  |          |           |          |          |       |         |   |          |        |           |                       |              |          |         |            |              |       |             |          |            |       |         |        |  |   |           |        |         |        |   |             |        |   |               |        |  |  |           |   |  |       |           |   |         |  |            |   |  |   |       |   |  |   |            |   |  |   |             |          |   |   |             |         
|                                                                                                         | Redeemable Convertible Preferred Stock (unaudited) |                 |  |        |            |                                                    |        |  |                       |      |  |          |           | 126,013  |          |       |         |  |          |        |           |                      |              |          |         |           |              |       |             |         |            |       |         |       |  |   |           | 24,103 |         |        |   |            |        |   |               |       |  |  |           |  |  |       |           |  |         |  |            |  |  |   |       |  |  |   |            |  |  |   |             | (150,116 | ) |   |             | (150,116 | )
|Issuance of stock options (unaudited)                                                                    |                                                    | 01/06-03/06     |  |        | 4.00       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   | 25,510     |   |  |   |            |          |   |   | 25,510      |         
|Exercise of stock options (unaudited)                                                                    |                                                    | 01/06-03/06     |  |        | 0.50       |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  | 8,200      |   |  |   | 1     |   |  |   | 4,099      |   |  |   |            |          |   |   | 4,100       |         
|Net loss (unaudited)                                                                                     |                                                    |                 |  |        |            |                                                    |        |  |                      |       |  |          |          |          |          |       |        |   |          |        |          |                       |              |          |        |            |              |       |            |          |            |       |        |        |  |   |          |        |         |        |  |             |        |   |              |        |  |  |          |   |  |       |          |   |         |  |           |   |  |   |      |   |  |   |           |   |  |   | (3,344,720  | )        |   |   | (3,344,720  | )       
|                                                                                                         |                                                    |                 |  |        |            |                                                    |        |  |                       |       |  |          |           |          |          |       |         |   |          |        |           |                       |              |          |         |            |              |       |             |          |            |       |         |        |  |   |           |        |         |        |   |             |        |   |               |        |  |  |           |   |  |       |           |   |         | 
|Balance at March 31, 2006 (unaudited)                                                                    |                                                    |                 |  |        |            |                                                    |        |  | 2,291,144             |       |  | $        | 8,950,708 |          |          |       | 593,226 |   |          | $      | 9,491,622 |                       |              |          | 285,714 |            |              | $     | 1,945,563   |          |            |       | 438,232 |        |  | $ | 1,489,696 |        |         | $      |  |             |        | $ |              |        |  |  | 1,000,000 |   |  | $     | 4,000,000 |   |         |  | 12,931,638 |   |  | $ | 1,294 |   |  | $ | 27,637,592 |   |  | $ | (64,257,080 | )        |   | $ | (32,618,194 | )       
|                                                                                                         |                                                    |                 |  |        |            |                                                    |        |  |                       |       |  |          |           |          |          |       |         |   |          |        |           |                       |              |          |         |            |              |       |             |          |            |       |         |        |  |   |           |        |         |        |   |             |        |   |               |        |  |  |           |   |  |       |           |   |         | 






F-6



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)





Consolidated Statements of Cash Flows





|                                                                                         |                                                                                 |                                                    |            |            |              |   |                    |             |          |             |             |             |          |      |             |            |         |   |           |            |         |   |            |         |         |   |             |            |           | 
|---------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------- | -------------------------------------------------- | ---------- | ---------- | ------------ | - | ------------------ | ----------- | -------- | ----------- | ----------- | ----------- | -------- | ---- | ----------- | ---------- | ------- | - | --------- | ---------- | ------- | - | ---------- | ------- | ------- | - | ----------- | ---------- | --------- | 
|                                                                                         |                                                                                 |                                                    |            |            |              |   |                    | Period from |          |             |             |             |          |      | Period from |           
|                                                                                         |                                                                                 |                                                    |            |            |              |   |                    | October 7,  |          |             |             |             |          |      | October 7,  |           
|                                                                                         |                                                                                 |                                                    |            |            |              |   |                    | 1999        |          |             |             |             |          |      | 1999        |           
|                                                                                         |                                                                                 |                                                    |            |            |              |   |                    | (Date of    |          |             |             |             | (Date of |     
|                                                                                         |                                                                                 |                                                    |            | Inception) |              |   | Three Months Ended |             |          | Inception)  |            
|                                                                                         |                                                                                 | Years Ended December 31,                           |            |            | Through      |   |                    | March 31,   |          |             | Through     |            
|                                                                                         |                                                                                 |                                                    |            |            | December 31, |   |                    |             |          |             | March 31,   |            
|                                                                                         |                                                                                 | 2003                                               |            |            | 2004         |   |                    | 2005        |          |             | 2005        |             |          | 2005 |             |            | 2006    |   |           | 2006       |        
|                                                                                         |                                                                                 |                                                    |            |            |              |   |                    |             |          |             |             |             |          |      |             |            |         |   |           |            |        
|                                                                                         |                                                                                 |                                                    |            |            |              |   |                    |             |          |             |             | (unaudited) |         
|                                                                                         |                                                                                 |                                                    |            |            |              |   |                    |             |          | (unaudited) |             |             |         
|Operating activities                                                                     |                                                                                 |                                                    |            |            |              |   |                    |             |          |             |             |             |          |      |             |            |         |   |           |            |         |   |            |         |         |   |             |           
|Net (loss) income                                                                        |                                                                                 | $                                                  | (3,819,749 | )          |              | $ | (5,723,808         | )           |          | $           | (27,926,337 | )           |          | $    | (56,396,325 | )          |         | $ | 2,506,065 |            |         | $ | (3,344,720 | )       |         | $ | (59,741,045 | )         
|Adjustments to reconcile net (loss) income to net cash used in
    operating activities: |                                                                                 |                                                    |            |            |              |   |                    |             |          |             |             |             |          |      |             |            |         |   |           |            |         |   |            |         |         |   |            |           
|                                                                                         | Depreciation and amortization                                                   |                                                    |            | 209,032    |              |   |                    | 185,905     |          |             |             | 194,206     |          |      |             | 1,684,849  |         |   |           | 46,944     |         |   |            | 60,063  |         |   |             | 1,744,912  |          
|                                                                                         | Stock-based compensation                                                        |                                                    |            |           |              |   |                    |            |          |             |             | 207,000     |          |      |             | 209,689    |         |   |           |           |         |   |            | 25,510  |         |   |             | 235,199    |          
|                                                                                         | Warrant amortization expense                                                    |                                                    |            |           |              |   |                    | 916,647     |          |             |             | 35,870      |          |      |             | 952,517    |         |   |           | 35,870     |         |   |            | 173,909 |         |   |             | 1,126,426  |          
|                                                                                         | Amortization of debt discount                                                   |                                                    |            | 15,565     |              |   |                    | 156,688     |          |             |             | 273,327     |          |      |             | 458,548    |         |   |           |           |         |   |            |        |         |   |             | 458,548    |          
|                                                                                         | Loss on patent and trademark costs                                              |                                                    |            |           |              |   |                    |            |          |             |             |            |          |      |             | 876,811    |         |   |           |           |         |   |            |        |         |   |             | 876,811    |          
|                                                                                         | Minority interest in net loss of consolidated subsidiary                        |                                                    |            |           |              |   |                    |            |          |             |             |            |          |      |             | (2,638,446 | )       |   |           |           |         |   |            |        |         |   |             | (2,638,446 | )        
|                                                                                         | Gain on extinguishment of note                                                  |                                                    |            |           |              |   |                    |            |          |             |             | (3,834,959  | )        |      |             | (3,834,959 | )       |   |           | (3,834,959 | )       |   |            |        |         |   |             | (3,834,959 | )        
|                                                                                         | Note issued for acquisition of technology expensed to operations                |                                                    |            |           |              |   |                    |            |          |             |             | 15,000,000  |          |      |             | 15,000,000 |         |   |           |           |         |   |            |        |         |   |             | 15,000,000 |          
|                                                                                         | Preferred stock issued for acquisition of technology expensed to
    operations |                                                    |            |           |              |   |                    |            |          |             |             | 4,000,000   |          |      |             | 4,000,000  |         |   |           |           |         |   |            |        |         |   |             | 4,000,000  |          
|                                                                                         | (Loss) gain on sale of property and equipment                                   |                                                    |            | (10,871    | )            |   |                    | 2,681       |          |             |             |            |          |      |             | (8,190     | )       |   |           |           |         |   |            | 1,727   |         |   |             | (6,463     | )        
|                                                                                         | Changes in operating assets and liabilities:                                    |                                                    |            |            |              |   |                    |             |          |             |             |             |          |      |             |            |         |   |           |            |         |   |            |         |         |   |             |            |          
|                                                                                         |                                                                                 | Inventories                                        |            |            | 63,649       |   |                    |             | 8,494    |             |             |             | 36,251   |      |             |            |        |   |           |            |        |   |            |         |        |   |             |            |          | 
|                                                                                         |                                                                                 | Prepaid expenses and other                         |            |            | (14,994      | ) |                    |             | (154,367 | )           |             |             | (84,611  | )    |             |            | (55,742 | ) |           |            | 76,323  |   |            |         | 118,644 |   |             |            | 62,902    | 
|                                                                                         |                                                                                 | Receivables due from related parties and employees |            |            | 11,892       |   |                    |             |         |             |             |             |         |      |             |            |        |   |           |            |        |   |            |         |        |   |             |            |          | 
|                                                                                         |                                                                                 | Accounts payable                                   |            |            | 423,928      |   |                    |             | (245,911 | )           |             |             | 385,834  |      |             |            | 543,823 |   |           |            | 254,451 |   |            |         | 971,555 |   |             |            | 1,515,378 | 
|                                                                                         |                                                                                 | Accrued expenses and other liabilities             |            |            | 163,376      |   |                    |             | 753,930  |             |             |             | 540,548  |      |             |            | 977,462 |   |           |            | 171,917 |   |            |         | 23,051  |   |             |            | 1,000,513 | 
|                                                                                         |                                                                                 |                                                    |            |            |              |   |                    |             |          |             |             |             |          |      |             |            |         |   |           |            |        
|Net cash used in operating activities                                                    |                                                                                 |                                                    | (2,958,172 | )          |              |   | (4,099,741         | )           |          |             | (11,172,871 | )           |          |      | (38,229,963 | )          |         |   | (743,389  | )          |         |   | (1,970,261 | )       |         |   | (40,200,224 | )         
|Investing activities                                                                     |                                                                                 |                                                    |            |            |              |   |                    |             |          |             |             |             |          |      |             |            |         |   |           |            |         |   |            |         |         |   |             |           
|Purchase of property and equipment                                                       |                                                                                 |                                                    | (33,530    | )          |              |   | (64,719            | )           |          |             | (564,202    | )           |          |      | (1,371,841  | )          |         |   | (300,581  | )          |         |   | (198,333   | )       |         |   | (1,570,174  | )         
|Proceeds from sale of property and equipment                                             |                                                                                 |                                                    | 17,500     |            |              |   |                   |             |          |             |            |             |          |      | 17,500      |            |         |   |          |            |         |   |           |         |         |   | 17,500      |           
|Purchase of intangibles                                                                  |                                                                                 |                                                    |           |            |              |   |                   |             |          |             |            |             |          |      | (391,472    | )          |         |   |          |            |         |   |           |         |         |   | (391,472    | )         
|                                                                                         |                                                                                 |                                                    |            |            |              |   |                    |             |          |             |             |             |          |      |             |            |         |   |           |            |        
|Net cash used in investing activities                                                    |                                                                                 |                                                    | (16,030    | )          |              |   | (64,719            | )           |          |             | (564,202    | )           |          |      | (1,745,813  | )          |         |   | (300,581  | )          |         |   | (198,333   | )       |         |   | (1,944,146  | )         




F-7



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Consolidated Statements of Cash Flows (continued)





|                                                          |  |                          |            |            |              |   |                    |             |  |             |            |             |          |      |             |   |      |   |           |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------- |  | ------------------------ | ---------- | ---------- | ------------ | - | ------------------ | ----------- |  | ----------- | ---------- | ----------- | -------- | ---- | ----------- | - | ---- | - | --------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                          |  |                          |            |            |              |   |                    | Period from |  |             |            |             |          |      | Period from |  
|                                                          |  |                          |            |            |              |   |                    | October 7,  |  |             |            |             |          |      | October 7,  |  
|                                                          |  |                          |            |            |              |   |                    | 1999        |  |             |            |             |          |      | 1999        |  
|                                                          |  |                          |            |            |              |   |                    | (Date of    |  |             |            |             | (Date of |     
|                                                          |  |                          |            | Inception) |              |   | Three Months Ended |             |  | Inception)  |           
|                                                          |  | Years Ended December 31, |            |            | Through      |   |                    | March 31,   |  |             | Through    |            
|                                                          |  |                          |            |            | December 31, |   |                    |             |  |             | March 31,  |            
|                                                          |  | 2003                     |            |            | 2004         |   |                    | 2005        |  |             | 2005       |             |          | 2005 |             |   | 2006 |   |           | 2006 | 
|                                                          |  |                          |            |            |              |   |                    |             |  |             |            |             |          |      |             |   |      |   |           |      | 
|                                                          |  |                          |            |            |              |   |                    |             |  |             |            | (unaudited) |         
|                                                          |  |                          |            |            |              |   |                    |             |  | (unaudited) |            |             |         
|Financing activities                                      |  |                          |            |            |              |   |                    |             |  |             |            |             |          |      |             |   |      |   |           |      |  |   |            |   |  |   |            |  
|Principal payments under capital lease obligations        |  |                          | (15,131    | )          |              |   | (1,404             | )           |  |             |           |             |          |      | (165,667    | ) |      |   |          |      |  |   |           |   |  |   | (165,667   | )
|Net change in borrowings under lines of credit            |  |                          | (132,186   | )          |              |   | (52,060            | )           |  |             |           |             |          |      | (175,071    | ) |      |   |          |      |  |   |           |   |  |   | (175,071   | )
|Increase in note payable to development partner           |  |                          |           |            |              |   |                   |             |  |             |           |             |          |      | 3,610,075   |   |      |   | 53,179    |      |  |   |           |   |  |   | 3,610,075  |  
|Payment upon extinguishment of note                       |  |                          |           |            |              |   |                   |             |  |             | (500,212   | )           |          |      | (500,212    | ) |      |   | (500,212  | )    |  |   |           |   |  |   | (500,212   | )
|Minority investment in consolidated subsidiary            |  |                          |           |            |              |   |                   |             |  |             |           |             |          |      | 2,638,446   |   |      |   |          |      |  |   |           |   |  |   | 2,638,446  |  
|Proceeds from issuance of common stock                    |  |                          | 1,150      |            |              |   | 4,419,831          |             |  |             | 17,853,987 |             |          |      | 22,329,218  |   |      |   | 5,522,193 |      |  |   | 4,100      |   |  |   | 22,333,318 |  
|Proceeds from bridge notes payable                        |  |                          | 1,400,000  |            |              |   | 600,000            |             |  |             |           |             |          |      | 4,410,226   |   |      |   |          |      |  |   |           |   |  |   | 4,410,226  |  
|Issuance of promissory note for acquisition of technology |  |                          |           |            |              |   |                   |             |  |             | 4,000,000  |             |          |      | 4,000,000   |   |      |   |          |      |  |   |           |   |  |   | 4,000,000  |  
|Payment of promissory note for acquisition of technology  |  |                          |           |            |              |   |                   |             |  |             | (4,000,000 | )           |          |      | (4,000,000  | ) |      |   |          |      |  |   |           |   |  |   | (4,000,000 | )
|Issuance of warrants                                      |  |                          | 2,688      |            |              |   |                   |             |  |             | 1,358,395  |             |          |      | 1,361,083   |   |      |   | 415,200   |      |  |   |           |   |  |   | 1,361,083  |  
|Net proceeds from issuance of preferred stock             |  |                          | 350,371    |            |              |   |                   |             |  |             |           |             |          |      | 14,919,349  |   |      |   |          |      |  |   |           |   |  |   | 14,919,349 |  
|                                                          |  |                          |            |            |              |   |                    |             |  |             |            |             |          |      |             |   |      |   |           |      | 
|Net cash provided by financing activities                 |  |                          | 1,606,892  |            |              |   | 4,966,367          |             |  |             | 18,712,170 |             |          |      | 48,427,447  |   |      |   | 5,490,360 |      |  |   | 4,100      |   |  |   | 48,431,547 |  
|                                                          |  |                          |            |            |              |   |                    |             |  |             |            |             |          |      |             |   |      |   |           |      | 
|Net increase (decrease) in cash and cash equivalents      |  |                          | (1,367,310 | )          |              |   | 801,907            |             |  |             | 6,975,097  |             |          |      | 8,451,671   |   |      |   | 4,446,390 |      |  |   | (2,164,494 | ) |  |   | 6,287,177  |  
|Cash and cash equivalents at the beginning of the period  |  |                          | 2,103,693  |            |              |   | 736,383            |             |  |             | 1,538,290  |             |          |      | 61,716      |   |      |   | 1,538,290 |      |  |   | 8,513,387  |   |  |   | 61,716     |  
|                                                          |  |                          |            |            |              |   |                    |             |  |             |            |             |          |      |             |   |      |   |           |      | 
|Cash and cash equivalents at the end of the period        |  | $                        | 736,383    |            |              | $ | 1,538,290          |             |  | $           | 8,513,387  |             |          | $    | 8,513,387   |   |      | $ | 5,984,680 |      |  | $ | 6,348,893  |   |  | $ | 6,348,893  |  
|                                                          |  |                          |            |            |              |   |                    |             |  |             |            |             |          |      |             |   |      |   |           |      | 
|Supplemental schedule of cash flow information            |  |                          |            |            |              |   |                    |             |  |             |            |             |          |      |             |   |      |   |           |      |  |   |            |   |  |   |            |  
|Cash paid during the period for interest                  |  | $                        | 37,732     |            |              | $ | 16,425             |             |  | $           | 1,200      |             |          | $    | 111,911     |   |      | $ |          |      |  | $ |           |   |  | $ | 111,911    |  
|                                                          |  |                          |            |            |              |   |                    |             |  |             |            |             |          |      |             |   |      |   |           |      | 




F-8



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Consolidated Statements of Cash Flows (continued)


Supplemental Schedule of Noncash Investing and Financing
Activities:


|                                                                                                            |  |                          |         |            |              |   |                    |             |  |             |            |             |          |      |             |  |      |   |         |      |  |   |         |  |  |   |            | 
|----------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | ---------- | ------------ | - | ------------------ | ----------- |  | ----------- | ---------- | ----------- | -------- | ---- | ----------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | - | ---------- | 
|                                                                                                            |  |                          |         |            |              |   |                    | Period from |  |             |            |             |          |      | Period from | 
|                                                                                                            |  |                          |         |            |              |   |                    | October 7,  |  |             |            |             |          |      | October 7,  | 
|                                                                                                            |  |                          |         |            |              |   |                    | 1999        |  |             |            |             |          |      | 1999        | 
|                                                                                                            |  |                          |         |            |              |   |                    | (Date of    |  |             |            |             | (Date of |     
|                                                                                                            |  |                          |         | Inception) |              |   | Three Months Ended |             |  | Inception)  |           
|                                                                                                            |  | Years Ended December 31, |         |            | Through      |   |                    | March 31,   |  |             | Through    |            
|                                                                                                            |  |                          |         |            | December 31, |   |                    |             |  |             | March 31,  |            
|                                                                                                            |  | 2003                     |         |            | 2004         |   |                    | 2005        |  |             | 2005       |             |          | 2005 |             |  | 2006 |   |         | 2006 | 
|                                                                                                            |  |                          |         |            |              |   |                    |             |  |             |            |             |          |      |             |  |      |   |         |      | 
|                                                                                                            |  |                          |         |            |              |   |                    |             |  |             |            | (unaudited) |         
|                                                                                                            |  |                          |         |            |              |   |                    |             |  | (unaudited) |            |             |         
|Accretion of undeclared dividends on Series A/ D Redeemable
    Convertible Preferred Stock                 |  | $                        | 646,180 |            |              | $ | 600,472            |             |  | $           | 600,452    |             |          | $    | 2,884,297   |  |      | $ | 150,116 |      |  | $ | 150,116 |  |  | $ | 3,034,413  | 
|Accretion (reversal) of undeclared dividends on
    Series B Redeemable Convertible Preferred Stock         |  |                          | 299,441 |            |              |   | (299,441           | )           |  |             |           |             |          |      | 817,182     |  |      |   |        |      |  |   |        |  |  |   | 817,182    | 
|Declared dividends on Series B Redeemable Convertible
    Preferred Stock                                   |  |                          | 341,094 |            |              |   |                   |             |  |             |           |             |          |      | 664,440     |  |      |   |        |      |  |   |        |  |  |   | 664,440    | 
|Fair value of stock warrants issued for consulting services and
    placement agreement amendment           |  |                          |        |            |              |   | 916,647            |             |  |             |           |             |          |      | 920,161     |  |      |   |        |      |  |   | 173,909 |  |  |   | 1,094,070  | 
|Fair value of stock warrants in connection with borrowings under
    lines of credit                        |  |                          |        |            |              |   |                   |             |  |             |           |             |          |      | 16,110      |  |      |   |        |      |  |   |        |  |  |   | 16,110     | 
|Fair value of stock warrants issued for patents                                                             |  |                          |        |            |              |   |                   |             |  |             | 35,870     |             |          |      | 35,870      |  |      |   | 35,870  |      |  |   |        |  |  |   | 35,870     | 
|Fair value of stock warrants issued for bridge notes                                                        |  |                          | 70,000  |            |              |   | 65,325             |             |  |             | 273,327    |             |          |      | 408,652     |  |      |   |        |      |  |   |        |  |  |   | 408,652    | 
|Fair value of stock warrants issued in connection with private
    placement                                |  |                          |        |            |              |   |                   |             |  |             | 1,358,395  |             |          |      | 1,358,395   |  |      |   | 415,200 |      |  |   |        |  |  |   | 1,358,395  | 
|Fair value of beneficial conversion feature of stock warrants
    issued for convertible subordinated notes |  |                          |        |            |              |   | 32,961             |             |  |             |           |             |          |      | 32,961      |  |      |   |        |      |  |   |        |  |  |   | 32,961     | 
|Issuance of note in connection with subscription for preferred
    stock                                    |  |                          |        |            |              |   |                   |             |  |             |           |             |          |      | 244,834     |  |      |   |        |      |  |   |        |  |  |   | 244,834    | 
|Issuance of preferred stock upon conversion of unsecured
    convertible notes                              |  |                          |        |            |              |   |                   |             |  |             |           |             |          |      | 1,031,979   |  |      |   |        |      |  |   |        |  |  |   | 1,031,979  | 
|Issuance of common stock upon conversion of convertible
    subordinated notes                              |  |                          |        |            |              |   | 2,064,686          |             |  |             |           |             |          |      | 2,064,686   |  |      |   |        |      |  |   |        |  |  |   | 2,064,686  | 
|Assets recorded under capital lease                                                                         |  |                          |        |            |              |   |                   |             |  |             |           |             |          |      | 121,169     |  |      |   |        |      |  |   |        |  |  |   | 121,169    | 
|Note issued for acquisition of technology                                                                   |  |                          |        |            |              |   |                   |             |  |             | 15,000,000 |             |          |      | 15,000,000  |  |      |   |        |      |  |   |        |  |  |   | 15,000,000 | 
|Preferred stock issued for acquisition of technology                                                        |  |                          |        |            |              |   |                   |             |  |             | 4,000,000  |             |          |      | 4,000,000   |  |      |   |        |      |  |   |        |  |  |   | 4,000,000  | 



F-9



---



##### Table of Contents






ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements


(Information subsequent to December 31, 2005 and
pertaining to


March 31, 2006 and the three-months ended March 31,
2005 and 2006 is unaudited)




|   |                     
|-- | --------------------
|1. | Business Description







|   |                                
|-- | -------------------------------
|2. | Significant Accounting Policies



| |              
| | -------------
| | Consolidation





| |                              
| | -----------------------------
| | Interim Financial Information





| |                      
| | ---------------------
| | Basis of Presentation



F-10



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)






| |                 
| | ----------------
| | Cash Equivalents





| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |            
| | -----------
| | Inventories

first-in,




| |                       
| | ----------------------
| | Property and Equipment





| |                  
| | -----------------
| | Long-Lived Assets

Accounting for the Impairment or
Disposal of Long-Lived Assets,




| |                    
| | -------------------
| | Revenue Recognition

















F-11



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)












| |                         
| | ------------------------
| | Stock-Based Compensation

Accounting for Stock
Issued to Employees Accounting
for Stock Based Compensation





Share Based Payment









F-12



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)














|                                                    |                                |                          |   |            |                    |  |   |            |   |  |                |             |   |  |   |           | 
|--------------------------------------------------- | ------------------------------ | ------------------------ | - | ---------- | ------------------ |  | - | ---------- | - |  | -------------- | ----------- | - |  | - | --------- | 
|                                                    |                                | Years Ended December 31, |   |            |                   
|                                                    |                                |                          |   |            | Three Months Ended | 
|                                                    |                                | 2003                     |   |            | 2004               |  |   | 2005       |   |  | March 31, 2005 |            
|                                                    |                                |                          |   |            |                    |  |   |            |   |  |                |            
|Net income (loss) available to common stockholders: |                                |                          |   |            |                    |  |   |            |   |  |                |             |   |  |   |          
|                                                    | As reported                    |                          | $ | (5,106,464 | )                  |  | $ | (6,024,839 | ) |  | $              | (28,526,789 | ) |  | $ | 2,355,949 | 
|                                                    | Pro forma SFAS No. 123 expense |                          |   | 20,591     |                    |  |   | 56,504     |   |  |                | 141,781     |   |  |   | 23,692    | 
|                                                    |                                |                          |   |            |                    |  |   |            |   |  |                |            
|                                                    | Pro forma                      |                          | $ | (5,127,055 | )                  |  | $ | (6,081,343 | ) |  | $              | (28,668,570 | ) |  | $ | 2,332,257 | 
|                                                    |                                |                          |   |            |                    |  |   |            |   |  |                |            

F-13



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)





|                                                                                          |         |                          |   |       |                    |  |   |       |   |  |                |       |   |  |   |      | 
|----------------------------------------------------------------------------------------- | ------- | ------------------------ | - | ----- | ------------------ |  | - | ----- | - |  | -------------- | ----- | - |  | - | ---- | 
|                                                                                          |         | Years Ended December 31, |   |       |                   
|                                                                                          |         |                          |   |       | Three Months Ended | 
|                                                                                          |         | 2003                     |   |       | 2004               |  |   | 2005  |   |  | March 31, 2005 |      
|                                                                                          |         |                          |   |       |                    |  |   |       |   |  |                |      
|Net income (loss) available to common stockholders per
    sharebasic and diluted:       |         |                          |   |       |                    |  |   |       |   |  |                |       |   |  |   |     
|As reported                                                                               |         |                          |   |       |                    |  |   |       |   |  |                |       |   |  |   |     
|                                                                                          | Basic   |                          | $ | (1.74 | )                  |  | $ | (1.07 | ) |  | $              | (3.01 | ) |  | $ | 0.30 | 
|                                                                                          | Diluted |                          | $ | (1.74 | )                  |  | $ | (1.07 | ) |  | $              | (3.01 | ) |  | $ | 0.18 | 
|                                                                                          |         |                          |   |       |                    |  |   |       |   |  |                |      
|Pro forma income (loss) available to common stockholders per
    sharebasic and diluted: |         |                          |   |       |                    |  |   |       |   |  |                |       |   |  |   |     
|                                                                                          | Basic   |                          | $ | (1.75 | )                  |  | $ | (1.08 | ) |  | $              | (3.03 | ) |  | $ | 0.30 | 
|                                                                                          | Diluted |                          | $ | (1.75 | )                  |  | $ | (1.08 | ) |  | $              | (3.03 | ) |  | $ | 0.18 | 
|                                                                                          |         |                          |   |       |                    |  |   |       |   |  |                |      






| |                                  
| | ---------------------------------
| | Research and Development Expenses





| |             
| | ------------
| | Income Taxes

Accounting for Income
Taxes




| |                 
| | ----------------
| | Use of Estimates





| |                                                   
| | --------------------------------------------------
| | Concentration of Credit Risk and Limited Suppliers







| |                                                                 
| | ----------------------------------------------------------------
| | Net (Loss) Income Available to Common Stockholders per
    Share



F-14



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)




|                                                                                          |                             |                    |            |           | 
|----------------------------------------------------------------------------------------- | --------------------------- | ------------------ | ---------- | --------- | 
|                                                                                          |                             | Three Months Ended |           
|                                                                                          |                             | March 31, 2005     |           
|                                                                                          |                             |                    |           
|Weighted-average common shares outstanding used to compute basic
    net income per share |                             |                    | 7,769,415  |          
|Add dilutive common equivalents:                                                          |                             |                    |            |          
|                                                                                          | Stock options               |                    |            | 892,308   | 
|                                                                                          | Convertible preferred stock |                    |            | 4,330,301 | 
|                                                                                          | Warrants                    |                    |            | 154,107   | 
|                                                                                          |                             |                    |           
|Shares used to compute diluted net income per share                                       |                             |                    | 13,146,131 |          
|                                                                                          |                             |                    |           






|                            |  |              |           |  |                    |  |           |      |  |  |                |  |  |  |           | 
|--------------------------- |  | ------------ | --------- |  | ------------------ |  | --------- | ---- |  |  | -------------- |  |  |  | --------- | 
|                            |  | December 31, |           |  |                   
|                            |  |              |           |  | Three Months Ended | 
|                            |  | 2003         |           |  | 2004               |  |           | 2005 |  |  | March 31, 2006 | 
|                            |  |              |           |  |                    |  |           |      |  |  |                | 
|Convertible preferred stock |  |              | 4,330,301 |  |                    |  | 4,330,301 |      |  |  | 5,330,301      |  |  |  | 5,330,301 | 
|Stock options               |  |              | 1,077,250 |  |                    |  | 1,967,761 |      |  |  | 2,695,724      |  |  |  | 2,579,024 | 
|Warrants                    |  |              | 163,071   |  |                    |  | 973,071   |      |  |  | 1,686,749      |  |  |  | 1,761,749 | 
|Convertible notes payable   |  |              | 1,024,721 |  |                    |  | 329,384   |      |  |  |               |  |  |  |          | 









| |                                          
| | -----------------------------------------
| | Recently Issued Accounting Pronouncements







Exchanges of
Nonmonetary Assets Accounting for Nonmonetary Transactions








Accounting Changes and Error Corrections A Replacement
of APB Opinion No. 20 and FASB Statement No. 3





115-1), The
Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments


F-15



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)






|   |                   
|-- | ------------------
|3. | Balance Sheet Data

Property and Equipment




|                                      |  |                 |           |  |              |   |           |      |  |   |           | 
|------------------------------------- |  | --------------- | --------- |  | ------------ | - | --------- | ---- |  | - | --------- | 
|                                      |  | At December 31, |           |  |             
|                                      |  |                 |           |  | At March 31, |  
|                                      |  | 2004            |           |  | 2005         |   |           | 2006 | 
|                                      |  |                 |           |  |              |   |           |      | 
|Leasehold improvements                |  | $               | 567,896   |  |              | $ | 622,663   |      |  | $ | 622,663   | 
|Laboratory machinery and equipment    |  |                 | 862,677   |  |              |   | 937,697   |      |  |   | 1,356,868 | 
|Computer and communications equipment |  |                 | 243,695   |  |              |   | 347,856   |      |  |   | 348,364   | 
|Office furniture and equipment        |  |                 | 152,463   |  |              |   | 184,377   |      |  |   | 214,704   | 
|Construction in progress              |  |                 |          |  |              |   | 292,229   |      |  |   | 32,850    | 
|                                      |  |                 |           |  |              |   |           |      | 
|                                      |  |                 | 1,826,731 |  |              |   | 2,384,822 |      |  |   | 2,575,449 | 
|Less accumulated depreciation         |  |                 | 1,466,766 |  |              |   | 1,654,861 |      |  |   | 1,708,945 | 
|                                      |  |                 |           |  |              |   |           |      | 
|                                      |  | $               | 359,965   |  |              | $ | 729,961   |      |  | $ | 866,504   | 
|                                      |  |                 |           |  |              |   |           |      | 

Accrued Expenses




|                                       |  |                 |         |  |              |   |         |      |  |   |         | 
|-------------------------------------- |  | --------------- | ------- |  | ------------ | - | ------- | ---- |  | - | ------- | 
|                                       |  | At December 31, |         |  |             
|                                       |  |                 |         |  | At March 31, |  
|                                       |  | 2004            |         |  | 2005         |   |         | 2006 | 
|                                       |  |                 |         |  |              |   |         |      | 
|Accrued salaries and vacation benefits |  | $               | 199,153 |  |              | $ | 118,940 |      |  | $ | 194,488 | 
|Accrued contract services              |  |                 | 434,176 |  |              |   | 574,024 |      |  |   | 159,463 | 
|Other accrued expenses                 |  |                 |        |  |              |   | 200,234 |      |  |   | 337,298 | 
|                                       |  |                 |         |  |              |   |         |      | 
|                                       |  | $               | 633,329 |  |              | $ | 893,198 |      |  | $ | 691,249 | 
|                                       |  |                 |         |  |              |   |         |      | 



|   |             
|-- | ------------
|4. | Income Taxes



|                                                  |  |                          |            |   |      |   |            |      |  |   |            |  
|------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | ---- |  | - | ---------- | -
|                                                  |  | Years Ended December 31, |           
|                                                  |  |                          |           
|                                                  |  | 2003                     |            |   | 2004 |   |            | 2005 | 
|                                                  |  |                          |            |   |      |   |            |      | 
|Tax benefit at statutory rate                     |  | $                        | (1,299,000 | ) |      | $ | (1,946,000 | )    |  | $ | (9,245,000 | )
|State taxes (net of federal benefit)              |  |                          | (223,000   | ) |      |   | (385,000   | )    |  |   | (1,328,000 | )
|Foreign rates lower than U.S. statutory rates     |  |                          | 454,000    |   |      |   | 61,000     |      |  |   |           |  
|Net benefit from research and development credits |  |                          | (77,000    | ) |      |   | (91,000    | )    |  |   | (129,000   | )
|Other                                             |  |                          | 14,000     |   |      |   | 11,000     |      |  |   | 393,000    |  
|Valuation allowance                               |  |                          | 1,131,000  |   |      |   | 2,350,000  |      |  |   | 10,309,000 |  
|                                                  |  |                          |            |   |      |   |            |      | 
|Tax benefit at statutory rate                     |  | $                        |           |   |      | $ |           |      |  | $ |           |  
|                                                  |  |                          |            |   |      |   |            |      | 

F-16



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)




|                                |                                  |                 |            |           |      |   |             |           | 
|------------------------------- | -------------------------------- | --------------- | ---------- | --------- | ---- | - | ----------- | --------- | 
|                                |                                  | At December 31, |           
|                                |                                  |                 |           
|                                |                                  | 2004            |            |           | 2005 |  
|                                |                                  |                 |            |           |      |  
|Current deferred tax assets:    |                                  |                 |            |           |      |   |             |          
|                                | Reserves and accrued liabilities |                 | $          | 93,000    |      |   | $           | 26,000    | 
|                                | Other                            |                 |            |          |      |   |             | 3,000     | 
|                                |                                  |                 |            |           |      |  
|                                |                                  |                 | 93,000     |           |      |   | 29,000      |          
|Noncurrent deferred tax assets: |                                  |                 |            |           |      |   |             |          
|                                | Property and equipment           |                 |            | 144,000   |      |   |             | 165,000   | 
|                                | Intangibles                      |                 |            | 992,000   |      |   |             | 9,805,000 | 
|                                | Research and development credits |                 |            | 1,089,000 |      |   |             | 1,507,000 | 
|                                | Net operating loss carryforward  |                 |            | 4,744,000 |      |   |             | 5,865,000 | 
|                                |                                  |                 |            |           |      |  
|                                |                                  |                 | 6,969,000  |           |      |   | 17,342,000  |          
|                                |                                  |                 |            |           |      |  
|Total deferred tax assets       |                                  |                 | 7,062,000  |           |      |   | 17,371,000  |          
|Valuation allowance             |                                  |                 | (7,062,000 | )         |      |   | (17,371,000 | )        
|                                |                                  |                 |            |           |      |  
|Net deferred tax assets         |                                  | $               |           |           |      | $ |            |          
|                                |                                  |                 |            |           |      |  





5.     Investment in ImaRx Oncology,
Ltd.




F-17



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)








|   |                           
|-- | --------------------------
|6. | Related Party Transactions





|   |                         
|-- | ------------------------
|7. | Short-term Notes Payable



| |                               
| | ------------------------------
| | Convertible Subordinated Notes





| |                                 
| | --------------------------------
| | Secured Promissory Notes Payable





| |                                        
| | ---------------------------------------
| | Note Payable for Technology Acquisition





|   |                        
|-- | -----------------------
|8. | Long-term Notes Payable



| |                                    
| | -----------------------------------
| | Note Payable to Development Partner



F-18



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)












|   |                    
|-- | -------------------
|9. | Equity Transactions



| |                               
| | ------------------------------
| | Series A and D Preferred Stock











| |                         
| | ------------------------
| | Series B Preferred Stock



F-19



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)










| |                         
| | ------------------------
| | Series C Preferred Stock









| |                         
| | ------------------------
| | Series E Preferred Stock











F-20



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)






Common Stock






















F-21



---



##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)


Warrants to Purchase Common and
Preferred Stock














F-22



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)

















Warrants Issued








|               |  |             |           |                  |                |  |      |             |  |  |           | 
|-------------- |  | ----------- | --------- | ---------------- | -------------- |  | ---- | ----------- |  |  | --------- | 
|               |  |             |           | Weighted Average |                |  |     
|               |  | Warrants    |           |                  | Remaining Life |  |      | Warrants    | 
|Exercise Price |  | Outstanding |           |                  | in Years       |  |      | Exercisable | 
|               |  |             |           |                  |                |  |      |             | 
|$2.00          |  |             | 443,938   |                  |                |  | 3.48 |             |  |  | 443,938   | 
|$2.75          |  |             | 11,407    |                  |                |  | 4.79 |             |  |  | 11,407    | 
|$3.00          |  |             | 520,000   |                  |                |  | 3.02 |             |  |  | 520,000   | 
|$3.30          |  |             | 233,333   |                  |                |  | 3.92 |             |  |  | 233,333   | 
|$4.00          |  |             | 175,000   |                  |                |  | 8.36 |             |  |  | 175,000   | 
|$4.25          |  |             | 375,000   |                  |                |  | 6.61 |             |  |  | 375,000   | 
|$7.00          |  |             | 3,071     |                  |                |  | 4.93 |             |  |  | 3,071     | 
|               |  |             |           |                  |                |  |      |             | 
|               |  |             | 1,761,749 |                  |                |  | 5.02 |             |  |  | 1,761,749 | 
|               |  |             |           |                  |                |  |      |             | 




F-23



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)




|    |              
|--- | -------------
|10. | Stock Options






|                                                  |  |         |           |                |           |           |           |                |  |   |      | 
|------------------------------------------------- |  | ------- | --------- | -------------- | --------- | --------- | --------- | -------------- |  | - | ---- | 
|                                                  |  |         |           |                |           | Weighted- |          
|                                                  |  |         |           | Exercise Price |           |           | Average   |               
|                                                  |  | Options |           |                | Per Share |           |           | Exercise Price | 
|                                                  |  |         |           |                |           |           |           |                | 
|Balance at January 1, 2003                        |  |         | 834,700   |                |           | $         | 0.50      |                |  | $ | 0.50 | 
|Granted                                           |  |         | 273,000   |                |           |           | 0.50      |                |  |   | 0.50 | 
|Exercised                                         |  |         | (2,300    | )              |           |           | 0.50      |                |  |   | 0.50 | 
|Canceled                                          |  |         | (28,150   | )              |           |           | 0.50      |                |  |   | 0.50 | 
|                                                  |  |         |           |                |           |           |           |                | 
|Balance at December 31, 2003                      |  |         | 1,077,250 |                |           |           | 0.50      |                |  |   | 0.50 | 
|Granted                                           |  |         | 1,151,041 |                |           |           | 2.00-3.00 |                |  |   | 2.73 | 
|Exercised                                         |  |         | (26,330   | )              |           |           | 0.50      |                |  |   | 0.50 | 
|Canceled                                          |  |         | (234,200  | )              |           |           | 0.50      |                |  |   | 0.50 | 
|                                                  |  |         |           |                |           |           |           |                | 
|Balance at December 31, 2004                      |  |         | 1,967,761 |                |           |           | 0.50-3.00 |                |  |   | 1.83 | 
|Granted                                           |  |         | 1,229,899 |                |           |           | 3.00-4.00 |                |  |   | 3.35 | 
|Exercised                                         |  |         | (317,270  | )              |           |           | 0.50-3.00 |                |  |   | 0.95 | 
|Canceled                                          |  |         | (184,666  | )              |           |           | 0.50-3.00 |                |  |   | 2,48 | 
|                                                  |  |         |           |                |           |           |           |                | 
|Balance at December 31, 2005                      |  |         | 2,695,724 |                |           | $         | 0.50-4.00 |                |  | $ | 2.56 | 
|Granted                                           |  |         | 172,500   |                |           |           | 4.00      |                |  |   | 4.00 | 
|Exercised                                         |  |         | (8,200    | )              |           |           | 0.50      |                |  |   | 0.50 | 
|Canceled                                          |  |         | (281,000  | )              |           |           | 0.50-4.00 |                |  |   | 3.09 | 
|                                                  |  |         |           |                |           |           |           |                | 
|Balance at March 31, 2006 (unaudited)             |  |         | 2,579,024 |                |           | $         | 0.50-4.00 |                |  | $ | 2.66 | 
|                                                  |  |         |           |                |           |           |           |                | 
|Available for grant at March 31, 2006 (unaudited) |  |         | 1,958,376 |                |           |           |           |                |  |   |      | 
|                                                  |  |         |           |                |           |           |           |                | 















|                        |  |                 |           |  |                |                      |      |          |  |   |      | 
|----------------------- |  | --------------- | --------- |  | -------------- | -------------------- | ---- | -------- |  | - | ---- | 
|                        |  |                 |           |  |                | Fair Value of        |     
|                        |  |                 |           |  |                | Common Stock on Date |     
|2005 Grants             |  | Options Granted |           |  | Exercise Price |                      |      | of Grant | 
|                        |  |                 |           |  |                |                      |      |          | 
|April                   |  |                 | 355,000   |  |                | $                    | 3.00 |          |  | $ | 3.00 | 
|July                    |  |                 | 275,000   |  |                |                      | 3.00 |          |  |   | 3.00 | 
|August                  |  |                 | 170,000   |  |                |                      | 3.00 |          |  |   | 3.00 | 
|September               |  |                 | 20,000    |  |                |                      | 4.00 |          |  |   | 4.00 | 
|October                 |  |                 | 35,000    |  |                |                      | 4.00 |          |  |   | 4.00 | 
|November                |  |                 | 159,900   |  |                |                      | 4.00 |          |  |   | 4.00 | 
|December                |  |                 | 214,999   |  |                |                      | 4.00 |          |  |   | 4.00 | 
|                        |  |                 |           |  |                |                      |      |          | 
|2005 Subtotal           |  |                 | 1,229,899 |  |                |                      |      |          |  |   |      | 
|                        |  |                 |           |  |                |                      |      |          | 
|2006 Grants (unaudited) |  |                 |           |  |                |                      |      |          |  |   |      | 
|                        |  |                 |           |  |                |                      |      |          | 
|February                |  |                 | 160,000   |  |                |                      | 4.00 |          |  |   | 4.00 | 
|March                   |  |                 | 12,500    |  |                |                      | 4.00 |          |  |   | 4.00 | 
|                        |  |                 |           |  |                |                      |      |          | 
|2006 Subtotal           |  |                 | 172,500   |  |                |                      |      |          |  |   |      | 




F-24



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)










|                |           |             |           |                  |              |  |      |         |  |  |         |         | 
|--------------- | --------- | ----------- | --------- | ---------------- | ------------ |  | ---- | ------- |  |  | ------- | ------- | 
|                |           |             |           | Weighted Average |              |  |     
|Range of        |           | Options     |           |                  | Remaining    |  |      | Options | 
|Exercise Prices |           | Outstanding |           |                  | Life (Years) |  |      | Vested  | 
|                |           |             |           |                  |              |  |      |         | 
|$0.00-0.50      |           |             | 533,625   |                  |              |  | 5.53 |         |  |  | 479,975 |        
|                | 0.51-2.00 |             |           | 250,000          |              |  |      | 8.00    |  |  |         | 250,000 | 
|                | 2.99-3.00 |             |           | 1,220,000        |              |  |      | 8.72    |  |  |         | 236,250 | 
|                | 3.99-4.00 |             |           | 575,399          |              |  |      | 9.70    |  |  |         | 12,500  | 
|                |           |             |           |                  |              |  |      |         | 
|Total           |           |             | 2,579,024 |                  |              |  | 8.24 |         |  |  | 978,725 |        
|                |           |             |           |                  |              |  |      |         | 






















|    |                
|--- | ---------------
|11. | Lines of Credit








|    |             
|--- | ------------
|12. | Benefit Plan



F-25



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)




|    |                       
|--- | ----------------------
|13. | Technology Acquisition






Determining
Whether a Nonmonetary Transaction Involves Receipt of Productive
Assets or of a Business.







|    |                              
|--- | -----------------------------
|14. | Commitments and Contingencies



| |                  
| | -----------------
| | Lease Commitments



15.                 Licensing
Agreements




| |                                          
| | -----------------------------------------
| | License Agreement with UNEMED Corporation





| |                                                 
| | ------------------------------------------------
| | License Agreement with Dr. med. Reinhard Schlief



F-26



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)




| |                                              
| | ---------------------------------------------
| | License Agreement with University of Arkansas





|    |                              
|--- | -----------------------------
|16. | Subsequent Events (unaudited)



| |                                                                
| | ---------------------------------------------------------------
| | Issuance of Series F Mandatorily Redeemable Preferred
    Stock





| |                                     
| | ------------------------------------
| | Acquisition from Abbott Laboratories

Determining Whether a
Nonmonetary Transaction Involves Receipt of Productive Assets or
of a Business




F-27



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##### Table of Contents



ImaRx Therapeutics, Inc.


(A Development Stage Company)


Notes to Consolidated Financial Statements (continued)




F-28



---



##### Table of Contents



Shares


Common Stock








PROSPECTUS
















Through and
including                     ,
2006 (25 days after the date of this prospectus), all
dealers that buy, sell or trade our common stock, whether or not
participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers obligation
to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.






---



##### Table of Contents



PART II


INFORMATION NOT REQUIRED IN PROSPECTUS




|         |                                            
|-------- | -------------------------------------------
|Item 13. | Other Expenses of Issuance and Distribution



|                                               |  |   |         | 
|---------------------------------------------- |  | - | ------- | 
|SEC registration fee                           |  | $ | 8,025   | 
|NASD filing fee                                |  |   | 8,000   | 
|Nasdaq National Market initial listing fee     |  |   | 100,000 | 
|Blue sky qualification fees and expenses       |  |   | *       | 
|Printing and engraving expenses                |  |   | *       | 
|Legal fees and expenses                        |  |   | *       | 
|Accounting fees and expenses                   |  |   | *       | 
|Transfer agent and registrar fees and expenses |  |   | *       | 
|Miscellaneous                                  |  |   | *       | 
|                                               |  |   |        
|Total                                          |  | $ | *       | 






|  |                             
|- | ----------------------------
|* | To be provided by amendment.



|         |                                          
|-------- | -----------------------------------------
|Item 14. | Indemnification of Officers and Directors







II-1



---



##### Table of Contents


















|                                                                                                                  |  |        |      | 
|----------------------------------------------------------------------------------------------------------------- |  | ------ | ---- | 
|Exhibit Document                                                                                                  |  | Number |     
|                                                                                                                  |  |        |     
|Form of Underwriting Agreement*                                                                                   |  |        | 1.1  | 
|Registrants Amended and Restated Certificate of
    Incorporation, to be effective upon closing of this offering |  |        | 3.3  | 
|Form of Indemnification Agreement                                                                                 |  |        | 10.1 | 
|Second Amended and Restated Investors Rights Agreement,
    dated April 14, 2006                                |  |        | 10.2 | 







|  |                         
|- | ------------------------
|* | To be filed by amendment






|  |                 
|- | ----------------
| | Previously filed






|         |                                        
|-------- | ---------------------------------------
|Item 15. | Recent Sales of Unregistered Securities





|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | We sold an aggregate of 456,100 shares of our common stock
    to certain of our employees, directors and consultants for cash
    consideration in the aggregate amount of $365,550 upon the
    exercise of stock options granted under our 2000 Stock Plan,
    none of which have been repurchased by us.                                                                                                                                                                                                                                                                                                               
|  
|  
|2. | We granted stock options to certain employees, directors and
    consultants under our 2000 Stock Plan covering an aggregate of
    3,296,440 shares of common stock, at exercise prices
    ranging from $0.50 to $5.00 per share. Of these, options
    covering an aggregate of 753,016 shares were canceled
    without being exercised.                                                                                                                                                                                                                                                                                
|  
|  
|3. | In January 2003, we sold 128,000 shares of Series D
    preferred stock to accredited investors at a price of
    $2.75 per share. This securities issuance was a follow-on
    closing to an offering of Series D preferred stock that
    took place in October 2002 and was conducted on the same terms
    as the October 2002 offering. No underwriters were involved in
    these sales of securities.                                                                                                                                                                                                                
|  
|4. | Between June 2003 and January 2004, we sold 7% unsecured
    convertible promissory notes in the aggregate principal amount
    of $2,000,000 and warrants to purchase up to an aggregate of
    206,469 shares of common stock, with an exercise price of
    $2.75 per share to accredited investors. The principal
    amount of the promissory notes plus accrued interest was
    automatically converted into 1,032,343 shares of our common
    stock in connection with our March 2004 private placement at a
    conversion price of $2.00 per share. No underwriters were
    involved in this sale of securities.

II-2



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##### Table of Contents





|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | In October 2003, in connection with the grant of a sublicense,
    we issued a warrant to UNEMED Corporation, an accredited
    investor, to purchase up to an aggregate of 5,000 shares of
    our common stock at an exercise price of $2.00 per share.                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|6. | In March 2004, we issued a warrant to each of Bridge Ventures,
    Inc. and Saggi Capital Corp., each of which is an accredited
    investor, as partial consideration for annual consulting
    services. Each warrant is for the purchase of
    250,000 shares of our common stock at an exercise price of
    $3.00 per share.                                                                                                                                                                                                                                                                                                                                       
|  
|7. | In March 2004, we sold 2,500,000 shares of our common stock
    to accredited investors at a purchase price of $2.00 per
    share pursuant to a private placement in which First Montauk
    Securities Corp. served as our exclusive placement agent.                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|8. | In October 2004, we issued a warrant to First Montauk Securities
    Corp. and certain executive officers of First Montauk Securities
    Corp., each of whom is an accredited investor, to purchase up to
    an aggregate of 250,000 shares of common stock at an
    exercise price of $2.00 per share.                                                                                                                                                                                                                                                                                                                                                               
|  
|  
|9. | Between October 2004 and February 2005, we sold an aggregate of
    2,333,331 shares of common stock to accredited investors at
    a purchase price of $3.00 per share pursuant to a private
    placement in which First Montauk Securities Corp. served as our
    exclusive placement agent. In connection with this offering and
    as partial consideration for entering into the placement agency
    agreement, First Montauk Securities Corp. and certain executive
    officers of First Montauk Securities Corp. also received
    warrants to purchase up to an aggregate of 233,333 shares
    of our common stock at an exercise price of $3.30 per share.
|  



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10. | In January 2005, as partial consideration for a patent license,
    we granted Dr. med. Reinhard Schlief a warrant to purchase
    up to an aggregate of 20,000 shares of common stock at an
    exercise price of $3.00 per share.                                                                                                                                                                                                                                                                                                                                        
|   
|   
|11. | In September 2005, we sold 1,000,000 shares of
    Series E preferred stock, valued at $4.0 million, to
    Abbott Laboratories, an accredited investor, as partial
    consideration for our acquisition of certain technologies from
    Abbott Laboratories pursuant to an Asset Purchase Agreement
    dated September 30, 2005. In connection with this Asset
    Purchase Agreement, we also issued Abbott Laboratories a
    secured 6% of promissory note in the principal amount of
    $15,000,000. No underwriters were involved in this sale of
    securities.
|   
|   
|12. | In September 2005, we issued secured 6% promissory notes in the
    aggregate principal amount of $4,000,000 and warrants for the
    purchase of an aggregate of 100,000 shares of our common
    stock at an exercise price of $4.00 per share to accredited
    investors. No underwriters were involved in this sale of
    securities. The secured promissory notes issued in this offering
    were repaid in full in October 2005 with proceeds from the
    private placement offering described below.                                                            
|   
|13. | In October 2005 and November 2005, we sold an aggregate of
    3,750,000 shares of our common stock to accredited
    investors at a purchase price of $4.00 per share in a
    private placement in which First Montauk Securities Corp. served
    as our exclusive placement agent. In connection with its
    placement agency agreement, First Montauk Securities Corp. and
    certain executive officers of First Montauk Securities Corp.
    received warrants to purchase up to 375,000 shares of our
    common stock at an exercise price of $4.25 per share.  
|   
|14. | In April 2006 and May 2006, we sold an aggregate of
    2,835,000 shares of Series F preferred stock to
    accredited investors at a price of $5.00 per share pursuant
    to a private placement in which First Albany Capital, First
    Montauk Securities Corp. and Maxim Group LLC served as our
    placement agents.                                                                                                                                                                                                                                               
|   
|15. | In April 2006, we issued Abbott Laboratories a secured 6%
    promissory note in the principal amount of $15,000,000 in
    partial consideration for assets we acquired. No underwriters
    were involved in this sale of securities.                                                                                                                                                                                                                                                                                                                                    

II-3



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##### Table of Contents













|         |                                           
|-------- | ------------------------------------------
|Item 16. | Exhibits and Financial Statement Schedules






|        |    |                         |  |                                                                                                                                            
|------- | -- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 1  | .1*                     |  | Form of Underwriting Agreement                                                                                                             
|        | 3  | .1                     |  | Fourth Amended and Restated Certificate of Incorporation of the
    registrant                                                             
|        | 3  | .2*                     |  | Amendment to Certificate of Incorporation of the registrant to
    effect
    a      for      reverse
    stock split                      
|        | 3  | .3                      |  | Form of Amended and Restated Certificate of Incorporation of the
    registrant, to be effective following this offering                   
|        | 3  | .4                     |  | Bylaws of the registrant, as amended                                                                                                       
|        | 3  | .5                     |  | Form of Amended and Restated Bylaws of the registrant, to be
    effective following this offering                                         
|        | 4  | .1*                     |  | Specimen certificate evidencing shares of common stock                                                                                     
|        | 5  | .1*                     |  | Opinion of DLA Piper Rudnick Gray Cary US LLP                                                                                              
|        | 10 | .1                      |  | Form of Indemnification Agreement to be entered into between the
    registrant and each of its directors and officers                     
|        | 10 | .2                     |  | Second Amended and Restated Investors Rights Agreement,
    dated April 14, 2006, by and among the registrant and
    certain stockholders
|        | 10 | .3                     |  | 2000 Stock Plan and related agreements                                                                                                     
|        | 10 | .4                      |  | 2006 Performance Incentive Plan and related agreements                                                                                     
|        | 10 | .5*                     |  | Executive Management Bonus Plan                                                                                                            
|        | 10 | .6**                    |  | Asset Purchase Agreement, dated September 30, 2005, between
    the registrant and Abbott Laboratories                                     
|        | 10 | .7                     |  | Security Agreement, dated September 30, 2005, between the
    registrant and Abbott Laboratories                                           
|        | 10 | .8                     |  | Patent License Agreement, dated September 30, 2005, between
    the registrant and Abbott Laboratories                                     
|        | 10 | .9                     |  | Secured Promissory Note, dated September 30, 2005, between
    the registrant and Abbott Laboratories                                      
|        | 10 | .10                    |  | Services Agreement, dated September 30, 2005, between the
    registrant and Abbott Laboratories                                           
|        | 10 | .11                     |  | License Agreement, dated January 4, 2005, between the
    registrant and Dr. med. Reinhard Schlief                                         
|        | 10 | .12                    |  | Exclusive Sublicense Agreement, dated October 10, 2003,
    between the registrant and UNEMED Corporation                                  




II-4



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##### Table of Contents






|        |    |                         |  |                                                                                                                                                                                                                                                     
|------- | -- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 10 | .13                    |  | Assignment, Assumption and License Agreement, dated
    October 7, 1999, between the registrant and Bristol-Myers
    Squibb Medical Imaging, Inc. (as successor to DuPont Contrast
    Imaging, Inc.) dated October 7, 1999, and amendments thereto
|        | 10 | .14                    |  | License Agreement, dated February 10, 2006, between the
    registrant and the University of Arkansas for Medical Sciences                                                                                                                          
|        | 10 | .15                     |  | Asset Purchase Agreement, dated April 10, 2006, between the
    registrant and Abbott Laboratories, and amendments thereto                                                                                                                          
|        | 10 | .16                    |  | Escrow Agreement, dated April 14, 2006, between the
    registrant and Abbott Laboratories                                                                                                                                                          
|        | 10 | .17                    |  | Inventory Trademark License Agreement, dated April 14,
    2006, between the registrant and Abbott Laboratories                                                                                                                                     
|        | 10 | .18                    |  | Security Agreement, dated April 14, 2006, between the
    registrant and Abbott Laboratories                                                                                                                                                        
|        | 10 | .19                    |  | Secured Promissory Note, dated April 14, 2006, between the
    registrant and Abbott Laboratories                                                                                                                                                   
|        | 10 | .20                    |  | Second Amended Executive Employment Agreement, dated
    May 15, 2006, between the registrant and Evan C. Unger                                                                                                                                     
|        | 10 | .21                    |  | Consulting Agreement, dated April 11, 2005, between the
    registrant and Greg Cobb                                                                                                                                                                
|        | 10 | .22                     |  | Executive Employment Agreement, dated April 27, 2005,
    between the registrant and Greg Cobb                                                                                                                                                      
|        | 10 | .23                     |  | Executive Employment Agreement, dated April 18, 2005,
    between the registrant and Randall Miller                                                                                                                                                 
|        | 10 | .24                     |  | Executive Employment Agreement, dated February 18, 2004,
    between the registrant and John A. Moore                                                                                                                                               
|        | 10 | .25                    |  | Agreement, dated March 31, 2006, by and among the
    registrant, John A. Moore and Edson Moore Healthcare Ventures                                                                                                                                 
|        | 10 | .26                    |  | Subscription Agreement and Investor Questionnaire, dated March
    2004, between the registrant and each of the signatory
    investors, offering price $2.00 per share                                                                             
|        | 10 | .27                    |  | Subscription Agreement and Investor Questionnaire, dated
    December 2004, between the registrant and each of the signatory
    investors, offering price $3.00 per share                                                                          
|        | 10 | .28                    |  | Subscription Agreement and Investor Questionnaire, dated
    September and October 2004, between the registrant and each of
    the signatory investors, offering price $4.00 per share                                                             
|        | 10 | .29                     |  | Commercial Lease Triple Net, dated November 1, 2002,
    between the registrant and ImaRx Investments L.L.C.                                                                                                                                       
|        | 10 | .30                     |  | Standard Commercial Industrial Lease, dated
    December 30, 1997, between the registrant and Tucson Tech
    Park and addenda thereto                                                                                                             
|        | 21 | .1                     |  | Subsidiaries of the registrant                                                                                                                                                                                                                      
|        | 23 | .1                      |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                        
|        | 23 | .2*                     |  | Consent of DLA Piper Rudnick Gray Cary US LLP (included in
    Exhibit 5.1)                                                                                                                                                                         
|        | 24 | .1                     |  | Power of Attorney                                                                                                                                                                                                                                   









|  |                         
|- | ------------------------
|* | To be filed by amendment



|   |                                 
|-- | --------------------------------
|  
|  | Previously filed                
|  
|  
|  
|** | Confidential treatment requested
|  





|         |             
|-------- | ------------
|Item 17. | Undertakings





II-5



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##### Table of Contents









bona fide








| |                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (i) Any preliminary prospectus or prospectus of the
    undersigned registrant relating to the offering required to be
    filed pursuant to Rule 424;                                                                                    
|
| | (ii) Any free writing prospectus relating to the offering
    prepared by or on behalf of the undersigned registrant or used
    or referred to by the undersigned registrant;                                                            
|
| | (iii) The portion of any other free writing prospectus
    relating to the offering containing material information about
    the undersigned registrant or its securities provided by or on
    behalf of the undersigned registrant; and
|
| | (iv) Any other communication that is an offer in the
    offering made by the undersigned registrant to the purchaser.                                                                                                                    

II-6



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##### Table of Contents



SIGNATURES












| |                         
| | ------------------------
| | IMARX THERAPEUTICS, INC.



| |     |                            
| | --- | ---------------------------
| | By: | /s/ Evan C.
    Unger, M.D.

| |                                      
| | -------------------------------------
| |                                      
| | Evan C. Unger, M.D.                  
|
| | President and Chief Executive Officer
|












|                                                |  |                                                                              |  |               |  | 
|----------------------------------------------- |  | ---------------------------------------------------------------------------- |  | ------------- |  | 
|Signature                                       |  | Title                                                                        |  | Date         
|                                                |  |                                                                              |  |              
|                                               
|/s/ Evan C.
    Unger, M.D.Evan C. Unger, M.D.  |  | President, Chief Executive Officer and Director(principal executive officer) |  | June 28, 2006
|                                               
|/s/ Greg CobbGreg Cobb                          |  | Chief Financial Officer(principal financial and accounting officer)          |  | June 28, 2006
|                                               
|/s/ Richard Love*Richard Love                   |  | Director                                                                     |  | June 28, 2006
|                                               
|/s/ Richard Otto*Richard Otto                   |  | Director                                                                     |  | June 28, 2006
|                                               
|/s/ Thomas W. Pew*Thomas W. Pew                 |  | Director                                                                     |  | June 28, 2006
|                                               
|/s/ Philip Ranker*Philip Ranker                 |  | Director                                                                     |  | June 28, 2006
|                                               
|/s/ James M.
    Strickland*James M. Strickland |  | Director                                                                     |  | June 28, 2006
|                                               
|*By:                                            |  | /s/ Greg CobbGreg
    Cobb
    Attorney-in-Fact                              |  |               |  | 




II-7



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##### Table of Contents



EXHIBIT INDEX





|        |    |                         |  |                                                                                                                                                                                                                                                     
|------- | -- | ----------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 1  | .1*                     |  | Form of Underwriting Agreement                                                                                                                                                                                                                      
|        | 3  | .1                     |  | Fourth Amended and Restated Certificate of Incorporation of the
    registrant                                                                                                                                                                      
|        | 3  | .2*                     |  | Amendment to Certificate of Incorporation of the registrant to
    effect
    a      for      reverse
    stock split                                                                                                                               
|        | 3  | .3                      |  | Form of Amended and Restated Certificate of Incorporation of the
    registrant, to be effective following this offering                                                                                                                            
|        | 3  | .4                     |  | Bylaws of the registrant, as amended                                                                                                                                                                                                                
|        | 3  | .5                     |  | Form of Amended and Restated Bylaws of the registrant, to be
    effective following this offering                                                                                                                                                  
|        | 4  | .1*                     |  | Specimen certificate evidencing shares of common stock                                                                                                                                                                                              
|        | 5  | .1*                     |  | Opinion of DLA Piper Rudnick Gray Cary US LLP                                                                                                                                                                                                       
|        | 10 | .1                      |  | Form of Indemnification Agreement to be entered into between the
    registrant and each of its directors and officers                                                                                                                              
|        | 10 | .2                     |  | Second Amended and Restated Investors Rights Agreement,
    dated April 14, 2006, by and among the registrant and
    certain stockholders                                                                                                         
|        | 10 | .3                     |  | 2000 Stock Plan and related agreements                                                                                                                                                                                                              
|        | 10 | .4                      |  | 2006 Performance Incentive Plan and related agreements                                                                                                                                                                                              
|        | 10 | .5*                     |  | Executive Management Bonus Plan                                                                                                                                                                                                                     
|        | 10 | .6**                    |  | Asset Purchase Agreement, dated September 30, 2005, between
    the registrant and Abbott Laboratories                                                                                                                                              
|        | 10 | .7                     |  | Security Agreement, dated September 30, 2005, between the
    registrant and Abbott Laboratories                                                                                                                                                    
|        | 10 | .8                     |  | Patent License Agreement, dated September 30, 2005, between
    the registrant and Abbott Laboratories                                                                                                                                              
|        | 10 | .9                     |  | Secured Promissory Note, dated September 30, 2005, between
    the registrant and Abbott Laboratories                                                                                                                                               
|        | 10 | .10                    |  | Services Agreement, dated September 30, 2005, between the
    registrant and Abbott Laboratories                                                                                                                                                    
|        | 10 | .11                     |  | License Agreement, dated January 4, 2005, between the
    registrant and Dr. med. Reinhard Schlief                                                                                                                                                  
|        | 10 | .12                    |  | Exclusive Sublicense Agreement, dated October 10, 2003,
    between the registrant and UNEMED Corporation                                                                                                                                           
|        | 10 | .13                    |  | Assignment, Assumption and License Agreement, dated
    October 7, 1999, between the registrant and Bristol-Myers
    Squibb Medical Imaging, Inc. (as successor to DuPont Contrast
    Imaging, Inc.) dated October 7, 1999, and amendments thereto
|        | 10 | .14                    |  | License Agreement, dated February 10, 2006, between the
    registrant and the University of Arkansas for Medical Sciences                                                                                                                          
|        | 10 | .15                     |  | Asset Purchase Agreement, dated April 10, 2006, between the
    registrant and Abbott Laboratories, and amendments thereto                                                                                                                          
|        | 10 | .16                    |  | Escrow Agreement, dated April 14, 2006, between the
    registrant and Abbott Laboratories                                                                                                                                                          
|        | 10 | .17                    |  | Inventory Trademark License Agreement, dated April 14,
    2006, between the registrant and Abbott Laboratories                                                                                                                                     
|        | 10 | .18                    |  | Security Agreement, dated April 14, 2006, between the
    registrant and Abbott Laboratories                                                                                                                                                        
|        | 10 | .19                    |  | Secured Promissory Note, dated April 14, 2006, between the
    registrant and Abbott Laboratories                                                                                                                                                   
|        | 10 | .20                    |  | Second Amended Executive Employment Agreement, dated
    May 15, 2006, between the registrant and Evan C. Unger                                                                                                                                     
|        | 10 | .21                    |  | Consulting Agreement, dated April 11, 2005, between the
    registrant and Greg Cobb                                                                                                                                                                
|        | 10 | .22                     |  | Executive Employment Agreement, dated April 27, 2005,
    between the registrant and Greg Cobb                                                                                                                                                      
|        | 10 | .23                     |  | Executive Employment Agreement, dated April 18, 2005,
    between the registrant and Randall Miller                                                                                                                                                 
|        | 10 | .24                     |  | Executive Employment Agreement, dated February 18, 2004,
    between the registrant and John A. Moore                                                                                                                                               
|        | 10 | .25                    |  | Agreement, dated March 31, 2006, by and among the
    registrant, John A. Moore and Edson Moore Healthcare Ventures                                                                                                                                 
|        | 10 | .26                    |  | Subscription Agreement and Investor Questionnaire, dated March
    2004, between the registrant and each of the signatory
    investors, offering price $2.00 per share                                                                             
|        | 10 | .27                    |  | Subscription Agreement and Investor Questionnaire, dated
    December 2004, between the registrant and each of the signatory
    investors, offering price $3.00 per share                                                                          
|        | 10 | .28                    |  | Subscription Agreement and Investor Questionnaire, dated
    September and October 2004, between the registrant and each of
    the signatory investors, offering price $4.00 per share                                                             






---



##### Table of Contents






|        |    |                         |  |                                                                                                                                        
|------- | -- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |                        
|Number  |    | Description of Document
|        |    |                        
|        | 10 | .29                     |  | Commercial Lease Triple Net, dated November 1, 2002,
    between the registrant and ImaRx Investments L.L.C.                          
|        | 10 | .30                     |  | Standard Commercial Industrial Lease, dated
    December 30, 1997, between the registrant and Tucson Tech
    Park and addenda thereto
|        | 21 | .1                     |  | Subsidiaries of the registrant                                                                                                         
|        | 23 | .1                      |  | Consent of Ernst & Young LLP                                                                                                           
|        | 23 | .2*                     |  | Consent of DLA Piper Rudnick Gray Cary US LLP (included in
    Exhibit 5.1)                                                            
|        | 24 | .1                     |  | Power of Attorney                                                                                                                      









|  |                         
|- | ------------------------
|* | To be filed by amendment



|   |                                 
|-- | --------------------------------
|  
|  | Previously filed                
|  
|  
|  
|** | Confidential treatment requested
|