UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549









FORM
10-Q







x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended September 30,
2009




OR




o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from _________to
_________




Commission
File Number: 333-145507




OMNIMMUNE
HOLDINGS, INC.


(Exact
name of registrant as specified in its charter)




Delaware
              
              26-3128407(State
      or other jurisdiction of incorporation or organization)
              
              (I.R.S.
      Employer Identification No.)




4600 Post Oak Place, Suite 352, Houston,
      Texas
              
              77027(Address
      of principal executive offices)
              
              (Zip
      Code)




(713)
622-8400


(Registrant’s
telephone number, including area code)




N/A


(Former
name, former address and former fiscal year, if changed since last
report)




Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.  Yes x No o




Indicate
by check mark whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the Registrant
was required to submit and post such
files).    Yes   ̈    No   ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.




Large accelerated filer o
            Accelerated filer
      o
            Non-accelerated filer
      o
            Smaller reporting company
      x




Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes oNo x




As of
November 16, 2009 there 8,914,921  shares of the issuer’s common stock
outstanding.




Table of Contents




OMNIMMUNE
HOLDINGS, INC. and Subsidiaries


Quarterly
Report on Form 10-Q




TABLE OF CONTENTS




PagePART
      I - FINANCIAL INFORMATIONItem
      1.
              Financial
      Statements
              4Consolidated Balance Sheets as of
      September 30, 2009 and December 31, 2008
              4Consolidated Statements of
      Operations for the three and nine months ended September 30, 2009 and
      September 30,2008
              5Consolidated Statements of
      changes in Stockholders’ Deficiency as of  September 30,
      2009
              6Consolidated Statements of
      Cash Flows for the nine months ended September 30, 2009 and September 30,
      2008
              18Notes to Consolidated
      Financial Statements
              20Item
      2.
              Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations
              37Item
      3.
              Quantitative and Qualitative
      Disclosures About Market Risk
              42Item
      4.
              Controls and
      Procedures
              43PART
      II - OTHER INFORMATIONItem
      1.
              Legal
      Proceedings
              43Item
      1A.
              Risk
      Factors
              43Item
      2.
              Unregistered Sales of Equity
      Securities and Use of Proceeds
              46Item
      3.
              Defaults Upon Senior
      Securities
              46Item
      4.
              Submission of Matters to a Vote
      of Security Holders
              46Item
      5.
              Other
      Information
              46Item
      6.
              Exhibits
              46




Table of Contents




EXPLANATORY
NOTE




Unless
otherwise indicated or the context otherwise requires, all references below in
this Current Report to “we,” “us,” “our” and the “Company” are to Omnimmune
Holdings, Inc., a Delaware corporation.  Omnimmune Holdings, Inc. was
originally incorporated on February 22, 2007, in the State of Nevada under the
name Roughneck Supplies, Inc., and upon a merger with and into Omnimmune
Holdings, Inc. effective August 6, 2008, the Company changed its domicile to
Delaware.  Further, on August 7, 2008, Omnimmune Corp., a Texas
corporation, merged with and into the Company’s wholly owned subsidiary and
Delaware Corporation, Omnimmune Acquisition Corp., after which Omnimmune
Acquisition Corp. changed its name to Omnimmune Corp. (the
“Merger”).  Prior to the Merger, the Company was a shell company and
Omnimmune Corp. was considered the acquirer for accounting purposes in the
transaction.  As a result the historical financial statements included
in this report are those of Omnimmune Corp., the Texas
Corporation.  Unless otherwise indicated, all financial and business
information contained in this Current Report relates exclusively to the business
and financial affairs of Omnimmune Holdings, Inc. and its
subsidiaries.




Table of Contents




PART
I - FINANCIAL INFORMATION




ITEM 1.
            FINANCIAL
      STATEMENTS





OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
BALANCE SHEETS


September
      30,
                            December
      31,2009
                            
                            
                            2008Assets
                            
                            (Unaudited)
                            
                            
                            (Audited)Current
      assetsCash
      and cash equivalents
                            
                            $
                            -
                            
                            
                            $
                            52,615Prepaid
      insurance
                            
                            
                            35,589
                            
                            
                            
                            -Total
      current assets
                            
                            $
                            35,589
                            
                            
                            $
                            52,615Liabilities
      and stockholders' deficiencyCurrent
      liabilitiesCash
      overdraft
                            
                            $
                            6,330
                            
                            
                            $
                            -Accounts
      payable and accrued liabilities
                            
                            
                            845,062
                            
                            
                            
                            471,775Line
      of credit
                            
                            
                            253,508
                            
                            
                            
                            259,157Accrued
      interest
                            
                            
                            280,198
                            
                            
                            
                            192,380Cash
      advance
                            
                            
                            230,400
                            
                            
                            
                            100,000Notes
      payable - current portion , net
                            
                            
                            987,046
                            
                            
                            
                            -Accounts
      payable and accrued liabilities-related party
                            
                            
                            900,988
                            
                            
                            
                            351,748Accrued
      interest- related party
                            
                            
                            481,755
                            
                            
                            
                            424,210Notes
      payable due to related parties, net
                            
                            
                            -
                            
                            
                            
                            287,768Total
      current liabilities
                            
                            
                            3,985,287
                            
                            
                            
                            2,087,038Long
      term portion of notes payable - net
                            
                            
                            22,235
                            
                            
                            
                            709,035Long
      term portion of notes payable, due to related parties, net
                            
                            
                            1,002,631
                            
                            
                            
                            1,000,864Total
      liabilities
                            
                            
                            5,010,153
                            
                            
                            
                            3,796,937Commitments
      and contingencies
                            
                            
                            -
                            
                            
                            
                            -Stockholders'
      deficiencyCommon
      stock, $0.0001 par value; 50,000,000 shares authorized;8,914,921
      and 8,814,921 shares issued and outstandingfor
      at September 30, 2009 and December 31, 2008, respectively
                            
                            
                            890
                            
                            
                            
                            880Additional
      paid-in capital
                            
                            
                            15,660,986
                            
                            
                            
                            15,592,797Common
      stock subscribed
                            
                            
                            1,137
                            
                            
                            
                            -Deficit
      accumulated during the development stage
                            
                            
                            (20,637,577
                            )
                            
                            
                            (19,337,999
                            )Total
      stockholder's deficiency
                            
                            
                            (4,974,564
                            )
                            
                            
                            (3,744,322
                            )$
                            35,589
                            
                            
                            $
                            52,615




4
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED STATEMENTS OF OPERATIONS


(Unaudited)








Cumulative
      fromInception(January
      15, 1997)For
      the ThreeMonths Ended September
      30,
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                For
      the NineMonths Ended September
      30,
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                to
      September 30,2009
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                2008
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                2009
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                2008
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                2009Revenue
                                                                                                                
                                                                                                                $
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                $
                                                                                                                -Operating
      expenses:General and administrative expenses
                                                                                                                
                                                                                                                
                                                                                                                401,300
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                885,583
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                1,123,207
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                5,044,618
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                13,640,216Impairment
      of license agreement
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                1,701,936Total
      operating expenses
                                                                                                                
                                                                                                                
                                                                                                                401,300
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                885,583
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                1,123,207
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                5,044,618
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                15,342,152Operating
      loss
                                                                                                                
                                                                                                                
                                                                                                                (401,300
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (885,583
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (1,123,207
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (5,044,618
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (15,342,152
                                                                                                                )Other
      expense:Interest  expense,
      net
                                                                                                                
                                                                                                                
                                                                                                                60,865
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                118,320
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                176,371
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                6,987,657
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                11,712,574Cancellation
      of shares previously issued for license agreement
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                (842,514
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (842,514
                                                                                                                )Gain
      (loss)  on restructuring of debt
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                10,000
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                (5,690,287
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (5,574,635
                                                                                                                )Total
      other  expense
                                                                                                                
                                                                                                                
                                                                                                                (60,865
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (128,320
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (176,371
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (454,856
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (5,295,425
                                                                                                                )Loss
      before income taxes
                                                                                                                
                                                                                                                
                                                                                                                (462,165
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (1,013,903
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (1,299,578
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (5,499,474
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (20,637,577
                                                                                                                )Provision
      for income taxes
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                -
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                -Net
      loss
                                                                                                                
                                                                                                                
                                                                                                                (462,165
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (1,013,903
                                                                                                                )
                                                                                                                
                                                                                                                
                                                                                                                (1,299,578
                                                                                                                )
                                                                                                                
                                                                                                                $
                                                                                                                (5,499,474
                                                                                                                )
                                                                                                                
                                                                                                                $
                                                                                                                (20,637,577
                                                                                                                )Net
      loss per share – basic
                                                                                                                
                                                                                                                $
                                                                                                                (0.05
                                                                                                                )
                                                                                                                
                                                                                                                $
                                                                                                                (0.14
                                                                                                                )
                                                                                                                
                                                                                                                $
                                                                                                                (0.15
                                                                                                                )
                                                                                                                
                                                                                                                $
                                                                                                                (1.08
                                                                                                                )Weighted
      average shares outstanding - basic
                                                                                                                
                                                                                                                
                                                                                                                8,830,143
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                7,245,256
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                8,820,054
                                                                                                                
                                                                                                                
                                                                                                                
                                                                                                                5,070,291




5
 Table of Contents





OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED STATEMENTS OF


CHANGES
IN STOCKHOLDERS' DEFICIENCY




Preferred
      Stock
                          
                          
                          Common
      StockShares
                          
                          
                          Value
                          
                          
                          Additional
      Paid-in Capital
                          
                          
                          Shares
                          
                          
                          Value
                          
                          
                          Additional
      Paid-in Capital
                          
                          
                          Common
                            Stock
                            Subscribed
                          
                          
                          Accumulated
                            Deficit
      During the Development Stage
                          
                          
                          Total
                            Stockholders
                            EquityBalance
      at January 15, 1997 (date of inception)
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -Contribution
      of assets and liabilities by founder
                          
                          
                          11,229
                          
                          
                          
                          112
                          
                          
                          
                          49,888
                          
                          
                          
                          1,055,507
                          
                          
                          
                          106
                          
                          
                          
                          43,466
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          43,572Beneficial
      conversion feature of note payable for the year ended December 31,
      1997
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          327,700
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          327,700Loss
      for the year ended December 31, 1997
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (1,366,300
                          )
                          
                          
                          (1,366,300
                          )Balance
      as of December 31, 1997
                          
                          
                          11,229
                          
                          
                          $
                          112
                          
                          
                          $
                          49,888
                          
                          
                          
                          1,055,507
                          
                          
                          $
                          106
                          
                          
                          $
                          371,166
                          
                          
                          $
                          -
                          
                          
                          $
                          (1,366,300
                          )
                          
                          $
                          (945,028
                          )Beneficial
      conversion feature of note payable for the year ended December 31,
      1998
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          43,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          43,000Loss
      for the year ended December 31, 1998
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (328,534
                          )
                          
                          
                          (328,534
                          )Balance
      as of December 31, 1998
                          
                          
                          11,229
                          
                          
                          $
                          112
                          
                          
                          $
                          49,888
                          
                          
                          
                          1,055,507
                          
                          
                          $
                          106
                          
                          
                          $
                          414,166
                          
                          
                          $
                          -
                          
                          
                          $
                          (1,694,834
                          )
                          
                          $
                          (1,230,562
                          )





6
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)




Preferred
      Stock
                    
                    
                    Common
      StockShares
                    
                    
                    Value
                    
                    
                    Additional
      Paid-in Capital
                    
                    
                    Shares
                    
                    
                    Value
                    
                    
                    Additional
      Paid-in Capital
                    
                    
                    Common
                      Stock
                      Subscribed
                    
                    
                    Accumulated
                        Deficit
      During the Development Stage
                    
                    
                    Total
                      Stockholders
                      EquityIssuance
      of 55,553 shares of common stock for technology license at $1.10 per
      share
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    55,553
                    
                    
                    
                    5
                    
                    
                    
                    61,837
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    61,842Issuance
      of 5,614 shares of convertible preferred stock at $4.45 per share to
      investors
                    
                    
                    5,614
                    
                    
                    
                    56
                    
                    
                    
                    24,944
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    25,000Issuance
      of 5,614 shares of convertible preferred stock at $4.45 per share to
      investors
                    
                    
                    5,614
                    
                    
                    
                    56
                    
                    
                    
                    24,944
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    25,000Issuance
      of 5,614 shares of convertible preferred stock at $4.45 per share to
      investors
                    
                    
                    5,614
                    
                    
                    
                    56
                    
                    
                    
                    24,944
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    25,000Issuance
      of 5,614 shares of convertible preferred stock at $4.45 per share to
      investors
                    
                    
                    5,614
                    
                    
                    
                    56
                    
                    
                    
                    24,944
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    25,000Beneficial
      conversion feature of note payable for the year ended December 31,
      1999
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    12,000
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    12,000




7
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)




Preferred
      Stock
                      
                      
                      Common
      StockShares
                      
                      
                      Value
                      
                      
                      Additional
      Paid-in Capital
                      
                      
                      Shares
                      
                      
                      Value
                      
                      
                      Additional
      Paid-in Capital
                      
                      
                      Common
                        Stock
                        Subscribed
                      
                      
                      Accumulated
                          Deficit
      During the Development Stage
                      
                      
                      Total
                        Stockholders
                        EquityLoss
      for the year ended December 31, 1999
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (429,692
                      )
                      
                      
                      (429,692
                      )Balance
      as of December 31, 1999
                      
                      
                      33,685
                      
                      
                      $
                      336
                      
                      
                      $
                      149,664
                      
                      
                      
                      1,111,060
                      
                      
                      $
                      111
                      
                      
                      $
                      488,003
                      
                      
                      $
                      -
                      
                      
                      $
                      (2,124,526
                      )
                      
                      $
                      (1,486,412
                      )Issuance
      of 5,614 shares of convertible preferred stock at $4.45 per share to
      investors
                      
                      
                      5,614
                      
                      
                      
                      56
                      
                      
                      
                      24,944
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      25,000Issuance
      of 11,229 shares of convertible preferred stock at $4.45 per share to
      investors
                      
                      
                      11,229
                      
                      
                      
                      112
                      
                      
                      
                      49,888
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      50,000Issuance
      of 5,614 shares of convertible preferred stock at $4.45 per share to
      investors
                      
                      
                      5,614
                      
                      
                      
                      56
                      
                      
                      
                      24,944
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      25,000Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant
      for
                        services
      rendered
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,807
                      
                      
                      
                      -
                      
                      
                      
                      6,250
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      6,250Beneficial
      conversion feature of note payable for the year ended December 31,
      2000
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      30,302
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      30,302Loss
      for the year ended December 31, 2000
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (422,306
                      )
                      
                      
                      (422,306
                      )Balance
      as of December 31, 2000
                      
                      
                      56,142
                      
                      
                      $
                      560
                      
                      
                      $
                      249,440
                      
                      
                      
                      1,113,867
                      
                      
                      $
                      111
                      
                      
                      $
                      524,555
                      
                      
                      $
                      -
                      
                      
                      $
                      (2,546,832
                      )
                      
                      $
                      (1,772,166
                      )




8
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)




Preferred
      Stock
                          
                          
                          Common
      StockShares
                          
                          
                          Value
                          
                          
                          Additional
      Paid-in Capital
                          
                          
                          Shares
                          
                          
                          Value
                          
                          
                          Additional
      Paid-in Capital
                          
                          
                          Common
                            Stock
                            Subscribed
                          
                          
                          Accumulated
                              Deficit
      During the Development Stage
                          
                          
                          Total
                            Stockholders
                            EquityIssuance
      of 1,055,507 shares of common stock at $2.24 per share in exchange
      for 2,500,000 shares in InVitro technology
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,055,507
                          
                          
                          
                          107
                          
                          
                          
                          59,894
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          60,001Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,807
                          
                          
                          
                          -
                          
                          
                          
                          6,250
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          6,250Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,807
                          
                          
                          
                          -
                          
                          
                          
                          6,250
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          6,250Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,807
                          
                          
                          
                          -
                          
                          
                          
                          6,250
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          6,250Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,807
                          
                          
                          
                          -
                          
                          
                          
                          6,250
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          6,250Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,807
                          
                          
                          
                          -
                          
                          
                          
                          6,250
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          6,250Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,807
                          
                          
                          
                          -
                          
                          
                          
                          6,250
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          6,250Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,807
                          
                          
                          
                          -
                          
                          
                          
                          6,250
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          6,250Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          2,807
                          
                          
                          
                          -
                          
                          
                          
                          6,250
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          6,250




9
 Table of Contents




OMNIMMUNE HOLDINGS,
INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)





Preferred
      Stock
                      
                      
                      Common
      StockShares
                      
                      
                      Value
                      
                      
                      Additional
      Paid-in Capital
                      
                      
                      Shares
                      
                      
                      Value
                      
                      
                      Additional
      Paid-in Capital
                      
                      
                      Common
                        Stock
                        Subscribed
                      
                      
                      Accumulated
                          Deficit
      During the Development Stage
                      
                      
                      Total
                        Stockholders
                        EquityIssuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,807
                      
                      
                      
                      -
                      
                      
                      
                      6,250
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      6,250Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,807
                      
                      
                      
                      -
                      
                      
                      
                      6,250
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      6,250Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,807
                      
                      
                      
                      -
                      
                      
                      
                      6,250
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      6,250Issuance
      of 2,807 shares of common stock at $2.24 per share to a consultant for
      services rendered
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      2,807
                      
                      
                      
                      -
                      
                      
                      
                      6,250
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      6,250Issuance
      of 60,665 shares of common stock at $2.24 per share for a technology
      license
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      60,665
                      
                      
                      
                      7
                      
                      
                      
                      135,060
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      135,067Issuance
      of 5,614 shares of convertible preferred stock at $4.45 per share to
      investors
                      
                      
                      5,614
                      
                      
                      
                      56
                      
                      
                      
                      24,944
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      25,000Issuance
      of 5,614 shares of convertible preferred stock at $4.45 per share to
      investors
                      
                      
                      5,614
                      
                      
                      
                      56
                      
                      
                      
                      24,944
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      25,000Issuance
      of 7,018 shares of common stock at $2.24 per share to a consultant for
      services rendered
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      7,018
                      
                      
                      
                      2
                      
                      
                      
                      15,624
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      15,626Value
      of 14,036 warrants issued to consultants
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      15,500
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      15,500Beneficial
      conversion feature of note payable for the year ended December 31,
      2001
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      25,000
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      25,000Loss
      for the year ended December 31, 2001
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (959,531
                      )
                      
                      
                      (959,531
                      )Balance
      as of December 31, 2001
                      
                      
                      67,370
                      
                      
                      $
                      672
                      
                      
                      $
                      299,328
                      
                      
                      
                      2,270,741
                      
                      
                      $
                      227
                      
                      
                      $
                      850,633
                      
                      
                      $
                      -
                      
                      
                      $
                      (3,506,363
                      )
                      
                      $
                      (2,355,503
                      )




10
 Table of Contents





OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)




Preferred
      Stock
                    
                    
                    Common
      StockShares
                    
                    
                    Value
                    
                    
                    Additional
      Paid-in Capital
                    
                    
                    Shares
                    
                    
                    Value
                    
                    
                    Additional
      Paid-in Capital
                    
                    Common
                      Stock
                      Subscribed
                    
                    Accumulated
                        Deficit
      During the Development Stage
                    
                    
                    Total
                      Stockholders
                      EquityIssuance
      of 1,123 shares of convertible preferred stock at $4.45 per share to
      investors
                    
                    
                    1,123
                    
                    
                    
                    11
                    
                    
                    
                    4,989
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    -
                    
                    
                    -
                    
                    
                    
                    5,000Conversion
      of 11,229 shares convertible preferred stock into 44,915 shares of common
      stock at $2.24 per share
                    
                    
                    (11,229
                    )
                    
                    
                    (112
                    )
                    
                    
                    (49,888
                    )
                    
                    
                    44,915
                    
                    
                    
                    4
                    
                    
                    
                    49,996
                    
                    -
                    
                    
                    -
                    
                    
                    
                    -Conversion
      of 5,614 shares convertible preferred stock into 11,229 shares of common
      stock at $2.22 per share
                    
                    
                    (5,614
                    )
                    
                    
                    (56
                    )
                    
                    
                    (24,944
                    )
                    
                    
                    11,229
                    
                    
                    
                    2
                    
                    
                    
                    24,998
                    
                    -
                    
                    
                    -
                    
                    
                    
                    -Conversion
      of 5,614 shares convertible preferred stock into 11,229 shares of common
      stock at $2.22 per share
                    
                    
                    (5,614
                    )
                    
                    
                    (56
                    )
                    
                    
                    (24,944
                    )
                    
                    
                    11,229
                    
                    
                    
                    2
                    
                    
                    
                    24,998
                    
                    -
                    
                    
                    -
                    
                    
                    
                    -Conversion
      of 5,614 shares convertible preferred stock into 11,229 shares of common
      stock at $2.22 per share
                    
                    
                    (5,614
                    )
                    
                    
                    (56
                    )
                    
                    
                    (24,944
                    )
                    
                    
                    11,229
                    
                    
                    
                    1
                    
                    
                    
                    24,999
                    
                    -
                    
                    
                    -
                    
                    
                    
                    -Conversion
      of 16,843 shares convertible preferred stock into 33,686 shares of common
      stock at $2.24 per share
                    
                    
                    (16,843
                    )
                    
                    
                    (56
                    )
                    
                    
                    (74,832
                    )
                    
                    
                    33,686
                    
                    
                    
                    3
                    
                    
                    
                    74,997
                    
                    -
                    
                    
                    -
                    
                    
                    
                    -




11
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)





Preferred
      Stock
                          
                          
                          Common
      StockShares
                          
                          
                          Value
                          
                          
                          Additional
      Paid-in Capital
                          
                          
                          Shares
                          
                          
                          Value
                          
                          
                          Additional
      Paid-in Capital
                          
                          
                          Common
                            Stock
                            Subscribed
                          
                          
                          Accumulated
                              Deficit
      During the Development Stage
                          
                          
                          Total
                            Stockholders
                            EquityConversion
      of 16,843 shares convertible preferred stock into 33,686 shares of common
      stock at $2.24 per share
                          
                          
                          (16,843
                          )
                          
                          
                          (168
                          )
                          
                          
                          (74,832
                          )
                          
                          
                          33,686
                          
                          
                          
                          3
                          
                          
                          
                          74,997
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Conversion
      of 5,614 shares convertible preferred stock into 11,229 shares of common
      stock at $2.22 per share
                          
                          
                          (5,614
                          )
                          
                          
                          (168
                          )
                          
                          
                          (24,944
                          )
                          
                          
                          11,229
                          
                          
                          
                          1
                          
                          
                          
                          24,999
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Conversion
      of 1,123 shares convertible preferred stock into 2,246 shares of common
      stock at $2.24 per share
                          
                          
                          (1,122
                          )
                          
                          
                          (11
                          )
                          
                          
                          (4,989
                          )
                          
                          
                          2,246
                          
                          
                          
                          -
                          
                          
                          
                          5,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -Beneficial
      conversion feature of note payable for the year ended December 31,
      2002
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,175,356
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,175,356Loss
      for the year ended December 31, 2002
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (3,061,599
                          )
                          
                          
                          (3,061,599
                          )Balance
      as of December 31, 2002
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          2,430,190
                          
                          
                          $
                          243
                          
                          
                          $
                          2,330,973
                          
                          
                          $
                          -
                          
                          
                          $
                          (6,567,962
                          )
                          
                          $
                          (4,236,746
                          )





12
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)




Preferred
      Stock
                          
                          
                          Common
      StockShares
                          
                          
                          Value
                          
                          
                          Additional
      Paid-in Capital
                          
                          
                          Shares
                          
                          
                          Value
                          
                          
                          Additional
      Paid-in Capital
                          
                          
                          Common
                            Stock
                            Subscribed
                          
                          
                          Accumulated
                              Deficit
      During the Development Stage
                          
                          
                          Total
                            Stockholders
                            EquityBeneficial
      conversion feature of note payable for the year ended December 31,
      2003
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          29,401
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          29,401Loss
      for the year ended December 31, 2003
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (540,986
                          )
                          
                          
                          (540,986
                          )Balance
      as of December 31, 2003
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          2,430,190
                          
                          
                          $
                          243
                          
                          
                          $
                          2,360,374
                          
                          
                          $
                          -
                          
                          
                          $
                          (7,108,948
                          )
                          
                          $
                          (4,748,331
                          )Issuance
      of 1,404 shares of common stock at $2.24 to a consultant for services
      rendered
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,404
                          
                          
                          
                          -
                          
                          
                          
                          3,125
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          3,125Issuance
      of 1,404 shares of common stock at $2.24 to a consultant for services
      rendered
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,404
                          
                          
                          
                          -
                          
                          
                          
                          3,125
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          3,125Value
      of 26,107 warrants issued to consultants
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          93,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          93,000Beneficial
      conversion feature of note payable for the year ended December 31,
      2004
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          17,149
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          17,149Loss
      for the year ended December 31, 2004
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (1,252,796
                          )
                          
                          
                          (1,252,796
                          )Balance
      as of December 31, 2004
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          2,432,998
                          
                          
                          $
                          243
                          
                          
                          $
                          2,476,773
                          
                          
                          $
                          -
                          
                          
                          $
                          (8,361,744
                          )
                          
                          $
                          (5,884,728
                          )Issuance
      of 134,746 shares of common stock at $2.24 for a technology
      license
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          134,746
                          
                          
                          
                          13
                          
                          
                          
                          299,987
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          300,000Issuance
      of 6,661 shares at $3.74 per share for cash
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          6,661
                          
                          
                          
                          1
                          
                          
                          
                          24,999
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          25,000Beneficial
      conversion feature of note payable for the year ended December 31,
      2005
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          72,000
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          72,000Loss
      for the year ended December 31, 2005
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (1,141,448
                          )
                          
                          
                          (1,141,448
                          )Balance
      as of December 31, 2005
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          2,574,405
                          
                          
                          $
                          257
                          
                          
                          $
                          2,873,759
                          
                          
                          $
                          -
                          
                          
                          $
                          (9,503,192
                          )
                          
                          $
                          (6,629,176
                          )





13
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)




Preferred
      Stock
                      
                      
                      Common
      StockShares
                      
                      
                      Value
                      
                      
                      Additional
      Paid-in Capital
                      
                      
                      Shares
                      
                      
                      Value
                      
                      
                      Additional
      Paid-in Capital
                      
                      
                      Common
                        Stock
                        Subscribed
                      
                      
                      Accumulated
                          Deficit
      During the Development Stage
                      
                      
                      Total
      Stockholders
                        EquityIssuance
      of 4,913 pursuant to an antidilution agreement
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4,913
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Issuance
      of 1,235 pursuant to an antidilution agreement
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,235
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Issuance
      of 1,235 pursuant to an antidilution agreement
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,235
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Issuance
      of 1,235 pursuant to an antidilution agreement
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,235
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Issuance
      of 3,706 pursuant to an antidilution agreement
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      3,705
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Issuance
      of 3,706 pursuant to an antidilution agreement
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      3,705
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Issuance
      of 1,235 pursuant to an antidilution agreement
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      1,235
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Issuance
      of 225 pursuant to an antidilution agreement
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      225
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Beneficial
      conversion feature of note payable for the year ended
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4,000
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      4,000Loss
      for the year ended December 31, 2006
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      (1,076,266
                      )
                      
                      
                      (1,076,266
                      )




14
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)


Preferred
      Stock
                                                                    
                                                                    
                                                                    Common
      StockShares
                                                                    
                                                                    
                                                                    Value
                                                                    
                                                                    
                                                                    Additional
      Paid-in Capital
                                                                    
                                                                    
                                                                    Shares
                                                                    
                                                                    
                                                                    Value
                                                                    
                                                                    
                                                                    Additional
      Paid-in Capital
                                                                    
                                                                    
                                                                    Common
                                                                      Stock
                                                                      Subscribed
                                                                    
                                                                    
                                                                    Accumulated
                                                                        Deficit
      During the Development Stage
                                                                    
                                                                    
                                                                    Total
      Stockholders
                                                                      EquityBalance
      at December 31, 2006
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    $
                                                                    -
                                                                    
                                                                    
                                                                    $
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    2,591,893
                                                                    
                                                                    
                                                                    $
                                                                    257
                                                                    
                                                                    
                                                                    $
                                                                    2,877,759
                                                                    
                                                                    
                                                                    $
                                                                    -
                                                                    
                                                                    
                                                                    $
                                                                    (10,579,458
                                                                    )
                                                                    
                                                                    $
                                                                    (7,701,442
                                                                    )Issuance
      of 7,018 shares at $3.74 per share for services rendered
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    7,017
                                                                    
                                                                    
                                                                    
                                                                    2
                                                                    
                                                                    
                                                                    
                                                                    26,249
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    26,251Issuance
      of 25,989 shares for $3.74 per share for licensing
    agreement
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    25,988
                                                                    
                                                                    
                                                                    
                                                                    2
                                                                    
                                                                    
                                                                    
                                                                    97,204
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    97,206Issuance
      of 25,989 shares for $3.74 per share for licensing
    agreement
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    25,990
                                                                    
                                                                    
                                                                    
                                                                    2
                                                                    
                                                                    
                                                                    
                                                                    97,204
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    97,206119,053
      shares to be issued at $0.37 per share for license
    agreement
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    445,305
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    445,305119,053
      shares to be issued at $0.37 per share for license
    agreement
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    445,305
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    445,305Beneficial
      conversion feature of note payable for the year ended December 31,
      2007
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    6,604,430
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    6,604,430Loss
      for the year months ended December 31, 2007
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    (2,768,669
                                                                    )
                                                                    
                                                                    
                                                                    (2,768,669
                                                                    )Balance
      at December 31, 2007
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    $
                                                                    -
                                                                    
                                                                    
                                                                    $
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    2,650,888
                                                                    
                                                                    
                                                                    $
                                                                    263
                                                                    
                                                                    
                                                                    $
                                                                    9,702,846
                                                                    
                                                                    
                                                                    $
                                                                    890,610
                                                                    
                                                                    
                                                                    $
                                                                    (13,348,127
                                                                    )
                                                                    
                                                                    $
                                                                    (2,754,408
                                                                    )Recapitalization
      upon reverse merger
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    3,000,000
                                                                    
                                                                    
                                                                    
                                                                    300
                                                                    
                                                                    
                                                                    
                                                                    (300
                                                                    )
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -Issuance
      of 119,053 shares of common stock at $0.37 per share, previously
      accrued
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    119,053
                                                                    
                                                                    
                                                                    
                                                                    12
                                                                    
                                                                    
                                                                    
                                                                    445,293
                                                                    
                                                                    
                                                                    
                                                                    (445,305
                                                                    )
                                                                    
                                                                    
                                                                    -
                                                                    
                                                                    
                                                                    
                                                                    -




15
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)





Preferred
      Stock
                                                                          
                                                                          
                                                                          Common
      StockShares
                                                                          
                                                                          
                                                                          Value
                                                                          
                                                                          
                                                                          Additional
      Paid-in Capital
                                                                          
                                                                          
                                                                          Shares
                                                                          
                                                                          
                                                                          Value
                                                                          
                                                                          
                                                                          Additional
      Paid-in Capital
                                                                          
                                                                          
                                                                          Common

                                                                              Stock

                                                                                Subscribed
                                                                          
                                                                          
                                                                          Accumulated
                                                                              Deficit
      During the Development Stage
                                                                          
                                                                          
                                                                          Total
      Stockholders

                                                                              EquityIssuance
      of 119,053 shares of common stock at $0.37 per share, previously
      accrued
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          119,053
                                                                          
                                                                          
                                                                          
                                                                          12
                                                                          
                                                                          
                                                                          
                                                                          445,293
                                                                          
                                                                          
                                                                          
                                                                          (445,305
                                                                          )
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -Issuance
      of 1,055,507 shares of common stock for cash at a price of $0.011 per
      share
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          1,055,508
                                                                          
                                                                          
                                                                          
                                                                          106
                                                                          
                                                                          
                                                                          
                                                                          44,690
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          44,796Issuance
      of 100,000 shares of common stock and 20,000 warrants to purchase
      additional shares of common stock at a price of $0.05 per share as a
      discount on notes payable
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          100,000
                                                                          
                                                                          
                                                                          
                                                                          10
                                                                          
                                                                          
                                                                          
                                                                          55,991
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          56,001Issuance
      of 1,055,508 shares of common stock at a price of $0.03 per share to a
      board member for services
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          1,055,507
                                                                          
                                                                          
                                                                          
                                                                          105
                                                                          
                                                                          
                                                                          
                                                                          29,895
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          30,000Issuance
      of 150,000 shares of common stock at a price of $1.25 per share to
      officers for services
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          150,000
                                                                          
                                                                          
                                                                          
                                                                          15
                                                                          
                                                                          
                                                                          
                                                                          187,485
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          187,500Issuance
      of 137,500 shares of common stock at a price of $0.05 per share as a
      discount to notes payable
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          137,500
                                                                          
                                                                          
                                                                          
                                                                          14
                                                                          
                                                                          
                                                                          
                                                                          6,861
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          -
                                                                          
                                                                          
                                                                          
                                                                          6,875




16
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY


(Continued)


Preferred
      Stock
                                        
                                        
                                        Common
      StockShares
                                        
                                        
                                        Value
                                        
                                        
                                        Additional
      Paid-in Capital
                                        
                                        
                                        Shares
                                        
                                        
                                        Value
                                        
                                        
                                        Additional
      Paid-in Capital
                                        
                                        
                                        Common
                                          Stock
                                          Subscribed
                                        
                                        
                                        Accumulated
                                              Deficit
      During the Development Stage
                                        
                                        
                                        Total
      Stockholders
                                          EquitySale
      of 707,200 shares of common stock and 707,200 warrants to purchase
      additional shares of common stock at a price of $2.50 per share for cash,
      net of costs of $359,729
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        707,200
                                        
                                        
                                        
                                        71
                                        
                                        
                                        
                                        1,408,200
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,408,271Cancellation
      of shares issued for technology license
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (279,788
                                        )
                                        
                                        
                                        (28
                                        )
                                        
                                        
                                        (842,486
                                        )
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (842,514
                                        )Value
      of options to purchase 2,250,000 shares of common stock at a price of
      $2,50 per shares issued to board member for extension of payment
      terms
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,811,962
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        2,811,962Value
      of warrants to purchase 75,000 shares of common stock at $2,50 per share
      issued to a board member for services
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        93,733
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        93,733Value
      of warrants to 70,180 shares of common stock at $1,78 per share issued to
      a board member for extension of credit terms
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        129,278
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        129,278Value
      of vested portion of options issued to officer
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        54,848
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        54,848Discount
      to notes payable due to beneficial conversion feature
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,019,208
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,019,208Loss
      for the year ended December 31, 2008
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (5,989,872
                                        )
                                        
                                        
                                        (5,989,872
                                        )Balance
      as of December 31, 2008
                                        
                                        
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        
                                        8,814,921
                                        
                                        
                                        $
                                        880
                                        
                                        
                                        $
                                        15,592,797
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        (19,337,999
                                        )
                                        
                                        $
                                        (3,744,322
                                        )Value
      of vested portion of 100,000 options issued to officer
      (unaudited)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        10,401
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        10,401Loss
      for the three months ended March 31, 2009 (unaudited)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (378,429
                                        )
                                        
                                        
                                        (378,429
                                        )Balance
      as of March 31, 2009 (unaudited)
                                        
                                        
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        
                                        8,814,921
                                        
                                        
                                        $
                                        880
                                        
                                        
                                        $
                                        15,603,198
                                        
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        (19,716,428
                                        )
                                        
                                        $
                                        (4,112,350
                                        )
  Value
      of vested portion of 100,000 options issued to officer
      (unaudited)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          10,399
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          10,39940,845
      shares to be issued for the exercise of 42,108 warrants of an exercise
      price of $0.036 per share (unaudited)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          1,137
                          
                          
                          
                          -
                          
                          
                          
                          1,137Loss
      for the three months ended June 30, 2009 (unaudited)
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (458,984
                          )
                          
                          
                          (458,984
                          )Balance
      as of June 30, 2009 (unaudited)
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          8,814,921
                          
                          
                          $
                          880
                          
                          
                          $
                          15,613,597
                          
                          
                          $
                          1,137
                          
                          
                          $
                          (20,175,412
                          )
                          
                          $
                          (4,559,798
                          )Issuance
      of 50,000 shares for services at a price of $0.30 per
share
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          50,000
                          
                          
                          
                          5
                          
                          
                          
                          14,995
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          15,000Issuance
      of 50,000 shares for services at a price of $0.44 per
share
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          50,000
                          
                          
                          
                          5
                          
                          
                          
                          21,995
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          22,000Value
      of vested portion of 100,000 options issued to officer
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          10,399
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          10,399Loss
      for the three months ended September 30, 2009
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          -
                          
                          
                          
                          (462,165
                          )Balance
      as of September 30, 2009
                          
                          
                          -
                          
                          
                          $
                          -
                          
                          
                          $
                          -
                          
                          
                          
                          8,914,921
                          
                          
                          $
                          890
                          
                          
                          
                          15,660,986
                          
                          
                          $
                          1,137
                          
                          
                          $
                          (20,637,577
                          )
                          
                          $
                          (4,974,564
                          )




See notes
to consolidated financial statements.




17
 Table of Contents





OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


For
      the Nine Months Ended
                      September 30,
                      2009
                    
                    For
      the Nine Months Ended
                      September
      30,
                      2008
                    
                    Cumulative
                      from
      Inception
                      (January
      15, 1997) to September 30, 2009Cash
      flows from operating activities:Net
      loss
                    
                    $
                    (1,299,578
                    )
                    
                    $
                    (5,499,474
                    )
                    
                    $
                    (20,637,577
                    )Adjustments
      to reconcile net loss to netcash
      used in operating activities:Non-cash
      compensation
                    
                    
                    68,199
                    
                    
                    
                    3,040,332
                    
                    
                    
                    4,074,709Amortization
      of discount on notes payable
                    
                    
                    14,245
                    
                    
                    
                    6,846,555
                    
                    
                    
                    8,756,664Impairment
      of technology licenses and equity securities
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,701,936Gain
      on restructuring of debt
                    
                    
                    -
                    
                    
                    
                    (5,690,287
                    )
                    
                    
                    (5,577,000
                    )Redemption
      of shares previously issued for license agreement
                    
                    
                    -
                    
                    
                    
                    (842,513
                    )
                    
                    
                    (842,513
                    )Net
      change in operating assets and liabilities:Cash
      overdraft
                    
                    
                    6,330
                    
                    
                    
                    
                    
                    
                    
                    6,330Advances
      to related party
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (10,000
                    )Prepaid
      insurance
                    
                    
                    (35,589
                    )
                    
                    
                    -
                    
                    
                    
                    (35,589
                    )Accounts
      payable and accrued liabilities
                    
                    
                    1,067,890
                    
                    
                    
                    545,312
                    
                    
                    
                    8,647,740Net
      cash used in operating activities
                    
                    
                    (178,503
                    )
                    
                    
                    (1,600,075
                    )
                    
                    
                    (3,915,300
                    )Cash
      flows from investing activities:Cash
      portion of investment in technology license
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (6,000
                    )Net
      cash used in investing activities
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (6,000
                    )Cash
      flows from financing activities:Proceeds
      from cash advances
                    
                    
                    130,400
                    
                    
                    
                    172,000
                    
                    
                    
                    926,400Principal
      payments on cash advances
                    
                    
                    -
                    
                    
                    
                    (130,000
                    )
                    
                    
                    (130,000
                    )Stock
      sold for cash, net of costs
                    
                    
                    -
                    
                    
                    
                    1,408,271
                    
                    
                    
                    1,738,271Proceeds
      from the exercise of warrants
                    
                    
                    1,137
                    
                    
                    
                    -
                    
                    
                    
                    1,137Proceeds
      from (repayments) to line of credit
                    
                    
                    (5,649
                    )
                    
                    
                    (1,180
                    )
                    
                    
                    253,511Principal
      payments on debt
                    
                    
                    -
                    
                    
                    
                    (510,760
                    )
                    
                    
                    (512,993
                    )Proceeds
      from notes payable
                    
                    
                    -
                    
                    
                    
                    950,000
                    
                    
                    
                    1,644,974Net
      cash provided by financing activities
                    
                    
                    125,888
                    
                    
                    
                    1,888,331
                    
                    
                    
                    3,921,300Net
      increase (decrease) in cash and cash equivalents
                    
                    
                    (52,615
                    )
                    
                    
                    288,256
                    
                    
                    
                    -Cash
      and cash equivalents at beginning of period
                    
                    
                    52,615
                    
                    
                    
                    209
                    
                    
                    
                    -Cash
      and cash equivalents at end of period
                    
                    $
                    -
                    
                    
                    $
                    288,465
                    
                    
                    $
                    -





18
 Table of Contents





CONSOLIDATED
STATEMENTS OF CASH FLOWS


(continued)




For
      the Nine Months Ended
                    September
      30,
                  
                  
                  Cumulative
                    from
      Inception
                    (January
      15, 1997) to September 30, 20092009
                  
                  
                  2008Supplemental
      disclosures of cash flow information:Cash
      paid during the period for: Interest
                  
                  $
                  7,411
                  
                  
                  $
                  24,309
                  
                  
                  $
                  71,734Income
      Taxes
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -Items
      not affecting cash flows:Beneficial
      conversion feature of notes payable
                  
                  $
                  14,245
                  
                  
                  $
                  6,623,545
                  
                  
                  $
                  14,905,485Common
      stock issued for services
                  
                  $
                  37,000
                  
                  
                  $
                  187,500
                  
                  
                  $
                  354,875Notes
      payable issued under restructure of debt
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  7,284,998Value
      of warrant issued as discount on debt
                  
                  $
                  -
                  
                  
                  $
                  129,278
                  
                  
                  $
                  331,510Notes
      payable issued for accounts payable
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  287,768Common
      stock issued for technology license
                  
                  $
                  -
                  
                  
                  $
                  920,610
                  
                  
                  $
                  920,610Common
      stock issued for the conversion of preferred stock
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  355,000Notes
      payable issued for services
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  3,746,971Impairment
      of technology licenses
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  616,908Value
      of warrants issued for debt
                  
                  $
                  -
                  
                  
                  $
                  12,747
                  
                  
                  $
                  12,747Issuance
      of common stock for cash
                  
                  $
                  -
                  
                  
                  $
                  1,408,271
                  
                  
                  $
                  1,408,271Gain
      from the restructuring of debt
                  
                  $
                  -
                  
                  
                  $
                  (5,690,287
                  )
                  
                  $
                  (5,576,993
                  )Value
      of options issued for services
                  
                  $
                  31,199
                  
                  
                  $
                  937,321
                  
                  
                  $
                  2,898,010Common
      stock exchanged for accounts payable
                  
                  $
                  -
                  
                  
                  $
                  30,000
                  
                  
                  $
                  30,000Cash
      advance converted to notes payable
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  521,200Capitalization
      of interest on debt
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  33,751Cancellation
      of shares previously issued for license
                  
                  $
                  -
                  
                  
                  $
                  (842,513
                  )
                  
                  $
                  (842,513
                  )




See notes
to consolidated financial statements.




19
 Table of Contents




OMNIMMUNE
HOLDINGS, INC.


(A
DEVELOPMENT STAGE ENTERPRISE)


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1.
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES




Business and Basis of
Presentation




Omnimmune
Holdings, Inc. (“Omnimmune” or the “Company”) is the holding company of
Omnimmune Corp., a development-stage biotechnology company integrating
complementary cancer therapeutic, diagnostic and prognostic technologies. Our
mission is to provide a comprehensive and personalized approach to the clinical
management of cancer through improved diagnostic, prognostic and therapeutic
interventions.




The
Company’s operating subsidiary, Omnimmune Corp., is currently a development
stage company under the provisions of Financial Accounting Standards Board
“FASB” Accounting Standard Codification “ASC” 915-10-15 (formerly referred to as
Statement of Financial Accounting Standards, (“SFAS”) No 7). The Company, whose
principal business is to act as a holding company for Omnimmune Corp., is also a
development-stage company. The accounts of the Company also include those of its
wholly owned subsidiary, InVitro Technologies, Inc., an inactive
company.




Merger with Roughneck
Supplies, Inc.




The
predecessor of the Company was originally incorporated on February 22, 2007, in
the State of Nevada as Roughneck Supplies, Inc. (“Roughneck”). On August 6,
2008, Roughneck merged with and into Omnimmune Holdings, Inc. On August 7, 2008,
Omnimmune Corp., a privately held Texas corporation incorporated on January 15,
1997 merged with and into Omnimmune Acquisition Corp., a Delaware corporation,
and a wholly-owned subsidiary of the Company formed for the purpose of the
merger.  As a result, (i)  Omnimmune Corp
became  a  wholly-owned subsidiary of the Company, (ii) the
shareholders of Omnimmune Corp. became the majority stockholders of the Company
and the shareholders prior to the merger were reduced to a minority ownership,
(iii) the historical management of the Company resigned, and the management of
Omnimmune Corp. became the management of the Company, (iv) the business of
Omnimmune Corp. became the business of Omnimmune and the former business of
Roughneck was eliminated, and (v) the historical financial statements of
Omnimmune Corp. became the historical financial statements of the Company.
Therefore, as a consequence of the two mergers, one on August 6, 2008 and one on
August 7, 2008, Omnimmune (formerly Roughneck) went from being a public
corporation domiciled in Nevada formerly in the business of marketing and
retailing oil and gas drilling supply products with little or no continuing
operations and a fiscal year end of May 31, to being a public company domiciled
in Delaware in the biotechnology business in the development stage with a fiscal
year end of December 31.  These transactions are described in detail
in the Company’s Form 8-K filed with the SEC on August 12, 2008, as amended on
August 21, 2008, August 27, 2008 and September 5, 2008,
respectively.





Going
Concern




The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. As shown in the accompanying
consolidated financial statements the Company had no cash at September 30, 2009
and incurred losses from operations of $462,165 and $1,013,903 for the three
months ended September 30, 2009 and 2008, respectively; losses from operations
of $1,299,578 and $5,499,474 for the nine months ended September 30, 2009 and
2008, respectively;  and $20,637,577 from inception (January 15, 1997)
through September 30, 2009. In addition, the Company’s current liabilities
exceed its current assets by $3,949,698 as of September 30, 2009. These factors
among others, including the Company’s current cash position, which
was  $0  as of September 30, 2009, as well as its delinquent
status under certain key license agreements and other payment
obligations,  indicate that the Company will very likely be unable to
continue as a going concern for a reasonable period of time absent the immediate
infusion of substantial additional capital.





20
 Table of Contents




If
operations and cash flows substantially improve, including through funds
realized upon one or more  debt or equity financing transaction,
management believes that the Company can meet its ongoing obligations and
continue in business.  However, there remains a substantial risk that
management’s actions will not result in the resolution of the Company’s
liquidity problems or its eventual emergence as a profitable
company.




The
accompanying consolidated financial statements do not include any adjustments
that might result should the Company be unable to continue as a going
concern.




Use of
Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reported periods.  Actual results could materially differ
from those estimates.





Long-lived
Assets




In
accordance with ASC 360-10-15 (formerly referred to as SFAS
No.  144),  long-lived  assets to be held and used
are analyzed for impairment  whenever  events or changes
in  circumstances  indicate that
the  carrying  amount  of an asset  may
not be  recoverable.  ASC 360-10-15 relates to assets that
can be amortized and the life  determinable.  The Company
evaluates  at each  balance  sheet date
whether  events and  circumstances  have
occurred  that  indicate  possible  impairment.  If
there are  indications  of impairment, the Company uses
future undiscounted cash flows of the related asset or asset  grouping
over the remaining life in measuring  whether the assets are
recoverable.  In the event such cash flows are not expected to
be  sufficient to
recover  the  recorded  asset  values,  the  assets  are  written  down
to their estimated  fair
value.  Long-lived  assets to be disposed of are reported at
the lower of  carrying  amount or fair value of asset less
the cost to sell.  During the three and nine months ended September
30, 2009 and 2008, the Company recognized $0 impairment of long-lived
assets.  From inception to September 30, 2009 an impairment of license
agreement in the amount of $1,701,936 was recorded.




Cash and Cash
Equivalents




For the
purposes of the statement of cash flows, cash equivalents include highly liquid
debt instruments with original maturities of three months or less which are not
securing any corporate obligations.





Net Income (Loss) Per
Common Share




The
Company computes earnings per share under ASC 260-10-45
(Financial  Accounting Standard No. 128,  "Earnings Per
Share" (SFAS 128)).  Net loss per common share is computed by dividing
net loss by the weighted  average  number of shares of
common stock and dilutive common stock equivalents  outstanding during
the year.  Dilutive common
stock  equivalents  consist of shares  issuable
upon  conversion of  convertible notes and the exercise of
the Company's  stock options and warrants  (calculated using
the  treasury  stock  method).  During
the three and nine months ended September 30, 2009 and 2008, and from inception
to September 30, 2009,  common stock equivalents  were
not  considered  in the  calculation  of
the weighted  average number of common shares outstanding because they
would be anti-dilutive, thereby decreasing the net loss per common
share.





At
September 30, 2009, the following convertible securities were not
included  in fully-diluted loss per share because the result would
have been anti-dilutive:  Options to purchase 2,350,000 shares at
$2.50 per share; Warrants to purchase 70,180 shares at $1.78 per share, warrants
to purchase 75,000 shares at $2.50 per share, and warrants to purchase 727,200
shares at $5.00 per share; debt convertible into 5,368,886 shares at $0.18 per
share, and debt convertible into 2,000,000 shares at $0.50 per
share.





At
September 30, 2008, the following convertible securities were not
included  in fully-diluted loss per share because the result would
have been anti-dilutive:  Options to purchase 2,350,000 shares at
$2.50 per share; warrants to purchase 84,216 shares at $0.10 per share, warrants
to purchase 70,180 shares at $1.78 per share, warrants to purchase 75,000 at
$2.50 per share, and warrants to purchase 727,200 shares at $5.00 per share;
debt convertible into 5,705,776  shares at $0.18 per share, and debt
convertible into 2,067,090 shares at $0.50 per share.




21
 Table of Contents




Research and
Development




The
Company  accounts for research and development  costs in
accordance with ASC 7.30-10-15 (formerly referred to as
Statement  of  Financial  Accounting
Standards  No. 2 ("SFAS 2"),  "Accounting  for
Research and  Development  Costs"). Under ASC 730-10-15, all
research and development  costs must be charged to expense
as  incurred.  Accordingly, internal research and
development costs are expensed as incurred.  Third-party research
and  development  costs are expensed  when the
contracted  work has been performed or as milestone  results
have been achieved. Company-sponsored research
and  development  costs  related to both present
and future  products  are expensed in the
period  incurred.  There were
no expenditures  on research and product  development
for the three and nine months ended September 30, 2009 and 2008, and from
inception through September 30, 2009.




Concentrations of Credit
Risk




Financial  instruments
and related items, which potentially  subject the Company
to  concentrations  of credit risk,  consist
primarily of cash, cash equivalents and related
party  receivables.  The Company  places its cash
and temporary cash investments with credit quality institutions.  At
times, such investments may be in excess of the
FDIC  insurance  limit.




Comprehensive
Income




ASC
220-10-15 (formerly referred to as Statement of
Financial  Accounting  Standards No. 130
("SFAS  130"),  "Reporting
Comprehensive  Income,")  establishes  standards
for reporting and  displaying of
comprehensive  income,  its components and
accumulated  balances.  Comprehensive income is defined to
include all changes in equity except those  resulting  from
investments by owners and distributions to owners. Among other disclosures, ASC
220-10-15 requires  that all items that are required to
be  recognized  under  current
accounting  standards
as  components  of  comprehensive  income
be reported in a financial  statement  that
is  displayed  with  the  same  prominence  as  other
financial  statements.  During the three and nine months
ended September 30, 2009 and 2008 there were no items  of other
comprehensive income.





Stock Based
Compensation




Effective
January 1, 2006, the Company adopted ASC 718-10 (formerly referred to as SFAS
No. 123 (revised), "Share-Based Payment" (SFAS 123(R)) which superseded APB
Opinion No. 25, "Accounting for Stock Issued to Employees" (the intrinsic value
method ) utilizing the modified prospective approach. Prior to the adoption of
ASC 718-10 we accounted for stock option grant in accordance with ASC 718-10 and
accordingly, recognized compensation expense for stock option
grants.




Under the
modified prospective approach, ASC 718-10 applies to new awards and to awards
that were outstanding on January 1, 2006 that are subsequently modified,
repurchased or cancelled. Under the modified prospective approach, compensation
cost recognized in the nine months of fiscal 2006 includes compensation cost for
all share-based payments granted prior to, but not yet vested as of January 1,
2006, based on the grant-date fair value estimated in accordance with the
original provisions of ASC 718-10, and compensation cost for all share-based
payments granted subsequent to January 1, 2006 based on the grant-date fair
value estimated in accordance with the provisions of ASC 718-10 Prior periods
were not restated to reflect the impact of adopting the new
standard.





A summary
of option activity under the Plan as of September 30, 2009, and changes during
the period ended are presented below:




Options
                  
                  
                  Weighted
      Average
                    Exercise
      PriceOutstanding
      at December 31, 2008
                  
                  
                  2,350,000
                  
                  
                  $
                  2.50Issued
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  
                  -Forfeited
      or expired
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at September 30, 2009
                  
                  
                  2,350,000
                  
                  
                  $
                  2.50Vested
      at September 30, 2009
                  
                  
                  2,319,283
                  
                  
                  $
                  2.50Non-vested
      at September 30, 2009
                  
                  
                  30,717
                  
                  
                  $
                  2.50




22
 Table of Contents




Aggregate
intrinsic value of options outstanding and exercisable at September 30, 2009 was
$0. Aggregate intrinsic value represents the difference between the Company's
closing stock price on the last trading day of the fiscal period, which was
$0.25 as of September 30, 2009, and the exercise price multiplied by the number
of options outstanding. As of September 30, 2009, total unrecognized stock-based
compensation expense related to stock options was $38,148. The total fair value
of options vested during the three months September 30, 2009 and 2008 was
$10,399 and $40,983, respectively. The total fair value of options vested during
the nine months September 30, 2009 and 2008 was $31,199 and $2,852,832,
respectively.




Income
Taxes




The
Company has implemented the provisions of ASC 740-10-05 (formerly referred to as
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (SFAS 109)). ASC 740-10-05 requires that income tax accounts be computed
using the liability method. Deferred taxes are determined based upon the
estimated future tax effects of differences between the financial reporting and
tax reporting bases of assets and liabilities given the provisions of currently
enacted tax laws.




Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statements carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets, including tax loss and credit carryforwards, and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment
date.




Deferred
income tax expense represents the change during the period in the deferred tax
assets and deferred tax liabilities. The components of the deferred tax assets
and liabilities are individually classified as current and non-current
based on their characteristics. Realization of the deferred tax asset is
dependent on generating sufficient taxable income in future years. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Due to the uncertainties as to the realization of deferred
tax assets, an allowance has been provided regarding all deferred tax assets of
the Company.




Fair Value of Financial
Instruments




The
Company  measures its financial  assets
and  liabilities in
accordance  with  accounting  principles  generally
accepted in the United States of America.  The estimated fair values
approximate their carrying value because of the short-term maturity of
these  instruments  or the
stated  interest  rates are indicative of market interest
rates.




Reclassifications




Certain
reclassifications have been made in prior year's financial statements to conform
to classifications used in the current year.




Foreign
Currency




Aside
from one of its license agreements, which requires milestone and other payments
to be made in Euros, the Company is not involved any transactions with foreign
currency implications.




23
 Table of Contents




Significant Recent
Accounting Pronouncements




The
following accounting guidance has been issued and will be effective for the
Company in or after fiscal year 2009:














Financial
Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”)
820, Fair Value Measurements
and Disclosures (“ASC 820” and formerly referred to as FAS-157),
establishes a framework for measuring fair value in GAAP, clarifies the
definition of fair value within that framework, and expands disclosures about
the use of fair value measurements. ASC 820 is effective for fiscal years
beginning after November 15, 2007. ASC 820-10-65, Transition and Open Effective Date
Information, deferred the effective date of ASC 820, for non-financial
assets and liabilities that are not on a recurring basis recognized or disclosed
at fair value in the financial statements, to fiscal years, and interim periods,
beginning after November 15, 2008. The Company has adopted the guidance
within ASC 820 for non-financial assets and liabilities measured at fair value
on a nonrecurring basis at January 1, 2009 and will continue to apply its
provisions prospectively from January 1, 2009. The application of ASC 820
for non-financial assets and liabilities did not have a significant impact on
earnings nor the financial position for the periods presented.




FASB ASC
805, Business
Combinations (“ASC 805” and formerly referred to as FAS-141(R)) requires
the acquisition method to be applied to all transactions and other events in
which an entity obtains control over one or more other businesses, requires the
acquirer to recognize the fair value of all assets and liabilities acquired,
even if less than one hundred percent ownership is acquired, and establishes the
acquisition date fair value as measurement date for all assets and liabilities
assumed. The guidance within ASC 805 is effective prospectively for any
acquisitions made after fiscal years beginning after December 15,
2008.




FASB ASC
810, Consolidation
(“ASC 810”), ASC 810-10-65, Transition and Open Effective Date
Information (“ASC 810-10-65” and formerly referred to as FAS-160)
establishes accounting and reporting standards for the non-controlling interest
in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
non-controlling interest in a subsidiary is an ownership interest in the
consolidated financial statements. ASC 810-10-65 is effective for fiscal years
beginning after December 15, 2008. The application of ASC 810-10-65 did not
have a significant impact on earnings nor the financial position.




FASB ASC
815, Derivatives and Hedging(“ASC 815”), ASC 815-10-65, Transition and Open Effective Date
Information (“ASC 815-10-65”and formerly referred to as FAS-161) includes
a requirement for enhanced disclosures about an entity’s derivative and hedging
activities and thereby improves the transparency of financial reporting. ASC 815
is effective prospectively for fiscal years beginning after November 15,
2008. The application of ASC 815 expanded the required disclosures in regards to
the Company’s derivative and hedging activities.




FASB ASC
350, Intangibles – Goodwill
and Other, ASC 350-30-65, Transition and Open Effective Date
Information (“ASC 350-30-65” and formerly referred to as FSP FAS 142-3)
amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible. ASC
350-30-65 is effective for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years. The guidance in this ASC
350-30-65 for determining the useful life of a recognized intangible shall be
applied prospectively to intangible assets acquired after the effective date.
The disclosure requirements of ASC 350-30-65, however, shall be applied
prospectively to all intangible assets recognized in the Company’s financial
statements as of the effective date. The application of ASC 350-30-65 is not
expected to have a material impact on earnings nor the financial
position.




FASB ASC
715, Compensation – Retirement
Benefits, ASC 715-20-65, Transition and Open Effective Date
Information (“ASC 715-20-65” and formerly referred to as FSP
FAS-132(R)-1) provides guidance on an employer’s disclosures about plan assets
of a defined benefit pension or other postretirement plans. ASC 715-20-65 is
effective prospectively for fiscal years ending after December 15, 2009.
The application of ASC 715-20-65 will expand the Company’s disclosures regarding
pension plan assets.




FASB ASC
825 Financial
Instruments, ASC 825-10-65, Transition and Open Effective Date
Information (“ASC 825-10-65” and formerly referred to as FSP FAS 107-1
and APB 28-1) requires disclosures about fair value of financial instruments for
interim reporting periods as well as in annual financial statements. This
guidance also requires those disclosures in summarized financial information at
interim reporting periods. ASC 825-10-65 is effective prospectively for interim
reporting periods ending after June 15, 2009. The application of ASC
825-10-65 expanded the Company’s disclosures regarding the use of fair value in
interim periods.




24
 Table of Contents




FASB ASC
855, Subsequent Events
(“ASC 855” and formerly referred to as FAS-165), modified the subsequent event
guidance. The three modifications to the subsequent events guidance are: 1) To
name the two types of subsequent events either as recognized or non-recognized
subsequent events, 2) To modify the definition of subsequent events to refer to
events or transactions that occur after the balance sheet date, but before the
financial statement is issued or available to be issued and 3) To require
entities to disclose the date through which an entity has evaluated subsequent
events and the basis for that date, i.e. whether that date represents the date
the financial statements were issued or were available to be issued. This
guidance is effective for interim or annual financial periods ending after
June 15, 2009, and has been applied prospectively.




2.
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES




Accounts
payable and accrued liabilities at September 30, 2009 and December 31, 2008
of  $845,062  and $471,775, respectively, consisting of
trade payables. Accounts payable and accrued liabilities – related parties at
September 30, 2009 and December 31, 2008 of $900,988 and $351,748, respectively,
consisting of accrued liabilities to directors  and senior management
for services performed.





3.
LINE OF CREDIT




The
Company has bank loan and credit card agreements with various banks. The bank
loan is jointly guaranteed by two of the Company’s shareholders.  The
Company's Chief Executive Officer, Harris Lichtenstein, co-signs the credit card
agreements  and remains jointly liable with the Company on all
outstanding amounts due for these credit card liabilities. At September 30, 2009
and December 31, 2008, the Company had the following amounts due under its loan
and credit agreements:




September
      30,
                    2009
                  
                  
                  December
      31,
                    2008Bank
      loan
                  
                  $
                  149,976
                  
                  
                  $
                  149,976Credit
      cards
                  
                  
                  103,532
                  
                  
                  
                  109,181Total
                  
                  $
                  253,508
                  
                  
                  $
                  259,157




4.
ACCRUED INTEREST




Notes
payable and accrued interest at September 30, 2009 and December 31, 2008
are  summarized as follows:




September
      30,
                
                
                December
      31,2009
                
                
                2008Number
      of notes payable
                
                
                16
                
                
                
                16Number
      of notes payable - related party
                
                
                4
                
                
                
                5Principal
      amount - notes payable, net of discount
                
                $
                1,009,288
                
                
                $
                709,035Principal
      amount - notes payable - related party, net of discount
                
                $
                1,002,631
                
                
                $
                1,288,632Accrued
      interest
                
                $
                280,198
                
                
                $
                192,380Accrued
      interest - related party
                
                $
                481,755
                
                
                $
                424,210




25
 Table of Contents




Interest
expense (net) consisted of the following for the three and nine months ended
September 30, 2009 and 2008:




For
      the Three Months Ended
                    September
      30,
                  
                  
                  For
      the Nine Months Ended
                    September
      30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Accrued
      interest - notes payable
                  
                  $
                  2,191
                  
                  
                  $
                  2,081
                  
                  
                  $
                  6,286
                  
                  
                  $
                  80,853Accrued
      interest - notes payable – related party
                  
                  
                  46,899
                  
                  
                  
                  42,606
                  
                  
                  
                  139,169
                  
                  
                  
                  100,581Bank
      credit line
                  
                  
                  3,119
                  
                  
                  
                  3,119
                  
                  
                  
                  9,254
                  
                  
                  
                  9,557Amortization
      of discount on notes payable
                  
                  
                  6,218
                  
                  
                  
                  66,478
                  
                  
                  
                  14,245
                  
                  
                  
                  6,566,773Amortization
      of discount on accounts payable
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  223,077Credit
      Cards
                  
                  
                  2,438
                  
                  
                  
                  4,036
                  
                  
                  
                  7,417
                  
                  
                  
                  6,882Interest
      (income)
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Total
      interest
                  
                  $
                  60,865
                  
                  
                  $
                  118,320
                  
                  
                  $
                  176,371
                  
                  
                  $
                  6,987,657





5.
CASH ADVANCES





During
the three and nine months ended September 30, 2009, the Company received $30,400
and $130,400, respectively, in new non-interest bearing, payable on demand,
unsecured cash advances from  shareholders. All such advances are
demand obligations and bear no interest




6.
NOTES PAYABLE




The
Company has convertible notes payable outstanding which contain a provision for
contingent warrants that are potentially issuable.  Pursuant to the
convertible notes agreements, these warrants are issuable if  the note
holder elects to convert at least 25% of the principal amount of the note during
the term of the note.  At September 30, 2009, there are contingent 5
year warrants issuable to purchase an aggregate of 43,000 shares  of
the Company’s common stock at a price of $5.00 per share.




The
following table lists the notes payable at September 30, 2009 and December 31,
2008:





Principal
      balance:,September
      30, 2009
                      
                      
                      December
      31, 2008Convertible
      note payable to a related party in the amount of $2,000,000 dated June 14,
      1994. On March 3, 2007, this note was replaced with a new note in the
      amount of $3,170,188, which included accrued interest in the amount of
      $959,089, a salary payable of $106,575, and a loss of
      $104,524.  On March 1, 2008, this note was replaced with a new
      note in the amount of $500,000, the amount of $2,670,188 was forgiven by
      the note holder. The note signed on March 1, 2008 is a non interest
      bearing note, and is payable contingent upon (a) the Company’s receipt of
      revenues, as defined, in which case the Company will pay 2% of such
      revenues, as received, in satisfaction of this note; and/or (b) the sale
      of substantially all of the Company’s assets.  Interest in the
      amount of $0 was accrued on these  notes during the
      three  months ended September 30, 2009 and 2008,
      respectively.  Interest in the amount of $0 and $37,087 was
      accrued on these  notes during the nine  months ended
      September 30, 2009 and 2008, respectively. Total accrued interest at
      September 30, 2009 and 2008 amounted to $222,521.
                      
                      $
                      500,000
                      
                      
                      $
                      500,000Convertible
      note payable to a related party in the amount of $1,170,356 dated May 15,
      2002.  On March 3, 2007, this note was replaced with a new note
      in the amount of $1,342,127, which included accrued interest of $379,324,
      and a gain of $207,553. On March 1, 2008, this note was replaced with a
      new note in the amount of $500,000, the amount of $842,127 was forgiven by
      the debt holder. The note dated March 1, 2008 is a non interest bearing
      note, and is payable contingent upon (a) the Company’s receipt of
      revenues, as defined, in which case the Company will pay 2% of such
      revenues, as received, in satisfaction of this note; and/or (b) the sale
      of substantially all of the Company’s assets. Interest in the amount of $0
      was accrued on these notes during the three  months ended
      September 30, 2009 and 2008, respectively.  Interest in the
      amount of $0 and $15,701 was accrued on these notes during the nine months
      ended September30, 2009 and 2008, respectively.  Total accrued
      interest at September 30, 2009 and 2008 amounted to
    $94,206.
                      
                      
                      500,000
                      
                      
                      
                      500,000Convertible
      note payable to a related party in the amount of $25,000 dated March 10,
      2005.  On March 3, 2007, this note was replaced with a new note
      in the amount of $30,211, which includes accrued interest of $4,938 and a
      loss of $272.  On March 31, 2008, this note was replaced with a
      new note in the amount of $33,232, which includes accrued interest of
      $3,021. The note bears interest at the rate of 10% per annum, and was due
      in full on February 28, 2013.  This note is convertible into
      common stock of the Company at a conversion price of $0.1781 per share. A
      beneficial conversion feature in the amount of $33,232 was recorded as a
      discount to the note and is being amortized over the term of the note via
      the effective interest rate method at a rate of 8.3%. Interest in the
      amount of $838 was accrued on this note during the three months ended
      September 30, 2009 and 2008. Interest in the amount of $2,468 and $2,445
      was accrued on this note during the nine months ended September 30, 2009
      and 2008, respectively. Total accrued interest at September 30, 2009 and
      2008 amounted to $5,272 and $1,948, respectively.
                      
                      
                      33,232
                      
                      
                      
                      33,232




26
 Table of Contents




Principal
      balance:September
      30, 2009
                    
                    
                    December
      31, 2008Convertible
      note payable to a related party in the amount of $37,000 dated February
      26, 2005.  On March 3, 2007, this note was replaced with a new
      note in the amount of $44,848, which included accrued interest of $6,418,
      and loss of $1,430. On March 1, 2008, this note was replaced with a new
      note in the amount of $49,333, which includes accrued interest of
      $4,485.  The note bears interest at the rate of 10% per annum,
      and is due in full on February 1, 2013. This note is convertible into
      common stock of the Company at a conversion price of $1.78 per share. A
      beneficial conversion feature in the amount of $49,333 was recorded as a
      discount to the note, and is being amortized over the term of the note via
      the effective interest rate method at a rate of 8% Interest in the amount
      of $1,243 was accrued on this note during the three months ended September
      30, 2009 and 2008. Interest in the amount of $3,690 and $3,629 was
      accrued on this note during the nine months ended September 30, 2009 and
      2008, respectively.   Total accrued interest at September
      30, 2009 and 2008 amounted to $7,826 and $2,892,
    respectively.
                    
                    
                    49,333
                    
                    
                    
                    49,333Note
      payable in the amount of $8,110 dated December 31, 1997.  On
      March 3, 2007, this note was replaced with a new note in the amount of
      $19,442, which included accrued interest of $7,437, and loss of $3,895.
      The note bears interest at the rate of 10% per annum, and is due in full
      on February 28, 2010.  Interest in the amount of $490 was
      accrued on this note during the three months ended September 30, 2009 and
      2008.  Interest in the amount of $1,454 and $1,459 was accrued
      on this note during the nine months ended September 30, 2009 and 2008,
      respectively. Total accrued interest at September 30, 2009 and
      2008  amounted to $5,028 and $3,084, respectively. During the
      period ended December 31, 2008, the Company exercised its right to extend
      the maturity date until February 28, 2010.
                    
                    
                    19,442
                    
                    
                    
                    19,442Note
      payable in the amount of $11,932 dated December 31, 1999.  On
      March 3, 2007, this note was replaced with a new note in the amount of
      $23,641, which included accrued interest of $8,168, and a loss of $3,540.
      The note bears interest at the rate of 10% per annum, and is due in full
      on February 28, 2010.  Interest in the amount of $596 was
      accrued on this note during the three months ended September 30, 2009 and
      2008.  Interest in the amount of $1,768 and $1,775 was accrued
      on this note during the nine months ended September 30, 2009 and 2008,
      respectively.  Total accrued interest at September 30, 2009 and
      2008  amounted to $6,114 and $3,750 respectively. During the
      period ended December 31, 2008, the Company exercised its right to extend
      the maturity date until February 28, 2010.
                    
                    
                    23,641
                    
                    
                    
                    23,641Note
      payable in the amount of $33,860 dated December 31, 2000.  On
      March 3, 2007, this note was replaced with a new note in the amount of
      $60,971, which included accrued interest of $20,882, and a loss of $6,228.
      The note bears interest at the rate of 10% per annum, and is due in full
      on February 28, 2010.  Interest in the amount of $1,537 was
      accrued on this note during the three months ended September 30, 2009 and
      2008. Interest in the amount of $4,560 and $4,577 was accrued on this note
      during the nine months ended September 30, 2009 and 2008,
      respectively.  Total accrued interest at September 30, 2009 and
      2008  amounted to $15,796 and $9,672,
      respectively.  During the period ended December 31, 2008, the
      Company exercised its right to extend the maturity date until February 28,
      2010.
                    
                    
                    60,971
                    
                    
                    
                    60,971Note
      payable in the amount of $25,000 dated February 28, 2001. On March 3,
      2007, this note was replaced with a new not in the amount of $44,355,
      which included accrued interest in the amount of $15,014, and a loss of
      $4,341. On March 1, 2008, this note was replaced with a new note in
      the amount of $127,305, which consolidated two other notes payable to this
      note holder in the amounts of $41,774, and $28,603, and accrued interest
      of $11,573.The note bears interest at the rate of 10% per annum, and is
      due in full on February 28, 2013. This note is convertible into
      shares  of common stock at a rate of $1.78 per
      share.  A beneficial conversion in the amount of $127,305 was
      recorded for this note and is being amortized over the term of the note
      via the effective interest rate method at a rate of 8.2%. Interest in
      the amount of $3,209 was accrued on this note during the three months
      ended September 30, 2009 and 2008, respectively. Interest in the amount of
      $9,522 and $8,193 was accrued on this note during the nine months ended
      September 30, 2009 and 2008, respectively.  Total accrued
      interest at September 30, 2009 and 2008 amounted to $20,194 and $7,464,
      respectively.
                    
                    
                    127,305
                    
                    
                    
                    127,305Note
      payable in the amount of $16,750 dated June 1, 2002.  On March
      3, 2007, this note was replaced with a new note in the amount of $45,224,
      which included accrued interest in the amount of $14,275, and a loss of
      $3,322. The note bears interest at the rate of 10% per annum, and is due
      in full on February 28, 2010.  Interest in the amount of $1,140
      was accrued on this note during the three months ended September 30,
      2009 and 2008. Interest in the amount of $3,383 and $3,395 was accrued on
      this note during the nine months ended September 30, 2009 and 2008,
      respectively. Total accrued interest at September 30, 2009 and
      2008  amounted to $11,696 and $7,174, respectively. During the
      period ended December 31, 2008, the Company exercised its right to extend
      the maturity date until February 28, 2010.
                    
                    
                    45,224
                    
                    
                    
                    45,224Note
      payable in the amount of $18,000 dated June 1, 2002.  On March
      3, 2007, this note was replaced wit ha new note in the amount of $28,350,
      which included accrued interest in the amount of $8,551, and a loss of
      $1,798. On March 1, 2008, this  note was replaced with a new
      note in the amount of $31,185, which includes accrued interest in the
      amount of $2,835. The note bears interest at the rate of 10% per annum,
      and is due in full on February 28, 2013. This note is convertible
      into shares  of common stock at a rate of $1.78 per
      shares.  A beneficial conversion feature in the amount of
      $31,285 was recorded for this note and is being amortized over the term of
      the note via the effective interest rate method at a rate of 8.3%.
      Interest in the amount of $786 was accrued on this note during the three
      months ended September 30, 2009 and 2008. Interest in the amount of
      $2,332 and $2,294 was accrued on this note during the nine
      months ended September 30, 2009 and 2008,
      respectively.  Total accrued interest at September 30, 2009 and
      2008 amounted to $4,947 and $1,828, respectively.
                    
                    
                    31,185
                    
                    
                    
                    31,185




27
 Table of Contents




Principal
      balance:September
      30, 2009
                    
                    
                    December
      31, 2008Note
      payable in the amount of $62,019 dated July 1, 2005. On January 1, 2007,
      this note was replaced with a new note in the amount of $94,334, which
      included accrued interest of $9,328, and a loss of 422,987. On March 1,
      2008, this note was replaced with a new note in the amount of $88,132,
      which includes accrued interest in the amount of $2,221. The note bears
      interest at the rate of 10% per annum, and is due in full on February 28,
      2013.  This note is convertible into shares  of common
      stock at a price of $1.78 per share.  A beneficial conversion
      feature was recorded in the amount of $91,149 on the note. Interest in the
      amount of $2,221 was accrued on this note during the three months ended
      September 30, 2009 and 2008. Interest in the amount of $6,592 and $6,602
      was accrued on this note during the nine months ended September 30, 2009
      and 2008, respectively. Total accrued interest at September 30, 2009 and
      2008 amounted to $13,230 and $4,417, respectively.
                    
                    
                    88,132
                    
                    
                    
                    88,139Note
      payable in the amount of $25,000 dated October 6, 2005.  On
      March 3, 2007, this note was replaced with a new note in the amount of
      $28,603, which included interest in the amount of $3,500, and a loss of
      $103. On March 1, 2008, this note was consolidated into a new note in the
      amount of $29,025, and is due on February 28, 2013. Interest in the amount
      of $731 was accrued on this note during the three months ended September
      30, 2009 and 2008. Interest in the amount of $2,170and $2,135was accrued
      on this note during the nine months ended September 30, 2009 and 2008,
      respectively. Total accrued interest at September 30, 2009 and 2008
      amounted to $4,603 and $1,701, respectively.
                    
                    
                    29,025
                    
                    
                    
                    29,025Note
      payable in the amount of $69,806 dated March 3, 2007. On March 1, 2008,
      this note was replaced with a new note in the amount of $76,787, which
      included accrued interest in the amount of $6,981. The note bears interest
      at a rate of 10% per annum, and is due in full on February 28,
      2013.  This note is convertible into shares (post shares) of
      common stock at a rate of $1.78 per share.  A beneficial
      conversion feature in the amount of $76,787 was recorded on the note and
      is being amortized over the term of the note via the effective interest
      rate method at a rate of 8.3%. Interest in the amount of $1,935 was
      accrued on this note during the three months ended September 30, 2009 and
      2008. Interest in the amount of $5,743 and $5,590 was accrued on this
      note during the nine months ended September 30, 2009 and 2008,
      respectively.   Total accrued interest at September 30,
      2009 and 2008 amounted to $12,121 and $4,443,
respectively.
                    
                    
                    76,787
                    
                    
                    
                    76,787Note
      payable  in the amount of $550,000 dated June 24,
      2008.  The note bears interest at a rate of 10% per annum, and
      is due in full on June 24, 2010.  This note becomes convertible
      into shares  of common stock upon the closing of a qualified
      financing.  Interest in the amount of $13,863 and $13,863 was
      accrued during the three months ended September 30, 2009 and 2008,
      respectively. Interest in the amount of $41,137 and $14,767 was accrued
      during the nine months ended September 30, 2009 and 2008,
      respectively.   Total accrued interest at September 30,
      2009 and 2008 amounted to $69,767 and $14,767,
    respectively.
                    
                    
                    550,000
                    
                    
                    
                    550,000Note
      payable in the amount of $521,200 dated March 1, 2008. The note bears
      interest at a rate of 10% per annum, and is due in full on February 28,
      2013. This note is convertible into common stock at a rate of $1.78 per
      share.  A beneficial conversion feature in the amount of
      $521,200 was recorded and is being amortized over the term of the note via
      the effective interest rate method at a rate of 8.3%.  Interest
      in the amount of $13,137 and $14,469 was accrued on this note during the
      three months ended September 30, 2009 and 2008,
      respectively. Interest in the amount of $38,983 and $33,736 was
      accrued on this note during the nine months ended September 30, 2009 and
      2008, respectively.   Total accrued interest at September
      30, 2009 and 2008 amounted to $85,856 and $33,736,
      respectively.
                    
                    
                    521,200
                    
                    
                    
                    521,200Note
      payable in the amount of $287,768 dated October 31, 2008. The note
      bears interest at a rate of 10% per annum, and was due in full on June 30,
      2009.  Interest in the amount of $7,253 and $0 was accrued on
      this note during the three months ended September 30, 2009 and 2008,
      respectively.  Interest in the amount of $21,523 and $0 was
      accrued on this note during the nine months ended September 30, 2009 and
      2008, respectively.  Total accrued interest at September 30,
      2009 and 2008 amounted to $26,333 and $0, respectively. This note is
      currently past due and may be called by the payee at any
    time.
                    
                    
                    287,768
                    
                    
                    
                    287,768




28
 Table of Contents




Total
      outstanding
                        
                        $
                        2,943,245
                        
                        
                        $
                        2,943,252Less
      discount on notes payable
                        
                        
                        (931,333
                        )
                        
                        
                        (945,585
                        )Total
      – net of discounts
                        
                        
                        2,011,912
                        
                        
                        
                        1,997,667Less
      current portion – net of discounts
                        
                        
                        (987,046
                        )
                        
                        
                        (287,768
                        )Long-term
      portion – net of discounts
                        
                        $
                        1,024,866
                        
                        
                        $
                        1,709,899Related
      Party
                        
                        $
                        1,002,631
                        
                        
                        $
                        1,288,632Related
      Party – current portion
                        
                        
                        -
                        
                        
                        
                        287,768Related
      Party – long term portion
                        
                        $
                        1,002,631
                        
                        
                        $
                        1,000,864Non-related
      party
                        
                        $
                        1,009,288
                        
                        
                        $
                        709,035Non-related
      party – current portion
                        
                        
                        987,046
                        
                        
                        
                        -Non-related
      party – long term portion
                        
                        $
                        22,235
                        
                        
                        $
                        709,035




7.
EQUITY




On July
8, 2008, the Company filed an amendment to its certificate of incorporation in
the State of Delaware decreasing the number of authorized shares from
300,000,000 to 50,000,000 and decreasing the par value from $0.01 to
$0.0001. At September 30, 2009 and December 31, 2008, the Company had
issued and outstanding 8,914,921, and 8,814,921 shares,
respectively.  No shares of preferred stock were issued or
outstanding.




The
Company completed a 1-for-2.8072 split of its common stock, effective March 27,
2008. The Company completed a 10-for-1 reverse split of its common stock
effective June 9, 2008.  Each of these stock splits is accounted for
in all share numbers included in this report, unless otherwise
indicated.




Common
Stock





Three
months ended September 30, 2009:





The
Company issued 50,000 shares of common stock to a consultant for
services.  The fair value of these shares in the amount of $15,000 was
charged to operations during the three  months ended September 30,
2009.





The
Company issued 50,000 shares of common stock to a consultant for
services.  The fair value of these shares in the amount of $22,000 was
charged to operations during the three  months ended September 30,
2009.





Warrants





The
following table summarizes the changes in warrants outstanding and the related
prices for the shares of the Company’s common stock issued to non-employees of
the Company. The following table summarizes the warrants outstanding as of
September  30, 2009:





Warrants
      Outstanding
                                            
                                            Warrants
      ExercisableExercise
      Prices
                                            
                                            Number
      Outstanding
                                            
                                            Weighted
      Average Remaining
                                              Contractual
      Life (years)
                                            
                                            Weighted
      Average
                                              Exercise
      Price
                                            
                                            Number
      Exercisable
                                            
                                            Weighted
      Average
                                              Remaining
      Contractual
                                              Life
      (years)$
                                            
                                            
                                            1.78-2.50
                                            
                                            145,180
                                            
                                            6.17
                                            
                                            $
                                            1.78-2.50
                                            
                                            145,180
                                            
                                            6.175.00
                                            
                                            727,200
                                            
                                            3.86
                                            
                                            
                                            5.00
                                            
                                            727,200
                                            
                                            3.86Total
                                            
                                            872,380
                                            
                                            4.24
                                            
                                            
                                            
                                            
                                            872,380
                                            
                                            4.24





29
 Table of Contents





The
following table summarizes the changes in warrants outstanding and the related
prices for the shares of the Company’s common stock issued to non-employees of
the Company. The following table summarizes the warrants outstanding as of
December 31, 2008:





Warrants
      Outstanding
                                                  
                                                  Warrants
      ExercisableExercise
      Prices
                                                  
                                                  Number
      Outstanding
                                                  
                                                  Weighted
      Average Remaining
                                                    Contractual
      Life (years)
                                                  
                                                  Weighted
      Average
                                                    Exercise
      Price
                                                  
                                                  Number
      Exercisable
                                                  
                                                  Weighted
      Average
                                                    Remaining
      Contractual
                                                    Life
      (years)$
                                                  
                                                  
                                                  0.10
                                                  
                                                  84,215
                                                  
                                                  0.21
                                                  
                                                  $
                                                  0.10
                                                  
                                                  84,215
                                                  
                                                  0.211.78-2.50
                                                  
                                                  145,180
                                                  
                                                  6.92
                                                  
                                                  
                                                  1.78-2.50
                                                  
                                                  145,180
                                                  
                                                  6.925.00
                                                  
                                                  727,200
                                                  
                                                  4.61
                                                  
                                                  
                                                  5.00
                                                  
                                                  727,200
                                                  
                                                  4.61Total
                                                  
                                                  956,595
                                                  
                                                  4.57
                                                  
                                                  
                                                  
                                                  
                                                  956,595
                                                  
                                                  4.57





Transactions
involving warrants are summarized as follows:




Number
      of Shares
                  
                  
                  Weighted
      Average
                    Price
      Per ShareOutstanding
      at December 31, 2008
                  
                  
                  956,596
                  
                  
                  $
                  4.14Granted
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  (42,108
                  )
                  
                  
                  (0.10
                  )Cancelled
      or expired
                  
                  
                  (42,108
                  )
                  
                  
                  (0.10
                  )Outstanding
      at September  30, 2009
                  
                  
                  872,380
                  
                  
                  $
                  4.54




The
Company has convertible notes payable outstanding which contain a provision for
contingent warrants that are potentially issuable. Pursuant to the convertible
notes agreements that warrants are issuable if the notes holder elects to
convert at least 25% of the principal amount due, during the term of the note.
According to the convertible note payable agreements there are warrants issuable
to purchase 120,710 shares of common stock. Upon issuance these warrants are
exercisable for 5 years at a price of $1.80 per share.





Options




During
the year ended December 31, 2008, the Company issued options to purchase 100,000
shares of common stock at a price per share of $2.50. These options were
valued at an aggregate of $124,192, and vest at the following rate: 33,000
vested at the time of issuance, and the balance vest ratably over a 23 month
period.  During the three and nine months ended September 30, 2009,
the Company charged to operations the fair value of the vested options, or
$10,399 and $31,199, respectively.




30
 Table of Contents




The
following table summarizes the changes in options outstanding and the related
prices for the shares of the Company’s common stock issued to non-employees of
the Company. The following table summarizes the warrants outstanding as of
September 30, 2009:




Options
      Outstanding
                                
                                Options
      ExercisableExercise
      Prices
                                
                                
                                Number
      Outstanding
                                
                                Weighted
      Average Remaining Contractual Life (years)
                                
                                Weighted
      Average Exercise Price
                                
                                Number
      Exercisable
                                
                                Weighted
      Average
                                  Remaining
      Contractual
                                  Life
      (years)$
                                2.50
                                
                                
                                
                                2,350,000
                                
                                8.52
                                
                                $
                                2.50
                                
                                2,319,283
                                
                                8.52Total
                                
                                
                                
                                2,350,000
                                
                                8.52
                                
                                
                                
                                
                                2,319,283
                                
                                8.52





The
following table summarizes the changes in options outstanding and the related
prices for the shares of the Company’s common stock issued to non-employees of
the Company. The following table summarizes the warrants outstanding as of
December 31, 2008:




Options
      Outstanding
                                
                                Options
      ExercisableExercise
      Prices
                                
                                
                                Number
      Outstanding
                                
                                Weighted
      Average Remaining Contractual Life (years)
                                
                                Weighted
      Average Exercise Price
                                
                                Number
      Exercisable
                                
                                Weighted
      Average
                                  Remaining
      Contractual
                                  Life
      (years)$
                                2.50
                                
                                
                                
                                2,350,000
                                
                                9.27
                                
                                $
                                2.50
                                
                                2,285,791
                                
                                9.27Total
                                
                                
                                
                                2,350,000
                                
                                9.27
                                
                                
                                
                                
                                2,285,791
                                
                                9.27




Transactions
involving warrants are summarized as follows:




Number
      of Shares
                  
                  
                  Weighted
      Average
                    Price
      Per ShareOutstanding
      at December 31, 2008
                  
                  
                  2,350,000
                  
                  
                  $
                  2.50Granted
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  
                  -Cancelled
      or expired
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at September 30, 2009
                  
                  
                  2,350,000
                  
                  
                  $
                  2.50Exercisable
      at September 30, 2009
                  
                  
                  2,319,283
                  
                  
                  $
                  2.50Not
      exercisable at September 30, 2009
                  
                  
                  30,717
                  
                  
                  $
                  2.50




8.
RELATED PARTIES




Amounts
due to related parties at September 30, 2009 consisted of the
following:




Convertible Notes Payable to
related parties




The
Company has a note payable outstanding to its Chief Executive Officer, in the
amount of $500,000 at September 30, 2009 and December 31, 2008. The note is a
non interest bearing note, and is payable contingent upon (a) the Company’s
receipt of revenues, as defined, in which case the Company will pay 2% of such
revenues, as received, in satisfaction of this note; and/or (b) the sale of
substantially all of the Company’s assets. During the three and nine months
ended September 30, 2009 and 2008, the Company accrued no interest on these
notes.




The
Company has a convertible note payable outstanding to Dennis Lichtenstein, a
relative of the Chief Executive Officer, in the amount of $49,333 at September
30, 2009 and December 31, 2008. The note bears interest at a rate of 10%
per annum. During the three months ended September 30, 2009 and 2008, the
Company accrued interest in the amount of $1,243.  During the nine
months ended September 30, 2009 and 2008, the Company accrued interest in the
amount of $3,690 and $3,629, respectively.  A beneficial conversion
feature in the amount of $49,333 was recorded as a discount to the note, and is
being amortized over the term of the note via the effective interest rate method
at a rate of 8%.  As of September 30, 2009 a discount in the amount of
$47,761 remained on this note.




31
 Table of Contents




The
Company has a note payable outstanding to Alexander Krichevsky, an officer of
the Company, in the amount of $500,000 at September 30, 2009 and December
31, 2008. The note is a non interest bearing note, and is payable contingent
upon (a) the Company’s receipt of revenues, as defined, in which case the
Company will pay 2% of such revenues, as received, in satisfaction of this note;
and/or (b) the sale of substantially all of the Company’s
assets.  During the three and nine months ended September 30, 2009 and
2008, the Company accrued no interest on these notes.




The
Company has a note payable outstanding to Jennie Fay Lichtenstein, a relative of
the Chief Executive Officer, in the amount of $33,232 at September 30, 2009 and
December 31, 2008. This note bears interest at a rate of 10% per annum. During
the three months ended September 30, 2009 and 2008, the Company accrued interest
in the amount of $838.  During the nine months ended September 30,
2009 and 2008, the Company accrued interest in the amount of $2,468 and $2,445,
respectively. A beneficial conversion feature in the amount of $33,232 was
recorded as a discount to the note and is being amortized over the term of the
note via the effective interest rate method at a rate of 8.3%.  As of
September 30, 2009, a discount in the amount of $32,173 remained on this
note.





Accounts Payable- related
parties




The
Company had a liability to  a director for consulting fees payable in
the amount of $420,000 at September 30, 2009, which was included in accounts
payable and  accrued liabilities - related party.




Accrued Salaries-related
parties





During
the three and nine months ended September 30, 2009, the Company has accrued the
salary and payroll taxes payable to Harris Lichtenstein, the Company’s Chief
Executive Officer.  Pursuant to his employment agreement with the
Company, Dr. Lichtenstein is to be paid an annual salary of $245,000 and, as a
result, the Company has accrued the amount of $61,250 for each
quarter.  During the nine months ended September 30, 2009, the Company
made a $4,000 payment to the Officer. As of September 30, 2009, the Company has
accrued a total of $179,750 in accrued salary plus an additional $18,375 in
accrued payroll taxes.





During
the three and nine months ended September 30, 2009, the Company has accrued the
salary and payroll taxes payable to Alex Krichevsky, an officer of the
Company.  Pursuant to his employment agreement with the Company Cr.
Krichevsky is to be paid an annual salary of $245,000 and, as a result, the
Company has accrued the amount of $61,250 for each quarter.  During
the nine months ended September 30, 2009, the Company made no payments to the
Officer. As of September 30, 2009, the Company has accrued a total of $183,750
in accrued salary plus an additional $18,375 in accrued payroll taxes.
..




During
the three and nine months ended September 30, 2009, the Company has accrued the
consulting fees payable to Howard Becker, an officer of the
Company.  Pursuant to the consulting agreement, Mr. Becker’s
consulting firm, Becker Advisors, Ltd., is to be paid monthly fees of $8,600 for
part-time service to the Company and, as a result, the Company has accrued the
amount of $25,800 for each quarter.  As of September 30, 2009, the Company
has accrued a total of $73,400, which is shown in accounts payable-related party
on the Company's balance sheet.





There are
no agreements or understandings between the Company and the aforementioned
executives regarding the payment of the above salaries, taxes and consulting
fees, all of which are currently past due. As of the date of this
report,  none of these executives has taken any action or steps in
furtherance of the formal collection of these past due amounts.




9.
COMMITMENTS AND CONTINGENCIES




Lease of office
space




The
Company leases office space in Houston, Texas under a month to month lease
calling for annual rent of $8,400 .




32
 Table of Contents




ASRI License
Agreement




The
Company entered into a license agreement (the “ASRI License Agreement”) with
Allegheny-Singer Research Institute (“ASRI”) on February 3, 1999, as amended.
The two parties agreed to an amended and restated agreement which became
effective February 1, 2005. ASRI granted the Company rights to develop,
manufacture, sell, rent or lease Licensed Products in the Field (each as defined
in the ASRI License Agreement). The Company agreed to pay royalties of 1-2% of
net sales of all products covered in the agreement. The ASRI License Agreement
gives the Company the right to sublicense to third parties. The Company agreed
to pay ASRI between 5-20% of the sublicense income depending on the nature of
the sublicense.




The
Company and ASRI agreed to further amend the ASRI License Agreement which
amendment became effective February 1, 2007. As part of the amendment, ASRI
granted the Company an extension on the first payment of licensing fees from the
original due date of February 1, 2007 to May 1, 2007.  During the
three months ended March 31, 2008, the Company issued 119,053 shares of common
stock previously accrued, and has issued a total of 145,042 shares of common
stock under this agreement.




The
Company and ASRI agreed to further amend the license agreement, which amendment
became effective June 30, 2008.  ASRI granted the Company an extension
of the second payment of licensing fees from the original due date of February
1, 2008 to June 30, 2008.   Thereafter, ASRI agreed to further
extend from February 1, 2009 to August 1, 2009, the license fee of
$50,000.  As of September 30, 2009, the Company has paid
$50,000  in licensing fees under this agreement.   The
Company has not made the payment of  $50,000 that was due on August 1,
2009, nor has it received a formal extension from ASRI with respect
thereto.  Subsequent to the period covered by this report, the Company
paid ASRI $5,000 toward this past due obligation and continues to engage in
informal discussions with ASRI in an attempt to achieve a consensual payment
arrangement to resolve its past due obligations under the ASRI License
Agreement.  Although no agreement has been reached with ASRI regarding
these delinquent obligations,  ASRI has not, as of the date of this
report, declared a default under the ASRI License Agreement, after which we
would have a contractual period in which to make such payment and cure the
default before the ASRI License Agreement could be terminated. Should such a
declaration of default be issued, there is no assurance that the Company would
have sufficient wherewithal to cure the default within the prescribed cure
period or to otherwise stave off the termination of the ASRI License
Agreement.





As of
September 30, 2009, the Company has accrued the past due amount of $50,000,
which was due on August 1, 2009.





Columbia License
Agreement




The
Company entered into a license agreement (the “Columbia License Agreement”) with
Columbia University (“Columbia”) that was effective February 1, 2005, pursuant
to which  Columbia granted the Company rights to develop, manufacture,
sell, rent or lease Licensed Products in the Field (each as defined in the
Columbia License Agreement). Columbia received a 5% equity stake in the Company.
In addition, the Company paid a nonrefundable license fee of $30,000. The
agreement provided that  $15,000 was to be paid 60 days from the
effective date of the agreement and the other $15,000 to be paid one year from
the effective of the agreement. The Company agreed to reimburse Columbia for
past expenses of $50,000, of which $25,000 has been paid and the other $25,000
is due after sales of the licensed products amount to $1,000,000. The Company
agreed to pay royalties of 1-2% of net sales of all products covered in the
agreement. The agreement gives the Company the right to sublicense to third
parties. The Company agreed to pay Columbia between 10-20% of the sublicense
income depending on the nature of the sublicense. The Company agreed to pay
annual license maintenance fees according to the schedule below:




$10,000
during the fiscal year ended December 31, 2007




$20,000
during the fiscal year ending December 31, 2008




$35,000
during the fiscal year ending December 31, 2009




$50,000
on or before February 1, 2010; and $40,000 each year thereafter.





33
 Table of Contents




During
the three months ended March 31, 2008, the Company issued 119,053 shares of
common stock previously accrued, and has issued a total of 145,042 shares of
common stock under the Columbia License Agreement.




During
the year ended December 31, 2008, the Company entered into an amendment to the
Columbia License Agreement, pursuant to which Columbia terminated the Stock
Purchase agreement. As a result, the Company cancelled 279,788 shares of common
stock, which had been previously issued to Columbia. Also during the year ended
December 31, 2008, the Company and Columbia agreed to further amend the Columbia
License Agreement which amendment became effective June 30, 2008. The annual
license maintenance fees have been amended to the schedule shown
below:




$52,500
due on or before May 1, 2009




$75,000
due on or before May 1, 2010




$60,000
due on May 1 each year thereafter





Columbia
and the Company recently agreed to a further amendment to the Columbia License
Agreement, pursuant to which the $52,500 license maintenance fee due on May 1,
2009 was split into two equal payments of $26,250, the first of which continued
to be due on May 1, 2009, and the second of which was extended to August 1,
2009.    The Company has not made the required payments
of  $26,250 that were due, respectively, on May 1, 2009 and August 1,
2009, nor has it received a formal extension from Columbia with respect
thereto.  On September 18, 2009, the Company made a payment of $5,000
toward its arrears with Columbia and paid an additional $10,000 toward such
arrears subsequent to the period covered by this report.  The Company
continues to engage in informal discussions with Columbia in an attempt to
achieve a consensual payment arrangement to resolve its past due obligations
under the Columbia License Agreement.  Although no agreement has been
reached with Columbia regarding these delinquent obligations, Columbia has not,
as of the date of this report, declared a default under the Columbia License
Agreement, after which we would have a contractual period in which to make such
payment and cure the default before the Columbia License Agreement could be
terminated. Should such a declaration of default be issued, there is no
assurance that the Company would have sufficient wherewithal to cure the default
within the prescribed cure period or to otherwise stave off the termination of
the Columbia License Agreement.





As of
September 30, 2009, the Company has accrued the payment of $47,500 representing
the past due obligations from May 1 and August 1, 2009.




IGR License
Agreement




The
Company entered into a licensing agreement with Institut Gustave Roussy (IGR)
that was effective November 1, 2007 (the “IGR License Agreement”). IGR granted
the Company rights to use the Licensed Patents, Licensed Material and Licensed
Information (each as defined in the IGR License Agreement). The Company agreed
to pay a one time license fee of €125,000, of which €25,000 was payable on the
effective date, €50,000 was payable one year from effective date and €50,000 is
due two years from effective date. In addition, the Company agreed to pay
license maintenance fees according to the schedule below:




€10,000
during the fiscal year ending December 31, 2008




€20,000
during the fiscal year ending December 31, 2009




€35,000
during the fiscal year ending December 31, 2010




€50,000
on or before November 1, 2011 and €50,000 every year thereafter




During
the year ended December 31, 2007, the Company paid $36,087 (approximately
€25,000).




34
 Table of Contents




In
accordance with the above described schedule, on November 1, 2008, the Company
was obligated to pay a total of €60,000 to IGR in license fees and maintenance
fees, which payments were not made. The Company and IGR agreed to modify the
payment schedule described above, so that the €10,000 would continue to be due
as originally scheduled (subject to issuance of an invoice by IGR), and the
license fee €50,000 otherwise due on November 1, 2008, became payable in two
equal installments of €25,000 on March 1, 2009 and June 1, 2009, respectively.
 The€10,000  license
fee was timely paid on December 1, 2008.





Thereafter,
IGR agreed to split the €25,000 payment that would otherwise have been due on
March 1, 2009, into two payments, the first of which was in the amount of
€15,000 and continued to be due in March 2009.  The second payment
of  €10,000 became due no later than June 2009.  The Company
paid to IGR  the  €15,000 that was due in March but has not
made either the €10,000 payment or the €25,000 payment that were due in June
2009, nor has it received a formal extension from IGR with respect
thereto.  Subsequent to the period covered by this report, the Company
paid IGR €3,365 toward this past due obligation totaling €35,000 and continues
to engage in informal discussions with IGR in an attempt to achieve a consensual
payment arrangement to resolve its past due obligations under the IGR License
Agreement.  Although no agreement has been reached with IGR regarding
these delinquent obligations, IGR has not, as of the date of this report,
declared a default under the IGR License Agreement, after which we would have a
contractual period in which to make such payment and cure the default before the
IGR License Agreement could be terminated. Should such a declaration of default
be issued, there is no assurance that the Company would have sufficient
wherewithal to cure the default within the prescribed cure period or to
otherwise stave off the termination of the IGR License Agreement.





As of
September 30, 2009, the Company has accrued $48,014, representing the past due
obligations from March 1 and June 1, 2009 of €35,000.





Ohio State Licensing
Agreement




The
Company entered into a licensing agreement (the “OSU License Agreement”) with
Ohio State University (OSU) that was effective April 18, 2008, pursuant to
which  OSU granted the Company rights to use the Licensed Patents,
Licensed Material and Licensed Information (each as defined in the OSU License
Agreement). The OSU License Agreement provides for payment by the Company of a
one time license fee of $300,000, of which $5,000 was paid on execution, $45,000
was paid on the first business day following the Phase 1 Data Review Period,
$50,000 was paid in September 2009, $100,000 was originally due November 15,
2008, $50,000 was originally due June 30, 2009, and $50,000 was originally due
September 30, 2009. In addition, the OSU License Agreement provides for
reimbursement to OSU for its patent expenses according to the schedule
below:




$12,738
payable in eight quarterly payments beginning October 1, 2009




As of
September 30, 2009, the Company has paid $110,000 in licensing fees under this
agreement, plus an additional $200,000 in related payments under separate gift
agreements with OSU.




With
respect to the license fee of $100,000 which, under the OSU License Agreement,
was scheduled to be paid on or before November 15, 2008, the parties previously
reached an understanding whereby $10,000 was to be and was paid immediately,
$40,000 was to be due on March 1, 2009 and the balance of $50,000 would be due
on June 30, 2009.  In addition, it is the Company’s position that the
parties agreed to extend until September 30, 2009 the $50,000 license fee which,
under the OSU Agreement, was scheduled to be paid on June 30, 2009, although OSU
disputes that this amendment was effectuated.




As
described in detail in the Company’s Form 8-K filed with the SEC on August 24,
2009, on August 17, 2009, OSU issued a formal notice (the “Notice”) to the
Company of its alleged default under the OSU License Agreement based on the
Company’s non-payment of certain license fees.   The Company has
acknowledged that certain license fees called for under the OSU License
Agreement have not been paid.  However, as reported by the Company in
the aforementioned 8-K the Company believes that it has meritorious defenses and
counterclaims to OSU’s claim of breach under the OSU License Agreement, and that
it has separate claims both against OSU and one or more individuals at OSU
relating to conduct in inducing the Company into entering into the OSU License
Agreement without full disclosure of what it believes were certain known facts.
The OSU License Agreement provides that if the Company fails to make any
required payment when due, OSU  has the right to terminate the OSU
License Agreement on 30 days’ written notice, which has been provided to the
Company in the form of the Notice.  Under Section 11.2 of the OSU
License Agreement, any payments which, in fact, are due and owing as of the date
of the Notice must be paid in full within 30 days of the receipt of the Notice,
failing which the OSU License Agreement would terminate
automatically.  However, Section 11.5 of the OSU License Agreement
provides that if the Company, as licensee, disputes an alleged default or
breach, the 30 day cure period shall be tolled pending the resolution of the
dispute.  Such tolling is conditioned upon the posting of an
appropriate bond and payment of all attorney fees and costs should OSU
prevail.  Once the dispute is resolved, either for or against the
Company, the Company would have the remainder of the cure period to pay such
amounts found to be due to avoid automatic termination of the OSU License
Agreement.




35
 Table of Contents




The
Company has provided formal notice to OSU that it disputes OSU’s
characterization in the Notice that the Company’s non-payment of scheduled fees
and interest constitutes a breach of the OSU License
Agreement.  Subsequent to the period covered by this report, on
October 9, 2009, OSU advised the Company that it did not believe that the issues
raised by the Company constituted a valid dispute that would call into play the
tolling provisions of Section 11.5 and stated its view that it was considering
the OSU License Agreement as terminated.   While not waiving its
right to assert that the License Agreement was terminated, OSU went on in the
October 9, 2009 letter to demand a bond from the Company in the amount of
$450,371.79 under Section 11.5 of the OSU License Agreement pending the
resolution of the dispute.  Thereafter, the Company advised OSU of its
position that, based on the nature of its claims against OSU, the provisions in
the OSU License Agreement that purport to require a bond were not enforceable
and that no bond was required.  The Company further informed OSU that,
in its view, if it were determined subsequently that a bond was required, the
amount of any such bond would be substantially less than that demanded by
OSU.  As of the date of this report, no formal action has been taken
by either OSU or the Company regarding the bond or the underlying
dispute.




The
Company cannot predict the likelihood of prevailing in its dispute with OSU,
either with respect to the question of the need for a bond or the amount
thereof, or as to the underlying dispute itself.   However, if it
were ultimately determined that the Company’s defenses and counterclaims lack
merit and the dispute were resolved in favor of OSU, it is highly likely that
the OSU License Agreement will be terminated.  Also, if it were
determined that a bond was required within 30 days of receipt of the Notice from
OSU, or if a bond is required which the Company is unable to post, it is highly
likely that the OSU License Agreement will be terminated.  In
addition, if OSU were to prevail in its position that the Company was in breach
of the OSU License Agreement, the Company would also face an award or judgment
for all past due payments, plus interest, legal fees and court
costs.




The
technology that is the subject of the OSU License Agreement relates exclusively
to the Company’s vaccine technology and has no  direct or indirect
inter-relatedness or connection to the Company’s diagnostic and prognostic
technologies that are under license from academic institutions other than
OSU.  Any termination of the OSU License Agreement, whether through a
consensual understanding with OSU or through an adverse result following
litigation, will have no effect on the Company’s portfolio of diagnostic and
prognostic technologies, which are expected to be the Company’s primary focus
going forward.




As of
September 30, 2009, the Company has accrued unpaid license fees in the amount of
$190,000, which obligations are noted as being  disputed.




Contingent warrants
issuable




The
Company has convertible notes payable outstanding which contain a provision for
contingent warrants that are potentially issuable. Pursuant to the convertible
notes agreements that warrants are issuable if the notes holder elects to
convert at least 25% of the principal amount due, during the term of the note.
According to the convertible note payable agreements, there are potentially
1,207,096 warrants issuable to purchase shares of common stock. Upon issuance
these warrants are exercisable for 5 years at a price of $0.1781 per
share.




10.
SUBSEQUENT EVENTS




As of the
date of this interim financial report, November 23, 2009, and with the exception
of developments relating to the Company’s dispute with OSU under the OSU License
Agreement, which are described in detail in Note 9 --“Commitments and
Contingencies” --there
have been no subsequent events that warrants disclosure by the
Company.




36
 Table of Contents





ITEM 2.
            MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS




Overview




Omnimmune
Holdings, Inc. (“Omnimmune” or the “Company”) is the holding company of
Omnimmune Corp., a development-stage biotechnology company integrating
complementary cancer therapeutic, diagnostic and prognostic
technologies.  Our mission is to provide a comprehensive and
personalized approach to the clinical management of cancer through improved
diagnostic, prognostic and therapeutic interventions.  Omnimmune has
acquired licensed rights to breakthrough platform monoclonal antibody
technologies and a multivalent cancer vaccine targeting two epitopes of HER-2,
validated tumor associated antigens.  The vaccine has completed a
Phase I NCI sponsored clinical trial.  Omnimmune plans to sponsor
Phase II and III trials and market the vaccine in collaboration with
others.  We believe the core technology utilized in the development of
this multivalent vaccine represents a platform for the development of additional
vaccines.




Omnimmune
intends to play a leading role in the development of personalized cancer
treatment with the selection of prophylactic and therapeutic vaccines (active
immunization), monoclonal antibodies (passive immunization) and gene-based
products, which target a hormone called human chorionic gonadotropin
(“hCG”).  Appropriate patient-specific passive immunotherapies will be
based upon a patient’s own sequences of hCGb (human chorionic gonadotropin beta
subunit), and its gene products (mRNA).  HCGß and its genes have been
detected in a majority of cancers studied to date, and is a well validated tumor
marker.  On this basis, hCG has enormous potential as a target for the
diagnosis and treatment of cancer patients.  The application of
appropriate patient-specific immunotherapy will be based upon the genetic
expression and translation of a patient’s own subunit marker(s), as determined
by Omnimmune’s combined immuno-genetic cancer diagnostic and prognostic
systems.  An immuno-genetic companion diagnostic trial is being
planned by Omnimmune, and is expected to take place during the 2009 calendar
year, subject to the Company obtaining sufficient
financing.  Omnimmune expects that the results of that trial will be a
prelude to the development of a widely applicable diagnostic system for the
diagnosis, prognosis and determination of recurrence of certain
cancers.  Omnimmune plans to conduct a Phase I trial with its lead
candidate anti-hCGb monoclonal antibodies based upon the results of the
diagnostic trial.





Omnimmune
believes that this customized diagnostic-therapeutic coupling approach
represents a new paradigm for targeted therapy, and will significantly alter the
way in which cancer patients will be managed in the future. Omnimmune’s
objective is to be a leader in the implementation (reduction to practice) of
previously discovered and characterized vaccines and monoclonal antibodies, and
in the discovery, development and commercialization of new monoclonal antibodies
for diagnostic, prognostic and therapeutic (passive immunization) purposes, as
well as gene-based products targeting hCGb.





Omnimmune’s
unique HER-2 vaccine, hCGß and related technologies, which are protected through
an expanding intellectual property portfolio, have been developed at
institutions including The Ohio State University, Columbia University of New
York, The Allegheny-Singer Research Institute of the Allegheny General Hospital,
Pittsburgh, Pennsylvania and The Institute Gustave Roussy, Paris,
France.





The
predecessor of the Company was originally incorporated on February 22, 2007, in
the state of Nevada as Roughneck Supplies, Inc. (“Roughneck”).  On
August 6, 2008, Roughneck merged with and into Omnimmune Holdings, Inc. which
resulted in (i) Roughneck changing its domicile from Nevada to Delaware, (ii)
Roughneck changing its name from “Roughneck Supplies, Inc.” to “Omnimmune
Holdings, Inc.”, (iii) Roughneck changing its fiscal year end from May 31 to
December 31 and (iv) Roughneck’s shareholders becoming the stockholders of the
Company.




On August
7, 2008, Omnimmune Corp., a privately-held Texas corporation, merged with and
into Omnimmune Acquisition Corp., a Delaware corporation, and a wholly-owned
subsidiary of the Company formed for the purpose of the merger.  As a
result, (i) Omnimmune Corp. became a wholly-owned subsidiary of the Company,
(ii) the shareholders of Omnimmune Corp. became the majority stockholders of the
Company and the shareholders prior to the merger were reduced to a minority
ownership, (iii) the historical management of the Company resigned, and the
management of Omnimmune Corp. became the management of the Company, (iv) the
business of Omnimmune Corp. became the business of Omnimmune and the former
business of Roughneck was eliminated, and (v) the historical financial
statements of Omnimmune Corp. became the historical financial statements of the
Company.  Therefore, as a consequence of two mergers, one on August 6,
2008, and one on August 7, 2008, Omnimmune (formerly Roughneck) went from being
a public corporation domiciled in Nevada formerly in the business of marketing
and retailing oil and gas drilling supply products with little or no continuing
operations and a fiscal year end of May 31, to being a public company domiciled
in Delaware in the biotechnology business with a fiscal year end of December
31.  These transactions are described in detail in the Company’s Form
8-K filed with the SEC on August 12, 2008, as amended on August 21, 2008, August
27, 2008 and September 5, 2008, respectively.




37
 Table of Contents




Results
of Operations




Because
we produce no revenues, we rely entirely on debt and equity financing to fund
ongoing operations, and expect to continue to do so for the foreseeable
future.   Generating revenues and ultimately achieving
profitability will require the successful completion of our research and
development programs, and the subsequent commercialization of the results or of
products derived from such research and development efforts or from our patents
and patents pending and those licensed from our strategic
collaborators.  No assurances can be given as to our ability to
identify sufficient sources of funding to sustain our operations, commercialize
our products or achieve profitability.   These matters raise
substantial doubt about our ability to continue as a going concern. The
financial statements do not include any adjustments that may result from the
outcome of this uncertainty. In order to alleviate our working capital
deficiency and address our continued financing concerns, management intends to
continue to take affirmative steps towards identifying sources of capital that
will be sufficient to fund our operations until such time as we are cash flow
positive.




Three
Months Ended September 30, 2009 and September 30, 2008




Revenue





As a
development stage pharmaceutical company, we produce no revenues and do not
expect to produce any revenues for the foreseeable
future.





Costs and
Expenses





Our
selling, general and administrative expenses decreased approximately 55% to
$401,300  in the three months ended September 30, 2009, from $885,583
for the same period in 2008.  For the three months ended September 30,
2009, selling, general, and administrative expenses
consisted  primarily of payroll and employee benefits of $135,211;
license fees of $126,250; consulting fees of $59,300; non cash compensation of
$48,399; legal and accounting fees of $13,980;  and office rent
expense of $2,312.    The decrease in the selling, general
and administrative expenses was the result of a reduction in legal fees, due to
the completion of the reverse merger and the financings in the prior period, and
to a reduction in non-cash compensation during the current period.





Interest
Expense





Interest
expense decreased approximately 49% to $60,865 in the three months ended
September 30, 2009, from $118,320 for the same period in 2008. The primary
reason for this decrease was the acceleration of a portion of the amortization
of the discount which resulted from the amending of a note payable during the
three months ended September 30, 2008.




Net Loss





For the
reasons stated above, our net loss for the three months ending September 30,
2009 was $462,165, compared to a net loss for the three months ending September
30, 2008 of $1,013,903.  For the period since inception January 15,
1997 through September 30, 2009, our accumulated net loss is
$20,637,577.





38
 Table of Contents




Nine
Months Ended September 30, 2009 and September 30, 2008




Revenue





As a
development stage pharmaceutical company, we produce no revenues and do not
expect to produce any revenues for the foreseeable
future.





Costs and
Expenses





Our
selling, general and administrative expenses decreased approximately 78% to
$1,123,207  in the nine months ended September 30, 2009, from
$5,044,618 in the same period in 2008.  For the nine months ended
September 30, 2009, the primary components of selling, general, and
administrative expenses were  payroll and employee benefits of
$404,323; license fees of $263,500; consulting fee of $186,250;  legal
and accounting fees of $141,686; non cash compensation of $69,197; insurance
expense of $23,452; and office rent expense of $6,936. The decrease in the
selling, general and administrative expenses was the result of a reduction in
legal fees, due to the completion of the reverse merger and the financings in
the prior period, and to a reduction in non-cash compensation during the
current  period.




Interest
Expense





Interest
expense decreased approximately 97% to $176,371 in the nine months ended
September 30, 2009, from $6,987,657 for the same period in 2008. The primary
reason for this decrease was the acceleration of a portion of the amortization
of the discount which resulted from the restructuring of debt during the nine
months ended September 30, 2008.




Net Loss





For the
reasons stated above, our net loss for the nine months ending September 30, 2009
was $1,299,578, compared to a net loss for the nine months ending September 30,
2008 of $5,499,474.  For the period since inception January 15, 1997
through September 30, 2009, our accumulated net loss is
$20,637,577.





These  losses,
in addition to a lack of continuing operations, raise substantial doubt about
our ability to continue as a going concern.  Also, as of November 04,
2009, we had $0 cash on hand.    Accordingly, absent an immediate
infusion of new capital, we will be unable to meet our ongoing obligations on a
timely basis.  Since we do not expect to generate significant revenues
in the foreseeable future, we, in order to fund future operations, will be
completely dependent on additional debt and equity financing arrangements to
fund future operations.





Liquidity
and Capital Resources





Net
cash  used in operating activities was $178,503 for the nine months
ended September 30, 2009, compared to net cash used in operating activities of
$1,600,075 for the same period in 2008. This decrease was the result of the
restructuring of debt during the nine months ended September 30, 2008, and there
was no comparable activity during the nine months ended September 30, 2009. From
inception through September 30, 2009, cash  used in operating
activities was $3,915,300.




Net cash
provided by financing activities was $125,888 for the nine months ended
September 30, 2009, compared  to
$1,888,331  for  the same period in 2008.   The
primary reason for the decrease is during the nine months ended September 30,
2009, the Company completed a stock offering where an aggregate of $1,408,281,
net of costs was raised, and there was no comparable activity during the nine
months ended September 30, 2009. From inception through September 30, 2009, we
have generated $3,921,300 in cash from financing activities.  We have
financed our operations primarily through loans from shareholders and investors
in our bridge financings and private placement equity offerings.




Management
is seeking to raise additional money through private debt and equity offerings
to enable us to satisfy our cash requirements in the coming months and beyond
and to fund ongoing research and development activities.  We are not
self-supporting through internally generated capital, and rely exclusively on
our continued ability to raise additional funds through private or public debt
or equity financings to meet our ongoing cash needs.




39
 Table of Contents




We will
require substantial additional funding in order to meet our obligations to our
licensors, continue our research and product development programs, including
preclinical testing and clinical trials of our product candidates, and meet
ongoing operating expenses.   We are currently delinquent with
all of our principal licensors with respect to our diagnostic technologies, and
are subject to the ongoing risk that our licensing partners will begin to take
aggressive measure in an attempt to terminate their license agreements with the
Company and reclaim their technologies.  We expect to continue to
incur substantial losses through at least the next several years and may incur
losses in subsequent periods.  The amount and timing of our future
losses are highly uncertain.  Our ability to achieve and thereafter
sustain profitability will be dependent upon, among other things, successfully
developing, commercializing and obtaining regulatory approval or clearances for
our technologies and products resulting from these technologies, which will
require substantial additional funding, the availability of which is
uncertain.




There is
no assurance that we will obtain financing sufficient to pay ongoing obligations
or to fund our working capital and other cash requirements.  No
assurance can be given that any such additional funding will be available or
that, if available, can be obtained on terms favorable to us.  If we
are unable to raise needed funds on acceptable terms, we will not be able to
develop our products, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements.  A material shortage
of capital will require us to take drastic steps such as reducing our levels of
operations, disposing of selected assets, curtailing our development efforts or
seeking an acquisition partner.  If cash is insufficient, we
may  not be able to retain our licensed technologies and may be forced
to discontinue operations.




Off-Balance
Sheet Arrangements




We have
not entered into any transactions with unconsolidated entities in which we have
financial guarantees, subordinated retained interests, derivative instruments or
other contingent arrangements that expose us to material continuing risks,
contingent liabilities or any other obligations under a variable interest in an
unconsolidated entity that provides us with financing, liquidity, market risk or
credit risk support.





Critical
Accounting Policies




The
preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires us to
make estimates and judgments that affect our reported assets, liabilities,
revenues, and expenses, and the disclosure of contingent assets and
liabilities.





We base
our estimates and judgments on historical experience and on various other
assumptions we believe to be reasonable under the circumstances. Future events,
however, may differ markedly from our current expectations and assumptions.
While there are a number of significant accounting policies affecting our
consolidated financial statements; we believe the following critical accounting
policy involves the most complex, difficult and subjective estimates and
judgments:




Stock Based
Compensation   Effective January 1, 2006, the Company
adopted ASC 718-10 utilizing the modified prospective approach. Prior to the
adoption of ASC 718-10 we accounted for stock option grant in accordance with
ASC718-10, and accordingly, recognized compensation expense for stock option
grants.




Under the
modified prospective approach, ASC 718-10 applies to new awards and to awards
that were outstanding on January 1, 2006 that are subsequently modified,
repurchased or cancelled. Under the modified prospective approach, compensation
cost recognized in the nine months of fiscal 2006 includes compensation cost for
all share-based payments granted prior to, but not yet vested as of January 1,
2006, based on the grant-date fair value estimated in accordance with the
original provisions of ASC 718-10, and compensation cost for all share-based
payments granted subsequent to January 1, 2006 based on the grant-date fair
value estimated in accordance with the provisions of ASC 718-10. Prior periods
were not restated to reflect the impact of adopting the new
standard.





40
 Table of Contents




A summary
of option activity under the Plan as of September 30, 2009, and changes during
the period ended are presented below:




Options
                  
                  
                  Weighted
      Average
                    Exercise
      PriceOutstanding
      at December 31, 2008
                  
                  
                  2,350,000
                  
                  
                  $
                  2.50Issued
                  
                  
                  -
                  
                  
                  
                  -Exercised
                  
                  
                  -
                  
                  
                  
                  -Forfeited
      or expired
                  
                  
                  -
                  
                  
                  
                  -Outstanding
      at September 30, 2009
                  
                  
                  2,350,000
                  
                  
                  $
                  2.50Vested
      at September 30, 2009
                  
                  
                  2,319,283
                  
                  
                  $
                  2.50Non-vested
      at September 30, 2009
                  
                  
                  30,717
                  
                  
                  $
                  2.50




Aggregate
intrinsic value of options outstanding and exercisable at September 30, 2009 was
$0. Aggregate intrinsic value represents the difference between the Company's
closing stock price on the last trading day of the fiscal period, which was
$0.25 as of September 30, 2009, and the exercise price multiplied by the number
of options outstanding. As of September 30, 2009, total unrecognized stock-based
compensation expense related to stock options was $38,148. The total fair value
of options vested during the three months September 30, 2009 and 2008 was
$10,399 and $44,449, respectively. The total fair value of options vested during
the nine months September 30, 2009 and 2008 was $31,199 and $44,449,
respectively.




Revenue
Recognition.   Our policy is to recognize revenue over the
period that we perform required activities under the terms of various
agreements.  Revenue from transactions that do not require future
performance obligations from us is recognized as contemplated in the agreements,
typically upon acceptance and when collectability is reasonably
assured.  Revenue resulting from the achievement of milestone events
stipulated in the agreements will be recognized when the milestone is
achieved.




Research and Development.
Research and development expenditures, including direct and allocated overhead
expenses, are charged to expense as incurred.





Royalties.  We are
required to remit royalty payments based on product sales to certain parties
under our license agreements.  From time to time we have been in
default under certain of our material license agreements with respect to our
payment obligations and achievement of performance milestones; however, such
license agreements are currently in good standing.





Long-Lived
Assets.  Equipment is stated at acquired cost less accumulated
depreciation.  Laboratory and office equipment are depreciated on the
straight-line basis over the estimated useful lives (three to seven
years).





Impairment
of long-lived assets is recognized when events or changes in circumstances
indicate that the carrying amount of the asset or related group of assets may
not be recoverable.  If the expected future undiscounted cash flows
are less than the carrying amount of the asset, an impairment loss is recognized
at that time.  Measurement of impairment may be based upon appraisal,
market value of similar assets or discounted cash flows.





Patent Costs and
Rights.  Patent costs and rights are expensed as
incurred.





Income Taxes.  As
of September 30, 2009, we had aggregate unused net operating loss carryforwards
of approximately $14,500,000.  These carryforwards may be used to reduce
future tax liabilities and expire at various dates through 2027.  Our
use of current net operating loss carryforwards may be substantially limited as
a result of the change in ownership related to the Merger and the
Offering.




Recent
Accounting Pronouncements




For a
summary of recently issued accounting standards, please see Note 1 to the
consolidated unaudited financial statements included in Part I, Item 1 in this
report.





41
 Table of Contents




Cautionary
Notice Regarding Forward Looking Statements




This
Quarterly Report on Form 10-Q contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), Section 21E of the Securities Exchange Act of 1934 (the
“Exchange Act”) and the Private Securities Litigation Reform Act of
1995.  Forward-looking statements reflect the current view about
future events and financial performance based on certain
assumptions.  They include opinions, forecasts, projections, guidance,
expectations, beliefs or other statements that are not statements of historical
fact.  In some cases, forward-looking statements can be identified by
words such as “may,” “can,” “will,” “should,” “could,” “expects,” “hopes,”
“believes,” “plans,” “anticipates,” “estimates,” “predicts,” “projects,”
“potential,” “intends,” “approximates” or the negative or other variation of
such terms and other comparable expressions.  Forward-looking
statements in this report may include statements about:




•
            future
      financial and operating results, including projections of revenues,
      income, expenditures, cash balances and other financial
    items;




•
            capital
      requirements and the need for additional
  financing;




•
            our
      ability to develop commercially viable
products;




•
            our
      intellectual property rights and similar rights of others, including
      actual or potential competitors;




•
            the
      outcome of regulatory submissions and approvals and clinical
      trials;




•
            the
      performance of our future products and their potential to generate
      revenues;




•
            our
      beliefs and opinions about the safety and efficacy of any of our future
      products and the results of our
studies;




•
            development
      of new products;




•
            growth,
      expansion and acquisition
strategies;




•
            current
      and future economic and political
conditions;




•
            overall
      industry and market performance;




•
            competition;




•
            management’s
      goals and plans for future operations;
and




•
            other
      assumptions described in this report underlying or relating to any
      forward-looking statements.




The
forward-looking statements in this report are only
predictions.  Actual results could and likely will differ materially
from these forward-looking statements for many reasons, including the risks
described under “Risk Factors” and elsewhere in this report.  No
guarantee about future results, performance or achievements can be
made.  These forward-looking statements are made only as of the date
hereof, and we undertake no obligation to update or revise the forward-looking
statements, whether as a result of new information, future events or
otherwise.  The safe harbors for forward-looking statements provided
by the Private Securities Litigation Reform Act are unavailable to issuers of
“penny stock.”  Our shares may be considered a penny stock and, as a
result, the safe harbors may not be available to us.




ITEM 3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK




Not
applicable.




42
 Table of Contents


ITEM 4.
            CONTROLS
      AND PROCEDURES




As of
September 30, 2009, we carried out an evaluation of the effectiveness of the
design and operation of our disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)).  This evaluation was
carried out under the supervision and with the participation of our Chief
Executive Officer and our Chief Financial Officer, Dr. Harris Lichtenstein.
Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of September 30, 2009 and December 31, 2008, our
disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is accumulated, recorded, processed, summarized for management and
reported within the time periods specified in the rules and forms of the SEC
..




Disclosure
controls and procedures are controls and other procedures that are designed to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.





Our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will necessarily prevent all fraud and
material error. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level.  Further,
the design of a control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation
of controls can provide absolute assurance that all control issues and instances
of fraud, if any, within the Company have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the
internal control. The design of any system of controls also is based in part
upon certain assumptions about the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or the degree of compliance with the policies
or procedures may deteriorate.





Changes
in Internal Controls





There
have been no changes in our internal controls over financial reporting
identified in the evaluation that occurred during our first and second quarters
of fiscal year 2009 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.




PART
II – OTHER INFORMATION




ITEM 1.
            LEGAL
      PROCEEDINGS




Although
no formal legal proceedings are currently pending between OSU and the Company
regarding the dispute under the OSU License Agreement, such formal proceedings,
either by or against the Company, could commence at any time.  See Note 9, “Commitments and
Contingencies -- OSU License Agreement.”  The Company may be subject
to other lawsuits, claims and other legal matters that arise in the ordinary
course of conducting business, none of which, in management’s opinion, would be
expected to have a material adverse impact on the Company’s financial condition,
results of operations or cash flows.




ITEM 1A.
            RISK
      FACTORS




An
investment in our common stock involves a high degree of risk.  You
should carefully consider the risks and uncertainties described below and all
other information contained in this report before deciding to invest in shares
of  our common stock.  While all risks and uncertainties
that we believe to be material to our business and, therefore, the value of our
common stock are described below, it is possible that other risks and
uncertainties that affect our business will arise or become material in the
future.  If we are unable to effectively address these risks and
uncertainties, our business, financial condition or results of operations could
be materially and adversely affected.  In this event, the value of the
common stock could decline and you could lose all or a portion of your
investment.





43
 Table of Contents




Our
auditors have substantial doubts as to our ability to continue as a going
concern.




The
auditor’s report on our financial statements for the year ended December 31,
2008 expresses an opinion that substantial doubt exists as to whether Omnimmune
can continue to meet its ongoing obligations and remain in
business.  Because Omnimmune has been issued an opinion by its
auditors that substantial doubt exists as to whether we can continue as a going
concern, it may be more difficult for us to attract investors.  Our
future is dependent upon our ability to obtain financing and upon future
profitable operations from the development and commercialization of our
products.  We may seek additional funds through private placements of
equity or the incurrence of additional debt.  Our financial statements
do not include any adjustments relating to the recoverability and classification
of recorded assets, or the amounts of and classification of liabilities that
might be necessary in the event we cannot continue in existence.




We
require additional financing, and an inability to raise the necessary capital or
to do so on acceptable terms would jeopardize our ability to stay in
business.




As of
September 30, 2009, we had a cash overdraft of $6,330, which it was resolved
subsequent to September 30, 2009, and cash of approximately $1,000 as of the
date of this report.  The Company has been unable to meet certain of
its ongoing obligations, including payments due to senior management, employees,
consultants, noteholders, licensors and other creditors.   Absent
immediate additional infusions of capital, the Company does not have sufficient
liquidity to meet its ongoing obligations on a timely basis, and must resort to
consensual extensions and hope that creditors will refrain from pursuing default
remedies with respect to delinquent obligations of the Company.  The
limited amount of cash on hand jeopardizes the Company’s ability to fund
operations and satisfy its ongoing obligations in a timely manner, including to
the licensors of its core technologies. In addition, if we are unable in the
near future to raise sufficient capital to fund storage costs related to the
Company’s cell-lines, sequences and other samples and materials being held in
frozen storage for future testing and to actually pursue the testing of those
materials so as to advance the development of the technologies being licensed
from third parties, there is a substantial risk that we will not be given access
to the stored materials or that, through the passage of time, the stored samples
will degrade or otherwise lose their value to the Company.




We may
seek to raise additional funds through public or private equity or debt
financing, licensing and other agreements, a line of credit, asset sales or
other arrangements.  However, we cannot be sure that any additional
funding, when needed, will be available on terms favorable to us or at
all.  Furthermore, any additional equity or equity-related financing
may be dilutive to our stockholders, and debt financing, if available, may
subject us to restrictive covenants and significant interest
costs.  We may also choose to obtain funding through licensing and
other contractual arrangements.  Such agreements may require us to
relinquish our rights to certain of our technologies, products or marketing
territories.




If we are
unable to obtain additional capital, we may then attempt to preserve our
available resources by various methods including deferring the satisfaction of
commitments, reducing expenditures on our research and development programs or
otherwise scaling back our operations. If we are unable to raise additional
capital or defer costs, that inability would have a material adverse effect on
our financial position, results of operations and prospects and our business
could fail.




We
are  past due under certain of our material license agreements with
respect to our payment obligations.  There is no assurance that we
will receive extensions of these obligations or that we will not default under
these agreements in the future; any such defaults could result in the
termination of one or more of our principal license agreements or otherwise
materially and adversely affect our business.




Each of
our existing license agreements with third party collaborators requires us to
make periodic payments to the licensors for the licensed rights, including, by
way of example, upfront and annual license maintenance fees, royalties based on
product sales utilizing the licensed technology, sublicensing royalties,
milestone payments based on certain achievements as we conduct trials on the
licensed products and progress them through the FDA approval process, and the
reimbursement or payment of costs associated with prosecuting the patents
subject to these license agreements.




44
 Table of Contents




Given our
significant cash flow limitations and our inability to raise additional capital
to date, we have had difficulties making required milestone and other payments
under our license agreements, and we are delinquent with respect to such
payments, including ASRI ($50,000 due August 1, 2009), Columbia ($52,500 due
August 1, 2009), and IGR (€25,000 due June 1, 2009 plus an additional €70,000 as
of the date of this report) and we are at significant risk of additional
delinquencies with respect to forthcoming payments due under our license
agreements.  In the case of OSU, we believe that we have meritorious
defenses and counterclaims with respect to our non-payment of certain milestone
payments totaling $140,. However, there is no assurance that the Company will be
successful in pursuing any such defenses and counterclaims, or in preventing the
OSU License Agreement from being terminated.




With the
exception of OSU none of our licensors is currently pursuing its default
remedies under its respective license agreement. However, certainty that such
licensors will continue to refrain from calling a default under their particular
license agreement or that we will have sufficient available funds with which to
make such payment within the cure period if a default were called.  If
a default is called and we do not timely cure or defend, the affected license
agreement would likely be terminated.




There is
also no assurance that we will be able to remain current in the payment of our
license fees on a go-forward basis, that the respective licensors will cooperate
in any requests for waivers or extensions, or, in the case of OSU, that we will
succeed in our defenses and counterclaims. All of the license agreements require
the licensors to give written notice of any payment default, which would then
commence a period of between 30 days and 90 days, depending on the particular
license agreement, during which time the Company could cure the default. If we
default in the payment of any of our obligations to our licensors, there is no
assurance that we will be in a position to cure any such defaults during the
particular cure period. In that event, the continued existence and/or
exclusivity of the affected license could be at risk.





Additionally,
our license agreements provide for various performance and achievement
milestones to ensure that we devote adequate personnel and financial resources
to the commercialization of the licensed patents and processes.  If we
do not achieve the milestones in our agreements with The Allegheny-Singer
Research Institute and Columbia University, the respective licensor can, with
prior notice and an opportunity to cure, elect to terminate the subject license
agreement or convert the exclusive worldwide license to a non-exclusive
license.  With respect to our license agreement with The Institute
Gustave Roussy, we have until November 1, 2010 to achieve net sales or
sublicense revenue from products developed with the licensed patents, after
which time the licensed rights will become non-exclusive; however, we can
request two one-year extensions of the exclusive license with the payment of an
additional license fee to the licensor.  Our agreement with OSU
provides that the parties can mutually agree to extend the performance
milestones so long as the delay is not a result of lack of capital for
development on our part.




Substantial
future issuances and sales of our common stock, or convertible notes or
preferred stock that can be converted into common stock, or adjustments to
prices of existing convertible securities,  could cause substantial
dilution to existing stockholders and could significantly depress our stock
price.





The
market price for our common stock could decline, perhaps significantly, as a
result of issuances of a large number of shares of our common stock in the
public market or even the perception that such issuances could
occur.  Such issuances may be direct, as in the case of stock issued
to investors as part of a financing or similar transaction, or indirect, in the
form of the issuance of convertible debt or equity  securities that
could be converted into common stock at prices substantially lower than the
then-current trading price of the Company’s common stock.  In
addition, the Company may reduce the conversion price associated with already
issued securities to induce the holders of such securities to advance additional
sums to the Company.  Because of the Company’s dire financial
condition and difficulty raising funds needed to continue to fund ongoing
operations, there is a significant likelihood that the Company will have to
issue such dilutive securities in order to raise necessary
funding.   Should the Company issue substantial additional stock,
or notes or preferred stock convertible into the Company’s common stock, such
issuances would have an adverse dilutive effect on all existing shares of the
Company’s common stock  and would likely cause the market price for
our common stock to decline, perhaps significantly.





45
 Table of Contents




Additional
Risk Factors are set forth in the Company’s most recent filing under Form 10-K
dated April 15, 2009, covering the calendar year ended December 31,
2008.




ITEM 2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS




For more
information about unregistered sales of our securities, see Item 1, Note 8 of
this report for a discussion of our sales of convertible promissory notes and
Units.




ITEM 3.
            DEFAULTS
      UPON SENIOR SECURITIES




None.




ITEM 4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS




None.




ITEM 5.
            OTHER
      INFORMATION




None.




ITEM 6.
            EXHIBITS




EXHIBIT
      NO.
                  
                  NAME
      OF EXHIBIT2.1
                  
                  Agreement
      of Merger, dated as of August 6, 2008, by and between Roughneck Supplies,
      Inc. and Omnimmune Holdings, Inc. (incorporated by reference to Exhibit
      2.1 to our Current Report on Form 8-K filed on August 12,
      2008).2.2
                  
                  Agreement
      of Merger and Plan of Reorganization, dated as of August 7, 2008, by and
      among the Omnimmune Holdings, Inc., Omnimmune Acquisition Corp., a wholly
      owned subsidiary of the Company, and Omnimmune Corp. (incorporated by
      reference to Exhibit 2.2 to our Current Report on Form 8-K filed on August
      12, 2008).2.3
                  
                  Certificate
      of Merger, effective August 6, 2008, merging Roughneck Supplies, Inc. with
      and into Omnimmune Holdings, Inc. (incorporated by reference to Exhibit
      2.3 to our Current Report on Form 8-K filed on August 12,
      2008).2.4
                  
                  Articles
      of Merger, effective August 7, 2008, merging Omnimmune Corp. with and into
      Omnimmune Acquisition Corp. (incorporated by reference to Exhibit 2.4 to
      our Current Report on Form 8-K filed on August 12,
  2008).4.1
                  
                  Second
      Amended and Restated Convertible Demand Promissory Note10.1
                  
                  Registration
      Rights Agreement, dated as of August 7, 2008, by and among Omnimmune
      Holdings, Inc. and the stockholders of Omnimmune Holdings, Inc. parties
      thereto (incorporated by reference to Exhibit 10.15 to our Current Report
      on Form 8-K filed on August 12, 2008).10.2
                  
                  Form
      of Lock-Up Agreement between the Company and executive officers and
      certain stockholders (incorporated by reference to Exhibit 10.18 to our
      Current Report on Form 8-K filed on August 12, 2008).10.3
                  
                  Amendment
      and Pledge dated July 31, 2008, to Gift Agreement entered into as of April
      18, 2008, by and among The Ohio State University Medical Center, The Ohio
      State University Foundation and Omnimmune Corp. (incorporated by reference
      to Exhibit 10.23 to our Current Report on Form 8-K filed on August 12,
      2008).31.1
                  
                  Chief Executive Officer
      Certification pursuant to Section 302 of the Sarbanes-Oxley Act of
      2002.32.1
                  
                  Chief Executive Officer
      Certification pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.




46
 Table of Contents




SIGNATURES




Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.




OMNIMMUNE
      HOLDINGS, INC.Dated:
      November 23, 2009
                
                /s/ HARRIS A.
      LICHTENSTEINHarris
      A. LichtensteinChief
      Executive Officer




47