##### Table of Contents



UNITED STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, D.C.
    20549
      Form 10-KSB
  (Mark One)þ

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006o

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    000-49635.
      MINRAD INTERNATIONAL,
    INC.
 (Name of small business issuer
    in its charter)
  Delaware

870299034(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)50 Cobham Drive, Orchard Park,
    New York

14127(Address of principal executive
    offices)

(Zip Code)   Issuers Telephone Number
 (716) 855-1068
  Securities registered under Section  12(b) of the
    Exchange Act:
 Common Stock $.01 par value
  Title of Each Class:

Name of Each Exchange on Which Registered:Common Stock, $.01 par value

American Stock Exchange   Securities registered under Section 12(g) of the
    Exchange Act:
  o
  þ o
  Regulation S-B Form 10-KSB Form 10-KSB. o
  Rule 12b-2 o þ
        o þ




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##### 



TABLE OF
    CONTENTS
  PageNumberItem 1

Description of
    Business


1Item 2

Description of
    Property


21Item 3

Legal
    Proceeding


21Item 4

Submission of
    Matters to a vote of Security Holders


21Item 5

Market for Common
    Equity And Related Stockholder Matters


22Item 6

Managements
    Discussion and Analysis or Plan of Operation


23Item 7

Financial
    Statements


30Item 8

Changes In and
    Disagreements With Accountants on Accounting and Financial
    Disclosure


51Item 8A

Controls and
    Procedures


51Item 9

Directors,
    Executive Officers, Promoters and Control Persons


51Item 10

Executive
    Compensation


54Item 11

Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


58Item 12

Certain
    Relationships and Related Transactions


60Item 13

Exhibits


63Item 14

Principal
    Accountant Fees and Services


65EX-23.1EX-31.1EX-31.2EX-32.1




---



INDUSTRY
    AND MARKET DATA
  Form 10-KSB
  PART I
  Item 1.
    Description
    of Business.  General
    Business Overview
  Form 10-KSB,
      tm tm tm tm
  same-day
 1




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##### Table of Contents



Anesthesia &
    Analgesia
    tm .
  Sevoflurane
      Desflurane
   2




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##### Table of Contents



Enflurane
    and Isoflurane
    tm tm
    Real-Time
    Image Guidance
  Industry
    Overview
    
    aging of the population;
    development of new minimally invasive surgical procedures;
    focus on increased productivity and lower costs;
    transition from hospital-based to outpatient procedures; and
    demand for improved therapeutic outcome.    
    decreasing operating time;
    enabling additional procedures to be performed on a minimally
    invasive basis;
    reducing patient trauma and recovery time;
    improving surgical accuracy; and
    reducing radiation exposure to patients and medical
    professionals in fluoroscopically-guided procedures.  tm
  Image
    Guidance Product Overview
  sub-surface tm
 3




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##### Table of Contents



tm ® tm ®
  tm tm
  tm tm tm tm tm
  tm ®
  
    improved surgical accuracy and corresponding reduction in
    complications;
    a reduction in x-ray on-time of 50% to 90% depending on the type
    of procedures; and
    the elimination of multiple instrument penetrations in attempts
    to locate subsurface targets and a corresponding reduction in
    time, expense and trauma.  tm tm
  Light
    Sabretm Procedure Instruments
  tm tm tm
  tm tm tm
 4




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##### Table of Contents



tm
  tm tm tm
  tm tm tm 30-day
  Conscious
    Sedation
           5




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##### Table of Contents



Sales,
    Distribution and Marketing
  Overview
    Our
    International Partners
    Partner
    Annual Minimum Purchases
  tm
       6




---



##### Table of Contents



Our
    Sales and Marketing Organization
  tm
        tm
    Competition
     7




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##### Table of Contents



Research &
    Development
  tm tm
  tm tm
      Intellectual
    Property
    Product
    Regulatory Status
  Inhalation
    Anesthetics  United States
    Inhalation
    Anesthetics  International
    
    enflurane approvals in 15 countries and four applications filed;
    isoflurane approvals in 25 countries with eight applications
    filed;
    sevoflurane approvals in six countries with 13 applications
    filed.  Real-time
    image guidance medical devices  United
    States
  tm tm
 8




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##### Table of Contents



Real-time
    image guidance medical devices 
    International
  tm
  Manufacturing
    tm Sub-assemblies tm
  Raw
    Materials
      Intellectual
    Property Position
   9




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##### Table of Contents



PatentNumber


Title

Filing Date


Expiration Date5,810,841


ENERGY GUIDED APPARATUS AND METHOD


5/20/1997



5/20/20175,969,193


METHOD FOR THE PREPARATION OF
    SEVOFLURANE


8/18/1997



8/18/20176,036,639


LARYNGOSCOPE HAVING LOW MAGNETIC
    SUSCEPTIBILITY


4/11/1997



4/11/20176,096,049


LIGHT GUIDING DEVICE AND METHOD


7/27/1998



7/27/20186,200,274


REMOVABLE NEEDLE RULE


7/7/1998



7/7/20186,264,618


SAMPLING DEVICE AND METHOD OF
    RETRIEVING A SAMPLE


1/28/2000



1/28/20206,297,502


ALIGNMENT VERIFICATION DEVICE AND
    METHOD OF USING THE SAME WITH A VISUAL LIGHT BEAM AND AN X-RAY


5/29/1998



5/29/20186,283,125


STERILE DRAPE


11/19/1998



11/19/20186,444,358


LARYNGOSCOPE HAVING LOW MAGNETIC
    SUSCEPTIBILITY


3/10/2000



3/10/20206,679,267


STERILE DRAPE


8/31/2001



8/31/20216,694,169


TARGETING SYSTEM AND METHOD OF
    TARGETING


2/22/2001



2/22/20216,829,500


METHOD AND DEVICE FOR DETERMINING
    ACCESS TO A SUBSURFACE TARGET


6/15/1999



6/15/2019     Application







Expiration DateNumber


Title

Filing Date


Assuming Issuance10/272,794


DRUG DELIVERY SYSTEM FOR CONSCIOUS
    SEDATION


10/17/2002



10/17/202210/644,500


METHOD FOR THE PREPARATION OF
    SEVOFLURANE


8/20/2003



8/20/202310/977,759


TARGETING SYSTEM AND METHOD OF
    TARGETING


10/29/2004



10/29/202411/281,294


METHOD FOR THE PREPARATION OF
    SEVOFLURANE


11/17/2005



11/17/202511/281,293


PROCESS FOR PRODUCTION OF
    1,2,2,2  TETRAFLUORO ETHYL DIFLUORO METHYL ETHER


11/17/2005



11/17/202511/098,243


REMOVAL OF CARBON DIOXIDE AND
    CARBON MONOXIDE FROM PATIENT EXPIRED GAS DURING ANESTHESIA


4/4/2005



4/4/202511/406,480


PREPARATION OF SEVOFLURANE WITH
    NEGLIGIBLE WATER CONTENT


4/18/2006



4/18/2026     Government
    Regulation
   10




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##### Table of Contents



Product
    Classifications and Pre-marketing Submission
    Requirements
  Real-Time
    Image Guidance Medical Devices
    tm tm tm
  tm tm tm
      Drugs
   11




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##### Table of Contents



Other
    Anticipated Regulatory Submissions
    Registration
    and Listing
    Labeling
    Manufacturing
    regulations for devices, including design controls
  13485-2003
  Post-marketing
    obligations
  13485-2003
  Penalties
    and legal remedies available to FDA for violations of its
    regulations
  on-site
 12




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##### Table of Contents



Employees
    Risk
    Factors
    We are currently in a growth stage and may experience
    setbacks in both business and product development.
  tm
  We may need additional capital to fulfill our business
    strategies. We may also incur unforeseen costs. Failure to
    obtain such capital would adversely affect our business.
    In the past we failed to meet a financial covenant in our
    credit facility and may fail to meet our financial covenants in
    the future, which could result in our lender limiting our access
    to our working capital facility.
    The loss of the services of key personnel would adversely
    affect our business.
   13




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##### Table of Contents



The loss of distribution partners who hold registrations in
    their territories for international sales of our products could
    negatively affect our projected sales.
    We face competition in our industry, and many of our
    competitors have substantially greater experience and resources
    than we do.
        We are dependent upon sales outside the United States, which
    are subject to a number of risks.
    
    Unforeseen changes in regulatory requirements;
    Weaker intellectual property rights protection in some countries;
    New export license changes in tariffs or trade restrictions;
    Political and economic instability in our target markets; and
    Greater difficulty in collecting receivables from product sales.  We rely upon third-party manufacturers and suppliers, which
    puts us at risk for supplier business interruptions.
  sub-assemble sub-assembly
 14




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##### Table of Contents



sub-assemble
  We rely on a single supplier to supply a material used to
    make sevoflurane, which could result in our not being able to
    obtain sufficient quantities to meet our short-term needs.
    We may face future product liability claims relating to the
    use of our products.
      Significant existing or additional governmental regulation
    could subject us to unanticipated delays and costs, which would
    adversely affect our revenues.
    
    Fines;
    Injunctions;
    Civil penalties; 15




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##### Table of Contents




    Recalls or seizures of our products;
    Total or partial suspension of the production of our products;
    Withdrawal of existing approvals or premarket clearances of our
    products;
    Refusal to approve or clear new applications or notices relating
    to our products;
    Recommendations by the FDA that we not be allowed to enter into
    government contracts; and
    Criminal prosecution.    Failure to obtain regulatory approvals for our products in
    the future may adversely affect our business.
    Medical
    Devices
    Pharmaceutical
    Products
    Manufacturing
    Guidelines
       16




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##### Table of Contents



We may not be able to expand or enhance our existing product
    lines with new products limiting our ability to grow our
    company.
    We are subject to environmental regulations, and any failure
    to comply may result in substantial fines and sanctions.
      Future acquisitions may divert the attention of management
    and may involve risk of undisclosed liabilities.
   17




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##### Table of Contents



We became public by means of a reverse merger, and as a
    result we are subject to the risks associated with the prior
    activities of the public company.
    We will need to make substantial financial and man-power
    investments in order to assess our internal controls over
    financial reporting and our internal controls over financial
    reporting may be found to be deficient.
  Form 10-KSB
    Risks
    Related to Our Intellectual Property
  If we are not able to adequately protect our intellectual
    property, we may not be able to compete effectively.
   18




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##### Table of Contents



Patent




FilingNumber


Title

Date


Expiration Date5,810,841


Energy guided apparatus and method
    with indication of alignment


5/20/1997



5/20/20175,969,193


Method for the preparation of
    sevoflurane


8/18/1997



8/18/20176,036,639


Laryngoscope having low magnetic
    susceptibility and method of assembling


4/11/1997



4/11/20176,096,049


Light guiding device and method


7/27/1998



7/27/20186,200,274


Removable needle rule


7/7/1998



7/7/20186,264,618


Sampling device and method of
    retrieving a sample


1/28/2000



1/28/20206,267,502


Alignment verification device and
    method of using the same with a visual light beam and an x-ray


5/29/1998



5/29/20186,283,125


Sterile drape


11/19/1998



9/25/20186,444,358


Battery for powering a medical
    device having low magnetic susceptibility


3/10/2000



4/11/20176,679,267


Sterile drape for use with laser
    tracking system


8/31/2001



11/14/20086,694,169


Targeting system and method of
    targeting


2/22/2001



2/22/20216,829,500


Method and device for determining
    access to a subsurface target


6/15/1999



6/15/2019     Application




Filing


Expiration DateNumber


Title

Date


Assuming Issuance10/272,794


Drug delivery system for conscious
    sedation


10/17/2002



10/17/202210/644,500


Method for the preparation of
    sevoflurane


8/20/2003



8/18/202310/977,759


Targeting system and method of
    targeting


10/29/2004



10/29/202411/281,294


Method for the preparation of
    sevoflurane


11/17/2005



11/17/202511/281,293


Process for production of 1,2,2,2
    - tetrafluoro ethyl difluoro methyl ether


11/17/2005



11/17/202511/098,243


Removal of carbon dioxide and
    carbon monoxide from patient expired gas during anesthesia


4/4/2005



4/4/202511/406,480


Preparation of sevoflurane with
    negligible water content


4/18/2006



4/18/2026    19




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##### Table of Contents



If we infringe on the rights of third parties, we may not be
    able to sell our products, and we may have to defend against
    litigation and pay damages.
    If our trademarks and trade names are not adequately
    protected, we may not be able to build brand loyalty and our
    sales and revenues may suffer.
  tm tm tm tm tm tm
  Risks
    Related to Our Securities
  We have a concentration of stock ownership and control, and a
    small number of stockholders have the ability to exert
    significant control in matters requiring stockholder vote and
    may have interests that conflict with yours.
   20




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Our stock price may be volatile because of factors beyond our
    control and you may lose all or a part of your investment.
    
    Our failure to achieve and maintain profitability;
    Our failure to meet financial analysts performance
    expectations;
    Changes in earnings recommendations by financial analysts;
    Actual or anticipated variations in our quarterly results of
    operations;
    Changes in market valuations of similar companies;
    Announcements by us or our competitors of significant contracts,
    new products, acquisitions, commercial relationships, joint
    ventures or capital commitments;
    The loss of major customers or product or component suppliers;
    The loss of significant partnering relationships;
    Product liability lawsuits or product recalls; and
    General market, political and economic conditions.   Item 2.  Description
    of Property.           Item 3.  Legal
    Proceedings.   Item 4.  Submission
    of Matters to a Vote of Security Holders.   21




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##### Table of Contents



PART II
 Item 5.  Market
    for Common Equity And Related Stockholder Matters
    .  Market
    Information
  over-the-counter mark-up,
  High


Low2005March 31, 2005


7.00



3.00June 30, 2005


4.35



2.00September 30, 2005


3.30



1.85December 31, 2005


2.46



1.252006March 31, 2006


2.75



1.55June 30, 2006


4.60



2.25September 30, 2006


4.25



3.40December 31, 2006


5.89



3.52   Holders
    Dividends
   22




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##### Table of Contents



Securities
    authorized for issuance under equity compensation plan
    Equity
    Compensation Plan Information
  (a)


(b)


(c)Number of SecuritiesRemaining Available forNumber of Securities to be





Future Issuance Under EquityIssued upon Exercise of


Weighted-Average Exercise


Compensation PlansOutstanding Options,


Price of Outstanding


(Excluding SecuritiesPlan Category

Warrants and Rights(1)


Options, Warrants and Rights


Reflected in Column (a))Equity compensation plans approved
    by security holders


4,950,051


$
3.63



1,807,214     (1)
    
    Reflects shares issuable upon exercise of options issued and
    issuable under the Companys 2004 Stock Option Plan.  Purchase
    of shares
   Item 6.  Managements
    Discussion and Analysis or Plan of Operation.  Cautionary
    Factors That May Affect Future Results
  Form 10-KSB
  Form 10-KSB Form 10-KSB,
  
    our limited operating history and business development
    associated with being a growth stage company;
    our need to obtain future funding through equity or debt
    financings;
    our dependence on key personnel;
    our need to attract and retain technical and managerial
    personnel;
    our ability to execute our business strategy;
    our dependence on strategic partnerships; 23




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##### Table of Contents




    intense competition with established leaders n the medical
    devices industry;
    our reliance on third party suppliers;
    our exposure to product liability claims resulting from the use
    of our products;
    our exposure to unanticipated and uncontrollable business
    interruptions;
    changes in international economic, political and regulatory
    conditions, interest rates and currency movements;
    the costs and effects of complying with changes to existing laws
    and regulations;
    the effect of failing to receive regulatory approval for new and
    existing products;
    the costs and effects of complying with laws and regulations
    relating to the environment and to the manufacture, storage,
    distribution and regulation of our products;
    our ability to successfully complete the integration of any
    future acquisitions;
    our ability to project the market for our products based upon
    estimates and assumptions;
    our ability to achieve and maintain adequate internal controls
    necessary to comply with regulations governing financial
    reporting;
    our ability to protect our intellectual property and proprietary
    technologies;
    costs associated with potential intellectual property
    infringement claims asserted by a third party; and
    our ability to protect, and build recognition of, our trademarks
    and tradenames.  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations
  Form 10-KSB.
  Results
    Of Operations  Year Ended December 31, 2006
    Compared To Year Ended December 31, 2005.
  Years EndedDecember 31,


December 31,2006


2005Revenue

$
16,340,664


$
8,345,278Cost of goods sold


10,753,482



4,828,943Gross profit

$
5,587,182


$
3,516,335Gross margin


34.2
%


42.1
%   Revenue
     24




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##### Table of Contents



Gross
    Profit
    Years EndedDecember 31,


December 31,2006


2005Operating expenses:Sales and marketing

$
5,073,919


$
1,759,773Research and development


2,916,007



1,804,162Finance and administrative


4,636,088



2,754,548Total operating
    expenses

$
12,625,994


$
6,318,483   Sales &
    Marketing
  $717,000 year-over-year,
  Research &
    Development
   25




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##### Table of Contents



Finance &
    Administration
    Years EndedDecember 31,


December 31,2006


2005Non-operating (income)
    expense:Interest expense 
    stockholders and affiliates

$



$
(2,014,802
)Interest expense  bank
    and other


(155,473
)


(267,279
)Interest income


641,710



Net loss on disposal of fixed
    assets


(50,604
)


Total non-operating (income)
    expense

$
435,633


$
(2,284,081
)   Interest
    Expense  stockholders and affiliates
    Interest
    Expense  bank and other
    Interest
    Income
    Years EndedDecember 31,


December 31,2006


2005Net Loss

$
(6,603,179
)

$
(5,084,229
)Less preferred stock
    dividends  cash


(485,801
)


(370,153
)Less preferred stock
    dividends  non cash


(182,948
)


(6,598,549
)Net loss available to common
    stockholders

$
(7,271,928
)

$
(12,052,931
)Net loss per share, basic and
    diluted

$
(0.20
)

$
(0.42
)Weighted average common shares
    outstanding, basic and diluted


36,639,348



28,519,125  26




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##### Table of Contents



Dividends
    Net
    loss available to common stockholders
    Liquidity
    and Capital
             27




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##### Table of Contents



Critical
    Accounting Policies and Estimates
    Allowance
    for Doubtful Accounts
    Inventory
    Valuation
  first-in,
  Property,
    Equipment and Depreciation
    Patents
    Income
    Taxes
   28




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##### Table of Contents



Revenue
    Recognition
    Research
    and Development Costs
    Stock
    Based Compensation
    Recent
    Accounting Pronouncements
     29




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##### Table of Contents



Item 7.  Financial
    Statements.  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageReport of Independent
    Registered Public Accounting Firm

31Consolidated Financial
    Statements:Balance Sheets

32Statements of Operations

33Statement of Changes in
    Stockholders Equity

34Statements of Cash Flows

35Notes to the Consolidated
    Financial Statements

36-50  30




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                 31




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##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  CONSOLIDATED BALANCE SHEETS
  December 31,


December 31,2006


2005ASSETSCurrent assets:Cash and cash equivalents

$
4,664,233


$
669,567Investments


7,249,048



Interest receivable


86,635



Accounts receivable


10,472,774



3,459,275Inventories


4,359,573



3,860,442Prepaid expenses and other current
    assets


1,476,809



961,484Total current assets


28,309,072



8,950,768Property and
    equipment:Machinery and equipment


2,420,229



1,379,657Computer equipment and software


571,020



220,790Furniture and fixtures


661,677



22,641Leasehold improvements


385,036



Construction in progress


4,176,643



295,1538,214,605



1,918,241Less accumulated depreciation


1,233,622



849,333Net property and equipment


6,980,983



1,068,908Other assets


439,390



163,732$
35,729,445


$
10,183,408LIABILITIES AND
    STOCKHOLDERS EQUITYCurrent liabilities:Demand note payable

$



$
2,720,000Accounts payable


965,276



2,541,838Accrued expenses


1,261,614



405,388Dividends payable






170,329Total current liabilities


2,226,890



5,837,555Commitments and contingencies
    (See Note 13)






Stockholders
    equity:Series A convertible
    preferred stock






2,800Common stock


470,483



290,585Additional paid in capital


76,513,393



40,261,861Accumulated deficit


(43,481,321
)


(36,209,393
)Total stockholders equity


33,502,555



4,345,853$
35,729,445


$
10,183,408    32




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##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF OPERATIONS
  Years EndedDecember 31,


December 31,2006


2005Revenue

$
16,340,664


$
8,345,278Cost of goods sold


10,753,482



4,828,943Gross margin


5,587,182



3,516,335Operating expenses:Sales and marketing


5,073,919



1,759,773Research and development


2,916,007



1,804,162Finance and administrative


4,636,068



2,754,548Total operating expenses


12,625,994



6,318,483Operating loss


(7,038,812
)


(2,802,148
)Non-operating income
    (expenses):Interest expense:Stockholders and affiliates






(2,014,802
)Bank and other


(155,473
)


(267,279
)Interest income


641,710



Loss on disposal of property and
    equipment


(50,604
)


Total non-operating income
    (expenses)


435,633



(2,282,081
)Net loss


(6,603,179
)


(5,084,229
)Less preferred stock
    dividends:Cash dividends


(485,801
)


(370,153
)Non cash dividends


(182,948
)


(6,598,549
)Net loss available for common
    stockholders

$
(7,271,928
)

$
(12,052,931
)Net loss per share, basic and
    diluted

$
(0.20
)

$
(.42
)Weighted average common shares
    outstanding, basic and diluted


36,639,348



28,519,125    33




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##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS
    EQUITY
  Series A Convertible








AdditionalPreferred Stock


Common Stock


Paid-in


AccumulatedShares


Amount


Shares


Amount


Capital


Deficit


TotalBalance at December 31,
    2004





$




28,019,153


$
280,192


$
20,512,202


$
(24,156,462
)

$
(3,364,068
)Sale of common stock; net of costs










868,241



8,682



1,426,500







1,435,182Sale of preferred stock; net of
    costs


11,260



2,815











9,460,284







9,463,099Conversion of preferred stock and
    accrued dividends to common stock


(60
)


(15
)


30,163



302



38







325Stock options exercised










140,874



1,409



237,527







238,936Stock based compensation on options
    extended


















121,050







121,050Warrants issued with demand notes


















925,188







925,188Warrants issued to related party
    for debt guarantee


















980,523







980,523Preferred dividends:Cash dividends






















(370,153
)


(370,153
)Amortization of beneficial
    conversion feature


















6,598,549



(6,598,549
)


Net loss






















(5,084,229
)


(5,084,229
)Balance at December 31,
    2005


11,200


$
2,800



29,058,431


$
290,585


$
40,261,861


$
(36,209,393
)

$
4,345,853Sale of common stock, net of costs










11,500,000



115,000



34,396,596







34,511,596Conversion of preferred stock and
    accrued dividends to common stock


(11,200
)


(2,800
)


5,677,666



56,777



128,971







182,948Preferred stock dividends






















(668,749
)


(668,749
)Stock warrants exercised










564,213



5,642



469,358







475,000Stock options exercised










247,930



2,479



415,443







417,922Stock based compensation


















841,164







841,164Net loss






















(6,603,179
)


(6,603,179
)Balance at December 31,
    2006





$




47,048,240


$
470,483


$
76,513,393


$
(43,481,321
)

$
33,502,555    34




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  Years EndedDecember 31, 2006


December 31, 2005Cash flows from operating
    activities:Net loss

$
(6,603,179
)

$
(5,084,229
)Adjustments to reconcile net loss
    to net cash used by operating activities:Depreciation and amortization


590,201



186,708Stock based compensation on
    options extended and granted to non-employees


841,164



121,050Loss on disposal of property and
    equipment


50,604



Amortization of bond discount


(42,666
)


Decrease in allowance for doubtful
    accounts






(317,000
)Amortization of note discount






925,188Warrants issued for guarantee






980,523Increase in assets:Accounts receivable


(7,013,499
)


(2,536,047
)Interest receivable


(86,635
)


Inventories


(499,131
)


(2,790,877
)Prepaid expenses


(664,349
)


(327,910
)Increase (decrease) in liabilities:Accounts payable


(2,450,056
)


(261,136
)Accrued expenses


856,226



(419,424
)Net cash used by operating
    activities


(15,021,320
)


(9,523,154
)Cash flows from investing
    activities:Purchases of investments


(12,423,980
)


Sales of investments


5,217,598



Purchases of property and equipment


(5,496,805
)


(375,795
)Acquisition of other assets


(309,213
)


(107,025
)Net cash used by investing
    activities


(13,012,400
)


(482,820
)Cash flows from financing
    activities:Borrowings under demand notes
    payable, net of costs


400,000



5,054,476Repayments under demand notes
    payable


(3,120,000
)


(2,971,125
)Proceeds from warrants exercised


475,000



Proceeds from sale of common
    stock, net of costs


34,511,596



435,182Preferred cash dividends


(656,132
)


(199,499
)Proceeds from options exercised


417,922



238,936Principal payments on long-term
    debt






(1,022,309
)Net repayments to affiliates






(374,740
)Net decrease in other assets






48,591Proceeds from sale of preferred
    stock, net of costs






9,463,099Net cash provided by financing
    activities


32,028,386



10,672,611Net increase in cash and cash
    equivalents


3,994,666



666,637Cash and cash
    equivalents  beginning of period


669,567



2,930Cash and cash
    equivalents  end of period

$
4,664,233


$
669,567    35




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
  NOTE
    1.  NATURE OF BUSINESS
  Basis of Presentation
    Business Description TM TM TM
  NOTE
    2.  SUMMARY OF SIGNIFICANT ACCOUNTING
    POLICIES
  Cash and Cash Equivalents
  Investments available-for-sale. Available-for-sale
  Accounts Receivable
  Sale of Certain Accounts Receivable
 36




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
        Inventories
  Property and Equipment
    Patents
  Income Taxes
  Revenue Recognition
 37




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  Research and Development Costs
  Advertising
  Stock-Based Compensation
  Earnings Per Share
    Recent Accounting Pronouncements
     38




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  Accounting Estimates
  Segment Reporting
  Fair Value of Financial Instruments
  Concentration of Credit Risk
    NOTE
    3.  INVESTMENTS
    Gross


GrossUnrealized


UnrealizedCost


Gains


Losses


Fair ValueAvailable-for-sale:U.S. Government securities

$
2,871,690


$



$



$
2,871,690Corporate bonds  fixed
    rate


2,658,888











2,658,888Certificates of deposit and other


1,718,470











1,718,470Total available for sale securities

$
7,249,048


$



$



$
7,249,048   NOTE
    4.  INVENTORIES
    2006


2005Raw materials

$
1,178,350


$
1,196,893Work-in-progress


2,028,026



1,420,495Finished goods


1,153,197



1,243,054$
4,359,573


$
3,860,442  39




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  NOTE
    5.  OTHER ASSETS
    2006


2005Patent application costs

$
282,596


$
141,232Long-term deposits and other


156,794



22,500$
439,390


$
163,732   NOTE
    6.  DEMAND NOTES PAYABLE
  Bank
    Stockholders
    and Affiliates
    NOTE
    7.  INCOME TAXES
    2006


2005Federal net operating loss
    carryforward

$
12,979,000


$
10,780,000Stock warrant and option expense


453,000



440,000Research and development credit
    carryforward


390,000



269,000Unrealized loss on investments


40,000



240,000Other temporary differences


(5,000
)


68,00013,857,000



11,797,000Less valuation allowance


13,857,000



11,797,000Net deferred tax asset

$



$
  40




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
      Years EndedDecember 31,


December 31,2006


2005Statutory United States federal
    rate


(34
)%


(34
)%State income taxes net of federal
    benefit


(6
)


(6
)Stock option expense


4



Other


4



Change in valuation reserves


32



40Effective tax rate



%



%   NOTE
    8.  STOCKHOLDERS EQUITY
    2006


2005Common, voting, $.01 par value


100,000,000



100,000,000Series A Convertible Preferred


5,000,000



5,000,000Total


105,000,000



105,000,000   Series A Convertible Preferred Stock
   41




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
      Stock Transactions  Year Ended
    December 31, 2006:
      Stock Transactions  Year Ended
    December 31, 2005:
  Stock Warrants 
  Number


Weightedof Waroants


AverageOutstanding


Exercise PriceOutstanding at December 31,
    2004


4,843,221


$
1.06Granted  Year ended
    December 31, 2005


4,085,171


$
3.16Outstanding at December 31,
    2005


8,928,392


$
2.02Exercised  Year ended
    December 31, 2006


(595,000
)

$
1.01Outstanding at December 31,
    2006


8,333,392


$
2.09  42




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
    WeightedAverageExercise Price


Number of


Weighted


RemainingRange


Warrants


Average Price


Life (Years)$0.75

$
1.00



2,860,000


$
0.97



1.8$1.01

$
1.50



1,657,195


$
1.17



3.7$1.51

$
2.00



1,001,197


$
1.88



4.5$3.01

$
4.00



2,815,000


$
3.85



1.5Total






8,333,392   NOTE
    9.  STOCK OPTIONS
       43




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
    Service
    Based Options
  Years EndedDecember 31,


December 31,2006


2005Expected dividend yield



%



%Expected stock price volatility


34
%


34
%Risk-free interest rate


4.8
%


4.0
%Expected life of options


4.9 Years



6.5 Years   Performance
    Based Options
 Years EndedDecember 31,


December 31,2006


2005Expected dividend yield



%


N/AExpected stock price volatility


34
%


N/ARisk-free interest rate


4.8
%


N/AExpected life of options


3.0 Years



N/A       Service
    Based Options
 Weighted


WeightedNumber of


Average


Average


AggregateShares Subject


Exercise


Remaining


Intrinsicto Options


Price


Life (Years)


ValueOutstanding as of
    December 31, 2005


2,906,808


$
2.04Granted to employees - Year
    ended December 31, 2006


1,433,000


$
3.80Forfeited - Year ended
    December 31, 2006


(621,827
)

$
3.82Exercised - Year ended
    December 31, 2006


(247,930
)

$
1.69Outstanding as of
    December 31, 2006


3,470,051


$
2.47



4.05


$
10,365,207Exercisable as of
    December 31, 2006


2,008,341


$
1.62



3.70


$
7,712,970  44




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  Performance
    Based Options
 Weighted


WeightedNumber of


Average


Average


AggregateShares Subject


Exercise


Remaining


Intrinsicto Options


Price


Life (Years)


ValueOutstanding as of
    December 31, 2005





$
Granted to employees 
    Year ended December 31, 2006


1,525,000


$
4.25Forfeited  Year ended
    December 31, 2006


(45,000
)

$
4.25Exercised  Year ended
    December 31, 2006





$
Outstanding as of
    December 31, 2006


1,480,000


$
4.25



2.62


$
1,790,800Exercisable as of
    December 31, 2006


141,125


$
4.25



1.75


$
170,761       Service
    Based Options
 Number of


Weighted-AverageNon-vested Shares


Grant-DateSubject to Options


Fair ValueNon-vested as of
    December 31, 2005


1,683,910


$
0.70Non-vested granted 
    year ended December 31, 2006


1,433,000


$
1.24Vested  year ended
    December 31, 2006


(1,126,033
)

$
0.49Forfeited  year
    ended December 31, 2006


(529,167
)

$
1.54Non-vested as of
    December 31, 2006


1,461,710


$
1.20   Performance
    Based Options
 Number of


Weighted-AverageNon-vested Shares


Grant-DateSubject to Options


Fair ValueNon-vested as of
    December 31, 2005





$
Non-vested granted 
    year ended December 31, 2006


1,525,000


$
0.95Vested  year ended
    December 31, 2006


(141,125
)

$
0.76Forfeited  year
    ended December 31, 2006


(45,000
)

$
0.98Non-vested as of
    December 31, 2006


1,338,875


$
.97    45




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
      Year EndedDecember 31, 2005Net loss available for common
    stock holders, as reported

$
(12,052,931
)Stock based compensation included
    in the determination of net loss

$
121,050Total stock based employee
    compensation expense determined under fair value method for all
    awards (SFAS 123R)

$
(450,450
)Net loss available for common
    stock holders, pro forma

$
(12,382,331
)Net loss per share, basic and
    diluted, as reported

$
(0.42
)Net loss per share, basic and
    diluted, pro forma

$
(0.43
)     Options Outstanding


Options ExercisableWeighted








WeightedWeighted


Average





Weighted


AverageExercise

Number of


Average


Remaining


Number of


Average


RemainingPrice Range

Options


Exercise Price


Life (Years)


Options


Exercise Price


Life (Years)$1.40  $1.99


1,882,801


$
1.46



3.76



1,761,966


$
1.46



3.73$2.00  $2.99


511,500


$
2.31



4.74



182,000


$
2.30



4.13$3.00  $3.99


166,000


$
3.67



3.94



20,500


$
3.54



3.12$4.00  $4.99


2,317,750


$
4.28



3.22



185,000


$
4.28



2.11$5.00  $5.99


60,000


$
5.67



4.42






$




$6.00  $6.15


12,000


$
6.15



4.45






$




Total


4,950,051


$
3.00



3.63



2,149,466


$
1.79



3.62     NOTE
    10.  RELATED PARTY TRANSACTIONS
   46




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
          NOTE
    11.  MAJOR CUSTOMERS
    Year Ended


Year EndedDecember 31, 2006


December 31, 2005Customer

Revenue


Accounts Receivable


Revenue


Accounts ReceivableA


33
%


48
%


9
%


21
%B


27
%


32
%


3
%


2
%C


3
%


1
%


15
%


15
%E


2
%


4
%


10
%


20
%    47




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  NOTE
    12.  RETIREMENT PLAN
    NOTE
    13.  COMMITMENTS AND CONTINGENCIES
        2007

$
492,7102008


492,7102009


492,7102010


492,7102011


500,190Thereafter


2,417,383Total

$
4,888,413       NOTE
    14.  BUSINESS INTERRUPTION
     48




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  NOTE
    15.  SUPPLEMENTAL CASH FLOW INFORMATION
    Years EndedDecember 31,


December 31,2006


2005Non cash investing and financing
    activities:Property and equipment
    acquisitions recorded as accounts payable

$
873,496


$
369,345Conversion of preferred stock to
    common stock

$
11,200,000


$
60,000Conversion of accrued dividends to
    common stock

$
182,948


$
325Cashless exercise of warrants

$
892


$
Non-cash dividends

$



$
6,598,549Preferred stock dividends payable

$



$
170,329Issuance of common stock for
    consideration of a demand note

$



$
1,000,000Note discount for value of
    detachable warrants granted with demand notes

$



$
925,188   NOTE
    16.  BUSINESS SEGMENT INFORMATION
    
    Anesthesia and Analgesia  We currently manufacture
    and sell three inhalation anesthetics; isoflurane, enflurane and
    sevoflurane.
    Real-Time Image Guidance  We currently manufacture
    and sell our
    SabreSourcetm
    system and complementary Light
    Sabretm    Revenues
    by Geographic Area
  Years EndedDecember 31,


December 31,2006


2005United States

$
7,061,831


$
2,464,880International


9,278,833



5,880,398Total revenues

$
16,340,664


$
8,345,278      49




---



##### Table of Contents



MINRAD
    INTERNATIONAL, INC. AND SUBSIDIARIES
  NOTES TO THE CONSOLIDATED
    FINANCIAL STATEMENTS  (Continued)
  NOTE
    17.  SUBSEQUENT EVENTS
       50




---



##### Table of Contents



Item 8.
    Changes
    In and Disagreements With Accountants on Accounting and
    Financial Disclosure.    Item 8A.
    Controls
    and Procedures.  Evaluation
    of Disclosure Controls and Procedures.
  Rule 13a-15(e) 15d-15(e) Form 10-KSB.
  Changes
    in Internal Control Over Financial Reporting.
  Rule 13a-15 Rule 15d-15
  PART III
  Item 9.
    Directors,
    Executive Officers, Promoters and Control Persons; Compliance
    with Section 16(a) of the Exchange Act.  Directors
    and Executive Officers
    Name

Age

PositionWilliam H. Burns, Jr.


57


Chairman of the Board and Chief
    Executive OfficerWilliam Rolfe


61


Vice President Controller, Acting
    Chief Financial OfficerJohn McNeirney


74


Senior Vice President and Chief
    Technology OfficerKirk Kamsler


56


Senior Vice President of
    Commercial DevelopmentRichard Tamulski


59


Vice President TreasurerDavid DiGiacinto(2)


53


DirectorDavid Donaldson(1)(3)


64


DirectorDonald Farley(3)


64


DirectorDuane Hopper(1)(2)


60


DirectorRobert Lifeso(1)


61


DirectorJohn Rousseau(2)(3)


64


DirectorTheodore Stanley





DirectorBrett Zbar





Director     (1)
    
    Audit Committee member(2)
    
    Compensation Committee member(3)
    
    Corporate Governance Committee member 51




---



##### Table of Contents



William H. Burns, Jr.
  William Rolfe
  John McNeirney
  Kirk Kamsler
  Richard Tamulski
  David DiGiacinto
  David Donaldson
  Donald Farley
 52




---



##### Table of Contents



Duane Hopper
  Robert Lifeso, MD
  John Rousseau
  Theodore Stanley, MD
  Brett Zbar, MD
  Director
    Independence
    Audit
    Committee
   53




---



##### Table of Contents



Code of
    Ethics
    Section 16(a)
    Beneficial Ownership Reporting Compliance
      Item 10.
    Executive
    Compensation.    SUMMARY
    COMPENSATION TABLE
  Stock


Option


All Other


TotalSalary


Bonus


Awards


Awards


Compensation


CompensationName and Principle Position

Year


($)


($)(a)


($)(b)


($)(c)


($)(d)


($)William H. Burns, Jr.


2006



225,961



84,570



1,200



388,974



1,200



701,905Chairman and CEO(1)


2005



200,000



75,490











1,200



276,690John C. McNeirney


2006



140,000



47,368



1,200



31,750



1,200



221,518Senior Vice President and CTO


2005



130,000



44,711











1,200



175,911Kirk D. Kamsler


2006



140,000



30,501



1,200



63,140



11,000



245,841Senior Vice President of


2005



130,000



41,792











1,200



172,992Commercial DevelopmentWilliam L. Bednarski


2006



120,788



8,863



700







143,421



273,772President and CFO(2)


2005



129,000



55,723







583,571



400



768,694     (a)
    
    The amount of bonus compensation is calculated based on a
    percentage of net or gross profit (or increase in gross profit)
    according to the employees employment agreement, The
    percentage is based on position and is approved by the
    compensation committee.(b)
    
    Stock awards are issued through the Companys 401(k) plan,
    in the amount of $100 per month.(c)
    
    During the year ended December 31, 2006, the Company
    granted performance based options that are exercisable upon
    meeting certain milestone performance thresholds. Management has
    determined the probability of achieving these performance
    thresholds by the option expiration date of September 30,
    2007 and valued them accordingly (See Note 9 of the
    December 31, 2006 Financial Statements). Options which 54




---



##### Table of Contents



management believes will not be earned prior to the option
    expiration date of September 30, 2007 are not valued and
    are not included.  (d)
    
    Other compensation includes the cash portion of the
    Companys retirement plan contribution and travel
    allowances, and in the case of Mr. Bednarski, his severance
    payments.(1)
    
    Mr. Burns served as President and CEO of Minrad
    International, Inc. from December 16, 2004 through
    January 3, 2006. On January 4, 2006, Mr. Burns
    relinquished the title of President of Minrad International, Inc.(2)
    
    Mr. Bednarski served as Executive Vice President and Chief
    Operating Officer from February 16, 2005 through
    January 3, 2006. On January 4, 2006,
    Mr. Bednarski was appointed President and Chief Financial
    Officer of Minrad International, Inc. Mr. Bednarski
    resigned from Minrad International, Inc. on August 28, 2006
    and will receive compensation through May 2007. Of the $583,571
    compensation for options granted in 2005, $467,976 was not
    reflected in the financial statements due to the forfeiture of
    the options granted prior to vesting.  Compensation
    Philosophy
           55




---



##### Table of Contents



OUTSTANDING
    EQUITY AWARDS AT FISCAL YEAR-END
  Stock AwardsEquityincentiveEquity


planOption Awards







incentive


awards:Equity













plan


Marketincentive













awards:


or payoutplan













Number of


value ofawards:










Market


unearned


unearnedNumber of


Number of


Number of







Number of


value of


shares,


shares,securities


securities


securities







shares or


shares or


units or


unitsunderlying


underlying


underlying







units of


units of


other


or otherexercised


exercised


unexercised


Option


Option

stock that


stock that


rights that


rights thatName and

options (#)


options (#)


unearned


exercise


expiration

have not


have not


have not


have notPrinciple Position

exercisable


unexercisable


options (#)


price ($)


date

vested (#)


vested ($)


vested (#)


vested ($)(a)

(b)


(c)


(d)


(e)


(f)

(g)


(h)


(i)


(j)William H. Burns, Jr.
    Chairman, President 
    and CEO


566,666



33,334







1.40


(1)














269,166



15,834







1.40


(2)














41,667











1.95


12/31/2009














84,500











4.25


9/30/2008






















338,000



4.25


(3)






















422,500



4.25


(4)














Total


928,665



82,502



760,500John C. McNeirney
    Senior Vice
    President and CTO


96,000











1.40


(5)














25,000











2.40


7/1/10














5,000











1.65


1/2/07














12,500











1.40


7/1/10














10,000











4.25


9/30/08






















25,000



4.25


(3)






















65,000



4.25


(4)














Total


148,500







90,000Kirk D. Kamsler
    Senior Vice President
    of Commercial
    Development


132,500











1.40


(6)














5,000











1.90


9/30/10














20,000











4.25


9/30/08






















50,000



4.25


(3)






















30,000



4.25


(4)














Total


157,500







80,000William L. Bednarski
    President and CFO
































     (1)
    
    Mr. Burns 600,000 options vest monthly at a rate of
    16,667 options per month during the period from May 2004 to
    April 1, 2007. These options expire five years after
    vesting.(2)
    
    Mr. Burns 285,000 options vest monthly at a rate of
    7,917 options per month during the period from March 1,
    2004 to February 1, 2007. These options expire five years
    after vesting.(3)
    
    Performance options that are not exercisable by the option
    expiration date of September 30, 2007. The options will
    expire two years after vesting. 56




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##### Table of Contents



(4)
    
    Performance options that are not expected to vest by the
    deadline of September 30, 2007. The options are expected to
    be forfeited.(5)
    
    Mr. McNeirney has 96,000 options, of which 48,000 will
    expire April 30, 2010 and 48,000 will expire April 30,
    2011.(6)
    
    Mr. Kamsler has 132,500 options, of which 66,250 will
    expire April 30, 2010 and 66,250 will expire April 30,
    2011.    Employment
    Agreements and Management Compensation
  William H. Burns, Jr.
  John McNeirney.
  William L. Bednarski . year-over-year
    Director
    Compensation
   57




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##### Table of Contents



Non-qualifiedFees earned











deferredor paid


Stock





Non-equity


compensation


All otherin cash


awards


Option awards


incentive plan


earnings


compensation


TotalName

($)


($)


($)(a)


compensation


($)


($)


($)Duane Hopper


9,000



9,000



6,905















24,905Dave DiGiacinto


6,500



6,500



6,905















19,905David Donaldson


6,500



6,500



6,905















19,905John Rousseau


6,250



6,250



6,905















19,405Robert Lifeso


5,750



5,750



6,905















18,405Donald Farley


3,500



3,500



6,905















13,905     (a)
    
    During the year ended December 31, 2006, the Company
    granted performance based options that are exercisable upon the
    Company meeting certain milestone performance thresholds.
    Management has determined the probability of achieving these
    milestones by the option expiration date of September 30,
    2007 and valued them accordingly (See Note 9 of the
    Financial Statements). Options which management believes will
    not be earned prior to the deadline of September 30, 2007
    are not valued and are not included.  Compensation
    Philosophy
            Item 11.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters.  Security
    Ownership of Certain Beneficial Owners and Management
     58




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##### Table of Contents



Number ofName of Beneficial Owner

Shares


PercentBeneficial owners of 5% of our
    common stock & affiliates(1)Kevin Kimberlin Partners
    L.P.(2)


8,390,905



16.5
%Laird Q. Cagan(3)


5,783,833



11.9
%New England Partners Capital
    LLC(4)


3,980,392



8.5
%Wellington Management Company,
    LLP(5)


2,949,800



6.3
%Aisling Capital II
    L.P.(6)


2,603,000



5.5
%HealthCor Management L.P.(7)


2,400,000



5.1
%Sub-Total for all 5%
    owners & affiliates


26,107,930



49.8
%Directors & executive
    officers(8)William H.
    Burns, Jr.(9)


2,421,465



5.0
%David DiGiacinto(10)


53,114



0.1
%David Donaldson(11)


53,150



0.1
%Donald F. Farley(12)


293,132



0.6
%Duane Hopper(13)


138,433



0.3
%Robert Lifeso(14)


741,189



1.6
%John Rousseau(15)


64,268



0.1
%William Rolfe(16)


20,298



0.0
%Kirk Kamsler(17)


191,854



0.4
%John McNeirney(18)


218,753



0.5
%Richard Tamulski(19)


90,298



0.2
%All directors and executive
    officers as a group (11 persons)(20)


4,285,954



8.8
%     (1)
    
    Excludes William H. Burns, Jr., our Chairman and Chief Executive
    Officer, who beneficially owned more than 5% of our common
    stock. Information with respect to Mr. Burns
    beneficial ownership of our common stock is included below under
    the caption Directors & executive officers.(2)
    
    Includes (i) 4,535,500 shares held by Kevin Kimberlin
    Partners L.P. (KKP) and various affiliates,
    (ii) 3,855,405 shares of common stock that KKP or its
    affiliates has the right to acquire by exercising warrants that
    are exercisable within 60 days of February 15, 2007.
    Kevin Kimberlin, the General Partner of KKP & its
    affiliates. Address: 535 Madison Ave. NY, NY 10022(3)
    
    Includes (i) 4,037,337 shares held directly by
    Mr. Cagan, (ii) 249,100 shares held by Cagan
    McAfee Capital Partners, LLC, an entity in which Mr. Cagan
    owns a 50% interest and shares voting and dispositive power,
    (iii) 1,472,396 shares that Mr. Cagan has the
    right to acquire by exercising warrants that were exercisable
    within 60 days of Feb. 15, 2007 and
    (iv) 25,000 shares that Mr. Cagan has the right
    to acquire by exercising options that were exercisable within
    60 days of Feb. 15, 2007. Address C/O Cagan McAfee Capital
    Partners, LLC 10600 N. DeAnza Blvd. Suite 250, Cupertino,
    CA 95014(4)
    
    Address: One Boston Place, Suite 3630 Boston, Massachusetts
    02108(5)
    
    Address: 75 State St. Boston, MA 02109(6)
    
    Includes 2,603,000 shares held by Aisling
    Capital II, LP, a Delaware limited partnership
    (Aisling), Aisling Capital Partners, LP, a
    Delaware limited partnership (Aisling Partners and
    general partner of Aisling), Aisling Capital Partners, LLC,
    a Delaware limited liability company (Aisling
    Partners GP and general 59




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##### Table of Contents



partner of Aisling Partners), Mr. Dennis Purcell
    (Mr. Purcell and a managing member of Aisling
    Partners GP), Mr. Andrew Schiff
    (Mr. Schiff and a managing member of Aisling
    Partners GP), and Mr. Steve Elms
    (Mr. Elms and a managing member of Aisling
    Partners GP). In their capacity as managing members of
    Aisling Partners GP, each of Messrs. Purcell, Schiff
    and Elms may be deemed to be beneficial owners of the securities
    held for the account of Aisling. Address 888
    7th
    Ave.,
    30th
    Floor, New York, NY 10106.  (7)
    
    Includes 2,400,000 shares held by HealthCor Management L.P.
    Address: Carnegie Hall Tower, 152 West 57th Street, 47th Floor
    New York, NY 10019(8)
    
    The address for all directors and executive officers is: 50
    Cobham Dr. Orchard Park, NY 14127(9)
    
    Includes (i) 1,410,298 shares held by Mr. Burns
    and (ii) 1,011,167 shares that Mr. Burns has the
    right to acquire pursuant to options that were exercisable
    within 60 days of Feb 15, 2007.(10)
    
    Includes (i) 1,614 common shares held by
    Mr. DiGiacinto and (ii) 51,500 shares that
    Mr. DiGiacinto has the right to acquire pursuant to options
    that were exercisable within 60 days of Feb. 15, 2007.
    Mr. DiGiacinto is a Senior Managing Director of Spencer
    Trask Specialty Group, LLC.(11)
    
    Includes (i) 1,650 common shares held by Mr. Donaldson
    and (ii) 51,500 shares that Mr. Donaldson has the
    right to acquire pursuant to options that were exercisable
    within 60 days of Feb. 15, 2007.(12)
    
    Includes (i) 219,560 shares held by Mr. Farley,
    (ii) 22,072 shares that Mr. Farley has the right
    to acquire pursuant to outstanding warrants that were
    exercisable within 60 days of Feb 15, 2007 and
    (iii) 51,500 shares that Mr. Farley has the right
    to acquire pursuant to outstanding options that were exercisable
    within 60 days of Feb. 15, 2007.(13)
    
    Includes (i) 86,933 shares held by Mr. Hopper and
    (ii) 51,500 shares that Mr. Hopper has the right
    to acquire pursuant to options that were exercisable within
    60 days of Feb. 15, 2007.(14)
    
    Includes (i) 639,689 shares held by Dr. Lifeso
    and (ii) 101,500 shares that Dr. Lifeso has the
    right to acquire pursuant to options that were exercisable
    within 60 days of Feb. 15, 2007.(15)
    
    Includes (i) 12,768 shares held by Mr. Rousseau
    and (ii) 51,500 shares that Mr. Rousseau has the
    right to acquire pursuant to options that were exercisable
    within 60 days of Feb. 15, 2007. Does not include the
    3,980,392 shares described in footnote (4) above, with
    respect to which Mr. Rousseau, as Managing General Partner
    of NEP, does not hold sole voting and dispositive power.(16)
    
    Includes (i) 298 shares held by Mr. Rolfe and
    (ii) 20,000 shares that Mr. Rolfe has the right
    to acquire pursuant to options that were exercisable within
    60 days of Feb 15, 2007.(17)
    
    Includes (i) 34,354 shares held by Mr. Kamsler,
    and (ii) 157,500 shares that Mr. Kamsler has the
    right to acquire pursuant to options that were exercisable
    within 60 days of Feb. 15, 2007.(18)
    
    Includes (i) 70,253 shares held by Mr. McNeirney
    and (ii) 148,500 shares that Mr. McNeirney has
    the right to acquire pursuant to options that were exercisable
    within 60 days of Feb. 15, 2007.(19)
    
    Includes (i) 10,298 shares held by Mr. Tamulski
    and (ii) 80,000 shares that Mr. Tamulski has the
    right to acquire pursuant to options that were exercisable
    within 60 days of Feb 15, 2007.(20)
    
    Officers & Directors as a group includes
    (i) 2,487,715 common stock held, (ii) warrants to
    acquire 22,072 common stock, and (iii) 1,776,167 options to
    purchase common stock that were exercisable by members of the
    group within 60 days of Feb. 15, 2007.  Item 12.
    Certain
    Relationships and Related Transactions.  Funding arrangements with Cagan McAfee Capital Partners, LLC
    and related parties
    
    payment of a management fee equal to 2% of the proceeds raised
    by Minrad Inc, during the term of the agreement in any equity
    transaction; 60




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##### Table of Contents




    payment of an advisory fee equal to 8% of the proceeds of any
    equity funding transaction lead managed directly by CMCP or by a
    third party engaged by CMCP;
    grant of investment warrants, exercisable for a period of seven
    years, to purchase a number of shares of Minrad, Inc. common
    stock equal to 10% of the number of shares sold in any equity
    funding lead managed by CMCP or by a third party engaged by
    CMCP, with the warrants to be exercisable at the same price as
    the shares were sold in the equity funding; and
    grant of incentive warrants, exercisable for a period of two
    years, to purchase up to 5,000,000 shares of Minrad Inc.
    common stock at an exercise price of $0.001 per share.    Form 8-K
         61




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##### Table of Contents



Financing
    Arrangements with Spencer Trask Specialty Group LLC
    
    Minrad Inc. repaid $457,482 under a $750,000 convertible
    promissory note held by Spencer Trask that was due in March 2004
    and accrued interest at the rate of 8%. Spencer Trask sold the
    unpaid balance of $292,518 on the note to a third party which
    exchanged the note with Minrad Inc. for 390,024 shares of
    common stock at a rate of $.75 per share.
    Minrad Inc. repaid the outstanding principal and accrued
    interest on a $75,000 convertible promissory note held by
    Spencer Trask which accrued interest at the rate of 10% and was
    past due. 62




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##### Table of Contents




    Minrad Inc. repaid the outstanding principal and accrued
    interest on a $250,000 convertible promissory note held by
    Spencer Trask, which accrued interest at the rate of 10% and was
    past due.
    Minrad Inc. repaid the outstanding principal and accrued
    interest on a $500,000 convertible promissory note held by
    Spencer Trask, which accrued interest at the rate of 10% and was
    past due.       Item 13.  Exhibits.  Form 10-KSB:
  3.1


Articles of Incorporation of
    Minrad International, Inc. (incorporated by reference to
    Exhibit 3.1 to
    Form SB-2
    filed on July 1, 2005)3.2


Certificate of Designations of
    Minrad International, Inc. (incorporated by reference to
    Exhibit 99.2 to
    form 8-K
    filed on June 14, 2005)3.3


Bylaws of Minrad International,
    Inc. (incorporated by reference to Appendix E to definitive
    Proxy Statement as filed under Schedule 14A on
    April 6, 2005)4.1


Note Subscription Agreement,
    dated February 8, 2005, relating to the sale of
    $1.5 million of Convertible Promissory Notes and Warrants
    to Tobin Family Trust (incorporated by reference to
    Exhibit 99.1 to
    Form 8-K
    filed on February 14, 2005)4.2


Note Subscription Agreement,
    dated February 8, 2005, relating to the sale of
    $1 million of Convertible Promissory Notes and Warrants to
    Laird Q. Cagan (incorporated by reference to Exhibit 99.2
    to
    Form 8-K
    filed on February 14, 2005)4.3


Form of Convertible Promissory
    Note, dated February 8, 2005, used in connection with the
    sale of an aggregate of $2.5 million of Convertible
    Promissory Notes and Warrants (incorporated by reference to
    Exhibit 99.3 to
    Form 8-K
    filed on February 14, 2005)4.4


Form of Warrant, dated
    February 8, 2005, used in connection with the sale of an
    aggregate of $2.5 million of Convertible Promissory Notes
    and Warrants (incorporated by reference to Exhibit 99.4 to
    Form 8-K
    filed on February 14, 2005)4.5


Form of Registration Rights
    Agreement, dated February 8, 2005, used in connection with
    the sale of an aggregate of $2.5 million of Convertible
    Promissory Notes and Warrants (incorporated by reference to
    Exhibit 99.5 to
    Form 8-K
    filed on February 14, 2005)4.6


Form of Guaranty, dated
    February 8, 2005, used in connection with the sale of an
    aggregate of $2.5 million of Convertible Promissory Notes
    and Warrants (incorporated by reference to Exhibit 99.6 to
    Form 8-K
    filed on February 14, 2005)4.7


Amendment To Convertible
    Promissory Notes dated as of May 11, 2005, between and
    among Minrad International, Inc., Laird Cagan and the Morrie
    Tobin Family Trust (incorporated by reference to
    Exhibit 10.9 to
    Form 10-QSB
    on May 13, 2005)4.8


Securities Purchase Agreement
    dated as of June 8, 2005, by and among Minrad
    International, Inc. an the purchasers listed therein
    (incorporated by reference to Exhibit 99.1 to
    form 8-K
    filed on June 14, 2005)4.9


Form of Warrant dated June 8,
    2005 (incorporated by reference to Exhibit 99.3 to
    form 8-K
    filed on June 14, 2005) 63




---



##### Table of Contents



4.10


Registration Rights Agreement
    dated June 8, 2005 (incorporated by reference to
    Exhibit 99.4 to
    form 8-K
    filed on June 14, 2005)4.11


Securities Purchase Agreement
    dated as of June 17, 2005, by and among Minrad
    International, Inc. and the investors listed therein
    (incorporated by reference to Exhibit 99.1 to
    Form 8-K
    filed on June 21, 2005)4.12


Form of Warrant, dated as of
    June 21, 2005, issued to Buyers under Securities Purchase
    Agreement of the same date by Minrad International, Inc.
    (incorporated by reference to Exhibit 99.3 to
    Form 8-K
    filed on June 21, 2005)4.13


Registration Rights Agreement,
    dated as of June 17, 2005, between Minrad International,
    Inc. and Buyers under Stock Purchase Agreement of the same date
    (incorporated by reference to Exhibit 99.4 to
    Form 8-K
    filed on June 21, 2005)4.14


Securities Purchase Agreement
    Securities Purchase Agreement dated as of June 28, 2005,
    among Minrad International, Inc. and the investors listed
    therein (incorporated by reference to Exhibit 10.8 to
    Form 10-QSB
    filed August 5, 2005)4.15


Form of Warrant dated
    June   , 2005 (incorporated by reference to
    Exhibit 10.9 to
    Form 10-QSB
    filed August 5, 2005)4.16


Registration Rights Agreement
    dated June 28, 2005 (incorporated by reference to
    Exhibit 10.10 to
    Form 10-QSB
    filed August 5, 2005)4.17


Form of Stock Option Agreement,
    dated December 15, 2004, by and among the Registrant,
    Minrad Inc., Cagan McAfee Capital Partners, LLC, Liviakis
    Financial Communications, Inc., Laird Q. Cagan, Eric McAfee and
    the Tobin Family Trust (incorporated by reference to
    Exhibit 4.2 to
    Form 8-K
    filed on December 21, 2004)10.1


Employment Agreement of William H.
    Burns, Jr., dated October 31, 2006 (incorporated by
    reference to Exhibit 10.1 to
    Form 8-K
    filed on November 6, 2006)10.2


Employment Agreement of John
    McNeirney, dated March 29, 2004 (incorporated by reference
    to Exhibit 10.2 to
    Form 8-K
    filed on December 21, 2004)10.3


Amendment to Employment Agreement
    between Minrad, Inc. and John McNeirney dated November 14,
    2005 (incorporated by reference to exhibit 10.1 to
    Form 8-K
    file November 17, 2005)10.4


Separation Agreement, Waiver and
    Release with William L. Bednarski, dated August 28, 2006
    (incorporated by reference to Exhibit 10.1 to
    Form 8-K
    filed on August 28, 2006).10.5


Supply Agreement, effective
    February 11, 2005, between Minrad EU and Merk Generiques
    (incorporated by reference to Exhibit 10.1 to
    Form 8-K
    filed on February 24, 2005)10.6


Minrad Inc. Patents and Inventions
    Policy (incorporated by reference to Exhibit 10.6 to
    Form 10-KSB
    filed on March 31, 2005)10.7


Minrad International, Inc. 2004
    Stock Option Plan (incorporated by reference to Appendix C
    to Schedule 14C filed on September 16, 2004)10.8


Minrad International, Inc. Code of
    Ethics for senior financial officers10.9


Exclusive Distribution Agreement
    effective June 9, 2004 between Minrad, Inc., and RxElite
    Holdings Inc. (incorporated by reference to Exhibit 10.8 to
    Form 10-QSB
    on May 13, 2005), amended on June 15, 2006
    (incorporated by reference to Exhibit 1.01, filed on
    June 20, 2006)10.10


Lease between Peter L. Krog and
    the Company dated as of October 20, 2005 (incorporated by
    reference to Exhibit 10.12 to
    Form 10-QSB
    filed November 14, 2005)10.11


Credit Agreement with KeyBank
    National Association dated December 21, 2005. (incorporated
    by reference to Exhibit 10.16 to
    Form 10-KSB
    filed on March 29, 2006)10.12


Form of Milestone Stock Option
    Agreement to be used in connection with stock options approved
    on April 21, 2005 (incorporated by reference to
    Exhibit 10.1 to
    Form 8-K
    filed April 27, 2005)10.13


Milestone Option Agreement
    (incorporated by reference to Exhibit 10.01 to
    Form 8-K
    filed August 17, 2006)10.14


Supply Agreement, dated as of
    February 17, 2005, by and between Minrad Inc. and Merck
    Génériques (incorporated by reference to
    Exhibit 10.1 to
    Form 8-K
    filed February 24, 2005)10.15


Amended Advisory Consulting
    Agreement between Minrad International and International Capital
    Advisory (incorporate by reference to Exhibit 10.1 to
    Form 8-K
    filed November 1, 2006) 64




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##### Table of Contents



21


Subsidiaries of the Registrant
    (incorporated by reference to Exhibit 21 to
    Form 10-KSB
    filed on March 31, 2005)23.1
*

Consent of Freed Maxick &
    Battaglia, CPAs, PC31.1
*

Certification of Principal
    Executive Officer Pursuant to
    Rules 13a-14(a)/15d-14(a)
    under the Securities Exchange Act of 1934, as amended31.2
*

Certification of Principal
    Financial Officer Pursuant to
    Rules 13a-14(a)/15d-14(a)
    under the Securities Exchange Act of 1934, as amended32.1
*

Certifications Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    Filed herewith Item 14.  Principal
    Accountant Fees and Services.  Fees of
    Independent Public Accountants
    Audit Fees. Form 10-KSB, Form 10-QSB
  Audit-Related Fees. Form 8-K Form 8-K/A.
  Tax Fees.
  All Other Fees.
  Pre-approval Policy for Audit and Non-Audit
    Services.
 65




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##### Table of Contents



Signatures
  Form 10-KSB
  Date: March 29, 2007

MINRAD INTERNATIONAL, INC.By: /s/  William
    H. Burns, Jr.William
    H. Burns, Jr., Chief Executive Officer   Form 10-KSB
  Signature/Title

Date(i) Principal Executive
    Officer:/s/  William
    H. Burns, Jr.William
    H. Burns, Jr./CEO

March 29, 2007(ii) Principal Financial
    Officer:/s/  William
    RolfeWilliam
    Rolfe/Controller and Interim CFO

March 29, 2007(iv) Directors:/s/  William
    H. Burns,
    Jr.William
    H. Burns, Jr./Director

March 29, 2007/s/  David
    DiGiacintoDavid
    DiGiacinto/Director

March 29, 2007/s/  David
    DonaldsonDavid
    Donaldson/Director

March 29, 2007/s/  Donald
    F.
    FarleyDonald
    Farley/Director

March 29, 2007/s/  Duane
    HopperDuane
    Hopper/Director

March 29, 2007Robert
    Lifeso/Director/s/  John
    RousseauJohn
    Rousseau/Director

March 29, 2007/s/  Theodore
    StanleyTheodore
    Stanley/Director

March 29, 2007/s/  Brett
    ZbarBrett
    Zbar/Director

March 29, 2007  66