##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM
10-K/A
 (Amendment
No. 1)
 (Mark One)
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to.
 COMMISSION FILE NUMBER: 0-24469
 GENVEC, INC.
 (Exact
name of Registrant as specified in its charter)
 DELAWARE
    
    23-2705690(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 65 WEST WATKINS MILL ROAD, GAITHERSBURG, MD
    
    20878(Address of principal executive offices)
    
    (Zip code)
 : 240-632-0740
 NONE
  COMMON STOCK, PAR VALUE $0.001 PER SHARE
 (Title of Class)
 o þ
 o þ
 þ o
 o
  o þ o
 o þ




---



##### 



Explanatory
Note
  TABLE OF CONTENTS
 PART
NO.
    

ITEM
NO.
    
    DESCRIPTION
    
    PAGE NO.III
    
    
    10
    
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    3611
    
    
    EXECUTIVE COMPENSATION
    
    
    3812
    
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    4013
    
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    4214
    
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    42IV
    
    
    15
    
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    44FINANCIAL STATEMENTS
    
    
    F1  F23
 THIS REPORT INCLUDES FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED (EXCHANGE ACT). FORWARD-LOOKING STATEMENTS ALSO MAY BE INCLUDED IN OTHER STATEMENTS THAT
WE MAKE. ALL STATEMENTS THAT ARE NOT DESCRIPTIONS OF HISTORICAL FACTS ARE FORWARD-LOOKING
STATEMENTS, BASED ON MANAGEMENTS ESTIMATES, ASSUMPTIONS AND PROJECTIONS THAT ARE SUBJECT TO RISKS
AND UNCERTAINTIES. THESE STATEMENTS CAN GENERALLY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS BELIEVES, EXPECTS, INTENDS, MAY, WILL, SHOULD, OR ANTICIPATES OR
SIMILAR TERMINOLOGY. ALTHOUGH WE BELIEVE THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING
STATEMENTS ARE REASONABLE AS OF THE DATE THEREOF, ACTUAL RESULTS, COULD DIFFER MATERIALLY FROM
THOSE CURRENTLY ANTICIPATED DUE TO A NUMBER OF FACTORS, INCLUDING RISKS RELATING TO THE EARLY STAGE
OF GENVECS PRODUCT CANDIDATES UNDER DEVELOPMENT; GENVECS ABILITY TO SECURE AND MAINTAIN
RELATIONSHIPS WITH COLLABORATORS; UNCERTAINTIES WITH, AND UNEXPECTED RESULTS AND RELATED ANALYSES
RELATING TO CLINICAL TRIALS OF GENVECS PRODUCT CANDIDATES, INCLUDING THE LENGTH OF TIME REQUIRED
TO ENROLL SUITABLE PATIENT SUBJECTS AND OUR ABILITY TO SECURE CLINICAL TRIAL SITES; THE AMOUNT OF
REVENUES ATTRIBUTABLE TO GENVECS VACCINE PROGRAM; THE TIMING AND CONTENT OF FUTURE U.S. FOOD AND
DRUG ADMINISTRATION REGULATORY ACTIONS WITH RESPECT TO GENVEC, ITS PRODUCT CANDIDATES, OR ITS
COLLABORATORS; DEPENDENCE ON THE EFFORTS OF THIRD PARTIES; COMPETITION FROM OTHER PHARMACEUTICAL OR
BIOTECHNOLOGY COMPANIES; THE SCOPE AND VALIDITY OF PATENT PROTECTION FOR GENVECS PRODUCTS AND
GENVECS ABILITY TO COMMERCIALIZE ITS PRODUCTS WITHOUT INFRINGING THE PATENT RIGHTS OF OTHERS;
RISKS THAT GENVEC MAY LACK THE FINANCIAL RESOURCES AND ACCESS TO CAPITAL TO FUND ITS OPERATIONS,
INCLUDING GENVECS ABILITY TO FULLY UTILIZE THE COMMITTED EQUITY FACILITY (CEFF) WITH KINGSBRIDGE
CAPITAL LIMITED AS A SOURCE OF FUTURE FUNDING, WHETHER DUE TO THE MAXIMUM NUMBER OF 12,735,050
SHARES ISSUABLE UNDER THE CEFF CONSISTENT WITH NASDAQ NATIONAL MARKET LISTING REQUIREMENTS,
GENVECS ABILITY TO SATISFY VARIOUS CONDITIONS TO DRAW DOWN UNDER THE CEFF, THE INVESTORS
PERFORMANCE OF ITS OBLIGATIONS UNDER THE CEFF OR OTHERWISE; AND RISKS RELATING TO THE
COMMERCIALIZATION, IF ANY, OF GENVECS PROPOSED PRODUCT CANDIDATES (SUCH AS MARKETING,
MANUFACTURING, REGULATORY, PATENT, PRODUCT LIABILITY, SUPPLY AND OTHER RISKS). FURTHER INFORMATION
ON THE FACTORS AND RISKS THAT COULD AFFECT GENVECS BUSINESS, FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS, ARE CONTAINED IN GENVECS FILINGS WITH THE U.S.
SECURITIES AND EXCHANGE COMMISSION (SEC), WHICH ARE AVAILABLE AT WWW.SEC.GOV. THESE
FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS PRESS RELEASE, AND GENVEC ASSUMES NO
DUTY TO UPDATE FORWARD-LOOKING STATEMENTS.
 1




---



##### 



PART III
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
   Directors with Terms Expiring in 2006
 Thomas H. Fraser, Ph.D. ,
 Paul H. Fischer, Ph.D. ,
 Wayne T. Hockmeyer, Ph.D., honoris causa
 Directors with Terms Expiring in 2007
 Zola P. Horovitz, Ph.D.,
 36




---



##### 



William N. Kelley, M.D.,
 Harold R. Werner
 Directors with Terms Expiring in 2008
 Barbara H. Franklin , age 65 th
 Stelios Papadopoulos, Ph.D. ,
 37




---



##### 



Joshua Ruch
 Section 16(a) Beneficial Ownership Reporting Compliance
    ITEM 11. EXECUTIVE COMPENSATION
  Summary Compensation Table
 Long-TermCompensationAnnual Compensation
    
    AwardsSecuritiesUnderlying
    
    All OtherSalary
    
    Bonus
    
    Options/SARS
    
    CompensationName and Principal Position
    
    Year
    
    ($)
    
    ($)
    
    (#)
    
    (1)Paul H. Fischer, Ph.D.
    
    
    2005
    
    
    $
    331,755
    
    
    $
    25,000
    
    
    
    150,000
    
    
    $
    7,000Chief Executive Officer,
President
    
    
    2004
    
    
    $
    320,072
    
    
    $
    64,014
    
    
    
    150,000
    
    
    $
    8,000and Director
    
    
    2003
    
    
    $
    320,072
    
    
    $
    128,030
    
    
    
    
    
    
    $
    3,500Jeffrey W. Church,
    
    
    2005
    
    
    $
    236,151
    
    
    $
    29,519
    
    
    
    75,000
    
    
    $
    5,904CFO, Treasurer and
Corporate
    
    
    2004
    
    
    $
    229,273
    
    
    $
    28,659
    
    
    
    40,000
    
    
    $
    5,732Secretary
    
    
    2003
    
    
    $
    221,520
    
    
    $
    55,380
    
    
    
    
    
    
    $
    3,003Thomas A. Davis, M.D. (2)
    
    
    2005
    
    
    $
    130,769
    
    
    $
    282,329
    
    
    
    150,000
    
    
    
    Chief Medical Officer
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    C. Richter King, Ph.D.
    
    
    2005
    
    
    $
    207,987
    
    
    $
    25,998
    
    
    
    75,000
    
    
    $
    5,200Senior Vice President,
    
    
    2004
    
    
    $
    199,031
    
    
    $
    37,318
    
    
    
    35,000
    
    
    $
    4,976Research
    
    
    2003
    
    
    $
    192,299
    
    
    $
    48,075
    
    
    
    
    
    
    $
    3,000
 
 (1)
    
    Represents the Companys contribution to GenVecs 401-K Defined Contribution Plan.(2)
    
    Dr. Davis joined the Company on July 26, 2005 with an annual salary of $300,000. Dr.
Davis bonus represents the amount paid to him upon commencement of employment as well as
the amount paid as an annual 2005 bonus of $15,000. 38




---



##### 



Option Grants in Last Fiscal Year
  Potential RealizableNumber of
    
    % of Total
    
    
    
    
    
    
    
    
    
    Value at AssumedSecurities
    
    Options
    
    
    
    
    
    
    
    
    
    Annual Rates of StockUnderlying
    
    Granted to
    
    Exercise
    
    
    
    
    
    Appreciation for theOptions Granted
    
    Employees
    
    Price per
    
    Expiration
    
    Option Term (2)Name
    
    (1)
    
    in 2005
    
    Share
    
    Date
    
    5%
    
    10%Paul H. Fischer, Ph.D.
    
    
    150,000
    
    
    
    9.2
    %
    
    $
    1.88
    
    
    
    1/19/2015
    
    
    $
    177,348
    
    
    $
    449,435Jeffrey W. Church
    
    
    75,000
    
    
    
    4.6
    %
    
    $
    1.88
    
    
    
    1/19/2015
    
    
    $
    88,674
    
    
    $
    224,718Thomas A. Davis, M.D.
    
    
    150,000
    
    
    
    9.2
    %
    
    $
    1.98
    
    
    
    7/25/2015
    
    
    $
    186,782
    
    
    $
    473,342C. Richter King, Ph.D.
    
    
    75,000
    
    
    
    4.6
    %
    
    $
    1.88
    
    
    
    1/19/2015
    
    
    $
    88,674
    
    
    $
    224,718
 
 (1)
    
    One-eighth of each option grant vests six months after the date of grant and the remainder
vests monthly on a pro-rata basis over the following 42 months. The options were granted
under the GenVec 2002 Stock Incentive Plan.(2)
    
    In accordance with the rules and regulations of the Securities and Exchange Commission, such
gains are based on assumed rates of annual compound stock appreciation of 5% and 10% from the
date on which the options were granted over the full term of the options. The rates do not
represent GenVecs estimate or projection of future GenVec common stock prices, and no
assurance can be given that these rates of annual compound stock appreciation will occur. Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
 Number of SecuritiesShares
    
    
    
    
    
    Underlying Unexercised
    
    Value of UnexercisedAcquired
    
    
    
    
    
    Options at
    
    In-The-Money Options aton
    
    Value
    
    December 31, 2005
    
    December 31, 2005Name
    
    Exercise
    
    Realized
    

Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisablePaul H. Fischer, Ph.D.
    
    
    65,592
    
    
    $
    98,339
    
    
    
    532,427
    
    
    
    191,044
    
    
    
    
    
    
    
    Jeffrey W. Church
    
    
    
    
    
    
    
    
    
    
    209,477
    
    
    
    83,023
    
    
    
    
    
    
    
    Thomas A. Davis, M.D.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    
    
    
    
    C. Richter King, Ph.D.
    
    
    
    
    
    
    
    
    
    
    202,809
    
    
    
    79,690
    
    
    
    
    
    
    
    
 Compensation of Directors
   39




---



##### 



Employment Contracts and Termination of Employment and Change-in-Control Arrangements
     ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
   40




---



##### 



Number of
    
    Percentage ofName of Beneficial Owner
    
    Shares Owned
    
    Class OwnedHealthCare Ventures LLC (1)
    
    
    10,436,462
    
    
    
    16.4
    %Wellington Management Company, LLP
    
    
    3,357,800
    
    
    
    5.3
    %Thomas H. Fraser, Ph.D. (3)
    
    
    1,193,456
    
    
    
    1.9
    %Barbara Hackman Franklin (3)
    
    
    62,500
    
    
    
    *Wayne T. Hockmeyer, Ph.D. (3)
    
    
    105,000
    
    
    
    *William N. Kelley, M.D. (3)
    
    
    77,500
    
    
    
    *Zola P. Horovitz, Ph.D. (3)
    
    
    114,723
    
    
    
    *Stelios Papadopoulos, Ph.D. (3)
    
    
    412,918
    
    
    
    *Joshua Ruch (2) (3)
    
    
    2,797,837
    
    
    
    4.4
    %Harold R. Werner (1) (3)
    
    
    10,436,462
    
    
    
    16.4
    %Paul H. Fischer, Ph.D. (3)
    
    
    824,479
    
    
    
    1.3
    %Jeffrey W. Church (3)
    
    
    221,935
    
    
    
    *Thomas A. Davis, M.D. (3)
    
    
    55,505
    
    
    
    *C. Richter King, Ph.D. (3)
    
    
    213,539
    
    
    
    *All directors and executive officers as a group
(12 persons)
    
    
    16,516,355
    
    
    
    25.9
    %
 
 *
    
    Represents ownership that does not exceed 1% of the outstanding shares of the Companys
Common Stock.(1)
    
    Healthcare Ventures LLC is an affiliate of and Harold R. Werner is a general partner of
Healthcare Partners II, L.P. (HCP II), Healthcare Partners III, L.P. (HCP III),
Healthcare Partners IV, L.P. (HCP IV), Healthcare Partners V, L.P. (HCP V), and
Healthcare Partners VI, L.P. (HCP VI), the general partner of Healthcare Ventures II, L.P.
(HCV II), Healthcare Ventures III, L.P. (HCV III), Healthcare Ventures IV, L.P. (HCV
IV), Healthcare Ventures V, L.P. (HCV V) and Healthcare Ventures VI, L.P. (HCV VI),
respectively. Mr. Werner, together with James H. Cavanaugh, John W. Littlechild, Christopher
K Mirabelli, Gus Lawlor, Eric Aguiar, and William W. Crouse, the other general partners of
HCP II, HCP III, HCP IV, HCP V and HCP VI (collectively, the HC Entities) share voting and
investment control with respect to shares owned by HCV II, HCV III, HCV IV, HCV V and HCV VI,
respectively. Mr. Werner does not own any shares of GenVecs capital stock in his individual
capacity. The address of Healthcare Ventures II, III, IV, V and VI, L.P. is 44 Nassau
Street, Princeton, New Jersey 08542. This information is based on a Schedule 13D filed with
the SEC on August 23, 2003.(2)
    
    Rho Capital Partners, Inc. (Rho), of which Joshua Ruch is Chairman and Chief Executive
Officer, may be deemed the beneficial owner of the shares owned by Rho Management Trust II
pursuant to an investment advisory agreement that confers voting and investment control over
such shares on Rho.Pursuant to a Loan Modification Agreement, dated November 28, 2003 with Nautilis Trust, an
affiliate of Rho, Rho Investment Partners H, L.P., became eligible to purchase an additional
1,639,929 shares of GenVecs common stock, in consideration for the cancellation of a
previously contracted debt. Rho and its affiliate do not have investment control and do not
have voting control over any of such 1,639,929 shares until the satisfaction of the conditions
specified in the Loan Modification Agreement. Neither Rho nor its affiliate has the right to
acquire investment or voting control over any such shares within the next 60 days.The address for Rho Management Trust II is c/o Rho Capital Partners, 152 West 57th Street,
23rd Floor, New York, NY 10019. This information is based on a Schedule 13D filed with the
SEC on September 2, 2003 and Amendment No. 1 thereto filed with the SEC on December 5, 2003.(3)
    
    Includes shares of Common Stock issuable upon exercise of options that are exercisable
within 60 days of February 28, 2006 in the following amounts: Thomas H. Fraser, 381,200
shares; Barbara Hackman Franklin, 57,500 shares; Wayne T. Hockmeyer, 75,500 shares; William
N. Kelley, 72,500 shares; Zola P. Horovitz, 97,138 shares; Stelios Papadopoulos, 107,078
shares; Joshua Ruch, 107,078 shares; Paul H. Fischer, 565,342 shares; Jeffrey W. Church,
220,935 shares; Thomas A. Davis, 55,505 shares; C. Richter King, 213,539 shares; and
directors and officers as a group (12 people) 1,954,059 shares. 41




---



##### 



Equity Compensation Plan Information
  (a)
    
    
    (b)
    
    
    (c)Number ofsecuritiesremainingavailable forNumber of
    
    
    
    
    
    
    future issuancesecurities to be
    
    
    Weighted-
    
    
    under equityissued upon
    
    
    average exercise
    
    
    compensationexercise of
    
    
    price of
    
    
    plans (excludingoutstanding
    
    
    outstanding
    
    
    securitiesoptions, warrants
    
    
    options, warrants
    
    
    reflected inPlan category
    
    and rights
    
    
    and rights
    
    
    column (a)Equity compensation
plans approved by
security holders
    
    
    4,932,051
    
    
    $
    3.02
    
    
    
    2,763,920Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    4,932,051
    
    
    $
    3.02
    
    
    
    2,763,920
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
   Fee Category
    
    2005
    
    
    2004Audit Fees
    
    $
    374,000
    
    
    $
    380,600Audit-Related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    12,100
    
    
    
    13,750All Other Fees
    
    
    
    
    
    
    Total
    
    $
    386,100
    
    
    $
    394,350
   42




---



##### 



43




---



##### 



PART IV
 ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a)
    
    
    (1
    )
    
    Financial Statements  See index to
Financial Statements on page F below
for a list of the financial statements
being filed herein.(2
    )
    
    Financial Statement Schedules  All financial statement schedules are
omitted because they are not applicable, not required under the instructions or all
the information required is set forth in the financial statements or notes thereto.(3
    )
    
    Exhibits  The Exhibits listed in the accompanying Index to Exhibits
are filed or incorporated by reference as part of this report.
 EXHIBITNUMBER
    
    DESCRIPTION3.1
    
    Amended & Restated Certificate of Incorporation of GenVec, Inc. (8)3.1(a)
    
    Certificate of Designation of the Series A Junior Participating Preferred Stock. (8)3.2
    
    Amended & Restated Bylaws of
GenVec, Inc. (13)4.1
    
    Rights Agreement dated as of September 7, 2001 between the Registrant and American Stock Transfer &
Trust Company, the form of Certificate of Designation of Series A Junior Participating Preferred Stock
attached as Exhibit A thereto, the form of Rights Certificate attached as Exhibit B thereto, and the
form of Summary of Rights attached as Exhibit C thereto. (4)4.2
    
    Stock Purchase Agreement dated as of December 21, 2001, by and among HealthCare Ventures V. L.P.,
HealthCare Ventures VI, L.P., and the Registrant. (5)4.3
    
    Investor Rights Agreement, dated as of December 21, 2001, by and among HealthCare Ventures V. L.P.,
HealthCare Ventures VI, L.P., and the Registrant. (5)4.4
    
    Registration Rights Agreement, dated as of March 15, 2006 by and between Kingsbridge Capital Limited
and the Registrant (filed herewith).4.5
    
    Form of Warrant, dated as of March 15, 2006 by and between Kingsbridge Capital Limited and the
Registrant (filed herewith).10.1
    
    Form of Indemnification Agreement for Directors and Officers. (1)10.2
    
    2002 Stock Incentive Plan.* (14)10.3
    
    Amended and Restated 1993 Stock Incentive Plan and forms of agreements thereunder.* (2)10.4
    
    2000 Employee Stock Purchase Plan, and form of agreement thereunder.* (1)10.5
    
    Amended and Restated 2000 Director Option Plan.* (7)10.6
    
    License Agreement dated May 31, 1996 between Scios, Inc. and the Registrant. (1)10.7
    
    New Collaboration Agreement dated January 1, 2003 between Fuso Pharmaceutical Industries, Ltd. and the
Registrant. + (8)10.8
    
    New Commercialization Agreement dated January 1, 2003 between Fuso Pharmaceutical Industries Ltd. and
the Registrant.+ (8)10.9
    
    License Agreement dated February 1, 1998 between Asahi Chemical Industry Co., Ltd. and the Registrant
(12)10.10
    
    Terms of Employment Arrangement
between the Registrant and Thomas A. Davis (15)10.12
    
    Amendment to Common Stock Warrant Agreement dated March 18, 2002 between the Registrant and Cornell
Research Foundation, Inc. (8)10.13
    
    Lease Agreement dated May 4, 1999 between MOR BENNINGTON LLP and the Registrant. (1)10.14
    
    Amended and Restated Registration Rights Agreement dated December 2, 1998 between the Registrant and
certain stockholders. (1)10.15
    
    Patent License Agreement dated January 8, 2000 between the Registrant and the Public Health Service,
as amended, and amendment number 1 hereto dated March 9, 2000. (12)10.16
    
    Patent License Agreement dated December 20, 2000 between the Registrant and Northwestern University.
(3)10.17
    
    Salary Continuation Agreement between the Registrant and Paul H. Fischer dated October 15, 2002. *(8)10.18
    
    Change in Control Agreement between the Registrant and Paul H. Fischer dated October 15, 2002. *(8)10.19
    
    Salary Continuation Agreement between the Registrant and Jeffrey W. Church dated October 15, 2002. *(8)10.20
    
    Change in Control Agreement between the Registrant and Jeffrey W. Church dated October 15, 2002. *(8)
 44




---



##### 



EXHIBITNUMBER
    
    DESCRIPTION10.21
    
    Form of Salary Continuation Agreement between the Registrant and other executive officers
and senior staff dated October 15, 2002. *(8)10.22
    
    Form of Indemnification and
Advancement of Expenses Agreement dated December 10, 2003. (12)10.23
    
    Agreement with the Vaccine Research Center at the National Institute of Allergy and
Infectious Diseases of the National Institutes of Health for the production of adenoviral
vector-based HIV vaccine candidates dated December 31, 2001, and amendment 1 thereto dated
January 25, 2002.+ (7)10.24
    
    Sublease dated January 24, 1991 by and among Diacrin and Building 79 Associated Limited
Partnership and Building 96 Associates Limited Partnership. (10)10.25
    
    Amendment to Sublease dated April 30, 2002. (11)10.26
    
    Research Collaboration Agreement between Cordis Corporation and the Company dated as of
December 22, 2003.+ (12)10.27
    
    Summary of GenVec, Inc. 2006 Annual Bonus Plan * (filed herewith).10.28
    
    Common Stock Purchase Agreement, dated as of March 15, 2006 by and between Kingsbridge
Capital Limited and the Registrant (filed herewith)23.1
    
    Consent of Independent Registered Public Accounting Firm (filed herewith).24.1
    
    Power of Attorney (filed herewith).31.1
    
    Rule 13a-14(a) Certification by Chief Executive Officer (filed herewith).31.2
    
    Rule 13a-14(a) Certification by Chief Financial Officer (filed herewith).32.1
    
    Rule 13a-14(b) Certification by Chief Executive Officer pursuant to 18 United States Code
Section 1350 (filed herewith).32.2
    
    Rule 13a-14(b) Certification by Chief Financial Officer pursuant to 18 United States Code
Section 1350 (filed herewith).
 
 *
    
    Compensatory plan, contract or arrangement.+
    
    Certain portions of this exhibit have been omitted based upon a
request for confidential treatment. The omitted portions have been filed with
the Commission pursuant to our application for confidential treatment.(1)
    
    Incorporated by reference to our Registration Statement on Form
S-1 (File No. 333-47408) declared effective by the Securities and Exchange
Commission on December 12, 2000.(2)
    
    Incorporated by reference from our Registration Statement on Form
S-8 (File No. 333-55590) filed with the Securities and Exchange Commission on
February 14, 2001.(3)
    
    Incorporated by reference from our Annual Report on Form 10-K
(File No: 0-24469) filed with the Securities and Exchange Commission on March
30, 2001.(4)
    
    Incorporated by reference from our Registration Statement on Form
8-A (File No: 0-24469) filed with the Securities and Exchange Commission on
September 26, 2001.(5)
    
    Incorporated by reference from our Form 8-K (File No: 0-24469)
filed with the Securities and Exchange Commission on January 3, 2002.(6)
    
    Incorporated by reference from our Quarterly Report on Form 10-Q
(File No: 0-24469) filed with the Securities and Exchange Commission on August
14, 2002.(7)
    
    Incorporated by reference from our Annual Report on Form 10-K
(File No. 0-24469) filed with the Securities and Exchange Commission on March
28, 2002.(8)
    
    Incorporated by reference from our Annual Report on Form 10-K
(File No. 0-24469) filed with the Securities and Exchange Commission on March
31, 2003.(9)
    
    Incorporated by reference from our Registration Statement on form
S-4 (File No. 333-105320) filed with the Securities and Exchange Commission on
May 16, 2003.(10)
    
    Incorporated by reference from Diacrin, Inc. Form 10-K, as
amended. (File No. 0-20139) filed on April 29, 1992.(11)
    
    Incorporated by reference from Diacrin, Inc. Form 10-K (File No.
0-20139) filed on March 26, 2003.(12)
    
    Incorporated by reference from our Annual Report on Form 10-K
(File No. 0-24469) filed with the Securities and Exchange Commission on March
15, 2004.(13)
    
    Incorporated by reference from our Quarterly Report on
Form 10-Q (File No. 0-24469) filed with the Securities and
Exchange Commission on November 10, 2003.(14)
    
    Incorporated by reference from our Quarterly Report on
Form 10-Q (File No. 0-24469) filed with the Securities and
Exchange Commission on August 8, 2005.(15)
    
    Incorporated by reference from our Form 8-K (File
No. 0-24469) filed with the Securities and Exchange Commission
on July 27, 2005. 45




---



##### 



SIGNATURES
  Genvec, Inc.Date:
April 28, 2006
    
    By:
    
    /s/ Paul H. Fischer, Ph.D.

Paul H. Fischer, Ph.DChief Executive Officer
 46




---



##### 



GENVEC, INC.
INDEX TO FINANCIAL STATEMENTS
 PAGE NO.Reportsof Independent Registered Public Accounting Firm
    
    F-1 to F-2Statements of OperationsYears Ended December 31, 2005, 2004 and 2003
    

    F-3Balance Sheets as of December 31, 2005 and 2004
    
    F-4Statements of Cash FlowsYears Ended December 31, 2005, 2004 and 2003
    

    F-5Statements of Stockholders Equity and Comprehensive Loss YearsEnded December 31, 2005, 2004 and 2003
    

    F-6Notes to Financial Statements
    
    F-7 to F-23




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
    Internal ControlIntegrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). Internal ControlIntegrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
  /s/ KPMG LLP
 
 F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal ControlIntegrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
 /s/ KPMG LLP
 
 F-2




---



##### 



GENVEC, INC.
STATEMENTS OF OPERATIONS
 (in thousands, except share and per share data)Years ended December 31,
    
    2005
    
    
    2004
    
    
    2003Revenue from strategic alliances and research contracts (Note 8)
    
    $
    26,554
    
    
    $
    11,853
    
    
    $
    10,520Operating expenses:Research and development
    
    
    30,802
    
    
    
    23,087
    
    
    
    23,457General and administrative
    
    
    8,333
    
    
    
    7,884
    
    
    
    8,405Loss on disposal of assets (Note 3 and 6)
    
    
    1,895
    
    
    
    2
    
    
    
    Total operating expenses
    
    
    41,030
    
    
    
    30,973
    
    
    
    31,862Operating loss
    
    
    (14,476
    )
    
    
    (19,120
    )
    
    
    (21,342
    )Other income (loss):Interest income
    
    
    908
    
    
    
    612
    
    
    
    389Interest expense
    
    
    (426
    )
    
    
    (386
    )
    
    
    (486
    )Investment gain
    
    
    2
    
    
    
    
    
    
    
    178Total other income, net
    
    
    484
    
    
    
    226
    
    
    
    81Net loss
    
    $
    (13,992
    )
    
    $
    (18,894
    )
    
    $
    (21,261
    )Basic and diluted net loss per share
    
    $
    (0.24
    )
    
    $
    (0.35
    )
    
    $
    (0.65
    )Shares used in computation of basic and diluted net loss per share
    
    
    57,823
    
    
    
    54,331
    
    
    
    32,963
 The accompanying Notes to Financial Statements are an integral part of these statements.
 F-3




---



##### 



GENVEC, INC.
BALANCE SHEETS
 (in thousands)As of December 31,
    
    2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,830
    
    
    $
    5,366Short-term investments (Note 4)
    
    
    25,169
    
    
    
    25,397Accounts receivable
    
    
    4,049
    
    
    
    1,544Prepaid expenses and other
    
    
    1,409
    
    
    
    1,821Bond sinking fund (Note 7)
    
    
    296
    
    
    
    276Total current assets
    
    
    37,753
    
    
    
    34,404Property and equipment, net (Notes 5 and 7)
    
    
    4,147
    
    
    
    5,418Long-term investments (Note 4)
    
    
    
    
    
    
    2,302Other assets
    
    
    1
    
    
    
    65Intangible assets (Note 3 and 6)
    
    
    
    
    
    
    1,882Total assets
    
    $
    41,901
    
    
    $
    44,071LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of long-term debt (Note 7)
    
    $
    913
    
    
    $
    1,227Accounts payable
    
    
    1,180
    
    
    
    1,622Accrued clinical trial expenses
    
    
    457
    
    
    
    1,364Accrued other expenses
    
    
    3,544
    
    
    
    2,128Unearned revenue
    
    
    1,182
    
    
    
    2,042Total current liabilities
    
    
    7,276
    
    
    
    8,383Long-term debt, less current portion (Note 7)
    
    
    2,351
    
    
    
    3,264Other liabilities
    
    
    852
    
    
    
    1,943Total liabilities
    
    
    10,479
    
    
    
    13,590Commitments (Notes 7 and 9)Stockholders equity (Notes 8 and 10):Preferred stock, $0.001 par value, 5,000,000 shares
authorized in 2005 and 2004; none
are issued and outstanding in 2005 and 2004
    
    
    
    
    
    
    Common stock, $0.001 par value, 100,000 shares authorized
in 2005 and 2004; 63,675 and 55,588 shares issued and
outstanding in 2005 and 2004
    
    
    64
    
    
    
    56Additional paid-in capital
    
    
    181,110
    
    
    
    166,656Deferred compensation (Note 10)
    
    
    (121
    )
    
    
    (382
    )Accumulated other comprehensive loss (Notes 4 and 12)
    
    
    (45
    )
    
    
    (255
    )Accumulated deficit
    
    
    (149,586
    )
    
    
    (135,594
    )Total stockholders equity
    
    
    31,422
    
    
    
    30,481Total liabilities and stockholders equity
    
    $
    41,901
    
    
    $
    44,071
 The accompanying Notes to Financial Statements are an integral part of these statements.
 F-4




---



##### 



GENVEC, INC.
STATEMENTS OF CASH FLOWS
 (in thousands)Years ended December 31,
    
    2005
    
    
    2004
    
    
    2003Cash flows from operating activities:Net loss
    
    $
    (13,992
    )
    
    $
    (18,894
    )
    
    $
    (21,261
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    2,060
    
    
    
    1,813
    
    
    
    2,608Stock option and warrant compensation (Note 10)
    
    
    261
    
    
    
    229
    
    
    
    1,176Loss on disposal of assets (Note 3 and 6)
    
    
    1,895
    
    
    
    2
    
    
    
    (Gain) on investments
    
    
    (2
    )
    
    
    
    
    
    
    (178
    )Loss on interest rate swap
    
    
    240
    
    
    
    
    
    
    
    Change in accounts receivable
    
    
    (2,505
    )
    
    
    278
    
    
    
    (898
    )Change in accounts payable and accrued expenses
    
    
    67
    
    
    
    (193
    )
    
    
    (1,696
    )Change in unearned revenue
    
    
    (1,634
    )
    
    
    25
    
    
    
    746Change in other assets and liabilities, net
    
    
    102
    
    
    
    676
    
    
    
    (125
    )Net cash used in operating activities
    
    
    (13,508
    )
    
    
    (16,064
    )
    
    
    (19,628
    )Cash flows from investing activities:Purchases of equipment
    
    
    (398
    )
    
    
    (242
    )
    
    
    (568
    )Cash acquired in acquisition, net of transaction costs of $2,445 (Note 3)
    
    
    
    
    
    
    
    
    
    
    4,828Purchases of investment securities
    
    
    (31,570
    )
    
    
    (27,573
    )
    
    
    (19,174
    )Proceeds from sale and maturity of investment securities
    
    
    33,725
    
    
    
    33,394
    
    
    
    33,181Net cash provided by investing activities
    
    
    1,757
    
    
    
    5,579
    
    
    
    18,267Cash flows from financing activities:Proceeds from issuance of common stock, net (Note 10)
    
    
    14,462
    
    
    
    12,099
    
    
    
    3,450Proceeds from debt borrowings
    
    
    
    
    
    
    29
    
    
    
    Payments of long-term debt obligations (Note 7)
    
    
    (1,247
    )
    
    
    (1,494
    )
    
    
    (1,469
    )Net cash provided by financing activities
    
    
    13,215
    
    
    
    10,634
    
    
    
    1,981Net change in cash and cash equivalents
    
    
    1,464
    
    
    
    149
    
    
    
    620Beginning balance of cash and cash equivalents
    
    
    5,366
    
    
    
    5,217
    
    
    
    4,597Ending balance of cash and cash equivalents
    
    $
    6,830
    
    
    $
    5,366
    
    
    $
    5,217Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    265
    
    
    $
    335
    
    
    $
    388Supplemental disclosure of non-cash investing activities:Property and equipment financed by capital leases
    
    
    
    
    
    $
    29
    
    
    $
    50
 The accompanying Notes to Financial Statements are an integral part of these statements.
 F-5




---



##### 



GENVEC, INC.
STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE LOSS
 (in thousands)AccumulatedAdditional
    
    
    
    
    
    Other Comp-Years ended December 31,
    
    Common Stock
    
    Paid-in
    
    Deferred
    
    rehensive
    
    Accumulated2005, 2004 and 2003
    
    Shares Amount
    
    Capital
    
    Compensation
    
    Income (Loss)
    
    Deficit
    
    TotalBalance, December 31, 2002
    
    
    21,979
    
    
    $
    22
    
    
    $
    112,975
    
    
    $
    (1,590
    )
    
    $
    (339
    )
    
    $
    (95,439
    )
    
    $
    15,629Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,261
    )
    
    
    (21,261
    )Unrealized change in
investments, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105
    )
    
    
    
    
    
    
    (105
    )Unrealized change in cash
flow derivative, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169
    
    
    
    
    
    
    
    169Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (21,197
    )Common stock issued under
Shelf registration, net
    
    
    757
    
    
    
    1
    
    
    
    1,848
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,849Common stock issued in
connection with acquisition
    
    
    27,665
    
    
    
    27
    
    
    
    38,504
    
    
    
    (563
    )
    
    
    
    
    
    
    
    
    
    
    37,968Common stock issued under
stock incentive plans
    
    
    949
    
    
    
    1
    
    
    
    1,600
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,601Deferred compensation charge
resulting from stock options
    
    
    
    
    
    
    
    
    
    
    (366
    )
    
    
    1,542
    
    
    
    
    
    
    
    
    
    
    
    1,176Balance, December 31, 2003
    
    
    51,350
    
    
    $
    51
    
    
    $
    154,561
    
    
    $
    (611
    )
    
    $
    (275
    )
    
    $
    (116,700
    )
    
    $
    37,026Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,894
    )
    
    
    (18,894
    )Unrealized change in
investments, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (137
    )
    
    
    
    
    
    
    (137
    )Unrealized change in cash
flow derivative, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    157
    
    
    
    
    
    
    
    157Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (18,874
    )Common stock issued under
Shelf registration, net
    
    
    4,000
    
    
    
    4
    
    
    
    11,693
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,697Common stock held in
treasury cancelled
    
    
    (70
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued under
stock incentive plans
    
    
    308
    
    
    
    1
    
    
    
    402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    403Deferred compensation charge
resulting from stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    229
    
    
    
    
    
    
    
    
    
    
    
    229Balance, December 31, 2004
    
    
    55,588
    
    
    $
    56
    
    
    $
    166,656
    
    
    $
    (382
    )
    
    $
    (255
    )
    
    $
    (135,594
    )
    
    $
    30,481Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,992
    )
    
    
    (13,992
    )Unrealized change in
investments, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30
    )
    
    
    
    
    
    
    (30
    )Adjustment for change in
non-qualifying hedge, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    240
    
    
    
    
    
    
    
    240Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,782
    )Common stock issued under
Shelf registration, net
    
    
    7,600
    
    
    
    8
    
    
    
    13,990
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,998Common stock issued under
Stock incentive plans
    
    
    487
    
    
    
    
    
    
    
    464
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    464Deferred compensation charge
resulting from stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    261
    
    
    
    
    
    
    
    
    
    
    
    261Balance, December 31, 2005
    
    
    63,675
    
    
    $
    64
    
    
    $
    181,110
    
    
    $
    (121
    )
    
    $
    (45
    )
    
    $
    (149,586
    )
    
    $
    31,422
 The accompanying Notes to Financial Statements are an integral part of these statements.
 F-6




---



##### 



NOTES TO FINANCIAL STATEMENTS
 (1) ORGANIZATION AND BUSINESS DESCRIPTION
  
    
    TNFeradeÔ, which is currently in a Phase II/III trial for the treatment
of locally advanced pancreatic cancer and Phase II trials for the treatment of rectal and
melanoma cancer;
    
    BIOBYPASSÒ, which is currently in a randomized,
placebo-controlled Phase II trial for the treatment of severe coronary artery disease. The
Company previously completed a randomized, controlled Phase II study of 67 patients with
severe coronary artery disease using a cardiac surgical procedure; and
    
    PEDF, which has completed enrollment in a Phase Ib trial for the treatment of
wet age-related macular degeneration, a leading cause of blindness in individuals over the
age of 50.
    (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 (a) CASH AND CASH EQUIVALENTS
  (b) INVESTMENTS
   F-7




---



##### 



(c) FAIR VALUE OF FINANCIAL INSTRUMENTS
  (d) PROPERTY AND EQUIPMENT
  (e) REVENUE RECOGNITION
  (f) RESEARCH AND DEVELOPMENT
  (g) CLINICAL TRIAL EXPENSES
  (h) INCOME TAXES
  F-8




---



##### 



(i) NET LOSS PER SHARE
   (j) COMPREHENSIVE LOSS
  (k) INTEREST RATE SWAP
  (l) TECHNOLOGICAL LICENSE AND INTELLECTUAL PROPERTY
  (m) STOCK OPTION PLANS AND EMPLOYEE STOCK PURCHASE PLAN
 Accounting for Stock Issued to
Employees Accounting for Stock-Based Compensation
  2005
    
    2004
    
    2003Net loss  as reported
    
    $
    (13,992
    )
    
    $
    (18,894
    )
    
    $
    (21,261
    )Deduct: Incremental stock-based employee
compensation expense determined under fair
value method for all awards
    
    
    (726
    )
    
    
    (713
    )
    
    
    (484
    )Net loss  pro forma
    
    $
    (14,718
    )
    
    $
    (19,607
    )
    
    $
    (21,745
    )Basic and diluted loss per share  as reported
    
    $
    (0.24
    )
    
    $
    (0.35
    )
    
    $
    (0.65
    )Basic and diluted loss per share  pro forma
    
    $
    (0.25
    )
    
    $
    (0.36
    )
    
    $
    (0.66
    )
 F-9




---



##### 



Accounting for Certain Transaction Involving Stock Compensation
 (n) USE OF ESTIMATES
  (o) RECENT ACCOUNTING PRONOUNCEMENTS
 Accounting Changes and Error Corrections.
 Accounting for Conditional Asset
Retirement Obligations,
 Accounting for Stock-Based Compensation Accounting
for Stock Issued to Employees
 Consolidation of Variable Interest Entities
 Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, .
 F-10




---



##### 



(3) BUSINESS ACQUISITION AND DISPOSITION
 (a) ACQUISITION
 Business Combinations
   Value of GenVec common stock issued
    
    $
    35,412Value of Stock Options issued
    
    
    3,120Less amount allocated to deferred compensation
    
    
    (563
    )Transaction costs incurred by GenVec*
    
    
    2,445Acquisition costs
    
    $
    40,414
   Cash and cash equivalents
    
    $
    7,273Short-term investments
    
    
    30,839Other current assets
    
    
    530Long-term investments
    
    
    2,681Property and equipment, net
    
    
    67Intangible assets
    
    
    1,981Total assets acquired
    
    
    43,371Current liabilities
    
    
    1,393Unearned revenue
    
    
    1,564Total liabilities
    
    
    2,957Net assets acquired
    
    $
    40,414
  F-11




---



##### 



(b) DISPOSITION
  (4) INVESTMENTS
  2005GrossUnrealizedAmortized
    
    
    Holding
    
    
    FairCost
    
    
    Gains/(Loss)
    
    
    ValueGovernment and agency notes
    
    $
    2,254
    
    
    $
    (2
    )
    
    $
    2,252Corporate bonds
    
    
    22,960
    
    
    
    (43
    )
    
    
    22,917$
    25,214
    
    
    $
    (45
    )
    
    $
    25,169
 2004GrossUnrealizedAmortized
    
    
    Holding
    
    
    FairCost
    
    
    Gains/(Loss)
    
    
    ValueGovernment agency notes
    
    $
    6,522
    
    
    $
    24
    
    
    $
    6,546Corporate bonds
    
    
    21,200
    
    
    
    (47
    )
    
    
    21,153$
    27,722
    
    
    $
    (23
    )
    
    $
    27,699
  2005
    
    
    2004Due within one year
    
    $
    25,169
    
    
    $
    25,397Due after one year through four years
    
    
    
    
    
    
    2,302$
    25,169
    
    
    $
    27,699
 (5) PROPERTY AND EQUIPMENT
  2005
    
    
    2004Equipment
    
    $
    8,625
    
    
    $
    9,712Leasehold improvements
    
    
    6,474
    
    
    
    6,566Furniture and fixtures
    
    
    414
    
    
    
    51915,513
    
    
    
    16,797Less accumulated depreciation and amortization
    
    
    (11,366
    )
    
    
    (11,379
    )$
    4,147
    
    
    $
    5,418
  F-12




---



##### 



(6) INTANGIBLE ASSETS
  (7) LONG-TERM DEBT
  2005
    
    
    2004Industrial revenue bond
    
    $
    2,580
    
    
    $
    3,130Notes payable:Term loan from landlord
    
    
    440
    
    
    
    531Equipment financing
    
    
    211
    
    
    
    765Economic development loan
    
    
    33
    
    
    
    48Other
    
    
    
    
    
    
    173,264
    
    
    
    4,491Less current maturities
    
    
    (913
    )
    
    
    (1,227
    )$
    2,351
    
    
    $
    3,264
  2006
    
    $
    9132007
    
    
    7542008
    
    
    7902009
    
    
    8072010
    
    
    Thereafter
    
    
    $
    3,264
 (a) INDUSTRIAL REVENUE BOND
   F-13




---



##### 



(b) TERM LOAN
  (c) EQUIPMENT FINANCING
   (d) ECONOMIC DEVELOPMENT LOAN
   (8) STRATEGIC ALLIANCES AND RESEARCH CONTRACTS
  2005
    
    
    2004
    
    
    2003Vaccine Research Center
    
    $
    18,791
    
    
    $
    7,373
    
    
    $
    7,230PATH/Malaria Vaccine Initiative
    
    
    1,496
    
    
    
    979
    
    
    
    US Naval Medical Research Center
    
    
    1,599
    
    
    
    493
    
    
    
    1,361FUSO Pharmaceuticals Industries, Ltd.
    
    
    1,595
    
    
    
    1,616
    
    
    
    1,724Terumo Corporation
    
    
    1,067
    
    
    
    396
    
    
    
    98Cordis Corporation
    
    
    470
    
    
    
    245
    
    
    
    Other strategic alliances and research grants
    
    
    1,536
    
    
    
    751
    
    
    
    107$
    26,554
    
    
    $
    11,853
    
    
    $
    10,520
 F-14




---



##### 



(a) VACCINE RESEARCH CENTER
  (b) PATH/MALARIA VACCINE INITIATIVE (MVI)
  (c) US NAVAL MEDICAL RESEARCH CENTER (NMRC)
   (d) FUSO PHARMACEUTICALS INDUSTRIES, LTD. (Fuso)
  F-15




---



##### 



(e) TERUMO CORPORATION (Terumo)
   (f) CORDIS CORPORATION (Cordis)
 ®
 ® ®
 (g) OTHER STRATEGIC ALLIANCES AND RESEARCH GRANTS
  F-16




---



##### 



(9) COMMITMENTS
 (a) LEASE AGREEMENTS
   2006
    
    
    $1,4542007
    
    
    7752008
    
    
    7922009
    
    
    6772010
    
    
    Thereafter
    
    
    $3,698
  (b) LICENSE AGREEMENTS
    F-17




---



##### 



(c) RESEARCH AND DEVELOPMENT AND CLINICAL AGREEMENTS
    (10) STOCKHOLDERS EQUITY
 (a) CAPITAL STOCK
  
    
    On January 22, 2003 the Company sold 756,800 shares of common stock to an existing
shareholder at $2.50 per share under the shelf registration. Proceeds, net of offering
costs, from this sale totaled $1,849,000.
    
    On April 16, 2004, the Company sold 4,000,000 shares of common stock to various
investors at $3.15 per share under the shelf registration. Proceeds, net of offering costs,
from this sale totaled $11,787,000. Stonegate Securities was engaged as the sole placement
agent for this transaction.
  
    
    On September 26, 2005, the Company sold 7,600,000 shares of common stock to various
investors at $2.00 per share under the shelf registration. Proceeds, net of offering costs,
from this sale totaled $13,990,000. SG Cowen & Co., LLC (SG Cowen) was engaged as the
sole placement agent for this transaction. Stelios Papadopoulos, Ph.D., is a Vice Chairman
in the investment banking division of SG Cowen and is a member of GenVecs board of
directors.
   F-18




---



##### 




    
    4,400,000 shares of $0.001 par value preferred stock have been authorized; none are
issued or outstanding.
    
    600,000 shares of $0.001 par value Series A junior participating preferred stock
have been authorized in connection with the preferred stock purchase rights referred to
above; none are issued or outstanding.
 (b) STOCK OPTION GRANTS
  
    
    On August 21, 2003, in connection with the Diacrin acquisition, the
stockholders approved an increase in the number of common shares to be issued under the
Plan by an additional 1,000,000.
    
    At the Companys Annual Meeting of Stockholders, held on June 15, 2005, the
stockholders approved an increase in the number of common stock shares to be issued
under the Plan by an additional 1,680,000.
   AverageNumber of Shares
    
    Exercise(in thousands, except per share data)
    
    Under Option
    
    PriceOutstanding at December 31, 2002
    
    
    4,640
    
    
    $
    3.18Assumed from acquisition
    
    
    1,937
    
    
    
    2.84Granted
    
    
    209
    
    
    
    2.73Exercised
    
    
    (914
    )
    
    
    1.69Cancelled
    
    
    (1,624
    )
    
    
    3.63Outstanding at December 31, 2003
    
    
    4,248
    
    
    
    3.15Granted
    
    
    1,105
    
    
    
    3.03Exercised
    
    
    (289
    )
    
    
    1.19Cancelled
    
    
    (279
    )
    
    
    3.64Outstanding at December 31, 2004
    
    
    4,785
    
    
    $
    3.20Granted
    
    
    1,633
    
    
    
    1.91Exercised
    
    
    (342
    )
    
    
    0.96Cancelled
    
    
    (1,235
    )
    
    
    3.05Outstanding at December 31, 2005
    
    
    4,841
    
    
    $
    3.01
  F-19




---



##### 



Outstanding
    
    ExercisableAverage
    
    Average
    
    
    
    
    
    AverageShares
    
    Exercise
    
    Remaining
    
    Shares
    
    ExerciseExercise Price
    
    (thousands)
    
    Price
    
    Life
    
    (thousands)
    
    Price$0.00  $1.00
    
    
    57
    
    
    $
    0.72
    
    
    5.7 years
    
    
    34
    
    
    $
    0.73$1.01  $3.00
    
    
    2,314
    
    
    
    2.09
    
    
    
    6.8
    
    
    
    1,214
    
    
    
    2.26$3.01  $4.00
    
    
    1,572
    
    
    
    3.28
    
    
    
    5.9
    
    
    
    1,256
    
    
    
    3.29$4.01  $5.00
    
    
    646
    
    
    
    4.39
    
    
    
    3.3
    
    
    
    646
    
    
    
    4.39$5.01  $10.00
    
    
    252
    
    
    
    6.73
    
    
    
    2.4
    
    
    
    252
    
    
    
    6.734,841
    
    
    $
    3.01
    
    
    5.8 years
    
    
    3,402
    
    
    $
    3.36
   (c) EMPLOYEE STOCK PURCHASE PLAN
    (d) WARRANTS
  2005
    
    2004
    
    2003Exercise Price
    
    Outstanding
    
    Vested
    
    Outstanding
    
    Vested
    
    Outstanding
    
    Vested$3.60
    
    
    66
    
    
    
    66
    
    
    
    66
    
    
    
    66
    
    
    
    66
    
    
    
    66$3.93
    
    
    25
    
    
    
    25
    
    
    
    31
    
    
    
    31
    
    
    
    56
    
    
    
    56$8.85
    
    
    
    
    
    
    
    
    
    
    318
    
    
    
    318
    
    
    
    318
    
    
    
    31891
    
    
    
    91
    
    
    
    415
    
    
    
    415
    
    
    
    440
    
    
    
    440
 F-20




---



##### 



(11) INCOME TAXES
  2005
    
    
    2004
    
    
    2003Tax provision computed at the statutory rate
    
    $
    (4,676
    )
    
    $
    (6,424
    )
    
    $
    (7,229
    )State income taxes, net of federal income tax provision
    
    
    (962
    )
    
    
    (751
    )
    
    
    ( 982
    )Book expenses not deductible for tax purposes
    
    
    7
    
    
    
    8
    
    
    
    8Research and experimentation tax credit
    
    
    (1,146
    )
    
    
    (787
    )
    
    
    (460
    )Nondeductible compensation expense
    
    
    94
    
    
    
    89
    
    
    
    381Change in valuation allowance for deferred tax assets
    
    
    6,683
    
    
    
    7,865
    
    
    
    8,282Income tax expense
    
    $
    
    
    
    $
    
    
    
    $
    
    2005
    
    
    2004
    
    
    2003Net operating loss carryforwards
    
    $
    76,689
    
    
    $
    71,682
    
    
    $
    64,695Capital loss carryforwards
    
    
    328
    
    
    
    328
    
    
    
    Research and experimentation tax credit
    
    
    10,425
    
    
    
    9,279
    
    
    
    8,492Deferred rent
    
    
    178
    
    
    
    
    
    
    
    Unearned revenue
    
    
    
    
    
    
    485
    
    
    
    465Property and equipment, principally due to differences in
depreciation
    
    
    (507
    )
    
    
    (655
    )
    
    
    (727
    )Deferred compensation expense
    
    
    747
    
    
    
    785
    
    
    
    873Intangible asset
    
    
    
    
    
    
    (727
    )
    
    
    (765
    )Other
    
    
    151
    
    
    
    139
    
    
    
    426Total deferred tax assets
    
    
    88,011
    
    
    
    81,316
    
    
    
    73,459Valuation allowance
    
    
    (88,011
    )
    
    
    (81,316
    )
    
    
    (73,459
    )Net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    
  F-21




---



##### 



(12) OTHER COMPREHENSIVE INCOME (LOSS)
  Unrealized
    
    
    AccumulatedUnrealized
    
    
    Gain (Loss)
    
    
    OtherGain (Loss)
    
    
    on Derivative
    
    
    Comprehensiveon Securities
    
    
    Instruments
    
    
    Income (Loss)Balance, December 31, 2002
    
    $
    227
    
    
    $
    (566
    )
    
    $
    (339
    )Unrealized gain from available-for-sale securities
    
    
    73
    
    
    
    
    
    
    
    73Loss in operations
    
    
    (178
    )
    
    
    
    
    
    
    (178
    )Unrealized loss on cash flow derivative
    
    
    
    
    
    
    (45
    )
    
    
    (45
    )Interest expense realized in operations
    
    
    
    
    
    
    214
    
    
    
    214Balance, December 31, 2003
    
    $
    122
    
    
    $
    (397
    )
    
    $
    (275
    )Unrealized loss from available-for-sale securities
    
    
    (137
    )
    
    
    
    
    
    
    (137
    )Loss in operations
    
    
    
    
    
    
    
    
    
    
    Unrealized loss on cash flow derivative
    
    
    
    
    
    
    (25
    )
    
    
    (25
    )Interest expense realized in operations
    
    
    
    
    
    
    182
    
    
    
    182Balance, December 31, 2004
    
    $
    (15
    )
    
    $
    (240
    )
    
    $
    (255
    )Unrealized loss from available-for-sale securities
    
    
    (30
    )
    
    
    240
    
    
    
    210Balance, December 31, 2005
    
    $
    (45
    )
    
    $
    
    
    
    $
    (45
    )
  (13) QUARTERLY RESULTS (UNAUDITED)
  2005
    
    Q1
    
    Q2
    
    Q3
    
    Q4Revenue
    
    $
    4,549
    
    
    $
    7,348
    
    
    $
    6,897
    
    
    $
    7,760Net loss
    
    $
    (3,458
    )
    
    $
    (2,956
    )
    
    $
    (3,249
    )
    
    $
    (4,329
    )Basic and Diluted Loss Per Share
    
    $
    (0.06
    )
    
    $
    (0.05
    )
    
    $
    (0.06
    )
    
    $
    (0.07
    )
 2004
    
    Q1
    
    Q2
    
    Q3
    
    Q4Revenue
    
    $
    2,741
    
    
    $
    3,151
    
    
    $
    2,932
    
    
    $
    3,029Net loss
    
    $
    (5,650
    )
    
    $
    (4,776
    )
    
    $
    (4,789
    )
    
    $
    (3,679
    )Basic and Diluted Loss Per Share
    
    $
    (0.11
    )
    
    $
    (0.09
    )
    
    $
    (0.09
    )
    
    $
    (0.07
    )
  F-22




---



##### 



(14) SUBSEQUENT
EVENT (UNAUDITED)
   F-23